2011 Sub-Saharan Africa Regional Snapshot
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2011 Sub-Saharan Africa Regional Snapshot

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CGAP and the Microfinance Information Exchange (MIX) have released the 2011 regional snapshot of microfinance analysis and key trends in Sub Saharan Africa. For the first time, broad, comprehensive ...

CGAP and the Microfinance Information Exchange (MIX) have released the 2011 regional snapshot of microfinance analysis and key trends in Sub Saharan Africa. For the first time, broad, comprehensive landscape data is available of close to 23,000 providers of deposit, credit or mobile banking services. In comparison to other regions, SSA has a strong depositor base--almost a quarter of the global depositors recorded by MIX are in SSA, while the region only accounts for 5% of the borrowers. With a large focus on deposit mobilization, MFIs in SSA require a small percentage of external debt. Financial expense ratios are around 2 percent, the lowest globally after the Middle East and North Africa. Large microfinance providers have the lion’s share of client outreach across SSA (between 80 and 90% of borrowers and depositors), but they are experiencing slower growth rates compared to smaller institutions.

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    2011 Sub-Saharan Africa Regional Snapshot 2011 Sub-Saharan Africa Regional Snapshot Presentation Transcript

    • MIX and CGAP Analysis of Key Trends 2011 Sub-Saharan Africa Regional Snapshot February 2012 © 2012, MIX and CGAP. All rights reserved.
    • Data SourcesMacroeconomic Data • World Development Indicators Landscape Data of • MIX: Mapping Africa Financial InclusionMicrofinance ProvidersCross-Border Funding • CGAP Cross-Border Funder Survey Performance ofMicrofinance Providers • MIX Market Policy Environment • CGAP Financial Inclusion Regulation Center and Central Banks’ websites Funding Structure of • MIX Market Funding Structure DataMicrofinance Providers 2 © 2012, MIX and CGAP. All rights reserved.
    • Table of Contents Overview of the Microfinance Sector in SSADiverse Ecosystem of Financial Service Providers Regulatory Environment Funding Flows Provider Performance in Global Context 3 © 2012, MIX and CGAP. All rights reserved.
    • The Big Picture Indicator as of end of 2010 * Value Number of countries with microfinance 45 providers Population 863 mln Population living below the national 48.4% poverty line % GNI per capita, Atlas method 1183 USD Number of microfinance providers 22,900 Number of loans outstanding 20.5 mln Number of deposit accounts 44.4 mln Loan portfolio, gross, USD 14.9 mln Deposits, USD 13.8 mln* When 2010 data is not available, data from the most recent prior period is used.Source: World Development Indicators. GNI per capita and poverty headcounts for the region are weighted by each country’s total population. 4 © 2012, MIX and CGAP. All rights reserved.
    • Financial Inclusion in SSA 5 © 2012, MIX and CGAP. All rights reserved.
    • SSA Microfinance in a Global Context 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Number of active Gross Loan Portfolio Number of depositors Deposits (sum) borrowers (sum) (sum) (sum) SSA EAP ECA LAC MENA SAMicrofinance providers reporting to MIX in SSA reach nearly one quarter of alldepositors globally, while accounting for less than five percent of borrowers.South Asia has the smallest average deposit size, SSA is a near second,emphasizing accessibility to savings accounts for the poor.Source: MIX Market: Cross Market Analysis 6 © 2012, MIX and CGAP. All rights reserved.
    • SSA Microfinance Clients in a Global ContextAfrica falls right in the middle of all regions globally in terms of percentof women borrowers, rural borrowers, and corporate and SME portfolio. 7 © 2012, MIX and CGAP. All rights reserved.
    • Access to Formal Financial Services Lowest in SSA Adults without an account (%) 75 to 100 50 to 75 25 to 50 0 to 25 No data Central Asia & Eastern EuropeHigh income OECD 50% East Asia &and non-OECD Middle East & North Africa Pacific8% 58% 58%% show the average South Asiapercent of unbankedpopulation Sub-Saharan Africa 78% 88% Latin America and Caribbean 60% Source: CGAP and Workd Bank Group. 2010. Financial Access 2010. Washington, D.C.: World Bank Group. Map shows percent of households without a deposit or loan account in an institution (Banks, Savings Banks, MFIs) 8 © 2012, MIX and CGAP. All rights reserved. 8
    • High Levels of Financial ExclusionThe majority of people surveyed in 14 Finscope studies across East andSouthern Africa are largely excluded from formal finance or useinformal financial services. 9 © 2012, MIX and CGAP. All rights reserved.
