Inafi africa cotonou declaration


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The entry of microfinance institutions into the remittances market

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Inafi africa cotonou declaration

  1. 1. International Network of Alternative Financial Institutions Building a Partnership for DevelopmentBuilding a Partnership for Development in Africa: the role of Microfinancein Africa: the role of Microfinance Institutions and the DiasporaInstitutions and the Diaspora OrganizationsOrganizations INAFI Africa Consultative Forum, 5-6 November 2007, Held at the Cotonou International Conference Centre, Boulevard de la Marina, Cotonou, Benin The INAFI Africa/ African Diaspora Cotonou Consultation background On 5 and 6 November 2007, INAFI Africa and the Africa Diaspora met at the Cotonou Conference Centre, Benin. The purpose of this meeting; attended by 50 delegates, was fivefold. During the one and half day consultative forum, the two groups were able to: 1. Establish the feasibility of collaborating together in harnessing remittances with microfinance to create jobs and enhance incomes.
  2. 2. 2. Define precisely the areas where there are immediate opportunities where both partners may contribute effectively to sustainable microfinance and human development. 3. Review worldview experiences and examples of migrants’ involvement in microfinance development. 4. Discuss mutual expectations, fears, and measures necessary to establish a secure safe and trusted platform for working together. 5. In the few areas of immediate action, identify the lead person(s) and practical steps towards realization of shared goals. 6. Create the space and time necessary for representatives of the two organizations to interact and get to know each other better. The consultative forum was organized to coincide with the global INAFI Conference on microfinance, remittances and development; also just held two days later at the same Conference Centre in Cotonou, Benin. Prior to the INAFI Consultative forum, there had been three explorative meetings between the 51-member microfinance organizations network and Diaspora association which had recommended the Cotonou forum. Besides INAFI Africa, the various Diaspora organizations or associations had concluded detailed discussions with the global INAFI network and the Asian and Latin American Chapters of the network about how to tap migrant remittances to develop microfinance. action plan These are the immediate action agreed by the 42 INAFI Africa and Africa Diaspora delegates to the Cotonou Consultative forum: • Clear purpose and vision of partners. • Safety of investments e.g. MFIs must meet basic. • Reasonable mix of profit and social return e.g. expansion of access, job creation, and better health services for poor families. Page 2
  3. 3. • MFIs to introduce new products of interest to the Diaspora, e.g. more affordable money transfer services that reach the last mile and credit guarantee for families and Diaspora in their country of migration. • There is need for a system of verification and compliance to back up the partnership. 1. Building trust was recognized as the first step in building long-lasting partnership between INAFI Africa member organizations and the African Diaspora. To this end, the forum recommended the organization of exchange study tours for the Africa Diaspora to MFIs and vice versa. 2. The forum identified acquisition of equity in INAFI Africa MFIs, given their more socially responsible mix of risk and return, as an important area of opportunity for collaboration. 3. The forum identified help from African Diaspora in facilitating foreign exchange guarantees for MFIs against foreign currency loans from the international capital markets. 4. Technology was identified as a two-way opportunity for the Diaspora and INAFI member organizations. On the one hand, the Africa Diaspora has experts in ICT that can support the MFIs, upgrade/develop their systems on reasonable terms. On the other hand, MFIs can adapt technology and combine this with their wide service delivery network to provide a platform for a more affordable money transfer. This way, the partnership gives an edge to the African Diaspora owned money transfer companies competing against the global giants like Western Union Forum. 5. The forum noted to INAFI members that they have a key role to play in helping to redress the overwhelmingly negative external image of Africa by reframing their missions from poverty alleviation to wealth creation and demonstrating tangible impact on job creation and enhancing clients’ incomes. 6. The forum called upon MFIs to document their own successes as intermediaries and their customers and Page 3
