Study of Microfinance Sector Capacity Building in Sierra Leone
Study of Microfinance Sector Capacity Building in Sierra Leone
Study of Microfinance Sector Capacity Building in Sierra Leone
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<strong>Study</strong> <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance <strong>Sector</strong><br />
<strong>Capacity</strong> <strong>Build<strong>in</strong>g</strong> <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong><br />
June 2008
Assignment 2007/146094<br />
Country : <strong>Sierra</strong> <strong>Leone</strong><br />
<strong>Study</strong> <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance <strong>Sector</strong><br />
<strong>Capacity</strong> <strong>Build<strong>in</strong>g</strong> <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong><br />
Prepared by :<br />
Andrew Obara (Team Leader)<br />
Poul Iben Hansen (F<strong>in</strong>ancial <strong>Sector</strong> Expert)<br />
Submitted by<br />
ADE <strong>in</strong> association with Grontmij Carl Bro<br />
"This report has been produced with the assistance <strong>of</strong> the European Commission. The contents <strong>of</strong> this report is<br />
the sole responsibility <strong>of</strong> ADE and can <strong>in</strong> no way be taken to reflect the views <strong>of</strong> the European Commission."
Table <strong>of</strong> Contents<br />
LIST OF ACRONYMS ................................................................................. 1<br />
EXECUTIVE SUMMARY ............................................................................. 1<br />
PART I: OVERVIEW OF THE SECTOR ASSESSMENT ................................... 3<br />
1. INTRODUCTION...................................................................................... 3<br />
1.1. Country Context ........................................................................ 3<br />
1.2. Rationale for the <strong>Study</strong>............................................................... 4<br />
1.3. Approach and Methodology Used ................................................. 5<br />
1.4. Possible Limitations and Challenges ............................................. 6<br />
2. THE MICROFINANCE SECTOR IN OTHER ACP COUNTRIES ......................... 7<br />
3. THE MICROFINANCE SECTOR IN SIERRA LEONE...................................... 8<br />
3.1. State <strong>of</strong> the Rural/ Pro-poor F<strong>in</strong>ancial <strong>Sector</strong>................................. 8<br />
3.2. Consumer characteristics............................................................ 8<br />
3.3. Supplier characteristics .............................................................. 9<br />
3.4. Products and delivery methodologies ......................................... 11<br />
3.5. Pr<strong>of</strong>essionalism <strong>in</strong> manag<strong>in</strong>g MFIs.............................................. 12<br />
3.6. Level <strong>of</strong> awareness <strong>of</strong> key sound practices .................................. 12<br />
3.7. Stage <strong>of</strong> growth....................................................................... 12<br />
4. ACCESS TO FINANCIAL SERVICES IN SIERRA LEONE ............................. 15<br />
5. EXISTING INSTITUTIONAL FRAMEWORK .............................................. 17<br />
5.1. Overview and structure ............................................................ 17<br />
5.2. Government and its programs ................................................... 17<br />
5.3. Registrars, supervisors/ regulators ............................................ 17<br />
5.4. Apex Organizations (Loan Fund<strong>in</strong>g & <strong>Capacity</strong> <strong>Build<strong>in</strong>g</strong>)................ 17<br />
5.5. Tra<strong>in</strong><strong>in</strong>g and technical assistance service providers ...................... 17<br />
5.6. Development partners.............................................................. 18<br />
5.7. Lessons learnt to date .............................................................. 18<br />
6. POLICY AND REGULATORY ENVIRONMENT ........................................... 19<br />
6.1. F<strong>in</strong>ancial sector laws & their enforcement ................................... 19<br />
6.2. Government’s stated policy....................................................... 19<br />
7. GAP/ SWOT ANALYSIS....................................................................... 19<br />
7.1 Strengths and weaknesses........................................................ 19<br />
7.2. Opportunities and Threats ........................................................ 22<br />
7.3. Strategic Gaps <strong>in</strong> the sector ...................................................... 23<br />
PART II. FIVE YEAR STRATEGY [2010-2014]...................................... 24<br />
1. CAPACITY BUILDING STRATEGIES ...................................................... 24<br />
1.1. Overall Goal............................................................................ 24<br />
1.2. Objectives and outputs............................................................. 24<br />
1.3. Strategies to Achieve the Objectives .......................................... 27<br />
1.3.1. Fund rais<strong>in</strong>g for micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g ......................... 30<br />
1.3.2. Establishment <strong>of</strong> a wholesale fund for micr<strong>of</strong><strong>in</strong>ance................... 31<br />
1.4. Cont<strong>in</strong>uity Strategy <strong>of</strong> SMART-Cap............................................. 32<br />
2. RECOMMENDATIONS......................................................................... 33
APPENDICES ......................................................................................... 35<br />
APPENDIX 1: LOGICAL FRAMEWORK FOR THE STRATEGY............................... 37<br />
APPENDIX 2: ACTIVITY MATRIX FOR THE STRATEGY ..................................... 41<br />
APPENDIX 3: GROWTH OF UGANDA’S MICROFINANCE SECTOR....................... 47<br />
APPENDIX 4: ASSESSMENT OF NSOS .......................................................... 52<br />
APPENDIX 5: POLICY, LEGAL AND REGULATORY ENVIRONMENT ..................... 73<br />
APPENDIX 6: LIST OF DOCUMENTS REVIEWED ............................................. 83<br />
APPENDIX 7: LIST OF PERSONS INTERVIEWED............................................. 87<br />
APPENDIX 8: MFI PERFORMANCE SUMMARIES.............................................. 91
LIST OF ACRONYMS<br />
Short<br />
ACP<br />
ADE<br />
AfDB<br />
ARC<br />
ARD<br />
AROA<br />
BizClim<br />
BoSL<br />
CARE<br />
CB<br />
CBFI<br />
CCF<br />
CEDA<br />
CoP<br />
CORDAID<br />
DEC<br />
DFC<br />
EC<br />
ECD<br />
EDF<br />
EU<br />
EUR<br />
FS<br />
FSS<br />
GoSL<br />
HM<br />
IC<br />
IDB<br />
IFAD<br />
KfW<br />
MarMCB<br />
MatMCB<br />
MDGs<br />
MFI<br />
MFP<br />
MIS<br />
Long<br />
African, Caribbean and Pacific Group <strong>of</strong> States<br />
Aide au Développement Economique<br />
African Development Bank<br />
American Refugee Committee<br />
Association for Rural Development<br />
Adjusted rate <strong>of</strong> return on assets<br />
Bus<strong>in</strong>ess Climate Facility<br />
Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong><br />
Cooperative Assistance Relief Everywhere<br />
Community Banks<br />
Community Based F<strong>in</strong>ancial Institution<br />
Christian Children’s Fund<br />
Community Empowerment and Development<br />
Agency<br />
Chief <strong>of</strong> Party<br />
Catholic Organisation for Relief and Development<br />
AID<br />
Delegation <strong>of</strong> the European Commission<br />
Strategy Advisors and Project Managers for the<br />
F<strong>in</strong>ancial <strong>Sector</strong><br />
European Commission<br />
European Commission Delegation<br />
European Development Fund<br />
European Union<br />
Euro, currency<br />
F<strong>in</strong>ance Salone<br />
F<strong>in</strong>ancial Self Sufficiency<br />
Government <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong><br />
Hope Micr<strong>of</strong><strong>in</strong>ance<br />
Investment Committee<br />
Islamic Development Bank<br />
International Fund for Agricultural Development<br />
Kreditanstalt für Wiederaufbau<br />
Marampa Masimera Community Bank<br />
Mattru Masimera Community Bank<br />
Millennium Development Goals<br />
Micr<strong>of</strong><strong>in</strong>ance Institution<br />
Micr<strong>of</strong><strong>in</strong>ance Programme<br />
Management Information System
MITAF<br />
MOFDEP<br />
NaCSA<br />
NCRRR<br />
NDB<br />
NGO<br />
NSO<br />
OFSA<br />
OSS<br />
PrCB<br />
PRIMED<br />
ROSCA<br />
SAPA<br />
SC<br />
SCB<br />
SLAMFI<br />
SME<br />
SMT<br />
TA<br />
TOR<br />
UNCDF<br />
UNDP<br />
UNHCR<br />
USAID<br />
USD<br />
VSLA<br />
WB<br />
WH<br />
YCB<br />
RTA<br />
PC<br />
Micr<strong>of</strong><strong>in</strong>ance Investment and Technical Assistance<br />
Facility<br />
M<strong>in</strong>istry <strong>of</strong> F<strong>in</strong>ance, Plann<strong>in</strong>g and Economic<br />
Development<br />
National Commission for Social Action<br />
National Commission for Reconstruction,<br />
Resettlement and Rehabilitation<br />
National Development Bank<br />
Non Governmental Organization<br />
Network Supported Organisation<br />
Other F<strong>in</strong>ancial Services Act<br />
Operational Self Sufficiency<br />
ProCredit Bank<br />
Promot<strong>in</strong>g Initiations for Micro Enterprise<br />
Development<br />
Rotat<strong>in</strong>g (Osuso) Sav<strong>in</strong>gs and Credit Associations<br />
The Social Action and Poverty Alleviation<br />
Programme<br />
Steer<strong>in</strong>g Committee<br />
Segbwema Community Bank<br />
<strong>Sierra</strong> <strong>Leone</strong> Association <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance<br />
Institutions<br />
Small and Medium Sized Enterprises<br />
<strong>Sierra</strong> <strong>Leone</strong> Micr<strong>of</strong><strong>in</strong>ance Trust<br />
Technical Advisor<br />
Terms <strong>of</strong> Reference<br />
United Nations Capital Development Fund<br />
United Nations Development Programme<br />
United Nations High Commission for refugees<br />
United States Agency for International<br />
Development<br />
United States Dollar, currency<br />
Village Sav<strong>in</strong>gs and Loan Associations<br />
World Bank<br />
World Hope<br />
Yoni Community Bank<br />
Resident Technical Advisor<br />
Paramount Chief
EXECUTIVE SUMMARY<br />
This report articulates and concludes a five month assignment for the<br />
government <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> under the coord<strong>in</strong>ation <strong>of</strong> ADE <strong>in</strong> association<br />
with Grontmij|Carlbro as participants <strong>in</strong> the BizClim framework contract.<br />
The assignment was to study the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry and develop a<br />
national capacity build<strong>in</strong>g strategy for it. In l<strong>in</strong>e with the Terms <strong>of</strong><br />
reference, the consultants accomplished the follow<strong>in</strong>g:<br />
Document reviews to assess the policy/legal/ regulatory environment<br />
and meso level support structures<br />
Field visits to MFIs and chiefdoms<br />
Interviews with key players<br />
<strong>Study</strong> <strong>of</strong> a successful ACP country <strong>in</strong> MF<br />
Analysed the demand survey report (done by DFC under another<br />
contract)<br />
Micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry gap/ SWOT analysis<br />
Draft strategy<br />
Stakeholders’ workshop and regional conference<br />
The key strategic gaps identified and addressed <strong>in</strong> this strategy are:<br />
(i)<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
Absence <strong>of</strong> an <strong>in</strong>stitutionalised, last<strong>in</strong>g capacity build<strong>in</strong>g<br />
framework<br />
Inadequate knowledge and skills at all levels<br />
Over-ambitious and less than effective laws on non-bank<br />
f<strong>in</strong>ancial regulation<br />
Limited rural/ geographical outreach<br />
Limited diversity <strong>of</strong> products and their delivery methodologies,<br />
severely limit<strong>in</strong>g growth <strong>in</strong> all the other areas<br />
Very low bus<strong>in</strong>ess aptitude and f<strong>in</strong>ancial services awareness<br />
among most <strong>of</strong> the population<br />
(vii) Weak national network support organizations<br />
(viii) Lack <strong>of</strong> stakeholder agreement on fundamental <strong>in</strong>dustry issues.<br />
(ix)<br />
Lack <strong>of</strong> adequate fund<strong>in</strong>g, both for capacity build<strong>in</strong>g and loan<br />
portfolios<br />
To address the above gaps, the National <strong>Capacity</strong> <strong>Build<strong>in</strong>g</strong> Strategy<br />
(2010 – 2014) seeks to:<br />
Establish an effective, <strong>in</strong>stitutionalised national capacity build<strong>in</strong>g<br />
centre for MF with dist<strong>in</strong>ct w<strong>in</strong>dows for MFI strengthen<strong>in</strong>g &<br />
<strong>in</strong>culcation <strong>of</strong> sound practices 1 , product development, outreach<br />
deepen<strong>in</strong>g/ broaden<strong>in</strong>g, and for bus<strong>in</strong>ess capacity enhancement<br />
1<br />
Includ<strong>in</strong>g tra<strong>in</strong><strong>in</strong>g & sensitization <strong>of</strong> NSOs, government and other public <strong>of</strong>ficials whose<br />
roles impact on the MF <strong>in</strong>dustry,<br />
page 1
Support member-<strong>in</strong>itiated and member-susta<strong>in</strong>ed growth <strong>of</strong><br />
SLAMFI for lobby, advocacy and <strong>in</strong>dustry dialogue<br />
Implement an effective, systematic fund rais<strong>in</strong>g for micr<strong>of</strong><strong>in</strong>ance<br />
sector capacity build<strong>in</strong>g<br />
Recommend the sett<strong>in</strong>g up <strong>of</strong> a wholesale lend<strong>in</strong>g function to<br />
f<strong>in</strong>ance MFI loan portfolios on a market responsive and susta<strong>in</strong>able<br />
way<br />
Po<strong>in</strong>t out the key constra<strong>in</strong>ts and problems, not directly related to<br />
the micr<strong>of</strong><strong>in</strong>ance sector, which unless addressed will check the<br />
success <strong>of</strong> the strategy.<br />
This report also makes recommendations on the follow<strong>in</strong>g strategic level<br />
gaps, weaknesses and threats which cannot be addressed fully by the<br />
strategy because responsibility and authority for their implementation<br />
falls outside <strong>of</strong> the sector:<br />
Review <strong>of</strong> the relevant legislation and regulatory provisions<br />
Physical and ICT <strong>in</strong>frastructure<br />
Inadequate regulation <strong>of</strong> community banks under the current<br />
legislation<br />
Illiteracy<br />
Public expectations on fast outreach by MFIs<br />
page 2
PART I: OVERVIEW OF THE SECTOR<br />
ASSESSMENT<br />
1. Introduction<br />
This report presents the f<strong>in</strong>d<strong>in</strong>gs and analysis from the micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>dustry assessment <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong>, expla<strong>in</strong>s the strategic gaps<br />
identified and proposes strategies to address them. The strategies focus<br />
on critical areas that need to be addressed for micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g to become more effective dur<strong>in</strong>g and after the five years.<br />
The assignment followed a request for assistance filed by the National<br />
Commission for Social Action (NaCSA) on behalf <strong>of</strong> the Government <strong>of</strong><br />
<strong>Sierra</strong> <strong>Leone</strong>. NaCSA, a Government Commission <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong>, works<br />
on reconstruction, social welfare <strong>in</strong>itiatives and micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g. Follow<strong>in</strong>g the request, ADE <strong>in</strong> association with Grontmij|Carlbro<br />
won the bid (under the BizClim framework contract) to undertake the<br />
<strong>in</strong>dustry assessment and develop a strategic development plan for <strong>Sierra</strong><br />
<strong>Leone</strong>’s micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry.<br />
This document is the f<strong>in</strong>al assignment outcome. It embraces both an<br />
assessment <strong>of</strong> the country’s micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry capacity build<strong>in</strong>g and a<br />
strategy/ recommendations for more effective and efficient micr<strong>of</strong><strong>in</strong>ance<br />
capacity build<strong>in</strong>g. Because detailed reports on <strong>in</strong>dustry assessment have<br />
already been sent 2 to the client and contract<strong>in</strong>g entity dur<strong>in</strong>g the first<br />
phase <strong>of</strong> the assignment, the first part <strong>of</strong> this report is presented <strong>in</strong> a<br />
succ<strong>in</strong>ct and concise way. This allows the actual strategy, which is the<br />
key deliverable, to take more prom<strong>in</strong>ence <strong>in</strong> the document.<br />
1.1. Country Context<br />
<strong>Sierra</strong> <strong>Leone</strong> emerged out <strong>of</strong> a vicious civil war <strong>in</strong> 2002. By the time it<br />
ended, the war had destroyed the country’s <strong>in</strong>frastructure, economic life,<br />
social structures and people’s morale immensely. Government has s<strong>in</strong>ce<br />
then embarked on a phased recovery, rehabilitation and reconstruction<br />
programme.<br />
A few facts and observations highlight the country’s economic and<br />
demographic characteristics, and thus provide some <strong>in</strong>sight <strong>in</strong>to the<br />
broader context <strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry <strong>in</strong> the country:<br />
The population is about six million people <strong>of</strong> whom just under 50<br />
per cent are over 20 years old (work<strong>in</strong>g age)<br />
By 2003, the country had about 935,800 households – which could<br />
have grown to 1.01 million by now 3<br />
2<br />
3<br />
In l<strong>in</strong>e with the ToR<br />
If we apply an estimated growth <strong>of</strong> 2%, one third <strong>of</strong> the overall annual population<br />
growth<br />
page 3
The <strong>in</strong>formal sector (which has the bulk <strong>of</strong> potential micr<strong>of</strong><strong>in</strong>ance<br />
clientele) accounts for about two thirds <strong>of</strong> the labour force<br />
65 per cent <strong>of</strong> the population lives <strong>in</strong> rural areas<br />
Annual economic growth (GDP) is around 6%<br />
Over 80 per cent <strong>of</strong> the population lives below the <strong>in</strong>ternational<br />
poverty l<strong>in</strong>e <strong>of</strong> US$ 1 per day<br />
Largely illiterate or semi-literate population<br />
Annual rate <strong>of</strong> <strong>in</strong>flation is below 10% and the national currency 4 is<br />
fairly stable<br />
The country has 20 ethnic groups, with Krio as the national l<strong>in</strong>gua<br />
franca, English as the <strong>of</strong>ficial language and a number <strong>of</strong> local<br />
dialects<br />
In <strong>in</strong>ternational trade, exports are dom<strong>in</strong>ated by diamonds<br />
account<strong>in</strong>g for over three quarters <strong>of</strong> the export value<br />
The country has a negative trade balance not likely to be closed up<br />
soon<br />
Over 80% <strong>of</strong> imports are consumer goods.<br />
The above aspects strongly suggest that purposive promotion <strong>of</strong> rural<br />
development and <strong>in</strong>clusive economic growth is necessary. Government is<br />
committed to do<strong>in</strong>g this and prioritization <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance outreach is a<br />
relevant strategy contribut<strong>in</strong>g to its realisation.<br />
1.2. Rationale for the <strong>Study</strong><br />
Government <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong>’s economic development strategy po<strong>in</strong>ts out<br />
development <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance (for <strong>in</strong>creased access to f<strong>in</strong>ancial services<br />
by rural and poor people) as one <strong>of</strong> its priorities. To some extent, the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry, which is still young <strong>in</strong> the country, has shown a<br />
potential to fulfil this. In context, the rationale for this undertak<strong>in</strong>g 5 lay <strong>in</strong><br />
the follow<strong>in</strong>g aspects:<br />
The vital place <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> the national development<br />
priorities<br />
Micr<strong>of</strong><strong>in</strong>ance, as an emerg<strong>in</strong>g vital sector, needs a comprehensive<br />
and coherent capacity build<strong>in</strong>g strategy as a basis for its<br />
accelerated development<br />
The comprehensive sector assessment done <strong>in</strong> 2003 recommended<br />
some strategic <strong>in</strong>itiatives <strong>in</strong>clud<strong>in</strong>g implement<strong>in</strong>g a Pro-Poor<br />
F<strong>in</strong>ancial <strong>Sector</strong> Development as a project (PPFSD, which is <strong>in</strong><br />
place). These <strong>in</strong>itiatives and other developments have provided<br />
lessons learnt which, together with lessons learnt elsewhere <strong>in</strong> the<br />
ACP, should appropriately <strong>in</strong>form the next micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g strategy for the country<br />
The current phase <strong>of</strong> the PPFSD, under MITAF 6 ends <strong>in</strong> 2009 and a<br />
grand strategy needs to be developed for the years after that<br />
4<br />
5<br />
6<br />
The <strong>Leone</strong><br />
Micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry assessment and development <strong>of</strong> a comprehensive capacity<br />