    • Table of Contents Overview of the Microfinance Sector in SSADiverse Ecosystem of Financial Service Providers Regulatory Environment Funding Flows Provider Performance in Global Context 10 © 2012, MIX and CGAP. All rights reserved.
    • A Diverse Ecosystem of Providers A diverse set of 22,900 providers without one dominant model. • There are more clients with savings-led organizations than credit-only providers. • Credit unions reach the largest number of clients, but many of them are small.Source: MIX Market: Mapping Africa Financial Inclusion - Overview 11 © 2012, MIX and CGAP. All rights reserved.
    • Credit Unions Credit unions: stable growth with deepest outreach in East and West Africa 12 Credit union / cooperative clients by Millions subregion 10 8 6 4 2 0 2006 2007 2008 2009 2010 Central East Southern WestSource: WOCCU; 2008 data for WAEMU estimated 12 © 2012, MIX and CGAP. All rights reserved.
    • Savings GroupsSavings groups: primarily active in East and West Africa, reaching scalecomparable to formal providers in some markets. Number of Accounts Source: MIX Africa landscape, SAVIX site 13 © 2012, MIX and CGAP. All rights reserved.
    • Greenfield Institutions Greenfield institutions demonstrate rapid credit and savings growth in some markets. 40+ institutions started since mid-1990s, now with over 1.4 million accounts. Congo DRC, Ghana, and Nigeria have the greatest number of greenfields.Source: MIX Market 14 © 2012, MIX and CGAP. All rights reserved.
    • M-Banking M-Banking is spreading to many markets, but M-Pesa and MTN dominate growth in Kenya, Tanzania, and Uganda.Source: GSMA / Wireless Intelligence Mobile Deployment Tracker. Data is number of wallets for more recent period (2009 – present) 15 © 2012, MIX and CGAP. All rights reserved.
    • ATM Retail Networks The most developed networks are in Southern Africa.Note: Medians are reported for “High Income”, “Developing”, and “SSA” categories.Source: Financial Access database. 16 © 2012, MIX and CGAP. All rights reserved.
    • POS Retail Networks On average POS retail networks are far less developed than in other developing countries.Note: Medians are reported for “High Income”, “Developing”, and “SSA” categories.Source: Financial Access database. 17 © 2012, MIX and CGAP. All rights reserved.
    • Table of Content Overview of the Microfinance Sector in SSADiverse Ecosystem of Financial Service Providers Regulatory Environment Funding Flows Provider Performance in Global Context 18 © 2012, MIX and CGAP. All rights reserved.
    • Regulatory Frameworks in Evolution Kenyan authorities created a supervisionNew MF law adopted by entity for financial coopsBCEAO and revised (SASRA); E-moneydirectives. A new regulation drafted;accounting framework Consumer protectionis mandatory regulation in progress Harmonized microfinance law is being discussed among EAC Nigeria adopted revised Microfinance Policy Framework Non-prudential regulation for credit-only MFIs under discussion (Kenya, Tanzania, Central Bank of DR Congo adopted a Uganda) new regulation microfinance law and The Bank of the Republic of accounting framework. Burundi drafted a E-money A E-money regulation is being drafted regulation for adoption Source: CGAP Financial Inclusion Regulation Center – Central Banks’ websites 19 © 2012, MIX and CGAP. All rights reserved.
    • Microfinance Regulation • In several countries (e.g. WAEMU, CEMAC, Madagascar, Burundi, Rwanda etc.), specialized microfinance laws cover both microfinance Specialized institutions and financial MF laws cooperatives MF under banking or NBFI laws Drafting • In 2010, revision of Specialized MF laws microfinance law in process in Nigeria, Ghana, BurundiSource: CGAP Financial Inclusion Regulation Center – Central Banks’ websites 20 © 2012, MIX and CGAP. All rights reserved.