  4. 4. disseminate this information widely, especially via the world-wide web. 7. The forum called upon the Diaspora and MFIs to closely collaborate in campaigning and lobbying for an appropriate/conducive regulatory environment for their intended partnership in money transfer, capitalizing microfinance development, and making a contribution to sustainable human development. 8. The forum called upon the INAFI member organizations to lobby for the rightful recognition of the invaluable contribution by the Africa Diaspora in creating jobs, addressing poverty, and relief to their families and communities. 9. An INAFI Africa-wide ICT inventory was recommended to be done within the next six months. This baseline analysis shall provide the platform for upgrading, connectivity, and initiation of money transfer services. 10. An E-group was formed to facilitate ongoing exchange, dissemination of information, and strategizing between INAFI member organizations and the African Diaspora. 11. INAFI Africa to provide a hub for e-networking between the Diaspora and MFIs. 12. The forum proposed the establishment of the following five committees:  A committee to define the role and required capacity for INAFI Africa to provide the leadership and coordination of the partnership. The committee will also look into the immediate resources to support take off of the partnership.  An ICT group to lead the ICT inventory and strategy.  A communication committee to develop a policy and strategy for disseminating positive case studies and communicating more generally.  An investment committee to explore the opportunities for mobilizing African Diaspora investment and designing a fund prospectus. Page 4
  5. 5.  A committee to focus on immediate money transfer. 13. MFIs’ capacity to deliver appropriate and affordable services conveniently was recognized to be of paramount importance. As a result, the forum called MFIs to pay attention to their leadership, governance, and service delivery capacity through appropriate training of their human resource. context of action The Consultative forum noted how microfinance, a new system of delivering self-sustaining financial services to a previously ignored, excluded, disadvantaged and poor third world population surreptitiously emerged three decades ago. The forum acknowledged that the new field of service dubbed “microfinance” is now a fully-fledged industry worth some $150 billion. The participants were informed that, although initially a preserve of relief and non-profit organizations, microfinance is today delivered by a very diverse group of financial organizations, including the regulated e.g. downscaling commercial banks, credit unions, and transformed/specialized microfinance NGOs, etc. as well as unregulated financial intermediaries. Participants acknowledged that microfinance is a service now found to be in every part of Africa. The forum heard that an assessment of the microfinance sector by the Africa Union in early 2007 identified close to 7,000 active microfinance institutions in the 53 member states. Hence, the keynote speaker, basing his calculation on the typical average outstanding loan portfolio of the 51 INAFI Africa member organizations, noted that Africa’s gross outstanding loan portfolio was close to $10 billion. While observing this was a huge amount of investment, the INAFI Africa keynote speaker noted how the annual remittances from the African Diaspora to the mother continent was even much bigger; at $39 billion citing a report just released by IFAD and Inter-American Bank2 . Still further, the forum heard from the INAFI Africa keynote speaker that despite the huge opportunities for harnessing remittances with microfinance (and even talent from the Diaspora), there was as yet no 2 2006 IFAD Report Page 5
