What is the Cutting Edge for Microfinance in Rural Areas and Arid and Semi-Arid Land?   The case of UNCDF intervention in ...
<ul><li>Sierra Leone country context </li></ul>
Sierra Leone country context <ul><li>Post-conflict, emerging from a decade of civil war that resulted in the  decline in s...
Background of the microfinance sector before intervention <ul><li>Estimated unmet demand of microfinance services between ...
UNCDF Conceptual Approach   UNCDF supports the Building of Inclusive Financial Sectors, both through investments in emergi...
UNCDF Inclusive Finance sector development approach <ul><li>Step 1. Sector Assessment : Diagnosis of the financial sector ...
Results achieved <ul><li>- Building partnerships & mobilizing resources </li></ul><ul><li>The project has performed admira...
Results achieved <ul><li>- Outreach   2004   2009 </li></ul><ul><li>Number of active clients 13,000  123,960 </li></ul><ul...
<ul><li>- Loan portfolio outstanding 2004  2009 </li></ul><ul><li>  US$ 1 million   US$ 11.5 million </li></ul><ul><li>- P...
Results achieved <ul><li>The following graphs show the exceptionally high rate of growth in clients and portfolios since p...
Results achieved <ul><li>Graph 1: Growth in Active Loan Clients </li></ul>
Results achieved <ul><li>Graph 2: Growth in Outstanding Loan Portfolio </li></ul>
Results achieved <ul><li>Graph 3: Growth in Active Savings Clients </li></ul>
Results achieved <ul><li>- Attracting Market Leaders </li></ul><ul><li>Under the MicroLead program (US$20M), one of the wo...
Lessons learned and success factors <ul><li>This case demonstrates that if government and donors combine their efforts, it...
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AMERMS Workshop 6: Microfinance in Rural Areas and Arid and Semi-Arid Land (PPT by Issa Barro)

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FULL TITLE:
What is the Cutting Edge for Microfinance in Rural Areas and Arid and Semi-Arid Land?
ROOM: Tsavo A
Translated session: English & French
PANEL:
Chair: Mr. Wolday Amha, Executive Director, Association of Ethiopian Microfinance Institution (AEMFI), Ethiopia
Panelist: Mr. Issa Barro, Inclusive Finance Specialist, United Nations Capital Development Fund (UNCDF), Senegal
Panelist: Mr. Mwangi Githaiga, Managing Director, Kenya Women Finance Trust (KWFT), Kenya

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AMERMS Workshop 6: Microfinance in Rural Areas and Arid and Semi-Arid Land (PPT by Issa Barro)