build<strong>in</strong>g strategy for the sector<br />
Which focuses ma<strong>in</strong>ly on strengthen<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance retail <strong>in</strong>stitutions<br />
page 4
The political will, national policy, current limited supply <strong>of</strong> f<strong>in</strong>ancial<br />
services and vivid market potential all seem to favour micr<strong>of</strong><strong>in</strong>ance<br />
development, yet the <strong>in</strong>dustry outreach, though quite impressive <strong>in</strong><br />
growth over the last four years, rema<strong>in</strong>s modest<br />
A majority <strong>of</strong> people <strong>in</strong> the country do not have access to f<strong>in</strong>ancial<br />
services, and this can be a check on overall economic growth<br />
In the context <strong>of</strong> all the above, the key gaps, weaknesses and<br />
threats needed to be identified for the strategy to be well<br />
formulated.<br />
1.3. Approach and Methodology Used<br />
The approach taken <strong>in</strong> the assignment, which was highlighted <strong>in</strong> the ToR,<br />
followed a logical process <strong>in</strong> which each subsequent activity was <strong>in</strong>formed<br />
by a preced<strong>in</strong>g one and eventually all the activities contributed towards<br />
the f<strong>in</strong>d<strong>in</strong>gs and strategy. Us<strong>in</strong>g this approach the consultants undertook<br />
the follow<strong>in</strong>g broad activities <strong>in</strong> sequence:<br />
(ii)<br />
(iii)<br />
(iv)<br />
(v)<br />
(vi)<br />
Review <strong>of</strong> numerous key documents to get a broad<br />
understand<strong>in</strong>g <strong>of</strong> the <strong>in</strong>dustry structure, operations, issues and<br />
dynamics, and to assess the policy/legal/ regulatory<br />
environment as well as the meso level support<br />
Development <strong>of</strong> guid<strong>in</strong>g <strong>in</strong>terview/ survey tools followed by field<br />
visits to MFIs and chiefdoms<br />
Interviews with key players (non-MFIs)<br />
<strong>Study</strong> <strong>of</strong> the relevant capacity build<strong>in</strong>g aspects <strong>of</strong> an successful<br />
ACP that has a well developed micr<strong>of</strong><strong>in</strong>ance sector 7<br />
Analysis <strong>of</strong> the demand/supply survey report by DFC under<br />
another contract, to get more facts and op<strong>in</strong>ion for the <strong>in</strong>dustry<br />
assessment and strategy development<br />
(vii) Conduct<strong>in</strong>g the <strong>in</strong>dustry/ sector gap analysis, us<strong>in</strong>g <strong>in</strong>formation<br />
from all the above processes<br />
(viii) Draw<strong>in</strong>g up a list <strong>of</strong> key strategic gaps, threats & weaknesses<br />
to be addressed <strong>in</strong> the strategy<br />
(ix)<br />
(x)<br />
(xi)<br />
Development <strong>of</strong> overall goal, key objectives, desired outputs<br />
and a detailed activity matrix<br />
Draft <strong>of</strong> capacity build<strong>in</strong>g strategy<br />
Plann<strong>in</strong>g for and conduct<strong>in</strong>g the national stakeholders’<br />
workshop and regional conference, to get more <strong>in</strong>put from<br />
various stakeholders<br />
(xii) Production <strong>of</strong> the f<strong>in</strong>al report (<strong>in</strong>dustry assessment report and<br />
capacity build<strong>in</strong>g strategy).<br />
7<br />
Uganda<br />
page 5
1.4. Possible Limitations and Challenges<br />
The follow<strong>in</strong>g are the possible limitations and challenges to the smooth<br />
realization <strong>of</strong> this strategy:<br />
Assignment looked at the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry, which is<br />
heavily affected by developments external to it. Although<br />
recommendations have been made on some <strong>of</strong> these, events<br />
and circumstances outside <strong>of</strong> the <strong>in</strong>dustry could affect the<br />
success <strong>of</strong> the strategy<br />
At the time <strong>of</strong> completion <strong>of</strong> this assignment, there doesn’t<br />
seem to be an obvious, strong and effective <strong>in</strong>stitution to<br />
champion the implementation <strong>of</strong> the strategy after the PPFSD<br />
project ends. MFP-NaCSA, the requestor <strong>of</strong> the assignment, has<br />
s<strong>in</strong>ce been significantly weakened by way <strong>of</strong> reduced<br />
pr<strong>of</strong>essional staff, cont<strong>in</strong>ued absence <strong>of</strong> operational funds and<br />
<strong>in</strong>adequate logistics<br />
There are considerable fundamental differences among<br />
stakeholders 8 that unless resolved are likely to affect the<br />
implementation <strong>of</strong> this strategy.<br />
8<br />
On their strategic th<strong>in</strong>k<strong>in</strong>g on key aspects <strong>of</strong> the <strong>in</strong>dustry<br />
page 6
2. THE MICROFINANCE SECTOR IN OTHER ACP COUNTRIES<br />
This subsection briefly presents the wider context and dynamics <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> other ACP countries, putt<strong>in</strong>g the specific case <strong>of</strong> Uganda<br />
that shares a lot with <strong>Sierra</strong> <strong>Leone</strong>. The ToR required consultants to look<br />
<strong>in</strong>to this wider context so as to complement the local lessons learnt <strong>in</strong><br />
develop<strong>in</strong>g a suitable <strong>in</strong>dustry sector strategy for <strong>Sierra</strong> <strong>Leone</strong>.<br />
Micr<strong>of</strong><strong>in</strong>ance as an <strong>in</strong>dustry has risen from <strong>in</strong>cognito to worldwide<br />
recognition <strong>in</strong> less than 20 years. In many poor and middle <strong>in</strong>come<br />
countries, it has played a key role <strong>in</strong> provid<strong>in</strong>g f<strong>in</strong>ancial services for the<br />
poor, marg<strong>in</strong>alized or remote rural people that the bank<strong>in</strong>g sector<br />
previously found “unbankable”. Among the ACP countries, the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry is at various stages <strong>of</strong> maturity – rang<strong>in</strong>g from the<br />
very mature ones at the f<strong>in</strong>ancial sector <strong>in</strong>tegration stage like Bolivia,<br />
Bangladesh and Uganda to those at the growth stage like <strong>Sierra</strong> <strong>Leone</strong><br />
and to those at start-up stage like Liberia. In many ACP countries,<br />
especially <strong>in</strong> Africa, the formal banks have for long had limited <strong>in</strong>terest <strong>in</strong><br />
serv<strong>in</strong>g the low <strong>in</strong>come people. The banks have tended to concentrate<br />
around urban and peri-urban centres to the relative neglect <strong>of</strong> rural areas<br />
where <strong>in</strong> most cases the masses live. Micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions are mak<strong>in</strong>g<br />
headway <strong>in</strong> provid<strong>in</strong>g f<strong>in</strong>ancial services for such people, although a lot<br />
still needs to be done. 9<br />
Institutions <strong>of</strong>fer<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance services <strong>in</strong> ACP countries now range<br />
from some commercial banks to prudentially regulated MFIs <strong>in</strong> special<br />
tiers, non-regulated micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions, village banks, community<br />
banks, sav<strong>in</strong>gs and credit cooperative organizations (SACCOs) and small,<br />
local community based organizations. Whereas the <strong>in</strong>dustry structure<br />
differs from one country to another, all these various <strong>in</strong>stitutional<br />
categories or their equivalents exist <strong>in</strong> most ACP countries that have a<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry.<br />
Of the ACP countries that have developed a mature micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>dustry, Uganda has the closest similarities to <strong>Sierra</strong> <strong>Leone</strong> and thus<br />
<strong>of</strong>fers the closest parallels (location <strong>in</strong> Africa, emergence from civil<br />
conflict <strong>in</strong> 1986 to establish economic structures to <strong>in</strong>duce growth, and<br />
predom<strong>in</strong>ance <strong>of</strong> subsistence farm<strong>in</strong>g as the source <strong>of</strong> livelihood, large<br />
<strong>in</strong>formal sector). In the work plan, the consultants agreed with the client<br />
to review the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry <strong>of</strong> one other ACP country and to get<br />
some lessons there from.<br />
The growth <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> Uganda has shown that adaptation <strong>of</strong><br />
<strong>in</strong>ternational sound practices, active government support <strong>in</strong> creat<strong>in</strong>g a<br />
suitable environment, focus on susta<strong>in</strong>ability, <strong>in</strong>dustry cohesion and a<br />
holistic approach to capacity build<strong>in</strong>g all play vital roles <strong>in</strong> promot<strong>in</strong>g<br />
development <strong>of</strong> the <strong>in</strong>dustry. Appendix 4 to this report gives some<br />
details on the growth <strong>of</strong> Uganda’s micr<strong>of</strong><strong>in</strong>ance.<br />
9<br />
In areas such as develop<strong>in</strong>g suitable products, more affordable pric<strong>in</strong>g, broaden<strong>in</strong>g and<br />
deepen<strong>in</strong>g outreach<br />
page 7
3. THE MICROFINANCE SECTOR IN SIERRA LEONE<br />
3.1. State <strong>of</strong> the Rural/ Pro-poor F<strong>in</strong>ancial <strong>Sector</strong><br />
Among the adverse effects <strong>of</strong> the war <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong> was a destruction<br />
<strong>of</strong> rural f<strong>in</strong>ance. Banks that had upcountry branches closed them. Some<br />
bank branches <strong>in</strong> the prov<strong>in</strong>ces were burnt or otherwise destroyed. The<br />
result is that currently, commercial banks are only concentrated <strong>in</strong><br />
Freetown the capital and Bo, the second city. Outside <strong>of</strong> these, there are<br />
no bank branches. Follow<strong>in</strong>g the worsen<strong>in</strong>g <strong>of</strong> rural <strong>in</strong>frastructure and<br />
rural economy, nearly all sav<strong>in</strong>gs and credit cooperative organizations<br />
have been rendered non functional and even their f<strong>in</strong>ancial apex, the<br />
National Cooperative Bank, closed. Former rural banks have also all<br />
closed down.<br />
Some NGOs have started micr<strong>of</strong><strong>in</strong>ance programs and a number <strong>of</strong> them<br />
are show<strong>in</strong>g very encourag<strong>in</strong>g potential. From December 2005 (when the<br />
Pro Poor F<strong>in</strong>ancial <strong>Sector</strong> Development project managed by MITAF<br />
started work<strong>in</strong>g with MFIs) to September 2007, for <strong>in</strong>stance, the 10<br />
MFIs 10 <strong>in</strong> aggregate realised the follow<strong>in</strong>g overall improvement:<br />
TABLE 1: COMPARATIVE OVERALL PERFORMANCE OF MFIS<br />
PERFORMANCE MEASURE DEC 2005 Sep 2007<br />
Number <strong>of</strong> borrowers 24,251 48,115<br />
Total loan portfolio (US$ millions) 2.8 4.9<br />
Total number <strong>of</strong> savers 3,383 8,688<br />
Total Sav<strong>in</strong>gs/ deposits (US$ millions) 0.28 1.33<br />
Additionally, BoSL also helped four communities to open up community<br />
banks as pilots to provide a demonstration effect to the other<br />
communities to open their own. One community bank is do<strong>in</strong>g well, one<br />
is do<strong>in</strong>g averagely well and two are do<strong>in</strong>g critically badly. Apart from <strong>in</strong> a<br />
few large cities like Freetown, therefore, there is <strong>in</strong>adequate supply <strong>of</strong><br />
f<strong>in</strong>ancial services <strong>in</strong> most <strong>of</strong> the country.<br />
3.2. Consumer characteristics<br />
The follow<strong>in</strong>g characteristics were identified by the Micr<strong>of</strong><strong>in</strong>ance Demand<br />
Survey and the assessment lead<strong>in</strong>g to this strategic plan. The demand<br />
survey sampled households representative <strong>of</strong> all the relevant<br />
characteristics <strong>of</strong> the country’s population.<br />
10 ProCredit Bank(new and not an MFI <strong>in</strong> the strict sense), F<strong>in</strong>ance Salone(FS), Hope<br />
Micr<strong>of</strong><strong>in</strong>ance HM), Community Empowerment and Development Agency(CEDA),<br />
Association for Rural Development(ARD), Christian Children’s Fund/ <strong>Sierra</strong> <strong>Leone</strong><br />
Micr<strong>of</strong><strong>in</strong>ance Trust (CCF/SMT), Yoni Community Bank, Marampa Masimera Community<br />
Bank, Matru-Jong Community Bank and Segbwema Community Bank<br />
page 8
High level <strong>of</strong> illiteracy; overall, 62% <strong>of</strong> household heads reported<br />
to have no formal education, more so <strong>in</strong> the rural (73%) than <strong>in</strong><br />
the urban areas (36%).<br />
Agriculture is the most common source <strong>of</strong> <strong>in</strong>come (55% <strong>of</strong><br />
households). In rural areas it accounts for 74% <strong>of</strong> household<br />
<strong>in</strong>come.<br />
Overall the lowest <strong>in</strong>come region is the North, followed by East,<br />
South and then Western <strong>in</strong> that order<br />
Level <strong>of</strong> education impacts on usage <strong>of</strong> formal f<strong>in</strong>ancial services:<br />
75% <strong>of</strong> the households where the household head has no formal<br />
education uses <strong>in</strong>formal services, which only 5% <strong>of</strong> those with<br />
post-secondary education use<br />
Only 8% <strong>of</strong> households without formal education but 76% <strong>of</strong><br />
households with post-secondary education are banked.<br />
For the majority <strong>of</strong> respondents the reasons for not borrow<strong>in</strong>g are<br />
related to access.<br />
Current MFI clients are the poor and/ or low <strong>in</strong>come people <strong>in</strong><br />
urban & peri-urban locations 11 : rarely the very rural dwellers<br />
For many <strong>of</strong> those that have little or no access to f<strong>in</strong>ancial services,<br />
the mention <strong>of</strong> “micr<strong>of</strong><strong>in</strong>ance” rem<strong>in</strong>ds them <strong>of</strong> the defunct<br />
government credit (chiefdoms and NGO schemes), prompt<strong>in</strong>g them<br />
to ask questions like “when will the money come” or “how will it<br />
be distributed). They therefore need a lot <strong>of</strong> sensitization and<br />
education to become suitable consumers <strong>of</strong> susta<strong>in</strong>able f<strong>in</strong>ancial<br />
services.<br />
Most <strong>of</strong> those who approach MFIs seek loans rather than sav<strong>in</strong>gs<br />
or any other f<strong>in</strong>ancial services<br />
There is general lack <strong>of</strong> bus<strong>in</strong>ess acumen and f<strong>in</strong>ancial awareness<br />
among the exist<strong>in</strong>g and potential MFI clientele<br />
3.3. Supplier characteristics<br />
The table below is a summary <strong>of</strong> supplier characteristics, compiled after<br />
assess<strong>in</strong>g the 10 <strong>in</strong>stitutions currently aided by the Pro-poor F<strong>in</strong>ancial<br />
<strong>Sector</strong> Development project managed by MITAF as well as some <strong>in</strong>formal<br />
set-ups. The assessment <strong>in</strong>cluded field visits, performance reviews and<br />
detailed questionnaires which the MFIs filled and returned to the<br />
consultants.<br />
11 Includ<strong>in</strong>g some trad<strong>in</strong>g centres <strong>in</strong> rural areas.<br />
page 9
TABLE 2: FINANCIAL SERVICE SUPPLIER CHARACRTERISTICS IN<br />
SIERRA LEONE<br />
NGOs<br />
COMMUNITY<br />
BANKS<br />
OTHER<br />
BANKS<br />
INFORMAL<br />
GROUPS<br />
Ownership<br />
Fluid<br />
structures<br />
with no<br />
concrete<br />
ownership<br />
Companies<br />
limited by<br />
guarantee with<br />
share capital;<br />
owned by<br />
users who<br />
have paid for<br />
shares<br />
Dist<strong>in</strong>ct<br />
owners for<br />
each bank<br />
User-owned<br />
and <strong>in</strong>formal,<br />
<strong>in</strong> many<br />
cases not<br />
formalized<br />
Governance<br />
Governance<br />
and<br />
oversight by<br />
a board <strong>of</strong><br />
directors,<br />
most <strong>of</strong> who<br />
are <strong>of</strong> good<br />
pr<strong>of</strong>ile and<br />
need MF/<br />
governance<br />
related<br />
tra<strong>in</strong><strong>in</strong>g<br />
Board<br />
members from<br />
the local<br />
communities<br />
and a BoSL<br />
representative;<br />
most<br />
significantly<br />
need MF/<br />
governance<br />
tra<strong>in</strong><strong>in</strong>g<br />
Boards <strong>of</strong><br />
directors<br />
oversee<br />
management;<br />
BoSL<br />
regulates<br />
No formal<br />
governance<br />
but <strong>in</strong> some<br />
cases quite<br />
effective<br />
because<br />
members all<br />
know one<br />
another<br />
Management<br />
Senior<br />
managers<br />
are ma<strong>in</strong>ly<br />
from the<br />
welfare<br />
background;<br />
a few from<br />
bank<strong>in</strong>g<br />
Managers,<br />
ma<strong>in</strong>ly<br />
nationals,<br />
supported by<br />
RTAs and staff.<br />
They critically<br />
need further<br />
technical<br />
tra<strong>in</strong><strong>in</strong>g<br />
Pr<strong>of</strong>essional,<br />
experienced<br />
management,<br />
<strong>in</strong>clud<strong>in</strong>g<br />
expatriates<br />
Group self<br />
management;<br />
no hired or<br />
<strong>in</strong>dependent<br />
managers<br />
Technical<br />
aptitude<br />
Overall, fair<br />
aptitude<br />
which has<br />
improved<br />
with MITAF<br />
tra<strong>in</strong><strong>in</strong>g, and<br />
could be<br />
improved<br />
with more<br />
tra<strong>in</strong><strong>in</strong>g and<br />
TA<br />
Management<br />
and board<br />
members <strong>in</strong><br />
need <strong>of</strong><br />
tra<strong>in</strong><strong>in</strong>g; RTAs<br />
do<strong>in</strong>g some<br />
good job <strong>of</strong><br />
technical and<br />
mgt tra<strong>in</strong><strong>in</strong>g<br />
Management<br />
is technically<br />
apt and very<br />
technically<br />
skilled<br />
No technical<br />
aptitude. In<br />
their modest<br />
way,<br />
members<br />
govern and<br />
manage their<br />
affairs<br />
Products<br />
Ma<strong>in</strong>ly group<br />
based<br />
lend<strong>in</strong>g,<br />
backed by<br />
collateralized<br />
sav<strong>in</strong>gs, with<br />
limited<br />
product<br />
variety<br />
Group and<br />
<strong>in</strong>dividual<br />
sav<strong>in</strong>gs, group<br />
& <strong>in</strong>dividual<br />
loans, current<br />
accounts.<br />
Better product<br />
variety than<br />
NGOs<br />
Full range <strong>of</strong><br />
conventional<br />
bank<strong>in</strong>g<br />
products<br />
Collective<br />
sav<strong>in</strong>gs and<br />
merry-goround<br />
types<br />
<strong>of</strong> lend<strong>in</strong>g<br />
page 10
Pr<strong>of</strong>itability/<br />
susta<strong>in</strong>ability<br />
Asset quality<br />
Outreach<br />
Poverty<br />
focus<br />
NGOs<br />
OSS around<br />
or above<br />
100% <strong>in</strong><br />
most, and<br />
pr<strong>of</strong>itability<br />
is improv<strong>in</strong>g<br />
In some<br />
cases good<br />
(below 5%);<br />
<strong>in</strong> others<br />
less healthy.<br />
Overall,<br />
better than<br />
community<br />
banks.<br />
Far more<br />
numerical/<br />
geographical<br />
outreach<br />
than<br />
community<br />
banks,<br />
though still<br />
modest.<br />
6,000 to<br />
over 20,000<br />
clients per<br />
<strong>in</strong>stitution.<br />
COMMUNITY<br />
BANKS<br />
Some at<br />
around or just<br />
above break<br />
even, others<br />
far below<br />
break even. In<br />
3 <strong>of</strong> them,<br />
poor portfolio<br />
quality could<br />
threaten<br />
Susta<strong>in</strong>ability<br />
Generally poor,<br />
PAR >30 days<br />
rang<strong>in</strong>g from<br />
12% to 92%,<br />
and they do<br />
not take it as<br />
emergency<br />
Limited<br />
outreach to the<br />
immediate<br />
catchments<br />
area. From<br />
just over 1,000<br />
to just over<br />
2,000<br />
OTHER<br />
BANKS<br />
Operat<strong>in</strong>g<br />
pr<strong>of</strong>itably<br />
Very good,<br />
with PAR >30<br />
days near<br />
zero<br />
Target the<br />
economically<br />
active,<br />
monetized<br />
sector. Little<br />
rural or<br />
poverty<br />
outreach<br />
INFORMAL<br />
GROUPS<br />
Don’t aim at<br />
<strong>in</strong>stitutional<br />
pr<strong>of</strong>itability<br />
Usually<br />
excellent,<br />
though<br />
limited <strong>in</strong><br />
growth<br />
Limited to<br />
nucleus<br />
communities<br />
<strong>in</strong> villages.<br />
High High Not much Very high<br />
3.4. Products and delivery methodologies<br />
<strong>Sierra</strong> <strong>Leone</strong>’s micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry is at the start <strong>of</strong> its growth stage.<br />
Normally at this stage, product ranges are limited. Dur<strong>in</strong>g the first phase<br />
<strong>of</strong> this assignment (visits, <strong>in</strong>terviews and surveys) it was ascerta<strong>in</strong>ed that<br />
for micr<strong>of</strong><strong>in</strong>ance (which is the subject <strong>of</strong> the report), there are broadly<br />
group and <strong>in</strong>dividual loans, mandatory, collateralised and voluntary<br />
sav<strong>in</strong>gs and money transfer services, ma<strong>in</strong>ly through sub agency <strong>of</strong><br />