  6. 6. concrete plan of action. But he strongly urged the forum not to waste any more time in coming up with a simple, yet concrete first step. While calling upon the consultative forum to urgent action, the keynote speaker pointed out to Africa’s disadvantaged position in attracting financing for the development of its microfinance sector. While also noting the areas of strength and challenges of Africa’s microfinance sector – such as the huge size and established technology, etc, he at the same time expressed a bewilderment as to why Africa has not been as successful in benefiting from the new capital specifically targeting microfinance worldwide. For instance, he noted that Africa’s microfinance industry has experienced rapid growth in the past 12 years. He also noted that competition in microfinance has evidently stiffened over the period due to a fast learning clientele and the entry into the emerging market by all sorts of operators, including formal financial institutions that once shirked the lower end market segment. However, along with this expansion and growth, he acknowledged that the industry has begun to experience multiple challenges at different fronts, e.g.: • Declining growth in new customers as well as the outstanding loan portfolio • Declining portfolio yield • Increasing level of financial cost as a proportion of total expenditure The consultative forum heard about some of the most likely causes for this overall trend, which included amongst other: • Shortage of funds to scale up, or strengthen institutional human capital • Due to a change in focus, i.e., commercialization of services, some microfinance organizations now prefer to invest in other ways rather than giving out loans to the poor • Notable drift or change in target clientele and delivery system • Product failure and subsequent recalling of loans • Low demand for loans due to unsuitable terms, including perceived high interest rates, declining profits in the micro/small- scale enterprise sector due to low entry barriers and too many firms competing for same market The consultative forum observed how, for the first time in three decades, Africa reported a net decline in client base in 2005. In Uganda, there was Page 6
  7. 7. a drop of 15 percent in client base! Delegates agreed that Africa’s future microfinance system was clearly challenged to find new strategies if it is to grow and prosper. Within the region itself, it was noted that access to microfinance also varies by country and sub-region. The microfinance system in Tunisia, for example, is reaching more of the country’s population than the systems in Senegal, Togo, Uganda, or Ethiopia. Throughout the region, not just the number of new institutions entering the market is diminishing, but also the number of first-time microfinance customers joining the system is either declining or stagnated. Furthermore, whereas 75 percent of microfinance institutions in Asia are concentrated in rural areas, in Africa 65 percent are concentrated in the urban areas. In addition to the limited and unbalanced outreach, the microfinance system in Africa also lags behind other regions in performance. Table B: Global Distribution of Investment Funds (in US$, millions) Source: McKinsey, 2007; Micro Rate, 2007 With regard to resources for funding growth, Africa is also the region that is most lacking; having received the least amount of the nearly $1 billion funds invested yearly since 2000. Even though the level of investment in Africa’s microfinance system has increased lately; from about 1.3 percent of total funds invested in 2003, to 5.3 percent by 2005, the absolute amount of external capital to Africa targeting the sector is disproportionately small compared to investments going to Asia’s and Latin America’s microfinance systems; the two regions attracted nearly six percent and 41.8 percent of the growth capital in 2006 (table A). Yet, more than 90 percent of the 120 microfinance institutions surveyed by CGAP in Africa in 2004 cited lack of capital as their single most important constraint to growth. Region Private funds Public investors All Investors Total Debt Equity Debt Equity Guarantees Eastern Europe & Central Asia 35.6 73.5 323 68.2 2 502.2 Latin America & Caribbean 162.8 67.4 150.9 13.4 63.3 457.9 Sub-Saharan Africa 31.2 14.9 1.7 6.1 9 62.9 East Asia & Pacific 23.9 1.2 6 3.7 0.9 35.7 South Asia 27.7 1 0 5.3 1.1 29 Middle East & North Africa 1.8 0 0 0 7 8.8 Total 276.9 158 481.6 96.6 83.3 1,096.5 Page 7
  8. 8. Many of the operators lack sufficient resources to finance their investment needs. Therefore, to meet these needs, they are depending on the same international capital markets, either from official sources or from private capital sources. Aside from being relatively expensive and hard to get, however, both gross foreign development aid and foreign direct investment are far much less than migrant remittances worldwide. In 2006, for instance, total global remittances, of which close to $39 billion came to Africa, was $300 billion, compared to the $232 billion in foreign capital. This volume of migrant remittances to the developing world alone was almost twice the amount of total development aid from all formal sources. As a proportion of the gross domestic product in 2006, remittances were the largest source of external capital in many developing countries. It is further believed that about another 50 percent or even double the formal volume of remittances flows to developing countries like Africa through informal channels. This makes migrant remittances a potentially very important source of capital for human development. How to harness this large source of funding to narrow the funding gap facing the microfinance sector is the overall purpose of this pertinent consultative forum held in Cotonou, Benin. Page 8