  1. 1. What is the Cutting Edge for Microfinance in Rural Areas and Arid and Semi-Arid Land? The case of UNCDF intervention in sierra leone Africa-Middle East Regional Microcredit Summit April 7-10, 2010 Nairobi, Kenya Issa Barro Consultant
  2. 2. <ul><li>Sierra Leone country context </li></ul>
  3. 3. Sierra Leone country context <ul><li>Post-conflict, emerging from a decade of civil war that resulted in the decline in social indicators, putting Sierra Leone at the bottom of UNDP’s Human Development Index. </li></ul><ul><li>Destruction of rural finance + Banks that had up-country branches closed them. Nearly all savings and credit cooperative organizations have been rendered non operational. </li></ul><ul><li>Most microcredit was being supplied by 50 to 60 microfinance NGOs, projects and programs. Most of these microfinance operations were small and institutionally weak with an outreach of less than 200 clients, and none had achieved sustainability. </li></ul>
  4. 4. Background of the microfinance sector before intervention <ul><li>Estimated unmet demand of microfinance services between 76,000 and 145,000 customers and a financing gap of US$ 20 to 40 million. </li></ul><ul><li>This gap to be overcome only by building robust and professional institutions or bank units that are specialized in providing sustainable financial services to the lower segments of the market. </li></ul><ul><li>It was then suggested that there was a need for an integrated, sector-wide approach to achieve significant, long term results. </li></ul><ul><li>Measures should be taken to ensure optimal coordination among stakeholders in order to effectively advance the vision and strategy presented in the Government’s microfinance policy. </li></ul>
  5. 5. UNCDF Conceptual Approach UNCDF supports the Building of Inclusive Financial Sectors, both through investments in emerging microfinance institutions and through the UNCDF Sector Development Approach to Inclusive Finance: 1.1 Gather data on access to financial services to establish a Baseline and measure results. 1.2 Evaluate legal, regulatory and policy framework, and financial services infrastructure requirements. 1.3 Evaluate human and institutional capacity and constraints. 1.4 Formulate program document that summarizes the process, identifies key constraints to inclusive finance and provides initial basis for steps 2 and 3. 1. Financial Sector Assessment 4.1 Address policy issues identified in National Strategy and Action Plan. 4.2 Establish Investment Fund and Investment Committee. 4.3 Scale up investments in Financial service providers and infrastructure. 4.4 Gather data on access, quality and quantity of financial services providers, financial service provider sustainability and investment results. 4. Implement National Action Plan 2. Pilot Initial Activities 3. Develop Nationally Owned Policy, Strategy & Action Plan 2.1 Train key policy makers on issues related to inclusive finance. 2.2 Research legal options for Fund for Inclusive Finance and establish Investment Committee. 2.3 Identify and pilot investment mechanism, solicit initial proposals and hold Investment Committee. 3.1 Develop supportive legal, regulatory & policy environments, 3.2 Strengthen capacity of financial service providers to provide products and services to all market segments.
  6. 6. UNCDF Inclusive Finance sector development approach <ul><li>Step 1. Sector Assessment : Diagnosis of the financial sector with a view to identifying gaps, constraints and opportunities to be addressed </li></ul><ul><li>Step 2. Nationally owned vision and strategy : Design and adoption of a National Strategy for Financial Inclusion (NSFI) grounded by microfinance best practices , along with an action plan and budget in a concerted process </li></ul><ul><li>Step 3. Implementation k ey principles : 1) Disciplined management; 2) Transparency; 3) Reporting and accountability; 4) Pricing, with MFIs free to set prices reflecting market conditions and their internal costs; 5) Delinquency control; 6) Appropriate techniques and products; 7) Gender consideration; 8) Governance, and free from government and political interference </li></ul>
  7. 7. Results achieved <ul><li>- Building partnerships & mobilizing resources </li></ul><ul><li>The project has performed admirably in this regard, mobilizing at least an additional US$12.5 million in MFI financing since its inception </li></ul><ul><li>- Creating an enabling environment </li></ul><ul><li>Microfinance is seen as an integral part of the financial sector. Clear guidelines for both credit-only and deposit-taking MFIs have been issued </li></ul><ul><li>- C reating a microfinance sector in SL </li></ul><ul><li>2004: only a handful of relief and development agencies providing credit but there was no real microfinance sector; </li></ul><ul><li>2009: more than 20 institutions offering financial services to the poor and underserved, and adhering to recognized good practice </li></ul>
  8. 8. Results achieved <ul><li>- Outreach 2004 2009 </li></ul><ul><li>Number of active clients 13,000 123,960 </li></ul><ul><li>MFIs have achieved very broad geographic coverage, including the difficult-to-access rural areas:Lumley, Wellington, Kambia, Lungi, Bo, Kono, Kenema and Kailahun, Waterloo in the Western Area, Lunsar and Port Loko town in Port Loko; Daru and Segbwema in Kailahun; Bamoi and Rokuprr in Kambia and Blama in Kenema, Makeni, Moyamba, Pujehun, Kissy, Pademba Road 1, Pademba Road 2, Mile 91, Tonkilili, Segbwema, Kailahun, Mattru, Bonthe, Kabala, Koinadugu and Zimmi. </li></ul>
  9. 9. <ul><li>- Loan portfolio outstanding 2004 2009 </li></ul><ul><li> US$ 1 million US$ 11.5 million </li></ul><ul><li>- Portfolio quality (PAR30) 2004 2009 </li></ul><ul><li>15.45% 7.82% </li></ul><ul><li>- Profitability (OSS) 2004 2009 </li></ul><ul><li> 70.33% 103.30% </li></ul>
  10. 10. Results achieved <ul><li>The following graphs show the exceptionally high rate of growth in clients and portfolios since project inception, with active loan clients increasing by 350% in the five-year period, and the loan portfolio by more than 650% </li></ul>
  11. 11. Results achieved <ul><li>Graph 1: Growth in Active Loan Clients </li></ul>
  12. 12. Results achieved <ul><li>Graph 2: Growth in Outstanding Loan Portfolio </li></ul>
  13. 13. Results achieved <ul><li>Graph 3: Growth in Active Savings Clients </li></ul>
  14. 14. Results achieved <ul><li>- Attracting Market Leaders </li></ul><ul><li>Under the MicroLead program (US$20M), one of the world market leader in microfinance, BRAC Bengla Desh, started activities in SL, with a target outreach of 80,000 clients by end of 2013 </li></ul><ul><li>- Attracting private investors </li></ul><ul><li>One of the best performing MFI that the project helped implement and develop, Finance Salone, has attracted private investors and was purchased by a local commercial bank and a private investment fund for US$1M. </li></ul>
  15. 15. Lessons learned and success factors <ul><li>This case demonstrates that if government and donors combine their efforts, it is feasible that within a period of 5 to 7 years, a poor, post-conflict country could move from the start-up to the consolidation phase of building an inclusive financial sector and achieve tremendous results in terms of outreach, impact, sustainability, etc. </li></ul><ul><li>A good sector assessment is key </li></ul><ul><li>Government should demonstrate its commitment, but not beyond its role creating an enabling environment and economic opportunities </li></ul><ul><li>Agreement on the principle and implementation of best practices is key to sound and sustainable sector development. </li></ul>
  16. 16. Thank you

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