    • Protecting Clients through RegulationConsumer protection legislation and implementation% of economies: With designated  27 out of 32 SSA countries have unit within 59 regulatory body laws and regulations addressing at least some aspects of financial consumer protection With at least one recourse 81 45 (e.g. fair treatment). mechanism 55  16 SSA countries require 52 financial institutions to Average extent of 44 periodic disclosure 42 implement procedures for 38 resolving customer complaints. Average extent of disclosure at 63 37 opening 48  Enforcement mechanisms are 37 the weakest despite the strong Average extent of fair treatment 86 59 interest shown by regulators. 47 High-income Developing Sub-Saharan countries countries AfricaSource: Financial Access 2010 21 © 2012, MIX and CGAP. All rights reserved.
    • Private Credit Bureaus and Public Credit Registries  Penetration level measured by percentage of adults registered in private credit bureaus is 5%Public Credit  This is low compared to otherRegistries (PCR) regions (18% East Asia, 34% in LACPrivate CreditBureaus (PCB) and 64% in OECD countriesNeither PCR or PCB Source: Doing business 2011No information 22 © 2012, MIX and CGAP. All rights reserved.
    • Interest Rate Regulation • 17 countries with interest rate ceiling on loans • 7 countries (CEMAC and Ethiopia) with minimum rates on deposits • Interest rate ceilings by type of institution, e.g. WAEMU : 27%No Interest rate for MFIs and 18% for banksceiling on loans • Restrictions tied to certainInterest rate ceiling types of loans , e.g. agriculturalon Loans loans in Nigeria or type of No Information population, e.g. in Uganda and Benin • Growing call for regulation of interest rate as a result of the second-wave of the global financial crisis 23 © 2012, MIX and CGAP. All rights reserved.
    • Table of Contents Overview of the Microfinance Sector in SSADiverse Ecosystem of Financial Service Providers Regulatory Environment Funding Flows Provider Performance in Global Context 24 © 2012, MIX and CGAP. All rights reserved.
    • Funding Structure Trends: Deposits Continue to Play Key Role100% Deposits remain the80% largest source of funding for all but60% NGOs – many of which are not40% allowed to mobilize deposits.20% Equity is dropping especially at NBFIs, 0% which are 2006 2008 2010 2006 2008 2010 2006 2008 2010 2006 2008 2010 2006 2008 2010 increasingly focused on deposits. There Bank CU/Coop NBFI NGO Rural was, however, an Bank uptake of equity at Equity Deposits Borrowings banks, rural banks, and NGOs in 2010.Source: Mix Market: Cross Market Analysis 25 © 2012, MIX and CGAP. All rights reserved.
    • Cross-Border Funding +15% -6% +31% 3.3 3.1 +65% +5% 2.9 2.2 2.3 2.2 +59% 1.3 .8 +49% +10% +10% 1.3 Dec07 Dec08 Dec09 Dec10 -12% -3% +5% Dec07 Dec08 Dec09 Dec10 .6 .8 .9 Multi-Region .6 .6 .6 .7 Dec07 Dec08 Dec09 Dec10 Eastern Europe & Dec07 Dec08 Dec09 Dec10 Central Asia (ECA) Middle East & North Africa (MENA) +12% East Asia & the +17% Pacific (EAP) +14% +2% -6% 3.5 +10% 3.3 +12% 1.7 1.7 3.1 +8% 1.5 2.8 +34% 2.3 1.3 2.0 1.9 1.4 Dec07 Dec08 Dec09 Dec10 Sub-Saharan AfricaCross-border funding Dec07 Dec08 Dec09 Dec10 (SSA) Dec07 Dec08 Dec09 Dec10to SSA increased Latin America & Caribbean (LAC) South Asia (SA)steadily but at lower Data for the 20 funders in our samplerates than global Cross-border commitments to microfinance – US$ billiongrowth in funding. Annual growth ratesSource: 2011 CGAP Cross-Border Funder Survey. 26 © 2012, MIX and CGAP. All rights reserved.
    • Local vs. Foreign Debt300,000,000 12.0%250,000,000 10.0% There is a relatively200,000,000 8.0% equal split between local and foreign borrowings, even as150,000,000 6.0% local funds are more expensive than100,000,000 4.0% foreign, approaching ten percent interest 50,000,000 2.0% rate on loans to MFIs. 0 0.0% Africa North America Western Europe Amount (USD), total Rate, weighted average Source: Mix Market: Funding Structure 27 © 2012, MIX and CGAP. All rights reserved.