Western union. Substantial product development usually takes place<br />
dur<strong>in</strong>g the consolidation and <strong>in</strong>tegration stages. In the case <strong>of</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>, the bigger MFIs are just gett<strong>in</strong>g to grips with group methodologies<br />
(which are very popular dur<strong>in</strong>g the start-up, growth and early<br />
consolidation stages but beg<strong>in</strong> to wane <strong>in</strong> popularity dur<strong>in</strong>g the later<br />
consolidation and <strong>in</strong>tegration stages).<br />
page 11
The NGOs <strong>of</strong>fer basic <strong>in</strong>dividual and/ or group loans, with group<br />
guarantees backed by collateralised or “mandatory” sav<strong>in</strong>gs. Community<br />
banks have a number <strong>of</strong> loan and sav<strong>in</strong>gs products. The loan products <strong>of</strong><br />
community banks are very similar <strong>in</strong> their features, mak<strong>in</strong>g them variants<br />
<strong>of</strong> the same product rather than dist<strong>in</strong>ct products. Delivery<br />
methodologies are also quite limited, <strong>in</strong>volv<strong>in</strong>g (<strong>in</strong> most cases) clients<br />
com<strong>in</strong>g to the MFI premises or other designated location to get the<br />
services.<br />
Overall, there needs to be significant efforts at product development and<br />
<strong>in</strong>novation over the next five years. Potential areas <strong>of</strong> product<br />
development are asset f<strong>in</strong>ance/ micro leas<strong>in</strong>g, micro hous<strong>in</strong>g/ mortgage<br />
loans, special purpose sav<strong>in</strong>gs deposits, agricultural loans, energy<br />
equipment f<strong>in</strong>ance (like end-use f<strong>in</strong>ance for photovoltaic equipment), and<br />
longer term loans for agro process<strong>in</strong>g/ agribus<strong>in</strong>ess value cha<strong>in</strong>.<br />
3.5. Pr<strong>of</strong>essionalism <strong>in</strong> manag<strong>in</strong>g MFIs<br />
As can be <strong>in</strong>ferred from table 1 above, some MFIs are very pr<strong>of</strong>essionally<br />
managed and others are <strong>in</strong> dire need. Generally, the NGOs are do<strong>in</strong>g<br />
better <strong>in</strong> adopt<strong>in</strong>g and adher<strong>in</strong>g to sound practices. The community<br />
banks generally have a longer way to go.<br />
Pr<strong>of</strong>essionalism <strong>of</strong> the <strong>in</strong>dustry <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong> has <strong>in</strong> the last four years<br />
been facilitated and <strong>in</strong> a sense driven by MITAF. Although by design<br />
MITAF had a well def<strong>in</strong>ed and limited mandate, the project has<br />
undertaken activities which have helped the MFIs to become more<br />
pr<strong>of</strong>essional and improve their operations.<br />
3.6. Level <strong>of</strong> awareness <strong>of</strong> key sound practices<br />
The 10 MFIs work<strong>in</strong>g with MITAF are very aware <strong>of</strong> <strong>in</strong>ternational sound<br />
practices and have imbibed them to vary<strong>in</strong>g degrees. Their management,<br />
staff, board members have also been tra<strong>in</strong>ed on key areas <strong>of</strong> sound<br />
practices. Other <strong>in</strong>stitutions <strong>of</strong>fer<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance and other stakeholders<br />
have, however, not been exposed adequately.<br />
3.7. Stage <strong>of</strong> growth<br />
Micr<strong>of</strong><strong>in</strong>ance sectors/ <strong>in</strong>dustries that have matured <strong>in</strong>to <strong>in</strong>tegration<br />
(where micr<strong>of</strong><strong>in</strong>ance is an <strong>in</strong>tegral part <strong>of</strong> the f<strong>in</strong>ancial sector) have<br />
generally gone through the follow<strong>in</strong>g broad stages:<br />
page 12
Figure 1:<br />
Stages <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry growth<br />
start up<br />
Growth<br />
Consolidatio<br />
n<br />
Maturity/<br />
Integration<br />
1. Start-up: Dur<strong>in</strong>g which there are just a couple <strong>of</strong> <strong>in</strong>stitutions <strong>in</strong>volved,<br />
country <strong>in</strong>dustry standards are not yet set, outreach is m<strong>in</strong>imal, portfolio<br />
quality not very healthy, there is some confusion whether micr<strong>of</strong><strong>in</strong>ance is<br />
a bus<strong>in</strong>ess or charity, the MFIs are generally not pr<strong>of</strong>itable and have little<br />
aspiration to be.<br />
2. Growth: Dur<strong>in</strong>g which there are upcom<strong>in</strong>g MFIs which are grow<strong>in</strong>g<br />
rapidly <strong>in</strong> asset volume and clientele, more <strong>in</strong>stitutions are com<strong>in</strong>g up to<br />
provide micr<strong>of</strong><strong>in</strong>ance, country <strong>in</strong>dustry standards start to be discussed<br />
but are not yet very firmly adhered to, geographical outreach starts to<br />
<strong>in</strong>crease significantly but is still modest overall, portfolio quality <strong>of</strong> the<br />
older MFIs show signs <strong>of</strong> susta<strong>in</strong>able improvement but asset quality <strong>in</strong><br />
the <strong>in</strong>dustry is overall still not very healthy, it is generally agreed that<br />
micr<strong>of</strong><strong>in</strong>ance is a bus<strong>in</strong>ess and not charity, some <strong>of</strong> the MFIs turn<br />
pr<strong>of</strong>itable and most other MFIs develop the aspiration to become<br />
pr<strong>of</strong>itable/ susta<strong>in</strong>able.<br />
3. Consolidation: Dur<strong>in</strong>g which the sound practice MFIs have<br />
enormously grown <strong>in</strong> asset volume and clientele, more <strong>in</strong>stitutions are<br />
matur<strong>in</strong>g, country <strong>in</strong>dustry standards have been set and are cherished,<br />
the network organisation is fully <strong>in</strong>stitutionalised, substantial outreach<br />
has been atta<strong>in</strong>ed, portfolio quality <strong>of</strong> the older MFIs is cont<strong>in</strong>ually very<br />
good, it is obvious to all stakeholders that micr<strong>of</strong><strong>in</strong>ance is a bus<strong>in</strong>ess and<br />
page 13
not charity, MFIs source most <strong>of</strong> their fund<strong>in</strong>g from the money market<br />
and some from concessional lenders, the <strong>in</strong>stitutions are cont<strong>in</strong>ually<br />
improv<strong>in</strong>g their pr<strong>of</strong>itability and susta<strong>in</strong>ability.<br />
4. Integration: Dur<strong>in</strong>g which most MFIs have embraced sound<br />
practices, some MFIs have grown <strong>in</strong>to regulated f<strong>in</strong>ancial <strong>in</strong>stitutions<br />
without significantly chang<strong>in</strong>g their major client characteristics,<br />
commercial banks start to downscale their lower end market <strong>in</strong>to<br />
micr<strong>of</strong><strong>in</strong>ance clients (and develop suitable products for these), MFIs <strong>in</strong><br />
their diversification also take up some <strong>of</strong> the commercial banks’ lower<br />
end market. Most MFIs get their money from the local or <strong>in</strong>ternational<br />
money market, the <strong>in</strong>stitutions no longer yearn for grants to fund the<br />
loan portfolio, outreach is deep and wide, product development and<br />
<strong>in</strong>novation is widespread, competition comes from both other MFIs as<br />
well as the more formal banks, country <strong>in</strong>dustry standards are taken as<br />
a given, the network organisation plays the role <strong>of</strong> high level advocacy<br />
and custody <strong>of</strong> sound practices, there are codes <strong>of</strong> conduct for MFIs,<br />
pr<strong>of</strong>itability and susta<strong>in</strong>ability are obvious targets, not just promoted by<br />
pr<strong>of</strong>essionals but which the <strong>in</strong>stitutions keenly work towards.<br />
<strong>Sierra</strong> <strong>Leone</strong> is currently at the early period <strong>of</strong> the growth<br />
stage, and therefore would benefit a lot from the<br />
implementation <strong>of</strong> a well formulated <strong>in</strong>dustry capacity<br />
build<strong>in</strong>g strategy.<br />
page 14
4. ACCESS TO FINANCIAL SERVICES IN SIERRA LEONE<br />
Accord<strong>in</strong>g to the survey report done by the consult<strong>in</strong>g team (DFC and<br />
Statistics <strong>Sierra</strong> Leon) that undertook a parallel statistical survey at<br />
the time <strong>of</strong> this assignment:<br />
90% <strong>of</strong> households are currently not served by any lend<strong>in</strong>g<br />
<strong>in</strong>stitutions or groups<br />
Well over half <strong>of</strong> the respondents are f<strong>in</strong>ancially illiterate, more so<br />
<strong>in</strong> rural (65%) than <strong>in</strong> urban areas (36%).<br />
The country is severely under-banked. 96% <strong>of</strong> households receive<br />
regular <strong>in</strong>come from their most important source <strong>in</strong> cash.<br />
Only 13% <strong>of</strong> households are currently sav<strong>in</strong>g, more so <strong>in</strong> urban<br />
(24%) than <strong>in</strong> rural areas (8%).<br />
Only 13% <strong>of</strong> households have an outstand<strong>in</strong>g loan while the vast<br />
majority has no access to loans<br />
Of the households that currently have a loan, 81% received it from<br />
an <strong>in</strong>formal lender, 10% from a semi-formal lender or group and<br />
only 9% from a formal <strong>in</strong>stitution such as a commercial,<br />
development and community bank or an MFI<br />
The <strong>in</strong>cidence <strong>of</strong> never be<strong>in</strong>g banked decreases with an <strong>in</strong>crease <strong>in</strong><br />
the level <strong>of</strong> education and f<strong>in</strong>ancial literacy<br />
The unserved households are particularly found where the head<br />
has no formal education and is f<strong>in</strong>ancially illiterate.<br />
The key reasons given for not sav<strong>in</strong>g relate to lack <strong>of</strong> funds to<br />
save, <strong>in</strong>accessibility to f<strong>in</strong>ancial <strong>in</strong>stitutions, low f<strong>in</strong>ancial literacy<br />
(translat<strong>in</strong>g <strong>in</strong>to discomfort with f<strong>in</strong>ancial <strong>in</strong>stitutions),and<br />
irregularity <strong>of</strong> household <strong>in</strong>come<br />
The key reasons given for not borrow<strong>in</strong>g relate to lack <strong>of</strong> access to<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions, lack <strong>of</strong> <strong>in</strong>formation about the f<strong>in</strong>ancial<br />
<strong>in</strong>stitutions and their loans, lack <strong>of</strong> formal education (mak<strong>in</strong>g it<br />
difficult for people to approach and talk to f<strong>in</strong>ancial <strong>in</strong>stitutions),<br />
lack f<strong>in</strong>ancial literacy, religious <strong>in</strong>fluence (Moslem households<br />
tended not to borrow compared to Christians), loan conditions like<br />
<strong>in</strong>terest and collateral requirements by some f<strong>in</strong>ancial <strong>in</strong>stitutions.<br />
There are about one million households <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong> currently.<br />
Accord<strong>in</strong>g to the f<strong>in</strong>d<strong>in</strong>gs summarised above, 90% <strong>of</strong> the households are<br />
unserved by f<strong>in</strong>ancial services <strong>in</strong> any form. Extrapolated to the<br />
population, this means about 900,000 households are unserved. If we<br />
assume that only one third <strong>of</strong> these constitute demand for f<strong>in</strong>ancial<br />
services and that <strong>in</strong> a household only one person effectively demands<br />
f<strong>in</strong>ancial services (both be<strong>in</strong>g very conservative assumptions), unmet<br />
demand would presently be 300,000 potential clients.<br />
page 15
5. EXISTING INSTITUTIONAL FRAMEWORK<br />
5.1. Overview and structure<br />
Key <strong>in</strong>stitutions <strong>in</strong> the <strong>in</strong>dustry are the MFIs ( NGOs, community banks,<br />
companies) supported by MITAF, BoSL Micr<strong>of</strong><strong>in</strong>ance and Community Bank<br />
units, MFP <strong>of</strong> NaCSA and a few other <strong>in</strong>stitutions. There is also the<br />
network organization, SLAMFI, <strong>in</strong> its embryonic stage.<br />
5.2. Government and its programs<br />
Government, through the micr<strong>of</strong><strong>in</strong>ance unit <strong>in</strong> MOFDEP, provides macro<br />
level support to the <strong>in</strong>dustry. MITAF is managed by a private consult<strong>in</strong>g<br />
firm on behalf <strong>of</strong> Government, and has to date produced the most<br />
notable and consistent positive results <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g.<br />
The others are the MFP at NaCSA which faces a challeng<strong>in</strong>g <strong>in</strong>stitutional<br />
context as well as the micr<strong>of</strong><strong>in</strong>ance unit <strong>of</strong> BoSL (with two sections: one<br />
for community banks and the other for other MFIs). For now, government<br />
related meso level support needs rationaliz<strong>in</strong>g <strong>in</strong> a clear <strong>in</strong>stitutionalised<br />
framework.<br />
5.3. Registrars, supervisors/ regulators<br />
Result<strong>in</strong>g from the exist<strong>in</strong>g laws, there is some bit <strong>of</strong> confusion at the<br />
moment. NGO, registered by Government, can <strong>in</strong> practice do<br />
micr<strong>of</strong><strong>in</strong>ance bus<strong>in</strong>ess while companies and cooperative societies <strong>in</strong> the<br />
same bus<strong>in</strong>ess are <strong>in</strong> pr<strong>in</strong>ciple subject to regulation under the Other<br />
F<strong>in</strong>ancial Services Act. BoSL reports to be work<strong>in</strong>g on draft legislation for<br />
micr<strong>of</strong><strong>in</strong>ance, and hopefully this anomaly will be dealt with there<strong>in</strong>.<br />
5.4. Apex Organizations (Loan Fund<strong>in</strong>g & <strong>Capacity</strong><br />
<strong>Build<strong>in</strong>g</strong>)<br />
Appendix 5 to this report is an assessment <strong>of</strong> the meso level<br />
organization. As already mentioned, MITAF has to date had the most<br />
significant impact by way <strong>of</strong> capacity build<strong>in</strong>g. The others have various<br />
capacity challenges (especially technical know-how and <strong>in</strong>stitutional<br />
context) which need to be addressed. SLAMFI, very vital for <strong>in</strong>dustry<br />
cohesion and <strong>in</strong>formation dissem<strong>in</strong>ation, is yet to become a work<strong>in</strong>g<br />
<strong>in</strong>stitution.<br />
5.5. Tra<strong>in</strong><strong>in</strong>g and technical assistance service providers<br />
For a grow<strong>in</strong>g national micr<strong>of</strong><strong>in</strong>ance sector, it is necessary to have well<br />
<strong>in</strong>formed tra<strong>in</strong>ers, consultants and other providers <strong>of</strong> technical assistance<br />
with broad and deep knowledge <strong>of</strong> how the <strong>in</strong>dustry works and<br />
<strong>in</strong>ternational sound practices. This is largely lack<strong>in</strong>g <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong><br />
(which is to be expected at this stage). Most micr<strong>of</strong><strong>in</strong>ance consultants<br />
presently come from outside the country. As part <strong>of</strong> this strategy,<br />
page 17
purposeful assistance needs to be given to potential local consultants to<br />
come up.<br />
5.6. Development partners<br />
The most notable donors to the <strong>in</strong>dustry’s capacity build<strong>in</strong>g and loan<br />
capitalisation are the UNDP, UNCDF, KFW and CORDAID. All <strong>of</strong> these<br />
work through MITAF, the project manag<strong>in</strong>g the Government’s Pro-poor<br />
F<strong>in</strong>ancial <strong>Sector</strong> Development project. There are other donor<br />
organisations that have funded or founded specific MFIs, but they do not<br />
actively work with any others. The strategy for capacity build<strong>in</strong>g seeks to<br />
appeal to other development partners to fund capacity build<strong>in</strong>g <strong>of</strong> the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry.<br />
5.7. Lessons learnt to date<br />
With<strong>in</strong> the country, the follow<strong>in</strong>g lessons have been learnt with regard to<br />
the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry:<br />
Directly delivered or closely directed micro credit from<br />
Government usually fails and creates confusion <strong>in</strong> the<br />
market for sound-practice micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions.<br />
Institutional arrangements need to be suitable for<br />
micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g to be effective<br />
Pool<strong>in</strong>g capacity build<strong>in</strong>g funds and management <strong>in</strong>to a<br />
basket is helpful and efficient, especially if contracted to a<br />
competent management agency<br />
For outreach to <strong>in</strong>crease significantly, <strong>in</strong>stitutional<br />
capacity build<strong>in</strong>g is a vital necessity<br />
Sav<strong>in</strong>gs, credit and other f<strong>in</strong>ancial services need to be<br />
equitably emphasized and promoted; not just credit<br />
Sound-practice based tra<strong>in</strong><strong>in</strong>g and capacity build<strong>in</strong>g can<br />
move the <strong>in</strong>dustry forward significantly<br />
Contracted and accountable capacity build<strong>in</strong>g project<br />
management can work well and deliver good results, if<br />
well directed<br />
Market responsive and bus<strong>in</strong>ess oriented outreach is<br />
the most susta<strong>in</strong>able and reliable way to expend the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry<br />
page 18
6. POLICY AND REGULATORY ENVIRONMENT<br />
Appendix 6 to this report is a full assessment <strong>of</strong> the relevant laws and<br />
policy documents related to micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> the country. This section<br />
gives a summary <strong>of</strong> the key relevant aspects.<br />
6.1. F<strong>in</strong>ancial sector laws & their enforcement<br />
Four laws related to the f<strong>in</strong>ancial sector have been reviewed and enacted<br />
s<strong>in</strong>ce 2000. Two <strong>of</strong> them impact on micr<strong>of</strong><strong>in</strong>ance and have many suitable<br />
provisions. The few provisions po<strong>in</strong>ted out by consultants as need <strong>in</strong><br />
review should be re-exam<strong>in</strong>ed. Particularly, regulation should focus on<br />
deposit safety and overall systemic stability. Registration, licens<strong>in</strong>g,<br />
regulation and supervision <strong>of</strong> licensed MFIs need to be made clearer and<br />
more effective.<br />
6.2. Government’s stated policy<br />
Government’s policy on micr<strong>of</strong><strong>in</strong>ance as a tool for poverty alleviation is<br />
clear. It will provide support and create a conducive environment for<br />
private sector led micr<strong>of</strong><strong>in</strong>ance services to grow. The Micr<strong>of</strong><strong>in</strong>ance Policy,<br />
drawn by Government, its development partners <strong>in</strong> the micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>dustry, is well formulate and if ma<strong>in</strong>ta<strong>in</strong>ed, will supports the <strong>in</strong>dustry’s<br />
orderly growth if adhered to.<br />
7. GAP/ SWOT ANALYSIS<br />
7.1 Strengths and weaknesses<br />
From the <strong>in</strong>dustry assessment that formed the first phase <strong>of</strong> this<br />
assignment, the consultants identified the country’s gaps <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance<br />
capacity build<strong>in</strong>g by conduct<strong>in</strong>g a SWOT analysis. This section presents<br />
the SWOT summary.<br />
page 19
TABLE 3: INDUSTRY STRENGTHS AND WEAKNESSES<br />
STRENGTHS<br />
Good groundwork/ structure<br />
for coord<strong>in</strong>ation is <strong>in</strong> place,<br />
although actual coord<strong>in</strong>ation<br />
is yet to mature<br />
Some <strong>in</strong>dustry collaboration<br />
started and cont<strong>in</strong>u<strong>in</strong>g<br />
Evident ability and potential<br />
by MFIs to effect more<br />
outreach to rural areas and<br />
to the poor<br />
Improv<strong>in</strong>g performance <strong>of</strong><br />
some MFIs, <strong>in</strong>dicat<strong>in</strong>g that<br />
with good TA and/ or<br />
management, MFIs can<br />
improve further<br />
In some community banks,<br />
PAR is com<strong>in</strong>g down<br />
(portfolio quality is<br />
improv<strong>in</strong>g) – thanks to the<br />
secondment <strong>of</strong> resident<br />
technical advisors<br />
WEANESSES<br />
Inadequate local/ national supply <strong>of</strong> capacity<br />
build<strong>in</strong>g services to MFIs <strong>in</strong> areas like account<strong>in</strong>g,<br />
f<strong>in</strong>ancial management, <strong>in</strong>ternal controls, product<br />
development, bus<strong>in</strong>ess plann<strong>in</strong>g and others<br />
Inappropriate <strong>in</strong>stitutional context <strong>of</strong> the MFP unit<br />
(be<strong>in</strong>g part <strong>of</strong> NaCSA)<br />
Poor loan portfolios, reflect<strong>in</strong>g <strong>in</strong>ability to manage<br />
loans<br />
Severe understaff<strong>in</strong>g among NSOs, pos<strong>in</strong>g the<br />
challenges <strong>of</strong> shortage <strong>of</strong> both numbers <strong>of</strong> staff and<br />
