The Promise of a Better Tomorrow The continent’s long-term growth prospects are strong, propelled by both external trends in the global economy and internal changes in the continent’s societies and economies. Presented by Michael Mithika, SAM Course Director - School of African Microfinance

1. The Future of Microfinance
in Africa
Michael Mithika, SAM Course Director
17th September, 2015

2. 2
Africa’s
Story…
hope
is
rising!
Promise of a better tomorrow
Population is young and resourceful…
Cities are booming…
Africans are embracing technology rapidly

3. 3
The
Promise
of
a
Better
Tomorrow
The continent’s long-term growth prospects are strong, propelled by both external trends
in the global economy and internal changes in the continent’s societies and economies.
Africa in 2008
$1.6 Tn
Africa’s combined
consumer spending in
2008
Africa’s collective GDP in
2008, roughly equal to
Brazil’s or Russia’s
$860 Bn
316 Mn
The no. of new mobile
phone subscribers
signed up in Africa since
2000
52
The no. of cities with
more than one million
people each
Africa in 2020
Africa’s collective GDP
in 2020$2.6 Tn
$1.4 Tn
Africa’s consumer
spending in 2020
1.1 Bn
No. of Africans of
working age in 2040
50%
The portions of people
living in cities by 2030
Source: Mc Kinsey

4. 4
Role
of
Financial
Services
in
Economic
Growth
The financial services sector is considered to be the continent’s brightest prospect – and
a means to tap into Africa’s extensive and unexploited growth potential.
Expected CAGR of
between 2013 and 2020
11%
% of sector’s
contribution
to continent’s
collective
GDP in 2009
19%
% of sector’s
contribution
to continent’s
collective
GDP in 2020
Source: AfDB and KPMG
Individuals
FS helps individuals:
Save money
Guard against
uncertainty
Build credit
Companies
FS help businesses:
Start up
Expand
Increase efficiency
Compete in local
and international
markets15%

5. 5
Financial
Inclusion
“Economic growth is the surest way to a substantial and sustained
reduction in poverty in Africa; policy for long-term growth requires
focusing on the larger and more formal parts of the financial
system. But while even growth-enhancing policies are beginning to
have their effect, improving the access of low-income households
and micro entrepreneurs to financial services should become an
additional central focus of financial sector policy”
World
Bank
-­‐
Making
Finance
Work
for
Africa
World
Bank

6. 6
Barriers
to
Financial
Inclusion
! A vicious cycle of insufficient information, inappropriate products, inadequate
infrastructure, and inflexible regulatory environments has limited the FS providers’
markets to clients within the top tiers of the economic pyramid.
Source: World Bank _Global Financial Inclusion Report
Self-reported barriers to use an account at a financial institution
0 10 20 30 40 50 60 70
Religious reasons
Lack of trust
Cannot get an account
Lack of necessary documentation
Financial institutions too far away
Family member already has an account
Does not need an account
Not enough money
Cited as the only reason
Cited with other reasons

7. 7
Is
MicroGinance
the
Answer?
57%
Percentage of for-profit
African MFIs
70%
Proportion of total loan
portfolio accounted for by
for-profit MFIs in SSA in
2009
71%
Proportion of total deposits
accounted for by for-profit
MFIs in SSA in 2009
16.5 million
depositors
6.5 million
borrowers
Shift of industry from being development-inspired to business-oriented…
African MFIs in 2008
2010
3,600 MFIs
200 Mnclients worldwide
135 Mn clients living on less
than US$1.25/day
Source: Microfinance Status Report 2014

8. 8
Changing
reputation
of
microGinance
The initial enthusiasm about microfinance has been replaced by skepticism.
“Microfinance is an idea whose time has come.”
- Kofi Annan, United Nations Secretary-General 2005
“The industry seems to be pumping debt down people’s throats. It is no
longer socially responsible and does not belong in developmental
funds.”
- Andrew Canter, Futuregrowth Asset Management. South Africa, 2012
“…there has been surprisingly little rigorous research that attempts to
isolate the impact of microfinance from other factors, or to identify how
different approaches to microfinance change outcomes.”
-Center for Global Development, 2007

9. 9
The
Golden
Age
is
Over…
“We’re competing against the
whole world... I mean everybody is
doing microfinance.”
- Rupert Scofield,
CEO, FINCA International
Traditional microfinance banks are now considered veterans in an industry
that is rapidly morphing.
New players entering the arena:

10. 10
The
Road
Ahead…
What needs to happen for us to succeed?
REGULATE
INNOVATE
PARTNER
• New, lower cost business models
• Simple and easily marketable products
• Client-centric financial services
• To protect the customer i.e. responsible pricing,
transparency
• To encourage innovation
• To leverage technology
• To scale more easily