    • Sources of Debt Financing Amount (USD), total300,000,000250,000,000200,000,000150,000,000100,000,000 50,000,000 Nearly three quarters of borrowings 0 come from financial institutions DFI Financial Institution Fund Government Other and funds, which are also the lenders charging the highest Rate, weighted average interest rates to MFIs. 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% DFI Financial Fund Government Other Institution 28 © 2012, MIX and CGAP. All rights reserved.
    • Table of Contents Overview of the Microfinance Sector in SSADiverse Ecosystem of Financial Service Providers Regulatory Environment Funding Flows Provider Performance in Global Context 29 © 2012, MIX and CGAP. All rights reserved.
    • Five Year Trend Analysis 76 SSA MFIs reported financial and outreach information to MIX Number of reporting MFIs consistently from 2005-2010.Source: Mix Market: Cross Market Analysis data download The following slides will be based on these MFIs. 30 © 2012, MIX and CGAP. All rights reserved.
    • Market Coverage by Size of MFI % Borrowers by Size of MFI* % Depositors by Size of MFI* 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Large Medium Small Large Medium Small Large MFIs have the lion’s share of client outreach across SSA but are experiencing slowed growth rates in both borrowers and depositors. * Size based on number of borrowers: small: <10,000, medium: ≥10,000 ≤30,000, large: >30,000Source: Mix Market: Cross Market Analysis data download 31 © 2012, MIX and CGAP. All rights reserved.
    • Low Financial Expenses Due to Deposit Focus Africa maintains the second Financial expense ratio lowest financial expense ratio8.0% (second only to MENA, where there is little debt-financing6.0% with a greater focus on4.0% equity).2.0% With such a large focus on0.0% deposit mobilization, MFIs in SSA EAP ECA LAC MENA South Asia SSA overall require a smaller Financial expense/ assets percentage of external debt, leading to a low financial expense ratio. 32 © 2012, MIX and CGAP. All rights reserved.
    • Risk: SSA in a Global Context SSA has had the highest risk of all regions in the past five years, though PAR>30 decreased slightly in 2010.Source: Mix Market: Cross Market Analysis 33 © 2012, MIX and CGAP. All rights reserved.
    • Medium-sized MFIs Face Greatest Challenges with Risk Large and small MFIs saw a drop in PAR>30, though medium MFIs did not. The contraction in borrowers among large and small MFIs may have allowed them to better focus on the repayment from existing clients. In contrast, medium MFIs may have struggled with the growing pains of increasing numbers ofSource: Mix Market: Cross Market Analysis data download borrowers and depositors in 2010. 34 © 2012, MIX and CGAP. All rights reserved.
    • Returns: SSA in a Global Context ROA (Weighted Avg) SSA returns on assets are on par with all regions other than South Asia, which saw a large drop due to the microfinance crisis in India However, median returns are lower, indicating thatSource: Mix Market: Cross Market Analysis smaller MFIs are less profitable than other regions 35 © 2012, MIX and CGAP. All rights reserved.
    • About MIX and CGAPAbout MIX About CGAPMIX is the premier source for objective, qualified CGAP is an independent policy and research centerand relevant microfinance performance data and dedicated to advancing financial access for theanalysis. Committed to strengthening financial world’s poor. It is supported by over 30inclusion and the microfinance sector by development agencies and private foundations whopromoting transparency, MIX provides performance share a common mission to alleviate poverty.information on microfinance institutions (MFIs), Housed at the World Bank, CGAP provides marketfunders, networks and service providers dedicated intelligence, promotes standards, developsto serving the financial sector needs for low- innovative solutions and offers advisory services toincome clients. governments, microfinance providers, donors, and investors. For more information, visitMIX fulfills its mission through a variety of http://www.cgap.org.platforms. On MIX Market (www.mixmarket.org),we provide instant access to financial and socialperformance information covering approximately2,000 MFIs around the world. Our publications,MicroBanking Bulletin and MIX MicrofinanceWorld, feature thorough and timely analysis basedon qualified data and research. 36 © 2012, MIX and CGAP. All rights reserved.