critical skills needed<br />
The member-based <strong>in</strong>dustry network, as an<br />
<strong>in</strong>stitution, is yet to be established. Board<br />
members have full time jobs <strong>in</strong> their own<br />
<strong>in</strong>stitutions, which take priority over nurtur<strong>in</strong>g<br />
SLAMFI<br />
The association (SLAMFI) is f<strong>in</strong>ancially weak<br />
Ow<strong>in</strong>g to the rather narrow def<strong>in</strong>ition <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance, community banks and other<br />
<strong>in</strong>stitutions outside <strong>of</strong> NGOs do not take<br />
themselves to be MFIs, thus weaken<strong>in</strong>g <strong>in</strong>dustry<br />
cohesion<br />
Current <strong>in</strong>itiatives address the supply side and<br />
there is no <strong>in</strong>itiative that addresses the demand<br />
side capacity needs.<br />
The proposed MITAF exit strategy, by<br />
strengthen<strong>in</strong>g SLAMFI to take over some key<br />
MITAF activities, does not appear very suitable<br />
Lack <strong>of</strong> a systematic and complete tra<strong>in</strong><strong>in</strong>g/ TA<br />
needs assessment before develop<strong>in</strong>g solutions<br />
In some cases (NGO and community banks),<br />
unclear ownership structures<br />
A very narrow product range and m<strong>in</strong>imal product<br />
development/ <strong>in</strong>novation by the <strong>in</strong>stitutions –<br />
perhaps mean<strong>in</strong>g product features are unsuitable <strong>in</strong><br />
many cases for specific client needs<br />
Inadequate double bottom-l<strong>in</strong>e focus; past<br />
<strong>in</strong>terventions exclusively focused on giv<strong>in</strong>g credit to<br />
the poor. This was done to the relative neglect <strong>of</strong><br />
<strong>in</strong>stitutional susta<strong>in</strong>ability. The current ma<strong>in</strong><br />
<strong>in</strong>itiative, the Pro-Poor F<strong>in</strong>ancial <strong>Sector</strong><br />
Development under MITAF, focuses heavily on the<br />
reverse.<br />
page 20
Limited numerical and geographical outreach by all<br />
types <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions <strong>in</strong> comparison to<br />
the market potential<br />
Limited opportunities with<strong>in</strong> the country for quality<br />
tra<strong>in</strong><strong>in</strong>g and technical assistance <strong>in</strong> diverse<br />
performance areas<br />
Lack <strong>of</strong> an all-embrac<strong>in</strong>g national framework for<br />
micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g.<br />
The current capacity build<strong>in</strong>g framework is not<br />
<strong>in</strong>clusive: MITAF deals only with fairly mature MFIs<br />
and BoSL only nurtures community banks and gets<br />
only m<strong>in</strong>imally <strong>in</strong>volved with other MFIs.<br />
Weak network support organizations<br />
Modestly knowledgeable and tra<strong>in</strong>ed management<br />
& staff <strong>of</strong> the MFIs<br />
Overall poor loan portfolio management especially<br />
among community banks.<br />
Lack <strong>of</strong> <strong>in</strong>dustry knowledge among the board<br />
members/ directors <strong>of</strong> MFIs<br />
Promotion <strong>of</strong> loans/ credit as “micr<strong>of</strong><strong>in</strong>ance” and<br />
sav<strong>in</strong>gs as only a means to gett<strong>in</strong>g the loans. This<br />
reflects <strong>in</strong>adequate knowledge among MFI clients,<br />
staff, management, board members and local<br />
leaders.<br />
Weak <strong>in</strong>ternal controls and management<br />
<strong>in</strong>formation systems (MIS) among the <strong>in</strong>stitutions,<br />
<strong>in</strong> some cases result<strong>in</strong>g <strong>in</strong>to fraud<br />
Community banks are weak, with little capital and<br />
not capable <strong>of</strong> attract<strong>in</strong>g <strong>in</strong>vestments, and yet they<br />
are licensed to take sav<strong>in</strong>gs from the public.<br />
Low outreach and weak l<strong>in</strong>kages with ma<strong>in</strong>stream<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions<br />
Inadequate external f<strong>in</strong>ancial support <strong>of</strong> MFIs for<br />
fixed assets, <strong>in</strong>itial salaries and other<br />
establishment costs to effect rural branch<strong>in</strong>g out<br />
Limited fund<strong>in</strong>g for <strong>in</strong>novation, research and<br />
development, exacerbated by low capacity for<br />
product development among MFIs<br />
page 21
7.2. Opportunities and Threats<br />
TABLE 4: INDUSTRY OPPORTUNITIES AND THREATS<br />
OPPORTUNITIES<br />
Supportive Government<br />
policies, documented <strong>in</strong> a<br />
clear way<br />
Vast, unexplored/ unsupplied<br />
national market for<br />
micr<strong>of</strong><strong>in</strong>ance<br />
Government’s active<br />
commitment to work towards<br />
develop<strong>in</strong>g the <strong>in</strong>dustry<br />
Available development<br />
partners with f<strong>in</strong>ancial means<br />
to f<strong>in</strong>ance the development <strong>of</strong><br />
the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry<br />
Vast demand for micr<strong>of</strong><strong>in</strong>ance<br />
services compared to current<br />
coverage<br />
THREATS<br />
Lack <strong>of</strong> adequate fund<strong>in</strong>g, which has halted<br />
activities <strong>of</strong> some NSOs like MFP-NaCSA<br />
Possible adverse effects <strong>of</strong> politiciz<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance,<br />
like has happened elsewhere <strong>in</strong> Africa<br />
A largely illiterate populace that forms the potential<br />
clientele <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance; the demand survey shows<br />
that the illiterate m<strong>in</strong>imally use formal f<strong>in</strong>ancial<br />
services<br />
Modest or poor bus<strong>in</strong>ess aptitude and culture<br />
among the population, coupled with lack <strong>of</strong> basic<br />
understand<strong>in</strong>g <strong>of</strong> f<strong>in</strong>ancial services.<br />
Stakeholder disagreements aris<strong>in</strong>g from<br />
dissimilarity <strong>of</strong> focus among them, which could<br />
potentially check <strong>in</strong>dustry progress<br />
Popular but unrealistic expectations that the<br />
outreach (poverty and geographical) <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance programs should be rapid, cover<strong>in</strong>g<br />
the whole country <strong>in</strong> one or a few years. This <strong>of</strong>ten<br />
leads to development <strong>of</strong> parallel government<br />
programs or abandon<strong>in</strong>g the market-led expansion<br />
<strong>in</strong> favour <strong>of</strong> a more populist approach.<br />
Lack <strong>of</strong> bus<strong>in</strong>ess supportive <strong>in</strong>frastructure – roads,<br />
telecommunication, <strong>in</strong>ternet l<strong>in</strong>kages, postal system<br />
etc<br />
Prudential regulation <strong>of</strong> all MFIs could turn out to be<br />
counter-productive<br />
Over-<strong>in</strong>fluence by donors could further fragment,<br />
duplicate and complicate MF capacity build<strong>in</strong>g<br />
efforts<br />
No regulation guidel<strong>in</strong>es for prudential regulation <strong>of</strong><br />
deposit tak<strong>in</strong>g MFIs<br />
Scepticism with<strong>in</strong> the population because <strong>of</strong> the<br />
rural banks that existed before the war, failed and<br />
people lost their money; to them, community banks<br />
are a resurrection <strong>of</strong> the same. This is further<br />
fuelled by there be<strong>in</strong>g no deposit <strong>in</strong>surance scheme<br />
at the BoSL or anywhere else<br />
Regulatory risk: under-regulation at present puts<br />
MFIs that take deposits at risk <strong>of</strong> violat<strong>in</strong>g<br />
prudential limits, and future imposition <strong>of</strong> full<br />
prudential regulation could stifle their activities, if<br />
commercial bank regulations are applied.<br />
page 22
7.3. Strategic Gaps <strong>in</strong> the sector<br />
From all the above weaknesses and threats, the consultants extracted/<br />
identified the strategic gaps that are to be addressed <strong>in</strong> the five year<br />
capacity build<strong>in</strong>g strategy. For this purpose, a gap is considered to be <strong>of</strong><br />
a strategic nature if;<br />
(i)<br />
(ii)<br />
Non-attendance to it would impair or check progress/ effects <strong>of</strong><br />
the <strong>in</strong>dustry’s capacity build<strong>in</strong>g <strong>in</strong> a material way and,<br />
Address<strong>in</strong>g it would result <strong>in</strong>to a solution to several key<br />
weaknesses and threats identified <strong>in</strong> section 7.2 above.<br />
The follow<strong>in</strong>g are the key gaps identified by the consultants and agreed<br />
to by the stakeholders <strong>in</strong> the regional workshop:<br />
Absence <strong>of</strong> an <strong>in</strong>stitutionalised capacity build<strong>in</strong>g<br />
framework<br />
Inadequate knowledge and skills at all levels<br />
Limited rural/ geographical outreach<br />
Limited diversity <strong>of</strong> products and delivery methods<br />
Low bus<strong>in</strong>ess and f<strong>in</strong>ancial services awareness among<br />
the population<br />
Weak MFIs and their national network support<br />
organizations<br />
Fundamental stakeholder differences on issues<br />
Lack <strong>of</strong> adequate fund<strong>in</strong>g for capacity build<strong>in</strong>g and loan<br />
portfolios<br />
page 23
PART II.<br />
FIVE YEAR STRATEGY [2010-2014]<br />
1. CAPACITY BUILDING STRATEGIES<br />
1.1. Overall Goal<br />
To substantially enhance performance <strong>of</strong> the <strong>Sierra</strong> <strong>Leone</strong>an micr<strong>of</strong><strong>in</strong>ance<br />
sector by establish<strong>in</strong>g a grow<strong>in</strong>g, vibrant and susta<strong>in</strong>able market <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance product/ service users, providers, and suppliers <strong>of</strong> capacity<br />
build<strong>in</strong>g support.<br />
1.2. Objectives and outputs<br />
The strategies are recommended with the key objectives <strong>of</strong>:<br />
(i) Increas<strong>in</strong>g outreach (depth and breadth)<br />
(ii) Increas<strong>in</strong>g product development/ <strong>in</strong>novation<br />
(iii) <strong>Build<strong>in</strong>g</strong> the <strong>in</strong>ternal capacities <strong>of</strong> MFIs to grow susta<strong>in</strong>ably<br />
(iv) Enhanc<strong>in</strong>g the bus<strong>in</strong>ess and f<strong>in</strong>ancial awareness <strong>of</strong> the<br />
population<br />
(v) Enhanc<strong>in</strong>g beneficial <strong>in</strong>dustry cohesion/ collaboration.<br />
(vi) Secur<strong>in</strong>g coord<strong>in</strong>ated f<strong>in</strong>ancial support for the <strong>in</strong>dustry.<br />
Accord<strong>in</strong>gly, by the Dec 2014, the follow<strong>in</strong>g results are expected:<br />
Objective 1: Geographical & rural outreach by MFIs <strong>in</strong>creased<br />
Output 1.1: The number <strong>of</strong> rural 12<br />
tripled.<br />
clients served by beneficiary MFIs<br />
Output 1.2: At least 150,000 are new 13 clients served by beneficiary MFIs<br />
<strong>in</strong> rural <strong>Sierra</strong> <strong>Leone</strong>.<br />
Output 1.3: At least 60 new branches <strong>of</strong> beneficiary MFIs or stand-alone<br />
community based f<strong>in</strong>ancial <strong>in</strong>stitutions established and serv<strong>in</strong>g low<strong>in</strong>come<br />
people <strong>in</strong> rural areas. At least two <strong>of</strong> these will be established <strong>in</strong><br />
every district.<br />
12 For this strategy, rural should be any location outside a 10 km radius <strong>of</strong> Freetown and<br />
Bo<br />
13 Incremental numbers <strong>of</strong> clients s<strong>in</strong>ce the <strong>in</strong>stitution started benefit<strong>in</strong>g from the scheme<br />
page 24
Objective 2: Product ranges <strong>of</strong> the beneficiary <strong>in</strong>stitutions<br />
broadened<br />
Output 2.1: At least four suitable agricultural/ agribus<strong>in</strong>ess f<strong>in</strong>ance<br />
products researched, and at least two <strong>of</strong> them developed, tested and<br />
replicated to a m<strong>in</strong>imum <strong>of</strong> 13 participat<strong>in</strong>g MFIs operat<strong>in</strong>g <strong>in</strong> rural areas.<br />
Output 2.2: At least three other forms <strong>of</strong> productive-asset f<strong>in</strong>ancial<br />
products (such as micro-leas<strong>in</strong>g, micro-mortgage, asset loans), suitable<br />
for rural people, researched and two <strong>of</strong> them developed and replicated to<br />
13 participat<strong>in</strong>g MFIs.<br />
Output 2.3: At least one <strong>of</strong> the exist<strong>in</strong>g MF service delivery<br />
methodologies for work<strong>in</strong>g capital/ trade f<strong>in</strong>ance further ref<strong>in</strong>ed for<br />
suitability to rural areas, and replicated to at least 10 participat<strong>in</strong>g MFIs<br />
that are active <strong>in</strong> rural areas.<br />
Objective 3: Internal capacities <strong>of</strong> MFIs built for susta<strong>in</strong>able<br />
growth.<br />
Output 3.1: Salone Micr<strong>of</strong><strong>in</strong>ance And Rural Trades <strong>Capacity</strong> Enhancement<br />
(SMART-Cap), the capacity build<strong>in</strong>g coord<strong>in</strong>ation <strong>in</strong>stitution, established<br />
and operationalised by Dec 2009.<br />
Output 3.2: At least 10 beneficiary MFIs that were not operationally or<br />
f<strong>in</strong>ancially susta<strong>in</strong>able at the start <strong>of</strong> scheme atta<strong>in</strong> full f<strong>in</strong>ancial<br />
susta<strong>in</strong>ability.<br />
Output 3.3: At least 10 other beneficiary MFIs that were not operationally<br />
susta<strong>in</strong>able at the start <strong>of</strong> the scheme atta<strong>in</strong>s full operational<br />
susta<strong>in</strong>ability.<br />
Output 3.4: Each <strong>of</strong> the other beneficiary MFIs that will not have atta<strong>in</strong>ed<br />
full operational susta<strong>in</strong>ability by the end <strong>of</strong> strategy period will have at<br />
least doubled the level <strong>of</strong> operational susta<strong>in</strong>ability s<strong>in</strong>ce the start <strong>of</strong> the<br />
scheme.<br />
Output 3.5: Each beneficiary MFI at least triples its client numbers,<br />
doubles its loan portfolio and ma<strong>in</strong>ta<strong>in</strong>s its portfolio at risk (PAR) below<br />
5%.<br />
Output 3.6: At least 20 <strong>Sierra</strong> <strong>Leone</strong>an actual and potential micr<strong>of</strong><strong>in</strong>ance<br />
consultants and tra<strong>in</strong>ers identified and tra<strong>in</strong>ed <strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance Best<br />
Practices and two other general micr<strong>of</strong><strong>in</strong>ance related discipl<strong>in</strong>es.<br />
Output 3.7: All managers <strong>of</strong> MFIs, public <strong>of</strong>ficers who work on<br />
micr<strong>of</strong><strong>in</strong>ance related functions and MFI board members fully appreciate<br />
micr<strong>of</strong><strong>in</strong>ance sound practices. 14<br />
14 Hav<strong>in</strong>g been tra<strong>in</strong>ed or sensitized through programs implemented as part <strong>of</strong> this<br />
strategy<br />
page 25
Objective 4: Industry cohesion and collaboration promoted<br />
Output 4.1: SLAMFI secretariat established with a CEO, staff, its own<br />
<strong>of</strong>fice and the necessary facilities.<br />
Output 4.2: SLAMFI takes the <strong>in</strong>itiative and leads other MF stakeholders<br />
<strong>in</strong> lobby<strong>in</strong>g to better laws, policies and regulation <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance;<br />
frequently dissem<strong>in</strong>ates <strong>in</strong>ternational and local micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>formation<br />
and engages member-MFIs <strong>in</strong> <strong>in</strong>dustry “self-regulation”.<br />
Output 4.3: SLAMFI conducts regular micr<strong>of</strong><strong>in</strong>ance forums, at which<br />
stakeholders freely share and work for common <strong>in</strong>dustry good.<br />
Objective 5: Bus<strong>in</strong>ess and f<strong>in</strong>ancial awareness <strong>of</strong> the population<br />
enhanced<br />
Output 5.1: Clients/ members <strong>of</strong> MFIs able to articulate their key rights<br />
and responsibilities as consumers <strong>of</strong> f<strong>in</strong>ancial services (hav<strong>in</strong>g been<br />
tra<strong>in</strong>ed through programs under this strategy)<br />
Output 5.2: A comprehensive rural bus<strong>in</strong>ess capacity needs assessment<br />
done and report as well as a clear plan <strong>of</strong> action to address them<br />
prepared and executed<br />
Output 5.3: Rural bus<strong>in</strong>ess sensitization materials 15 developed <strong>in</strong> English,<br />
Krio and local languages for rural bus<strong>in</strong>ess tra<strong>in</strong><strong>in</strong>g/ sensitization,<br />
educative radio programmes and visual displays.<br />
Output 5.4: At least 50 rural bus<strong>in</strong>ess tra<strong>in</strong>ers/ TA providers tra<strong>in</strong>ed on<br />
the usage and message <strong>in</strong> the materials, to be able to tra<strong>in</strong>/ sensitize <strong>in</strong><br />
bus<strong>in</strong>ess basics and to help rural people to cluster up for access to<br />
markets.<br />
Output 5.5: At least 240,000 rural people sensitized through rural,<br />
community level 5-day tra<strong>in</strong><strong>in</strong>g sem<strong>in</strong>ars on basic bus<strong>in</strong>ess skills – at<br />
least 3 sem<strong>in</strong>ars per district – and assisted to form enterprise clusters for<br />
easier access to markets.<br />
Objective 6: Coord<strong>in</strong>ated f<strong>in</strong>ancial support for the <strong>in</strong>dustry<br />
secured<br />
Output 6.1: Adequate fund<strong>in</strong>g for MF capacity build<strong>in</strong>g under this strategy<br />
secured<br />
Output 6.2: Micr<strong>of</strong><strong>in</strong>ance wholesale fund established with a reliable and<br />
experienced <strong>in</strong>stitution, <strong>in</strong>dependent <strong>of</strong> all capacity build<strong>in</strong>g concerns.<br />
15 Informative flyers, posters, flipcharts and other <strong>in</strong>formative visual/ audio/ literary aids<br />
page 26
1.3. Strategies to Achieve the Objectives<br />
The first phase <strong>of</strong> this assignment aimed at identify<strong>in</strong>g strategic gaps <strong>in</strong><br />
<strong>Sierra</strong> <strong>Leone</strong>’s micr<strong>of</strong><strong>in</strong>ance sector. On the basis <strong>of</strong> these strategic gaps,<br />
six strategic objectives were derived for <strong>in</strong>dustry capacity build<strong>in</strong>g (sec<br />
8.1 above). Under each strategic objective, a number <strong>of</strong> key desirable<br />
outputs or results have been identified. To atta<strong>in</strong> the five objectives, four<br />
broad strategies have been developed. The follow<strong>in</strong>g table summarises<br />
the four strategies and the objectives they each address. Appendices 1<br />
(logical framework) and 2 (activity matrix) to this report are vital parts <strong>of</strong><br />
the strategy. They expand the strategy and detail it out <strong>in</strong>to an<br />
implementable plan.<br />
TABLE 5: SUMMARY OF THE STRATEGY<br />
PROPOSED STRATEGY<br />
Establish a well staffed capacity<br />
build<strong>in</strong>g <strong>in</strong>stitution 16 (SMART-<br />
Cap) by Dec 2009, to manage/<br />
coord<strong>in</strong>ate activities<br />
implemented under the different<br />
w<strong>in</strong>dows as recommended.<br />
Establish SLAMFI as a strong,<br />
member-based <strong>in</strong>stitution 17<br />
Raise funds for all-round<br />
micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g,<br />
and for runn<strong>in</strong>g SMART-Cap<br />
Establish an effective MF<br />
wholesale fund – operated <strong>in</strong> a<br />
commercially viable and socially<br />
responsive way<br />
TO ADDRESS OBJECTIVE.<br />
1: Increase <strong>in</strong> geographical/ rural<br />
outreach by MFIs<br />
2: Broaden<strong>in</strong>g the product ranges <strong>of</strong> the<br />
beneficiary <strong>in</strong>stitutions<br />
3: <strong>Build<strong>in</strong>g</strong> the <strong>in</strong>ternal capacities <strong>of</strong> MFIs<br />
for susta<strong>in</strong>able growth.<br />
5: Bus<strong>in</strong>ess and f<strong>in</strong>ancial awareness <strong>of</strong><br />
the population enhanced<br />
4: Industry cohesion and collaboration<br />
promoted<br />
6: Fund<strong>in</strong>g for the <strong>in</strong>dustry (to support all<br />
the five objectives)<br />
6: Fund<strong>in</strong>g for the <strong>in</strong>dustry (Growth <strong>of</strong><br />
MFI portfolios, for them to extend their<br />
services, atta<strong>in</strong> greater outreach and<br />
grow susta<strong>in</strong>ably).<br />
1.3.1. Establishment <strong>of</strong> SMART-Cap<br />
In a sense, the most important strategy proposed <strong>in</strong> this report is the<br />
establishment <strong>of</strong> SMART-Cap. This will be a program managed<br />
<strong>in</strong>dependently by a competitively procured consult<strong>in</strong>g or project<br />
management firm, and whose head reports to a well constituted board<br />
compris<strong>in</strong>g <strong>of</strong> representatives from the Government, development<br />
partners and some <strong>in</strong>dependent technocrats <strong>in</strong> the micr<strong>of</strong><strong>in</strong>ance area. It<br />
is vital that both Government and the fund<strong>in</strong>g development partners take<br />