  9. 9. GROUP 1 NAME Diaspora /INAFI Country/Region Organization Contact Address Email Phone Fax Post Box 1 Papa Aly Ndior INAFI Senegal ACEP 338697550 (221)7764468 19 (221)338252 935 BP:5817 Dakar-Fann, Senegal 2 Barutwanayo Moussa INAFI Burundi CECM (257)2224927 2213375 (257)222133 75 BP:6665 Buj.Burundi 3 Ndeye Mariane Thioye INAFI Senegal FDEA (221)33825- 20-58/33824- 71-53 77569-35-48 (221)33825- 92-87 BP:3921 Dakar Senegal 4 Abdou Mawa Ndiaye Diaspora Spain CASC 34.93 692272 c/come.g 42 Bxs,08003 Barcelona 5 Timothy Xerxes Munyao INAFI Kenya KADET Timothy.munyao@kadet (254)733- 747203 Box 1676- 00200,Nairobi, Kenya 6 Tossou Felix INAFI Benin FED 97-447364 01BP 309 Cotonou 7 Moses Ehigiamusoe INAFI Nigeria LAPO (234)5260007 2 (234)526000 756 PMK.1729 Benin City Edo State Nigeria 8 Adanmado Franck INAFI Benin ASSOPIL (229)2136064 BP:1291 Page 9
  10. 10. 95455633 Calavi 9 Bikashy Chowdhury Barua Diaspora ORG The Netherlands BASUG Bikash.chowdhurybarua (31)-0-6- 290855/88 (31)-0-70- 3818204 Dr.j.Presserstr-30 2552 LN, The Hague The Netherlands 10 C-E Chikezle Diaspora ORG UK AFFORD Chukwu-emeka@afford- +44207587 3919 +44-7847 400001 11 Phyllis Mbungu INAFI Kenya SMEP (254)20- 55761 (254)20- 55768 Box 64063 -00620 Nairobi Kenya 12 Liberat Diaspora Org Netherlands Ropabu +31-0-6- 422755811 Maissata Nd. Niasse INAFI SENEGAL INAFI INternational maissata@inafiinternati (221 )77 618 0252 (221) 8604222 BP: 374 Dakar-Fann, Senegal GROUP 2 1 A. Cheruiyot INAFI Kenya K-Rep (254)20- 4343495 4343493 Box 10528-00100 Nairobi Kenya 2 Mohmoud M. Diaspora Somalia HIRDI +31- 640270728 Postbus 9004 1180 MA Amstelveen The Netherlands Page 10
  11. 11. 3 OzdenYalim Diaspora Turkey/Netherlands MIND +31(0)651005 724 Rapenburgerstr.78 1011 MK Amsterdam, NL 4 Joaquin Changue-Hay Diaspora ESPANIA ASOC:RIEBAPU A 5 Mamadou Lamine Gueye INAFI Senegal CAURIE-MFI (221)3395230 86 (221)339551 4339 BP:3024 Thies-Senegal 6 Mindanda Mohogu Diaspora DR Congo/Netherlands AFRIK FINANCE +31- 0610064174 Melis Stoke Lan 1542 2541 ET Den Haag Netherlands GROUP 3 1 Samuel Baguma INAFI Uganda UTRUST FINANCE Samuel.baguma@u- (256)7725024 24 (256)237046 Box 6972 Kampala,Uganda 2 Millicent Odongo Diaspora Kenya/Netherlands CFD +31- 615187150 3 Godfrey Jokonya INAFI Zimbabwe ZAMBUKO w (263)4333950 /302495 (254)433364 1 Box 1183 Harare 4 Wilson Obomanu Diaspora Nigeria ASDA +31-0-6- 27207817/81 27 5 Ndeye Sophie Ba INAFI Senegal PAMECAS (221)33839 8660 (221)835320 6 BP:15354 Dakar, Senegal Page 11
  12. 12. 6 Sylvia van den Bag-Ortega Diaspora Bolivia/Netherlands AYNI MIND +31- 302735157 7 Leah Mansaray Diaspora Sierra Leone ACCESS POINT CASH m +44-7939- 455-782 GROUP 4 1 Mohamed A. Hussein INAFI Somaliland Amaahkakaal MFI .uk (252)-52 3691 2 Mekka Abdelgabar Diaspora Sudan/Holland Women Org. Netherlands, Darfur +31- 703606458 +31- 31703627139 416 2501 CK The Hague The Netherlands 3 Andrew Odunga INAFI Tanzania PRIDE- TANZANIA (255)27250- 2945 (255)272504 050 Box 13900 Arusha Tanzania 4 Ahmadou Tidiana Diallo Diaspora Espagne Senegal APCISAD KANDEENA +34-627196 788 +34938/ 467605 5 Khady Sakho Diaspora MFI- FRANCE Senegal MECSEF(Mutue l d’Epargne et d Credit des Séne galais de France) +3367445482 8 6 Tony Fosu Appiah INAFI Ghana SINAPIABA Trust (233)2081224 59 (233)513248 3 Box 4911 Kumasi 7 Akiyeni Maximin Diaspora Benin ONG of (229)9093126 Page 12
  13. 13. Diaspora (229)930469- 03 GROUP 5 1 Bardouille Raj Diaspora North America Canada Cornell University rajbardouille (905)507- 0815 1919-25 Kingsbridge Garden Circle Mississanga,Ontario LSR 481,Canada 2 Anthony Githinji INAFI Kenya SISDO githnjianthony@gmail.c om (254)722- 818811 (254)20- 3871531 Box 76622 Nairobi,Kenya 3 Vicky Bishubo INAFI Tanzania PRIDE- Tanzania (255)713533 727 (255)22- 2185031 Box 65266-00508 Dar-es-Salaam Tanzania 4 Kane Yaya Migrant France/West Africa PSEAU +33-42876006 5 Dan Thierry INAFI Benin Vital Finance (229)9791723 0 6 Sam Afrane INAFI Ghana SINAPI ABA Trust (233)20- 8121004 7 Ali Haji Abdullah INAFI Somalia Amaahda Danyarta amaahdadanyarta@hot (252)252- 826391/ (252)252- 796083 Page 13