equitable part <strong>in</strong> govern<strong>in</strong>g SMART-Cap, and thus the board will function<br />
like a normal corporate board. Strategic board decisions will be reached<br />
by consensus and not a weighted vot<strong>in</strong>g procedure.<br />
16 Proposed name: Salone Micr<strong>of</strong><strong>in</strong>ance And Rural Trades <strong>Capacity</strong> Enhancement (SMART-<br />
Cap)<br />
17 For advocacy, lobby and <strong>in</strong>formation dissem<strong>in</strong>ation<br />
page 27
The proposed structure <strong>of</strong> SMART-Cap is depicted by the chart below.<br />
Figure 2: Proposed SMART-Cap structure<br />
BOARD<br />
SMART-Cap<br />
CONTRACTOR<br />
(COORDINATION, OVERALL MGT)<br />
W<strong>in</strong>dow 1: CAPACITY DEVT<br />
1. Institutional capacity<br />
2. Bus<strong>in</strong>ess <strong>Capacity</strong><br />
W<strong>in</strong>dow 2: SERVICE EXTENSION<br />
1. Outreach enhancement<br />
2. Product development<br />
The four strategy areas addressed by SMART-Cap are grouped <strong>in</strong>to 2<br />
w<strong>in</strong>dows: one manag<strong>in</strong>g <strong>in</strong>stitutional capacity build<strong>in</strong>g and bus<strong>in</strong>ess<br />
capacity development functions (<strong>Capacity</strong> Development) and the other<br />
manag<strong>in</strong>g the outreach and product development functions (Service<br />
Extension).<br />
Ideally, SMART-Cap should be managed under a framework arrangement<br />
<strong>in</strong> which a lead firm takes overall responsibility for runn<strong>in</strong>g the program<br />
and achiev<strong>in</strong>g results, and subcontracts two other competent firms each<br />
to undertake technical management and runn<strong>in</strong>g <strong>of</strong> one w<strong>in</strong>dow.<br />
Ow<strong>in</strong>g to the scarcity <strong>of</strong> experience and skills with<strong>in</strong> the country, overall<br />
management positions <strong>of</strong> SMART-Cap and its two w<strong>in</strong>dows will most likely<br />
be held by non-nationals. For each senior position, there should be a<br />
substantive deputisation by a <strong>Sierra</strong> <strong>Leone</strong>an. Particularly, staff <strong>of</strong> current<br />
government programs like MFP and MITAF should be part <strong>of</strong> SMART-Cap.<br />
The local staff will deputize and understudy the expatriates as one option<br />
for cont<strong>in</strong>uity after the five years.<br />
To ensure Government’s support and ownership is recognized while<br />
allow<strong>in</strong>g for efficient movement <strong>of</strong> and accountability for SMART-Cap<br />
funds, MoUs or contracts will be signed by the fund<strong>in</strong>g donors,<br />
government and SMART-Cap management under which:<br />
page 28
Funds committed by each donor and the purpose there<strong>of</strong> are<br />
known by all<br />
SMART-Cap management requests for funds and gets them<br />
directly from the donors, each time with copies <strong>of</strong> documents<br />
submitted to Government for <strong>in</strong>formation and updates<br />
Accountability is submitted by SMART-Cap management to the<br />
Board and to each donor, with copies to Government.<br />
SMART-Cap should start by sensitiz<strong>in</strong>g and tra<strong>in</strong><strong>in</strong>g 18 all MFIs <strong>of</strong> all sorts,<br />
and then proceed with them on a self-selection basis; the self selection<br />
be<strong>in</strong>g based on the extent to which the <strong>in</strong>stitutions adopt and entrench<br />
sound practices <strong>in</strong> their governance, management and operations.<br />
In pr<strong>in</strong>ciple, the SMART-Cap design should allow for a donor to put<br />
money <strong>in</strong>to the general SMART-Cap pool, target only one w<strong>in</strong>dow or even<br />
narrowly target one cause/ activity to f<strong>in</strong>ance with<strong>in</strong> a w<strong>in</strong>dow.<br />
This subsection is only a recommendation, albeit a very crucial one. It is<br />
not a full design. The logical and very important first step <strong>in</strong><br />
implementation will be to do a comprehensive and detailed design <strong>of</strong><br />
SMART-Cap, cover<strong>in</strong>g but limited to the follow<strong>in</strong>g aspects:<br />
Institutional structure/ framework<br />
Internal personnel and organisational structure<br />
Operational policies for the coord<strong>in</strong>ation unit and procedures for<br />
(adm<strong>in</strong>istration, procurement etc) and for each w<strong>in</strong>dow<br />
Appraisal, process<strong>in</strong>g and report<strong>in</strong>g policies and templates<br />
Target clientele<br />
Monitor<strong>in</strong>g and evaluation provisions<br />
F<strong>in</strong>anc<strong>in</strong>g/ concentration limits<br />
SMART-Cap relationships with stakeholders<br />
Fund receipt and disbursement modalities<br />
Resource allocation to w<strong>in</strong>dows and to strategic objectives there<strong>in</strong><br />
Report<strong>in</strong>g requirements<br />
Eligibility and selection criteria <strong>of</strong> beneficiary <strong>in</strong>stitutions and<br />
activities<br />
Match<strong>in</strong>g contributions<br />
Publicity<br />
It is essential and crucial that the design <strong>of</strong> SMART-Cap is done by<br />
persons with proven experience <strong>in</strong> design<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g funds or projects.<br />
18 Ma<strong>in</strong>ly on Sound Practices <strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance<br />
page 29
1.3.2. Establishment <strong>of</strong> SLAMFI<br />
For a micr<strong>of</strong><strong>in</strong>ance sector at its growth stage, the <strong>in</strong>stitutions need an<br />
active network organisation that is well equipped to handle the<br />
network<strong>in</strong>g, lobby, advocacy and <strong>in</strong>formation dissem<strong>in</strong>ation roles. This<br />
needs to go on without substantial dedication <strong>of</strong> time by managers <strong>of</strong><br />
MFIs who have their own targets to meet.<br />
The logical first step <strong>of</strong> establish<strong>in</strong>g SLAMFI will be to review its strategic<br />
plan <strong>in</strong> view <strong>of</strong> this national strategy. The SLAMFI board should then seek<br />
fund<strong>in</strong>g both from with<strong>in</strong> and outside <strong>of</strong> this proposed framework, for<br />
establishment <strong>of</strong> SLAMFI (rent for the first 12 months, salaries <strong>of</strong> the<br />
manager and core staff for the first 2 years, and core operational funds).<br />
The board should then hire a manager and one or two staff, task them<br />
and hand over the management and operations <strong>of</strong> the network to them,<br />
under keen oversight and monitor<strong>in</strong>g by the board.<br />
It will be essential that SLAMFI does not try to compete with tra<strong>in</strong>ers and<br />
TA service providers <strong>in</strong> <strong>of</strong>fer<strong>in</strong>g paid consult<strong>in</strong>g or tra<strong>in</strong><strong>in</strong>g services to<br />
MFIs, and that it excels <strong>in</strong> effect<strong>in</strong>g <strong>in</strong>dustry cohesion, spearhead<strong>in</strong>g<br />
advocacy and dissem<strong>in</strong>at<strong>in</strong>g <strong>in</strong>formation regularly.<br />
1.3.1. Fund rais<strong>in</strong>g for micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g<br />
A vital aspect that is likely to conv<strong>in</strong>ce donors/ development partners to<br />
support this strategy is that SMART-Cap is designed and the strategy<br />
adopted as the Government’s five-year plan for the micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>dustry. This should give all stakeholders a clear sense <strong>of</strong> the direction<br />
the Government is tak<strong>in</strong>g to support the <strong>in</strong>dustry. It will also<br />
communicate a clear capacity build<strong>in</strong>g framework chosen by the<br />
Government, and which development partners can work with.<br />
As part <strong>of</strong> the SMART-Cap design, a review the cost<strong>in</strong>g and pric<strong>in</strong>g <strong>of</strong><br />
<strong>in</strong>itiatives under this strategy (that are at this stage only broad<br />
estimates) will need to be conducted. The reviewed cost<strong>in</strong>g will then form<br />
part <strong>of</strong> the basis for fund rais<strong>in</strong>g for capacity build<strong>in</strong>g.<br />
As part <strong>of</strong> the SMART-Cap design, the alternative modes <strong>of</strong> participation<br />
by donors should be articulated. Out <strong>of</strong> this, Government should later<br />
construct a clear summary <strong>of</strong> SMART-Cap and further articulate the<br />
different participation options the development partners have for fund<strong>in</strong>g<br />
the <strong>in</strong>itiative. Effectively, this brief should be a sell<strong>in</strong>g document that<br />
Government uses to promote the cause <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g<br />
and to attract fund<strong>in</strong>g for it. With it, Government should proactively talk<br />
to donors and solicit their support (both with<strong>in</strong> and outside SL). This<br />
popularization <strong>of</strong> SMART-Cap and the strategy should be accompanied by<br />
solid assurances by Government that when the donors put money <strong>in</strong>to<br />
the strategy, Government will not seek to micromanage or redirect<br />
activities <strong>of</strong> SMART-Cap from what was agreed <strong>in</strong> the design.<br />
Once SMART-Cap is <strong>in</strong> place, part <strong>of</strong> the management agency’s task<br />
should be to cont<strong>in</strong>ually seek and attract further fund<strong>in</strong>g for micr<strong>of</strong><strong>in</strong>ance<br />
page 30
capacity build<strong>in</strong>g from development partners, whether or not they have a<br />
presence <strong>in</strong> the country.<br />
1.3.2. Establishment <strong>of</strong> a wholesale fund for micr<strong>of</strong><strong>in</strong>ance<br />
Although this assignment was purely for capacity build<strong>in</strong>g (thus<br />
preclud<strong>in</strong>g bus<strong>in</strong>ess/ loan fund<strong>in</strong>g for MFIs), the consultants know from<br />
experience elsewhere that strengthen<strong>in</strong>g <strong>in</strong>stitutions when they do not<br />
have reliable sources <strong>of</strong> loan fund<strong>in</strong>g can sometimes have limited effect.<br />
It is therefore recommended that as part <strong>of</strong> this strategy but parallel to<br />
the capacity build<strong>in</strong>g <strong>in</strong>itiatives, Government works with its development<br />
partners to establish a proper wholesale fund for micr<strong>of</strong><strong>in</strong>ance. This<br />
should be done outside all the capacity build<strong>in</strong>g <strong>in</strong>itiatives for two<br />
reasons:<br />
(i)<br />
(ii)<br />
<strong>Capacity</strong> build<strong>in</strong>g projects/ <strong>in</strong>itiatives are usually not structured<br />
for a lend<strong>in</strong>g function<br />
Quite <strong>of</strong>ten, the lend<strong>in</strong>g and capacity build<strong>in</strong>g roles would come<br />
<strong>in</strong>to conflict.<br />
To set up the fund, Government will need to hire consultants who should<br />
undertake key activities, <strong>in</strong>clud<strong>in</strong>g but not limited to the follow<strong>in</strong>g:<br />
<br />
<br />
<br />
<br />
<br />
<br />
Compile the lessons learnt from the previous programs <strong>in</strong><br />
the country<br />
Compile lessons learnt from successful and failed attempts<br />
elsewhere<br />
Articulate the rationale for the need to establish a market<br />
responsive wholesale fund<br />
Design the wholesale fund, complete with policies/<br />
procedures manuals and templates for application,<br />
appraisal, contract<strong>in</strong>g and monitor<strong>in</strong>g<br />
Assess development partners’ will<strong>in</strong>gness to support the<br />
fund<br />
Appraise possible <strong>in</strong>stitutions that could operate the<br />
wholesale fund and recommend at least two and at most<br />
three.<br />
Government and development partners will then need to negotiate with<br />
the chosen <strong>in</strong>stitutions, work out modalities for operations and<br />
operationalize the fund.<br />
page 31
1.4. Cont<strong>in</strong>uity Strategy <strong>of</strong> SMART-Cap<br />
For a five year strategy start<strong>in</strong>g when the <strong>in</strong>dustry is just start<strong>in</strong>g to<br />
grow, it would be <strong>in</strong>appropriate to stipulate the exit or cont<strong>in</strong>uity strategy<br />
<strong>of</strong> SMART-Cap from the start. To ensure that cont<strong>in</strong>uity elements are<br />
built-<strong>in</strong>, however, each key position should have a local counterpart that<br />
understudies it. Pr<strong>of</strong>essional staff currently under MITAF and MFP should<br />
particularly be part <strong>of</strong> SMART-Cap s<strong>in</strong>ce perhaps they have the most<br />
potential to take over SMART-Cap after the five years.<br />
Dur<strong>in</strong>g the first half <strong>of</strong> the fourth year <strong>of</strong> this strategy, Government and<br />
its development partners should agree on what to do with SMART-Cap as<br />
they develop a cont<strong>in</strong>uity or exit plan. At that time, it might be useful to<br />
evaluate the follow<strong>in</strong>g and any other options before tak<strong>in</strong>g a decision:<br />
1. Just w<strong>in</strong>d up SMART-Cap if there is evidence that enough capacity<br />
build<strong>in</strong>g has been done to develop a market <strong>of</strong> will<strong>in</strong>g and able<br />
consumers and providers <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g<br />
services.<br />
2. Identify a private sector entity to take over all assets and functions<br />
<strong>of</strong> SMART-Cap, under certa<strong>in</strong> conditions.<br />
3. Extend the program <strong>in</strong>to SMART-Cap II.<br />
4. Set up a semi-autonomous government corporation to take over<br />
from SMART-Cap.<br />
5. Establish a permanent Trust to take over from SMART-Cap.<br />
page 32
2. RECOMMENDATIONS<br />
The follow<strong>in</strong>g recommendations relate to aspects broader than or outside<br />
<strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry that need to be addressed for the strategy to<br />
succeed:<br />
<br />
<br />
<br />
<br />
<br />
<br />
Review the Other F<strong>in</strong>ancial Institutions Act to clearly<br />
differentiate between the <strong>in</strong>stitutions that are to be<br />
prudentially regulated and those that are subject to<br />
non-prudential regulations. In do<strong>in</strong>g this, non-deposit<br />
tak<strong>in</strong>g <strong>in</strong>stitutions and small, user owned <strong>in</strong>stitutions<br />
should not be subjected to prudential regulation<br />
For qualify<strong>in</strong>g <strong>in</strong>stitutions, prudential regulations<br />
should be applied without discrim<strong>in</strong>ation or favour.<br />
Laxity <strong>in</strong> prudential regulation <strong>of</strong> any deposit tak<strong>in</strong>g<br />
<strong>in</strong>stitution can underm<strong>in</strong>e public confidence <strong>in</strong> the<br />
f<strong>in</strong>ancial sector through <strong>in</strong>stitutional failures <strong>in</strong> which<br />
people lose their deposits<br />
Implement an effective deposit <strong>in</strong>surance scheme for<br />
deposit tak<strong>in</strong>g MFIs, probably run by the central<br />
bank. This is necessary for restor<strong>in</strong>g public<br />
confidence <strong>in</strong> the f<strong>in</strong>ancial sector when <strong>in</strong>stitutional<br />
failures happen<br />
Implement an all-<strong>in</strong>clusive Universal Primary and<br />
Secondary Education, to <strong>in</strong>crease the level <strong>of</strong> literacy<br />
and exposure <strong>of</strong> the population over the longer term<br />
Implement an all-<strong>in</strong>clusive Functional Adult Literacy<br />
Program. This has proved to be a powerful tool for<br />
poverty alleviation elsewhere, and it would also<br />
ensure that with time, more people appreciate and<br />
use f<strong>in</strong>ancial services to improve their household<br />
<strong>in</strong>comes and welfare<br />
Speed up the rebuild<strong>in</strong>g <strong>of</strong> <strong>in</strong>frastructure (like roads,<br />
power grid, rural communication and produce<br />
market<strong>in</strong>g <strong>in</strong>frastructure).<br />
page 33
APPENDICES<br />
page 35
APPENDIX 1: LOGICAL FRAMEWORK FOR THE STRATEGY<br />
(All objectives and outputs are for Dec 2014 unless otherwise specified)<br />
Strategic<br />
objective<br />
Geographical &<br />
rural outreach by<br />
MFIs <strong>in</strong>creased<br />
Outputs/<br />
Indicators<br />
The number <strong>of</strong><br />
rural 19 clients<br />
served by<br />
beneficiary MFIs<br />
tripled.<br />
At least 150,000<br />
new 20 clients<br />
served by<br />
beneficiary MFIs <strong>in</strong><br />
rural <strong>Sierra</strong> <strong>Leone</strong>.<br />
At least 60 new<br />
branches<br />
beneficiary MFIs<br />
or stand-alone<br />
CBFIs 21 opened;<br />
at least two <strong>in</strong><br />
every district.<br />
Means <strong>of</strong><br />
Verification<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
4. Field visits<br />
Important<br />
Assumptions<br />
1. Country-wide<br />
road, water and<br />
other transport<br />
<strong>in</strong>frastructure will<br />
be significantly<br />
improved by the<br />
Government.<br />
2. Government<br />
ma<strong>in</strong>ta<strong>in</strong>s the nodirect-provision<br />
policy on<br />
micr<strong>of</strong><strong>in</strong>ance<br />
3. No prohibitive<br />
regulation <strong>of</strong> non<br />
deposit tak<strong>in</strong>g<br />
<strong>in</strong>stitutions<br />
Product ranges <strong>of</strong><br />
the beneficiary<br />
<strong>in</strong>stitutions<br />
broadened<br />
Two suitable<br />
agricultural/<br />
agribus<strong>in</strong>ess<br />
f<strong>in</strong>ance products<br />
developed,<br />
replicated to 13<br />
participat<strong>in</strong>g MFIs<br />
Two other rural<br />
focused<br />
productive-asset<br />
f<strong>in</strong>ancial products<br />
developed and<br />
replicated to 13<br />
participat<strong>in</strong>g MFIs.<br />
1. MFI perf’<br />
reports<br />
2. Product<br />
manuals <strong>of</strong> MFIs<br />
3. SMART-Cap<br />
reports<br />
4. Field visits to<br />
verify<br />
1. MFI perf’<br />
reports<br />
2. Product<br />
manuals<br />
3. Field visits to<br />
verify<br />
1. Development<br />
partners will be<br />
keen to f<strong>in</strong>ance<br />
product<br />
development and<br />
<strong>in</strong>novation<br />
2. MFIs will have<br />
more competent<br />
management 22 to<br />
deliver several<br />
products<br />
efficiently and<br />
effectively<br />
19 For this strategy, rural should be any location outside a 10 km radius <strong>of</strong> Freetown and<br />
Bo<br />
20 Incremental numbers <strong>of</strong> clients s<strong>in</strong>ce the <strong>in</strong>stitution started benefit<strong>in</strong>g from the scheme<br />
21 Community based f<strong>in</strong>ancial <strong>in</strong>stitutions<br />
22 Follow<strong>in</strong>g further targeted tra<strong>in</strong><strong>in</strong>g or hir<strong>in</strong>g <strong>of</strong> new, more experienced managers
Strategic<br />
objective<br />
Outputs/<br />
Indicators<br />
Means <strong>of</strong><br />
Verification<br />
Important<br />
Assumptions<br />
One exist<strong>in</strong>g MF<br />
service delivery<br />
methodology<br />
ref<strong>in</strong>ed to suit<br />
rural areas and<br />
replicated to 13<br />
participat<strong>in</strong>g MFIs<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
Internal capacities<br />
<strong>of</strong> MFIs built for<br />
susta<strong>in</strong>able<br />
growth.<br />
SMART-Cap<br />
established and<br />
operationalised by<br />
Dec 2009.<br />
1. Smart-Cap<br />
design document<br />
2. Office location<br />
& address <strong>in</strong>fo<br />
3. SMART-Cap<br />
<strong>in</strong>ception report<br />
1. Government,<br />
development<br />
partners and all<br />
key stakeholders<br />
embrace this<br />
strategy and<br />
commit resources<br />
to implement it<br />
10 beneficiary<br />
MFIs atta<strong>in</strong> full<br />
susta<strong>in</strong>ability.<br />
10 other<br />
beneficiary MFIs<br />
atta<strong>in</strong> operational<br />
susta<strong>in</strong>ability.<br />
Each beneficiary<br />
MFI not atta<strong>in</strong><strong>in</strong>g<br />
operational<br />
susta<strong>in</strong>ability has<br />
doubled its the<br />
level <strong>of</strong><br />
operational<br />
susta<strong>in</strong>ability<br />
Each beneficiary<br />
MFI at least triples<br />
its client number,<br />
doubles its loan<br />
portfolio and<br />
ma<strong>in</strong>ta<strong>in</strong>s its<br />
portfolio at risk<br />
(PAR) below 5%.<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
4. Field visits to<br />
the participat<strong>in</strong>g<br />
MFIs<br />
2. OFSA reviewed<br />
to exclude<br />
prudential<br />
supervision <strong>of</strong><br />
non-deposit<br />
takers, and to<br />
provide for<br />
prudential<br />
regulation <strong>of</strong><br />
mature MFIs that<br />
want to take<br />
public deposits.<br />
3. Property<br />
ownership<br />
structures (e.g.<br />
popularization <strong>of</strong><br />
land title deeds)<br />
will be improved.<br />
4. There will be<br />
enough will<strong>in</strong>g<br />
qualified<br />
pr<strong>of</strong>essionals<br />
will<strong>in</strong>g to set up<br />
micr<strong>of</strong><strong>in</strong>ance<br />
consult<strong>in</strong>g as a full<br />
time bus<strong>in</strong>ess,<br />
with no direct<br />
external aid to<br />
them.
Strategic<br />
objective<br />
Outputs/<br />
Indicators<br />
Means <strong>of</strong><br />
Verification<br />
Important<br />
Assumptions<br />
20 <strong>Sierra</strong> <strong>Leone</strong>an<br />
actual and<br />
potential<br />
micr<strong>of</strong><strong>in</strong>ance<br />
consultants and<br />
tra<strong>in</strong>ers identified<br />
and tra<strong>in</strong>ed<br />
1. List &<br />
particulars <strong>of</strong> local<br />
MF consultants<br />
2. SMART-Cap<br />
monitor<strong>in</strong>g reports<br />
3. Term<strong>in</strong>al<br />
evaluation report<br />
4. Interviews with<br />
the consultants.<br />
All managers <strong>of</strong><br />
MFIs, public<br />
<strong>of</strong>ficers who work<br />
on micr<strong>of</strong><strong>in</strong>ance<br />
related functions<br />
and MFI board<br />
members fully<br />
appreciate<br />
micr<strong>of</strong><strong>in</strong>ance<br />
sound practices. 23<br />
1. MFI perf’<br />
reports<br />
2. SMART Cap<br />
monitor<strong>in</strong>g reports<br />
3. Interviews with<br />
MF managers,<br />
directors & public<br />
<strong>of</strong>ficers<br />
Industry cohesion<br />
and collaboration<br />
promoted<br />
SLAMFI secretariat<br />
established with<br />
staff, own <strong>of</strong>fice,<br />
budget & facilities.<br />
SLAMFI takes the<br />
<strong>in</strong>itiative and<br />
leads other MF<br />
stakeholders <strong>in</strong><br />
lobby<strong>in</strong>g,<br />
dissem<strong>in</strong>ates MF<br />
related<br />
<strong>in</strong>formation<br />
regularly<br />
1. Office location<br />
& address<br />
2. SMART-Cap<br />
reports<br />
3. Interview with<br />
SMART-Cap mgt<br />
1. Other F<strong>in</strong>ancial<br />
Services Act<br />
reviewed to suit<br />
mF<br />
2. Lobby memoirs<br />
and m<strong>in</strong>utes<br />
1. Government<br />
and its<br />
development<br />
partners are<br />
will<strong>in</strong>g to fund<br />
SLAMFI<br />
establishment and<br />
operation, without<br />
unduly controll<strong>in</strong>g<br />
its governance<br />
and operations.<br />
SLAMFI conducts<br />
regular, scheduled<br />
micr<strong>of</strong><strong>in</strong>ance<br />
forums.<br />
M<strong>in</strong>utes <strong>of</strong> MF<br />
forum meet<strong>in</strong>gs<br />
Bus<strong>in</strong>ess and<br />
f<strong>in</strong>ancial<br />
awareness <strong>of</strong> the<br />
population<br />
enhanced<br />
Clients/ members<br />
<strong>of</strong> MFIs able to<br />
articulate their<br />
key rights and<br />
responsibilities as<br />
consumers <strong>of</strong><br />
f<strong>in</strong>ancial services<br />
1. Interviews with<br />
people <strong>in</strong><br />
chiefdoms<br />
2. SMART-Cap<br />
monitor<strong>in</strong>g reports<br />
1. Government<br />
takes this<br />
(massive<br />
sensitization <strong>of</strong><br />
the population <strong>of</strong><br />
bus<strong>in</strong>ess aptitude<br />
& responsible<br />
23 Hav<strong>in</strong>g been tra<strong>in</strong>ed or sensitized through programs implemented as part <strong>of</strong> this strategy
Strategic<br />
objective<br />
Outputs/<br />
Indicators<br />
Means <strong>of</strong><br />
Verification<br />
Important<br />
Assumptions<br />
A comprehensive<br />
rural bus<strong>in</strong>ess<br />
capacity needs<br />
assessment done,<br />
report & action<br />
plan executed<br />
Rural bus<strong>in</strong>ess<br />
sensitization<br />
materials 24<br />
developed <strong>in</strong><br />
English, Krio and<br />
local languages<br />
1. Needs<br />
assessment report<br />
2. SMART-Cap<br />
reports<br />
3.<br />
Copies <strong>of</strong> the<br />
various materials<br />
consumption <strong>of</strong><br />
f<strong>in</strong>ancial services)<br />
up as a national<br />
priority.<br />
2. The chiefs and<br />
other local leaders<br />
cooperate <strong>in</strong><br />
mobilis<strong>in</strong>g people<br />
for sensitization/<br />
tra<strong>in</strong><strong>in</strong>g<br />
240,000 rural<br />
people sensitized<br />
through rural,<br />
community level<br />
5-day tra<strong>in</strong><strong>in</strong>g<br />
sem<strong>in</strong>ars on basic<br />
bus<strong>in</strong>ess skills<br />
1.Tra<strong>in</strong><strong>in</strong>g reports<br />
2. SMART-Cap<br />
reports<br />
3. Interviews with<br />
people <strong>in</strong> the<br />
chiefdoms<br />
Coord<strong>in</strong>ated<br />
f<strong>in</strong>ancial support<br />
for the <strong>in</strong>dustry<br />
secured<br />
Adequate fund<strong>in</strong>g<br />
for capacity<br />
build<strong>in</strong>g available<br />
throughout the<br />
five years<br />
A MF wholesale<br />
established and<br />
accessible by all<br />
qualify<strong>in</strong>g MFIs<br />
1. SMART-Cap<br />
reports<br />
2. Fund<strong>in</strong>g MoUs<br />
between<br />
Government or<br />
SMART-Cap &<br />
funders<br />
3. Interviews with<br />
beneficiary MFIs<br />
1. Fund<strong>in</strong>g MoUs<br />
between<br />
Government &<br />
wholesale funders<br />
2. Wholesale fund<br />
portfolio reports<br />
1. Government<br />
prioritizes this<br />
strategy as its MF<br />
capacity build<strong>in</strong>g<br />
framework<br />
2. MF<br />
stakeholders buy<br />
<strong>in</strong>to this strategy<br />
as the right<br />
<strong>in</strong>stitutional<br />
framework for<br />
capacity build<strong>in</strong>g<br />
3.Interviews with<br />
beneficiary MFIs<br />
4. Interviews with<br />
host <strong>in</strong>stitution <strong>of</strong><br />
the wholesale<br />
fund<br />
24 Informative flyers, posters, flipcharts and other <strong>in</strong>formative visual/ audio/ literary aids
APPENDIX 2: ACTIVITY MATRIX FOR THE STRATEGY<br />
The table below summarizes the ma<strong>in</strong> activities for the strategy. The<br />
budgets are prelim<strong>in</strong>ary estimates that will need to be reviewed as part<br />
<strong>of</strong> SMART-Cap design. “J” <strong>in</strong> the table means the activity is to be<br />
accomplished by 30 th June <strong>of</strong> the relevant year while “D” means it is to be<br />
accomplished by 31 st December.<br />
ACTIVITY<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Output 1.1: Number <strong>of</strong> rural 25 clients served by beneficiary MFIs tripled.<br />
Budget<br />
(US$<br />
‘000)<br />
Detail out the Outreach<br />
w<strong>in</strong>dow <strong>of</strong> SMART-Cap<br />
SC 26<br />
Designer<br />
n/a 27 .<br />
Support MFI 40 new<br />
branches<br />
-do- 2,400<br />
Support 20 new CBFIs -do- 600<br />
Output 1.2: At least 150,000 new 28 clients served by beneficiary MFIs <strong>in</strong> rural <strong>Sierra</strong><br />
<strong>Leone</strong>.<br />
Three activities <strong>in</strong> (1.1)<br />
above<br />
Support MFI branches<br />
& CBFIs to <strong>in</strong>crease<br />
clientele<br />
SC<br />
Designer<br />
800<br />
Output 1.3: At least 60 new branches beneficiary MFIs or stand-alone community<br />
based f<strong>in</strong>ancial <strong>in</strong>stitutions established<br />
As <strong>in</strong> (1.1) above<br />
Subtotal<br />
for<br />
objective 1 3,800<br />
25 For this strategy, rural should be any location outside a 10 km radius <strong>of</strong> Freetown<br />
26 SC+ SMART-Cap<br />
27 Part <strong>of</strong> SMART-Cap design<br />
28 Incremental numbers <strong>of</strong> clients s<strong>in</strong>ce the <strong>in</strong>stitution started benefit<strong>in</strong>g from the scheme
ACTIVITY<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Output 2.1: Two suitable agricultural/ agribus<strong>in</strong>ess f<strong>in</strong>ance developed replicated<br />
Detail out the Product<br />
Development w<strong>in</strong>dow<br />
<strong>of</strong> SMART-Cap<br />
Hire consultant,<br />
develop Ag product 1<br />
SC<br />
Designer<br />
Budget<br />
(US$<br />
‘000)<br />
n/a 29<br />
SCM 30 40<br />
Hire consultant<br />
develop Ag product 2<br />
Test & roll out the 2<br />
products<br />
SCM 40<br />
SCM/MFIs 10<br />
Output 2.2: Two other productive-asset f<strong>in</strong>ancial products for rural people developed<br />
and replicated.<br />
Hire consultant,<br />
develop Asset product<br />
1<br />
Test & rollout Asset<br />
product 1<br />
Hire consultant,<br />
develop Asset product<br />
2<br />
Test & rollout Asset<br />
product 2<br />
SCM 40<br />
SCM/MFIs 5<br />
SCM 40<br />
SCM/MFIs 5<br />
Output 2.3: One exist<strong>in</strong>g MF delivery methodology ref<strong>in</strong>ed for suitability to rural areas<br />
and replicated<br />
Hire consultant,<br />
reeng<strong>in</strong>eer<br />
methodology<br />
Rollout improved<br />
methodology<br />
Subtotal for<br />
objective 2<br />
SCM 30<br />
SCM/MFIs 10<br />
220<br />
29 Part <strong>of</strong> SMART-Cap design<br />
30 SMART-Cap Manager
ACTIVITY<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Output 3.1: SMART-Cap established and operationalised<br />
Hire consultant to do a<br />
detailed design <strong>of</strong><br />
SMART-Cap<br />
Adopt SMART-Cap<br />
<strong>in</strong>stitutional framework<br />
Procure project<br />
management firms to<br />
run SMART under a<br />
framework<br />
arrangement<br />
Set up SMART-Cap<br />
<strong>of</strong>fice, staff, start<br />
operations<br />
Susta<strong>in</strong> SMART-Cap<br />
operations –<br />
management fees +<br />
adm<strong>in</strong> exp.<br />
Budget<br />
(US$<br />
‘000)<br />
Govt 31 200<br />
Govt<br />
n/a<br />
Govt 32 90<br />
SCM 100<br />
SCM 11,520<br />
Output 3.2: 15 beneficiary MFIs atta<strong>in</strong> full f<strong>in</strong>ancial susta<strong>in</strong>ability.<br />
Detail out Institutional<br />
<strong>Capacity</strong> w<strong>in</strong>dow <strong>of</strong><br />
SMART-Cap<br />
SC<br />
Designer<br />
Support at least 60<br />
15,000<br />
MFIs’ cap build’ 33<br />
Output 3.3: 20 other beneficiary MFIs atta<strong>in</strong> full operational susta<strong>in</strong>ability.<br />
As <strong>in</strong> 3.3 above<br />
Output 3.4: Each beneficiary MFI below full operational susta<strong>in</strong>ability has doubled its<br />
OSS<br />
As <strong>in</strong> 3.3 above<br />
Output 3.5: Each beneficiary MFI at least triples its client numbers, doubles its loan<br />
portfolio and ma<strong>in</strong>ta<strong>in</strong>s its portfolio at risk (PAR) below 5%.<br />
As <strong>in</strong> 3.3 above<br />
Output 3.6: 20 micr<strong>of</strong><strong>in</strong>ance consultants and tra<strong>in</strong>ers identified and further tra<strong>in</strong>ed<br />
n/a<br />
Advertise an EOI for<br />
consultants<br />
SCM 10<br />
Select qualified<br />
consultants<br />
SCM<br />
n/a<br />
Tra<strong>in</strong> qualified<br />
consultants<br />
SCM 120<br />
31 With support <strong>of</strong> its development partners<br />
32 With support <strong>of</strong> its development partners<br />
33 Involv<strong>in</strong>g relevant tra<strong>in</strong><strong>in</strong>g and technical assistance
ACTIVITY<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Budget<br />
(US$<br />
‘000)<br />
Output 3.7: All MFI managers, board members, public <strong>of</strong>ficers with MF responsibility<br />
fully appreciate micr<strong>of</strong><strong>in</strong>ance sound practices.<br />
Advertise for EOIs <strong>in</strong><br />
the tra<strong>in</strong><strong>in</strong>g<br />
Identify key targets for<br />
the tra<strong>in</strong><strong>in</strong>g<br />
Hire tra<strong>in</strong>ers & conduct<br />
tra<strong>in</strong><strong>in</strong>gs<br />
Subtotal<br />
objective 3<br />
for<br />
SCM 10<br />
SCM<br />
n/a<br />
SCM 120<br />
27,170<br />
Output 4.1: SLAMFI secretariat established<br />
Review<br />
strategy<br />
SLAMFI<br />
Secure funds for<br />
SLAMFI establishment<br />
& operations<br />
Hire SLAMFI manager<br />
& staff<br />
Support<br />
operations<br />
SLAMFI<br />
Ma<strong>in</strong>ta<strong>in</strong> manager &<br />
staff<br />
SLAMFI<br />
members<br />
SLAMFI<br />
board<br />
n/a<br />
n/a<br />
As above 10<br />
Output 4.2: SLAMFI leads MF stakeholders <strong>in</strong> lobby<strong>in</strong>g, frequently dissem<strong>in</strong>ates<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>formation<br />
Monitor SLAMFI on<br />
strategy<br />
implementation<br />
SLAMFI<br />
board &<br />
members<br />
Output 4.3: SLAMFI conducts regular micr<strong>of</strong><strong>in</strong>ance forums, at which stakeholders<br />
freely share and work for common <strong>in</strong>dustry good.<br />
As <strong>in</strong> 4.2 above<br />
Subtotal<br />
for<br />
objective 4 1,030<br />
600<br />
420<br />
n/a<br />
Output 5.1: Clients/ members <strong>of</strong> MFIs able to articulate their key rights and<br />
responsibilities<br />
See 5.4 below
ACTIVITY<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Output 5.2: Rural bus<strong>in</strong>ess capacity needs assessment done<br />
executed<br />
Budget<br />
(US$<br />
‘000)<br />
and action plan<br />
Hire consultants to SCM 5<br />
undertake CNA 34<br />
Conduct CAN<br />
Prepare a suitable<br />
action plan to address<br />
gaps identified <strong>in</strong> CAN<br />
SCM/<br />
100<br />
Cons 35<br />
SCM<br />
Output 5.3: Rural bus<strong>in</strong>ess sensitization materials 36 and radio programmes developed<br />
Procure consultants to<br />
develop materials&<br />
programmes<br />
Develop sensitization<br />
<strong>in</strong>fo materials<br />
Develop tra<strong>in</strong><strong>in</strong>g<br />
materials<br />
n/a<br />
SCM 10<br />
SCM/<br />
240<br />
Cons 37<br />
SCM/<br />
240<br />
Cons 38<br />
Output 5.4: 240,000 rural people sensitized through community tra<strong>in</strong><strong>in</strong>g<br />
Prepare a grand plan<br />
for community<br />
tra<strong>in</strong><strong>in</strong>g/ sensitization<br />
Run educative<br />
programmes on radio<br />
Recruit rural bus<strong>in</strong>ess<br />
tra<strong>in</strong>ers, conduct ToT<br />
for them<br />
Hire consultants/<br />
service providers &<br />
conduct rural bus<strong>in</strong>ess<br />
tra<strong>in</strong><strong>in</strong>g<br />
SCM<br />
n/a<br />
SCM,<br />
936<br />
SPs 39<br />
SCM 400<br />
SCM 2,710<br />
Output 6.1: Adequate fund<strong>in</strong>g for MF capacity build<strong>in</strong>g under this strategy secured<br />
Popularise this strategy<br />
to devt partners as<br />
Government’s MF<br />
strategy<br />
Do a more concrete<br />
cost<strong>in</strong>g <strong>of</strong> strategy<br />
activities<br />
Govt<br />
SCM<br />
n/a<br />
n/a<br />
34 <strong>Capacity</strong> needs assessment<br />
35 Consultants<br />
36 Informative flyers, posters, flipcharts and other <strong>in</strong>formative visual/ audio/ literary aids<br />
37 Consultants<br />
38 Consultants<br />
39 Service providers (hired by SMART-Cap)
ACTIVITY<br />
Solicit donor fund<strong>in</strong>g<br />
for different<br />
components <strong>of</strong> SMART-<br />
Cap<br />
RESP’ 2009 2010 2011 2012 2013<br />
J D J D J D J D J D<br />
Govt +<br />
SCM<br />
Budget<br />
(US$<br />
‘000)<br />
n/a<br />
Output 6.2: Micr<strong>of</strong><strong>in</strong>ance wholesale fund established<br />
Outside <strong>of</strong> SMART-Cap,<br />
design a wholesale<br />
fund for MFIs<br />
Govt,<br />
consultant<br />
45<br />
Appraise available<br />
<strong>in</strong>stitutions and<br />
determ<strong>in</strong>e a home for<br />
the fund<br />
Govt+DPs 10<br />
Secure wholesale<br />
funds from<br />
development partners<br />
Contract the chosen<br />
<strong>in</strong>stitution to<br />
adm<strong>in</strong>ister the<br />
wholesale fund<br />
Govt<br />
Govt<br />
n/a<br />
n/a<br />
Operationalize and run<br />
the wholesale fund<br />
WSF<br />
50<br />
Mgr 40<br />
Subtotal for objectives 5&6<br />
OVERALL TOTAL<br />
4,746<br />
36,966<br />
40 Wholesale fund manager
APPENDIX 3: GROWTH OF UGANDA’S MICROFINANCE<br />
SECTOR<br />
Brief Economic History That Gave Birth to the Micr<strong>of</strong><strong>in</strong>ance<br />
Industry<br />
Uganda suffered a complete economic breakdown from 1971 to 1979<br />
dur<strong>in</strong>g the harsh regime <strong>of</strong> the then president Idi Am<strong>in</strong>. The declaration<br />
<strong>of</strong> Economic War 41 , disruption <strong>of</strong> l<strong>in</strong>kages <strong>in</strong> the ma<strong>in</strong> cash crop value<br />
cha<strong>in</strong>s, <strong>in</strong>security, dis<strong>in</strong>tegration and mismanagement <strong>of</strong> several sectors<br />
<strong>of</strong> the economy, breakdown <strong>of</strong> law and order all took their toll on the<br />
economy. F<strong>in</strong>ancial <strong>in</strong>frastructure, like other basics for a function<strong>in</strong>g<br />
economy, broke down <strong>in</strong> the country. All the while, <strong>in</strong>termittent wars<br />
raged with Ugandan groups <strong>in</strong> exile. The regime was overthrown <strong>in</strong> 1979<br />
by a comb<strong>in</strong>ed force <strong>of</strong> Ugandan guerrillas and the Tanzanian army. The<br />
early to mid 1980s was for Uganda a period <strong>of</strong> wars and military coups.<br />
The country degenerated further economically till by 1986, the whole<br />
country was completely run down.<br />
Government’s preoccupation from 1986 to the early 1990s was<br />
reconstruction and recovery. This was followed by emphasis on provision<br />
<strong>of</strong> an enabl<strong>in</strong>g environment for private bus<strong>in</strong>esses to thrive, private<br />
sector-led growth and poverty alleviation/ eradication. In its economic<br />
growth development plann<strong>in</strong>g which has s<strong>in</strong>ce 1997 focused on poverty<br />
alleviation, Government <strong>of</strong> Uganda has right from the start identified lack<br />
<strong>of</strong> f<strong>in</strong>ancial services for rural and poor people as a priority challenge for<br />
national development. Accord<strong>in</strong>gly, it supported the growth <strong>of</strong> the<br />
micr<strong>of</strong><strong>in</strong>ance sector. This is the stage at which <strong>Sierra</strong> <strong>Leone</strong> seems to be<br />
– start<strong>in</strong>g to support market-led, poverty focused provision <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance.<br />
The micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry <strong>in</strong> Uganda was a natural <strong>of</strong>fshoot <strong>of</strong> the<br />
general historical dynamics <strong>of</strong> the country’s economy briefly expla<strong>in</strong>ed<br />
above. The economic breakdown left rural and other low <strong>in</strong>come people<br />
lack<strong>in</strong>g f<strong>in</strong>ancial services. Many banks closed their upcountry branches.<br />
Cooperatives, <strong>in</strong>clud<strong>in</strong>g SACCOs, also closed down. Attempts to reverse<br />
this trend <strong>in</strong> the mid and late 1980s through massive rural branch<br />
open<strong>in</strong>g by the then Uganda Commercial Bank (UCB) <strong>in</strong> the 1980s was<br />
not successful as many <strong>of</strong> the branches made perpetual losses and were<br />
closed down.<br />
In their bid to alleviate poverty through a social agenda, a number <strong>of</strong><br />
NGOs and other aid organisations started develop<strong>in</strong>g some form <strong>of</strong><br />
microcredit as departments or side activities <strong>in</strong> the 1980s and early<br />
1990s. At about the same time, a few specialized MFIs also started<br />
deliver<strong>in</strong>g microcredit backed by compulsory sav<strong>in</strong>gs. 42 Ow<strong>in</strong>g to the real<br />
need for f<strong>in</strong>ancial services by low <strong>in</strong>come people, these micr<strong>of</strong><strong>in</strong>ance<br />
41 Expulsion <strong>of</strong> enterpris<strong>in</strong>g Asians and <strong>in</strong>troduction <strong>of</strong> other decrees that made private<br />
sector productive bus<strong>in</strong>ess extremely difficult<br />
42 used as collateral substitutes
programmes grew fairly fast <strong>in</strong> number and size. They also helped to fill<br />
the void left after Bank <strong>of</strong> Uganda <strong>in</strong> the late 1990s closed four banks 43<br />
for <strong>in</strong>solvency <strong>in</strong>clud<strong>in</strong>g Cooperative Bank, then Uganda’s second largest<br />
bank <strong>in</strong> terms <strong>of</strong> branch network.<br />
In the early and mid 1990s, some <strong>of</strong> the NGO-type micr<strong>of</strong><strong>in</strong>ance<br />
functions were spun <strong>of</strong>f <strong>in</strong>to fully fledged MFIs or stand-alone<br />
micr<strong>of</strong><strong>in</strong>ance programmes. The mid and late 1990s was also a time <strong>of</strong><br />
<strong>in</strong>creased <strong>in</strong>terest and education <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>ternationally. Through<br />
a comb<strong>in</strong>ation <strong>of</strong> donor programmes, Government support and keen<br />
<strong>in</strong>terest to learn on the part <strong>of</strong> the MFIs, a lot <strong>of</strong> fully sponsored tra<strong>in</strong><strong>in</strong>g<br />
and technical assistance based on “Micr<strong>of</strong><strong>in</strong>ance Best Practices” was<br />
provided dur<strong>in</strong>g the late 1990s and early 2000s. This resulted <strong>in</strong>to:<br />
• The MFIs and other stakeholders broaden<strong>in</strong>g their understand<strong>in</strong>g<br />
<strong>of</strong> micr<strong>of</strong><strong>in</strong>ance from microcredit to a full range <strong>of</strong> f<strong>in</strong>ancial<br />
services<br />
• Appreciation by most stakeholders that micr<strong>of</strong><strong>in</strong>ance should be<br />
delivered <strong>in</strong> a susta<strong>in</strong>able and bus<strong>in</strong>esslike way<br />
• Many MFIs and micr<strong>of</strong><strong>in</strong>ance programmes develop<strong>in</strong>g long and<br />
short term plans with a focus on operational and f<strong>in</strong>ancial<br />
susta<strong>in</strong>ability, which when implemented enabled them to attract<br />
<strong>in</strong>creas<strong>in</strong>g numbers <strong>of</strong> clients while adopt<strong>in</strong>g a more bus<strong>in</strong>ess<br />
oriented focus.<br />
Move Towards Commercialis<strong>in</strong>g and Ma<strong>in</strong>stream<strong>in</strong>g Micr<strong>of</strong><strong>in</strong>ance<br />
The adoption <strong>of</strong> susta<strong>in</strong>ability/ pr<strong>of</strong>itability alongside the social mission by<br />
MFIs (which came to be referred to as the dual mission or double bottoml<strong>in</strong>e)<br />
meant that sponsors and management <strong>of</strong> MFIs moved from see<strong>in</strong>g<br />
micr<strong>of</strong><strong>in</strong>ance purely as a social service to runn<strong>in</strong>g the <strong>in</strong>stitutions with a<br />
focus on pr<strong>of</strong>itability and long term commercial viability. The dual mission<br />
drove the MFIs to seek greater outreach and the MFIs grew the numbers<br />
<strong>of</strong> their clients significantly from the mid 1990s onwards.<br />
At the same time, stakeholders <strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry (MFIs,<br />
Government, donors, development partners and other people with<br />
<strong>in</strong>terest <strong>in</strong> the <strong>in</strong>dustry) started the Micr<strong>of</strong><strong>in</strong>ance Forum (MFF), an<br />
<strong>in</strong>formal but very effective <strong>in</strong>formation shar<strong>in</strong>g mechanism. Among other<br />
developments, the MFF started discussions on how to ma<strong>in</strong>stream<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>to the formal f<strong>in</strong>ancial sector and create conducive<br />
conditions for MFIs to become susta<strong>in</strong>able, thrive and grow. 44<br />
The challenges<br />
Commercialization and growth <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> Uganda came with<br />
some challenges. As MFIs grew <strong>in</strong> size and outreach, they started seek<strong>in</strong>g<br />
ways <strong>of</strong> becom<strong>in</strong>g formal (regulated) f<strong>in</strong>ancial <strong>in</strong>stitutions. With<br />
43 Cooperative bank, Greenland bank, Trust Bank and International Credit Bank<br />
44 For further details <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> Uganda from the early years until 2004, see<br />
Goodw<strong>in</strong>-Groen (CGAP-2004): UGANDA Micr<strong>of</strong><strong>in</strong>ance <strong>Sector</strong> Effectiveness Review.
participation <strong>of</strong> the <strong>in</strong>dustry practitioners, MFIs, Government and other<br />
stakeholders, BoU <strong>in</strong> 2002 drafted the MDI Bill from an earlier F<strong>in</strong>ancial<br />
<strong>Sector</strong> Policy that had been approved by Government. In November<br />
2003, Parliament passed the MDI Bill <strong>in</strong>to law, creat<strong>in</strong>g opportunity for<br />
large, mature MFIs to apply for BoU license under which they could<br />
accept and <strong>in</strong>termediate sav<strong>in</strong>gs from the public.<br />
Government supported the commercialization, growth and transformation<br />
<strong>of</strong> micr<strong>of</strong><strong>in</strong>ance partly because <strong>of</strong> the belief that market led penetration<br />
<strong>of</strong> micr<strong>of</strong><strong>in</strong>ance services would deliver rapid expansion <strong>in</strong> the<br />
geographical and poverty outreach and while lower<strong>in</strong>g the <strong>in</strong>terest rates<br />
and other relevant costs significantly. Neither <strong>of</strong> these has happened<br />
s<strong>in</strong>ce the licenses were issued <strong>in</strong> 2004 and 2005. Outreach <strong>in</strong> <strong>in</strong>creas<strong>in</strong>g<br />
at a reasonable pace but not rapidly while overall MF product pric<strong>in</strong>g has<br />
hardly reduced, despite <strong>in</strong>creas<strong>in</strong>g competition. Government, frustrated<br />
by the <strong>in</strong>ability <strong>of</strong> market forces to deliver what it desired to see as fast<br />
as it wanted, has now decided to concentrate its micr<strong>of</strong><strong>in</strong>ance support to<br />
SACCOs. Under the Rural F<strong>in</strong>ancial Strategy, Government will assist one<br />
SACCO per Sub County with capacity build<strong>in</strong>g and loan capital <strong>in</strong> order to<br />
create an extensive f<strong>in</strong>ancial <strong>in</strong>frastructure for <strong>in</strong>clusive development.<br />
Thus it now appears that Government’s former enthusiastic support for<br />
the <strong>in</strong>dustry has waned <strong>of</strong>f, and it is go<strong>in</strong>g back to government-f<strong>in</strong>anced<br />
micr<strong>of</strong><strong>in</strong>ance. This was attempted and it failed twice before.<br />
In the mean time, the MDIs, progressive SACCOs and other MFIs are<br />
runn<strong>in</strong>g grow<strong>in</strong>g and susta<strong>in</strong>able micr<strong>of</strong><strong>in</strong>ance bus<strong>in</strong>ess.<br />
Current F<strong>in</strong>ancial <strong>Sector</strong> Structure<br />
The f<strong>in</strong>ancial sector regulatory framework <strong>in</strong> Uganda currently categorizes<br />
<strong>in</strong>stitutions <strong>in</strong>to four tiers as follows:<br />
TIER<br />
TYPE OF INSTITUTIONS<br />
1 Commercial banks that are part <strong>of</strong> the central bank’s<br />
clear<strong>in</strong>g house; they engage <strong>in</strong> unlimited f<strong>in</strong>ancial<br />
services as long as they are legally provided<br />
2 Also known as “credit <strong>in</strong>stitutions”. These are non-bank<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions, some <strong>of</strong> which <strong>of</strong>fer only loans plus<br />
sav<strong>in</strong>gs accounts. They cannot operate current accounts<br />
and are not part <strong>of</strong> the clear<strong>in</strong>g house.<br />
3 Micro Deposit tak<strong>in</strong>g Institutions (MDIs) – these are<br />
MFIs that are licensed to accept deposits from the public<br />
and <strong>in</strong>termediate them. They are prudentially regulated<br />
and supervised by Bank <strong>of</strong> Uganda under the MDI Act<br />
4 Credit only MFIs, SACCOs and other <strong>in</strong>formal/<br />
semiformal <strong>in</strong>stitutions <strong>of</strong>fer<strong>in</strong>g micro loans to their<br />
clients.
Because <strong>of</strong> significant commercialisation, micr<strong>of</strong><strong>in</strong>ance is today provided<br />
<strong>in</strong> Uganda largely as a bus<strong>in</strong>ess. Donors have stopped giv<strong>in</strong>g grants for<br />
loan funds and many MFIs borrow from either specialised wholesale<br />
lenders at near-market rates or from the wider money market at market<br />
rates, or both.<br />
Some Lessons<br />
Exhaustive explanation <strong>of</strong> Uganda’s experience <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance is beyond<br />
the scope <strong>of</strong> this report. There are, however, some vital lessons for <strong>Sierra</strong><br />
<strong>Leone</strong> to be learnt from Uganda’s experience. These will be adequately<br />
considered <strong>in</strong> develop<strong>in</strong>g the micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g strategy for<br />
<strong>Sierra</strong> <strong>Leone</strong>. Some <strong>of</strong> the lessons are:<br />
- Systematic, sector-wide capacity build<strong>in</strong>g is key to growth; and<br />
the more organised, focused and tailored the capacity build<strong>in</strong>g<br />
<strong>in</strong>itiatives are, the faster the <strong>in</strong>stitutions grow<br />
- Industry collaboration by different stakeholders creates a healthy<br />
climate for cross-learn<strong>in</strong>g, which vital for this young <strong>in</strong>dustry<br />
- Government’s direct participation is necessary as an enabler but<br />
neither as a direct lender nor as the regulator/ supervisor <strong>of</strong> MFIs<br />
- The <strong>in</strong>dustry association/ network organization like SLAMFI is<br />
necessary and should be allowed to evolve from the needs <strong>of</strong> the<br />
MFIs rather than be<strong>in</strong>g <strong>in</strong>duced externally<br />
- MFIs grow naturally like other bus<strong>in</strong>esses and should not be<br />
expected to deliver sudden, quantum outreach. Over-expectations<br />
from Government <strong>of</strong>ten leave it frustrated when MFIs do not meet<br />
unrealistically high speed <strong>of</strong> outreach. In such cases, Government<br />
<strong>of</strong>ten needlessly becomes a foe or dis<strong>in</strong>terested stakeholder <strong>in</strong><br />
micr<strong>of</strong><strong>in</strong>ance<br />
- Generally, MFIs 45 can achieve better rural outreach than<br />
commercial banks if they actively develop a variety <strong>of</strong> suitable<br />
products, <strong>in</strong>novate cost-effective and outreach-focused delivery<br />
methodologies and pr<strong>of</strong>essionally manage their assets 46 and<br />
liabilities<br />
- Adherence to <strong>in</strong>ternationally recognised sound practices is the<br />
only way that market-led micr<strong>of</strong><strong>in</strong>ance can grow <strong>in</strong>to a stable,<br />
susta<strong>in</strong>able <strong>in</strong>dustry serv<strong>in</strong>g masses <strong>of</strong> rural/ poor people<br />
- Direct government credit or closely controlled credit l<strong>in</strong>es <strong>of</strong>ten<br />
pollute the market for sound-practice <strong>in</strong>stitutions and then<br />
eventually fail, hav<strong>in</strong>g done the harm. Such populist, quick-fix<br />
<strong>in</strong>itiatives eventually harm the poor more than it benefits them<br />
- For legislators, never legislate what cannot be effectively<br />
regulated and for f<strong>in</strong>ancial sector regulatory authorities, never<br />
regulate what you cannot effectively and keenly supervise.<br />
<strong>Capacity</strong> <strong>of</strong> the regulator/ supervisor needs to match the sector<br />
regulatory requirements<br />
45 MFIs <strong>in</strong> a broad sense, <strong>in</strong>clud<strong>in</strong>g NGOs, companies, SACCOs, community banks and<br />
other providers <strong>of</strong> f<strong>in</strong>ancial services for low <strong>in</strong>come people<br />
46 Especially the loan portfolio
- Prudential regulation is not necessary for non-deposit tak<strong>in</strong>g<br />
<strong>in</strong>stitutions, and laxity <strong>in</strong> prudential regulation <strong>of</strong> any deposit<br />
tak<strong>in</strong>g <strong>in</strong>stitution case can underm<strong>in</strong>e public confidence <strong>in</strong> the<br />
f<strong>in</strong>ancial sector through <strong>in</strong>stitutional failures <strong>in</strong> which people lose<br />
their deposits<br />
- An effective deposit <strong>in</strong>surance scheme, probably run by the<br />
central bank, is necessary <strong>in</strong> restor<strong>in</strong>g public confidence <strong>in</strong> the<br />
f<strong>in</strong>ancial sector when <strong>in</strong>stitutional failures happen.
APPENDIX 4: ASSESSMENT OF NSOs<br />
1. MICROFINANCE PROGRAM (MFP)- A COMPONENT OF<br />
THE NATIONAL COMMISSION FOR SOCIAL ACTION<br />
(NaCSA)<br />
A. Introduction<br />
This brief <strong>in</strong>stitutional assessment report presents the f<strong>in</strong>d<strong>in</strong>gs <strong>of</strong><br />
the micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g study/ strategy development<br />
team on MFP <strong>of</strong> NaCSA. The <strong>in</strong>stitutional assessment <strong>of</strong> MFP-<br />
NaCSA was carried out as part <strong>of</strong> the assessment <strong>of</strong> the network<br />
support organizations (NSOs) available <strong>in</strong> the country. As several<br />
<strong>in</strong>stitutions had to be appraised and the overall national<br />
micr<strong>of</strong><strong>in</strong>ance sector exam<strong>in</strong>ed <strong>in</strong> depth, the report on each<br />
<strong>in</strong>stitution is concise and focused on aspects that are directly<br />
relevant <strong>in</strong> the context <strong>of</strong> overall national micr<strong>of</strong><strong>in</strong>ance sector<br />
capacity needs. The assessment was done us<strong>in</strong>g an abridged and<br />
adopted version <strong>of</strong> the CGAP Guidel<strong>in</strong>es for the Assessment <strong>of</strong><br />
Network Support Organizations.<br />
B. Objectives and Institutional <strong>Capacity</strong><br />
MFP is a component <strong>of</strong> NaCSA that <strong>in</strong> the past worked both as a<br />
f<strong>in</strong>ancial and capacity build<strong>in</strong>g apex for micr<strong>of</strong><strong>in</strong>ance. Presently,<br />
the component’s key focus is supposed to be on tra<strong>in</strong><strong>in</strong>g, technical<br />
assistance, <strong>in</strong>dustry coord<strong>in</strong>ation and dissem<strong>in</strong>ation <strong>of</strong> sound<br />
practices. The areas <strong>of</strong> focus are similar to those <strong>of</strong> MITAF, a multidonor<br />
funded MF capacity build<strong>in</strong>g program whose management is<br />
contracted to a private consultancy firm. MFP has accord<strong>in</strong>gly<br />
reached an understand<strong>in</strong>g with MITAF to work together <strong>in</strong> order to<br />
avoid role duplication and ensure mutually beneficial work. For<br />
over 18 months, MFP has had no funds for operations and has thus<br />
not been very active.<br />
Among the activities undertaken by MFP and MITAF <strong>in</strong> the past<br />
were:<br />
- MF Best Practices course for board members and managers <strong>of</strong><br />
MFIs<br />
- Distance Learn<strong>in</strong>g Micr<strong>of</strong><strong>in</strong>ance Course for <strong>Sierra</strong> <strong>Leone</strong> and<br />
Liberia<br />
- Del<strong>in</strong>quency Management course<br />
- Information Shar<strong>in</strong>g Sem<strong>in</strong>ar for stakeholders<br />
Other courses <strong>of</strong>fered by MFP <strong>in</strong> the past <strong>in</strong>clude:<br />
- HIV/ AIDS awareness sem<strong>in</strong>ar, conducted <strong>in</strong> association with an<br />
AIDS focused NGO<br />
- Account<strong>in</strong>g for MFIs<br />
- F<strong>in</strong>ancial Management for MFIs
- ToT for MFOs <strong>in</strong> deliver<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance to people with<br />
disabilities<br />
Most <strong>of</strong> the courses above were delivered <strong>in</strong> 2005 and 2006. The<br />
account<strong>in</strong>g and f<strong>in</strong>ance related courses were delivered by the long<br />
term technical assistant who has s<strong>in</strong>ce left the country after his<br />
contract period. The courses were quite good <strong>in</strong> content although<br />
some <strong>of</strong> them (Del<strong>in</strong>quency Management and Best Practices) could<br />
have been better structured. MFP has had a fund<strong>in</strong>g problem that<br />
reportedly arose from a mis-procurement by another NaCSA<br />
component, as a result <strong>of</strong> which ADB has put conditions precedent<br />
to further disbursement that had to be fulfilled. Consequently, MFP<br />
for more than one and a half years had no funds for operation.<br />
More lately, the <strong>of</strong>ficer <strong>in</strong> charge reports that ADB has agreed to<br />
resume fund<strong>in</strong>g.<br />
With the TA out, MFP Director hav<strong>in</strong>g left <strong>in</strong> Jan 2007 and no funds<br />
for operations, MFP’s capacity to deliver is at present significantly<br />
impaired. There is only one pr<strong>of</strong>essional staff <strong>in</strong> the component at<br />
present: the Program Officer <strong>in</strong> Charge. A cont<strong>in</strong>u<strong>in</strong>g challenge is<br />
that MFP is part <strong>of</strong> a structured Government bureaucracy that<br />
might not necessarily look at micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> the context <strong>of</strong> its<br />
peculiarity.<br />
In a broad sense, MFP does not appear to have gone through a<br />
period when they enough money for all operations and were<br />
focus<strong>in</strong>g exclusively on capacity build<strong>in</strong>g. Whereas <strong>in</strong> the past MFP<br />
had considerable capacity (when the Director 47 , Program Manager<br />
and Technical Assistant 48 were around), it did not have the money<br />
to fully engage <strong>in</strong> <strong>of</strong>fer<strong>in</strong>g tra<strong>in</strong><strong>in</strong>g and TA to the <strong>in</strong>dustry outside<br />
<strong>of</strong> the courses run with MITAF and the account<strong>in</strong>g/ f<strong>in</strong>ancial<br />
management courses run by the Technical Assistant.<br />
In terms <strong>of</strong> <strong>in</strong>ternal procedures for execut<strong>in</strong>g assignments, MFP<br />
appears to be structured for efficiency. It is, however, part <strong>of</strong> a<br />
larger Commission <strong>of</strong> Government, and is bound to face challenges<br />
<strong>of</strong> policies, procedure and bureaucracy. The suspended fund<strong>in</strong>g <strong>of</strong><br />
the component is reported to have arisen from a procurement<br />
problem attributed to another component. This highlights how<br />
vulnerable MFP can be as part <strong>of</strong> NaCSA. Some autonomy would be<br />
good for any capacity build<strong>in</strong>g program that Government might<br />
come up with.<br />
MFP’s ma<strong>in</strong> weaknesses and challenges at the moment are:<br />
- Inadequate capacity to build MFI capacity <strong>in</strong> areas like<br />
account<strong>in</strong>g, f<strong>in</strong>ancial management, <strong>in</strong>ternal controls,<br />
report<strong>in</strong>g<br />
- Lack <strong>of</strong> fund<strong>in</strong>g, which has halted activities<br />
47 The MFP Director left Jan 2007 to work for UNDP <strong>in</strong> Liberia<br />
48 The Technical Assistant’s contract expired and he went back to Uganda
- Challeng<strong>in</strong>g <strong>in</strong>stitutional context (be<strong>in</strong>g part <strong>of</strong> NaCSA)<br />
- Severe understaff<strong>in</strong>g, pos<strong>in</strong>g the challenges <strong>of</strong> shortage <strong>of</strong><br />
both numbers <strong>of</strong> staff and critical skills needed<br />
C. Impact and Value Addition to Partners<br />
Ow<strong>in</strong>g to the fact that MFP has not had a long enough period as a<br />
busy <strong>in</strong>stitution with an exclusive focus on micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g, it has not yet made a notable impact <strong>in</strong> this area. MFIs<br />
talk <strong>of</strong> MFP <strong>in</strong> terms <strong>of</strong> be<strong>in</strong>g an associate to MITAF <strong>in</strong> deliver<strong>in</strong>g<br />
some courses, and they emphasize that MITAF has impacted more<br />
on them.<br />
D. Contribution to Broader <strong>Sector</strong> Growth<br />
MFP, <strong>in</strong> its earlier existence as SAPA, adm<strong>in</strong>istered two<br />
government funded micro-credit programs: the NGOs program (<strong>in</strong><br />
which funds were passed through NGOs to disburse to borrowers <strong>in</strong><br />
their communities) and the Chiefdoms scheme (<strong>in</strong> which money<br />
was delivered directly to people through their Chiefdoms). The<br />
latter seems to have been a complete failure and the former a<br />
moderate one with a 90% repayment rate. 49 From both these<br />
programs, the lesson generated by MFP is that Government funded<br />
programs, when publicized and delivered as such, have slim<br />
chances <strong>of</strong> succeed<strong>in</strong>g. This agrees with experience elsewhere <strong>in</strong><br />
the ACP and the rest <strong>of</strong> the world.<br />
With<strong>in</strong> its present limits, MFP cooperates with other meso level<br />
organizations <strong>in</strong> promot<strong>in</strong>g good practice micr<strong>of</strong><strong>in</strong>ance. The<br />
courses delivered jo<strong>in</strong>tly with MITAF, collaboration with BoSL and<br />
participation <strong>in</strong> <strong>in</strong>dustry meet<strong>in</strong>gs are examples <strong>of</strong> this.<br />
E. Summary Conclusions and Recommendations<br />
Focus<strong>in</strong>g MFP away from credit adm<strong>in</strong>istration to MF capacity<br />
build<strong>in</strong>g was a good move whose effectiveness was severely<br />
checked by absence <strong>of</strong> fund<strong>in</strong>g for the component. This was not<br />
helped by the departure <strong>of</strong> the component’s director, technical<br />
assistant and program manager. MFP’s present human resource<br />
and skill capacity would critically need enhanc<strong>in</strong>g for effective<br />
delivery <strong>of</strong> services. Ow<strong>in</strong>g to all these factors, the component’s<br />
contribution to sector growth has so far been modest.<br />
In view <strong>of</strong> the current challenges and the fact that this assignment<br />
is to come out with a national capacity build<strong>in</strong>g strategy for<br />
micr<strong>of</strong><strong>in</strong>ance, it is recommended that MFP challenges should not be<br />
addressed <strong>in</strong> isolation. The grand MF capacity build<strong>in</strong>g strategy<br />
should take care <strong>of</strong> all the current issues faced by MFP, without<br />
necessarily leav<strong>in</strong>g MFP <strong>in</strong> its current <strong>in</strong>stitutional context.<br />
Accord<strong>in</strong>gly:<br />
49 Information verbally given by MFP
A semi-autonomous secretariat should be set up for<br />
micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g, <strong>in</strong>dustry coord<strong>in</strong>ation and<br />
<strong>in</strong>formation dissem<strong>in</strong>ation. This could be a cont<strong>in</strong>uation <strong>of</strong> the<br />
merged roles <strong>of</strong> MITAF and MFP, <strong>in</strong> the context <strong>of</strong> the <strong>Capacity</strong><br />
<strong>Build<strong>in</strong>g</strong> Strategy<br />
Critical attention should be paid to develop<strong>in</strong>g local skills,<br />
through tra<strong>in</strong><strong>in</strong>g and understudy<strong>in</strong>g expatriates<br />
The head <strong>of</strong> the secretariat should report to a committee or<br />
board, not to a s<strong>in</strong>gle donor, group <strong>of</strong> donors or Government<br />
m<strong>in</strong>istry/ department.<br />
2. SIERRA LEONE ASSOCIATION OF MICROFINANCE<br />
INSTITUTIONS (SLAMFI)<br />
A. Introduction<br />
This brief report presents the f<strong>in</strong>d<strong>in</strong>gs from the assessment <strong>of</strong> the<br />
<strong>Sierra</strong> <strong>Leone</strong> Association <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance Institutions (SLAMFI) by<br />
the team undertak<strong>in</strong>g the micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g study/<br />
strategy development assignment. The <strong>in</strong>stitutional assessment <strong>of</strong><br />
SLAMFI was carried out as part <strong>of</strong> the assessment <strong>of</strong> the network<br />
support organizations (NSOs) available <strong>in</strong> the country. The<br />
assessment was guided by an abridged and tailored version <strong>of</strong> the<br />
CGAP Guidel<strong>in</strong>es for Appraisal <strong>of</strong> Network Support Organizations.<br />
The <strong>Sierra</strong> <strong>Leone</strong> Association <strong>of</strong> Micr<strong>of</strong><strong>in</strong>ance Institutions (SLAMFI)<br />
is supposed to be the national member-based network organisation<br />
for MF stakeholders <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong>. At the time <strong>of</strong> this<br />
assignment, SLAMFI had been registered 50 but <strong>in</strong> terms <strong>of</strong><br />
operations, was still only an idea. It has no <strong>of</strong>fice, no staff and all<br />
the <strong>in</strong>stitutional structures are still concepts with<strong>in</strong> the newly done<br />
strategic plan. SLAMFI has 8 ord<strong>in</strong>ary and 2 honorary members<br />
and as a young <strong>in</strong>stitution <strong>in</strong> a young and weak market, it has had<br />
no impact yet.<br />
SLAMFI’s vision and mission are:<br />
Vision:<br />
“Existence <strong>of</strong> a susta<strong>in</strong>able micr<strong>of</strong><strong>in</strong>ance sector fully <strong>in</strong>tegrated <strong>in</strong>to<br />
the formal f<strong>in</strong>ancial system driv<strong>in</strong>g poverty reduction <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>”.<br />
Mission:<br />
“To promote the development <strong>of</strong> a vibrant and susta<strong>in</strong>able<br />
micr<strong>of</strong><strong>in</strong>ance sector <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong> primarily through advocacy,<br />
<strong>in</strong>formation shar<strong>in</strong>g, capacity build<strong>in</strong>g and dissem<strong>in</strong>ation <strong>of</strong> best<br />
practices”<br />
50 Registered under the Friendly Societies Ord<strong>in</strong>ance (1924) <strong>of</strong> the Laws <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong>
B. Objectives and Institutional <strong>Capacity</strong><br />
The objectives <strong>of</strong> SLAMFI, accord<strong>in</strong>g to its recently completed<br />
strategic plan, are to:<br />
• Liaise with the Government <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> to improve the<br />
regulatory and policy environment to ensure safe operations<br />
and an efficient micr<strong>of</strong><strong>in</strong>ance sector;<br />
• Lobby and advocate on pert<strong>in</strong>ent issues and concerns<br />
relat<strong>in</strong>g to the <strong>in</strong>stitutional development needs <strong>of</strong> members;<br />
• Provide a constructive, collaborative network for dialogue<br />
among micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions (MFIs), donors, the private<br />
sector and other stakeholders;<br />
• Provide a forum for exchang<strong>in</strong>g experiences and<br />
<strong>in</strong>formation, lessons learned and network<strong>in</strong>g with a view to<br />
prevent disruption <strong>of</strong> the young <strong>in</strong>dustry.<br />
• Promote performance standards, norms and ethics that<br />
encourage efficient operations and high quality f<strong>in</strong>ancial<br />
service delivery among its membership;<br />
• Coord<strong>in</strong>ate and/or facilitate capacity build<strong>in</strong>g services to<br />
improve f<strong>in</strong>ancial <strong>in</strong>termediation for members and other<br />
MFIs;<br />
• Promote <strong>in</strong>tegration between the formal and <strong>in</strong>formal<br />
f<strong>in</strong>ancial sectors;<br />
• Develop l<strong>in</strong>kages and strategic partnerships at the local and<br />
<strong>in</strong>ternational levels;<br />
• Undertake research, publications and dissem<strong>in</strong>ation <strong>of</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>an micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry <strong>in</strong>formation, <strong>in</strong>novations,<br />
evaluations, and best practice tools and systems.<br />
The objectives came out more elaborately and clearly <strong>in</strong> the<br />
strategic plan than it did <strong>in</strong> <strong>in</strong>terviews with the Board members.<br />
The reason could be that there was technical assistance <strong>in</strong> do<strong>in</strong>g<br />
the strategic plan, which could raise questions whether SLAMFI at<br />
the moment enjoys adequate patronage and ownership from its<br />
direct stakeholders – the ord<strong>in</strong>ary members.<br />
The establishment <strong>of</strong> SLAMFI has so far been significantly<br />
spearheaded by MITAF, partly as MITAF’s own exit strategy. The<br />
bus<strong>in</strong>ess plan proposes that SLAMFI takes over some key roles <strong>of</strong><br />
MITAF at the end <strong>of</strong> 2009 51 . The strategic plan is very well done<br />
and conceptualized except for a few issues that could raise debate.<br />
Notable among these are the proposals that:<br />
- SLAMFI should take up fee based tra<strong>in</strong><strong>in</strong>g and TA provision after<br />
MUTAF;<br />
- SLAMFI reports to the donors that fund it.<br />
51 The strategic plan specifically says “The development <strong>of</strong> SLAMFI with<strong>in</strong> the next 18<br />
months should therefore be the centre piece <strong>of</strong> MITAF’s exit strategy and all other<br />
plans for the future development <strong>of</strong> the sector…”
On the first proposal, experience elsewhere shows that a memberbased<br />
network like SLAMFI does better if it participates on the<br />
consumers’ side <strong>of</strong> tra<strong>in</strong><strong>in</strong>g and TA. The network organization<br />
should check and control the quality <strong>of</strong> services that tra<strong>in</strong>ers/<br />
consultants deliver to its members. If it delivers market based,<br />
paid-for services to its members, SLAMFI would quickly f<strong>in</strong>d itself<br />
<strong>in</strong> a conflict <strong>of</strong> <strong>in</strong>terest situation. On the second proposal, SLAMFI<br />
should <strong>in</strong> its governance structure report to its council, which <strong>in</strong><br />
turn reports to the AGM. On the side, SLAMFI should submit<br />
reports to its donors as obligated by agreements.<br />
SLAMFI is very weak f<strong>in</strong>ancially, as might be expected <strong>of</strong> a young<br />
network. The strategic plan states:<br />
SLAMFI’s current sources <strong>of</strong> fund<strong>in</strong>g are membership<br />
subscription and assistance <strong>in</strong> k<strong>in</strong>d provided by MITAF.<br />
In July 2006 the annual membership subscription was<br />
set $33.33<br />
(Le100, 000). Total subscription collected from five<br />
members amounted to $166.65. This is patently<br />
<strong>in</strong>adequate for any mean<strong>in</strong>gful network operations…<br />
There has been no <strong>in</strong>come or expenditure to reflect <strong>in</strong><br />
that statement s<strong>in</strong>ce that date.<br />
The strategic plan has very optimistic revenue projections, based on<br />
comparatively high annual subscription fees. It further projects that<br />
after three years, SLAMFI’s f<strong>in</strong>ancially self-susta<strong>in</strong><strong>in</strong>g. Experience<br />
elsewhere shows that this is overly optimistic. In Uganda, AMFIU<br />
which has over 120 pay<strong>in</strong>g members and a fair amount <strong>of</strong> earned<br />
<strong>in</strong>come is not yet 60% f<strong>in</strong>ancially susta<strong>in</strong>able, yet it has lean staff<strong>in</strong>g<br />
and cautious overheads.<br />
C. Impact and Value Addition to Partners and the Industry<br />
As already expla<strong>in</strong>ed, SLAMFI has as yet made no significant impact<br />
on the <strong>in</strong>dustry. Strategic objectives related to advocacy,<br />
<strong>in</strong>formation dissem<strong>in</strong>ation, custody <strong>of</strong> MF Best Practices and <strong>in</strong>dustry<br />
cohesion, expla<strong>in</strong>ed <strong>in</strong> the strategic plan, will make it valuable.<br />
In the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry elsewhere <strong>in</strong> Africa, the network<br />
<strong>in</strong>stitutions that have made an impact and attracted high levels<br />
patronage are the ones that have concentrated their efforts on:<br />
- Advocacy and lobby<strong>in</strong>g for suitable regulatory and macroeconomic<br />
environments<br />
- Information dissem<strong>in</strong>ation to members and other <strong>in</strong>dustry<br />
stakeholders<br />
- Sensitization <strong>of</strong> regulators, legislators and other armslength<br />
stakeholders on the vital basics <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance<br />
- Development and implementation <strong>of</strong> comprehensive<br />
<strong>in</strong>dustry-wide performance monitor<strong>in</strong>g systems
- Develop<strong>in</strong>g and adm<strong>in</strong>ister<strong>in</strong>g <strong>in</strong>dustry ethical standards to<br />
membership<br />
- Assist<strong>in</strong>g member <strong>in</strong>stitutions to get fund<strong>in</strong>g for technical<br />
assistance, and to ensure that the right tra<strong>in</strong><strong>in</strong>g and TA is<br />
<strong>of</strong>fered to them.<br />
SLAMFI’s plan already focuses on most <strong>of</strong> the above areas. As<br />
SLAMFI gets established and seeks to have <strong>in</strong>creas<strong>in</strong>g impact on the<br />
<strong>in</strong>dustry, it would be helpful for it to consider cont<strong>in</strong>ually putt<strong>in</strong>g<br />
most <strong>of</strong> its efforts <strong>in</strong> the above areas.<br />
D. Summary Conclusions and Recommendations<br />
In any micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry, a member-based network organisation<br />
plays a crucial role. SLAMFI, therefore, has a vital and potentially<br />
challeng<strong>in</strong>g role <strong>in</strong> areas mentioned under section “C” above.<br />
Strengths<br />
SLAMF’s current strengths are:<br />
<br />
<br />
<br />
All major MFIs <strong>in</strong> the country (save for community banks) are<br />
members and are likely to rema<strong>in</strong> so, as long as the network<br />
cont<strong>in</strong>ues to provide useful, value add<strong>in</strong>g services<br />
A good strategic plan has been developed for SLAMFI, which<br />
forms a suitable start<strong>in</strong>g po<strong>in</strong>t for the execution <strong>of</strong> its roles<br />
There are already strategic alliances with other network<br />
organizations even dur<strong>in</strong>g SLAMFI’s formation –an aspect that<br />
<strong>in</strong>dicates SLAMFI’s broad focus.<br />
Weaknesses<br />
<br />
<br />
<br />
<br />
The <strong>in</strong>stitution is yet to be established and the board members<br />
have full time jobs <strong>in</strong> their own <strong>in</strong>stitutions, which take priority<br />
over nurtur<strong>in</strong>g SLAMFI<br />
Governance and management <strong>of</strong> the association is for the time<br />
be<strong>in</strong>g ad hoc and weak.<br />
SLAMFI’s affairs are not adequately attended to <strong>in</strong> a timely<br />
manner because it has no full time staff, no <strong>of</strong>fice and<br />
structures.<br />
The association is f<strong>in</strong>ancially weak. Membership subscriptions<br />
are dismal and there is hardly any other funder outside <strong>of</strong><br />
MITAF (which <strong>of</strong>fers fully funded technical assistance to<br />
SLAMFI).<br />
Ow<strong>in</strong>g to the rather narrow def<strong>in</strong>ition <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance,<br />
community banks do not take themselves to be MFIs and thus<br />
are not SLAMFI members. They have also formed an
association <strong>of</strong> community banks to which they have stronger<br />
allegiance.<br />
Recommendations<br />
The work be<strong>in</strong>g done by MITAF and other stakeholders to<br />
establish SLAMFI is good and should be cont<strong>in</strong>ued<br />
In the context <strong>of</strong> the overall national strategy, more effort<br />
should first be put <strong>in</strong> strengthen<strong>in</strong>g the micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>stitutions and then critical attention should turn to<br />
develop<strong>in</strong>g the network<br />
Right from the beg<strong>in</strong>n<strong>in</strong>g, SLAMFI should be set up as a<br />
member-based network organization that does not sell<br />
tra<strong>in</strong><strong>in</strong>g and TA to MFIs<br />
SLAMFI should look at fund<strong>in</strong>g by donors/ development<br />
partners rather than from fees for provid<strong>in</strong>g services.<br />
SLAMFI should be positioned not just as an association for<br />
narrowly def<strong>in</strong>ed “MFIs”, but as one for all the <strong>in</strong>stitutions<br />
provid<strong>in</strong>g f<strong>in</strong>ancial services to low <strong>in</strong>come people <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>.
3. MICROFINANCE INVESTMENT AND TECHNICAL ASSISTANCE<br />
FACILITY [MITAF]<br />
A. Introduction<br />
This brief <strong>in</strong>stitutional assessment report presents the f<strong>in</strong>d<strong>in</strong>gs <strong>of</strong><br />
the micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g study/ strategy development<br />
team on the Micr<strong>of</strong><strong>in</strong>ance Investment and Technical Assistance<br />
Facility (MITAF). The <strong>in</strong>stitutional assessment <strong>of</strong> MITAF was carried<br />
out as part <strong>of</strong> the assessment <strong>of</strong> the overall micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry<br />
<strong>in</strong> the country. The assessment followed an abridged and tailored<br />
version <strong>of</strong> the CGAP Guidel<strong>in</strong>es for Appraisal <strong>of</strong> Network Support<br />
Organizations. Because the overall assignment was broad, the<br />
reports on <strong>in</strong>dividual <strong>in</strong>stitutions are concise and limited to the key<br />
aspects relevant to overall <strong>in</strong>dustry assessment.<br />
MITAF supports tra<strong>in</strong><strong>in</strong>g, technical assistance, grants and loans to<br />
MFIs <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong> by work<strong>in</strong>g as an <strong>in</strong>vestment vehicle for<br />
donors who want to assist the sector, dissem<strong>in</strong>at<strong>in</strong>g sound MF<br />
pr<strong>in</strong>ciples and aid<strong>in</strong>g <strong>in</strong>dustry coord<strong>in</strong>ation. The partner donors <strong>of</strong><br />
MITAF are UNDP, UNCDF, Cord Aid and KfW. These, together with<br />
representatives from the M<strong>in</strong>istry <strong>of</strong> F<strong>in</strong>ance, Economic Plann<strong>in</strong>g<br />
and Development (MoFDEP) and Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> (BoSL) form<br />
the Investment Committee <strong>of</strong> MITAF, which acts as a board but<br />
with non-fund<strong>in</strong>g members (Government, BoSL) hav<strong>in</strong>g no votes<br />
on the decisions.<br />
Among the meso level organizations <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong>, MITAF has to<br />
date had the most vivid impact on the development <strong>of</strong> the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry. Accord<strong>in</strong>g to the f<strong>in</strong>ancial <strong>in</strong>stitutions<br />
<strong>in</strong>terviewed, MITAF is the program that has comb<strong>in</strong>ed tra<strong>in</strong><strong>in</strong>g,<br />
technical assistance and f<strong>in</strong>ancial assistance to create impact and<br />
growth to their organizations. It <strong>of</strong>fers services such as:<br />
Tra<strong>in</strong><strong>in</strong>g <strong>in</strong> the fields <strong>of</strong> del<strong>in</strong>quency management, best<br />
practices, f<strong>in</strong>ancial management, account<strong>in</strong>g and report<strong>in</strong>g,<br />
f<strong>in</strong>ancial analysis, human resource management, <strong>in</strong>ternal<br />
controls, tra<strong>in</strong><strong>in</strong>g <strong>of</strong> tra<strong>in</strong>ers, and due diligence<br />
Improvement <strong>of</strong> report<strong>in</strong>g by MFIs through tra<strong>in</strong><strong>in</strong>g, design<br />
<strong>of</strong> a report<strong>in</strong>g format and requirement <strong>of</strong> all the affiliated<br />
MFIs to submit accurate periodic reports<br />
Help<strong>in</strong>g other NSOs to establish or do their work more<br />
effectively: notably MFP, BoSL Micr<strong>of</strong><strong>in</strong>ance Unit and SLAMFI<br />
Industry coord<strong>in</strong>ation, discussion forums<br />
Loans and grants from donors to the MFIs.
B. Objectives and Institutional <strong>Capacity</strong><br />
MITAF is the embodiment <strong>of</strong> the project titled: Development <strong>of</strong> a<br />
Susta<strong>in</strong>able Pro Poor F<strong>in</strong>ancial <strong>Sector</strong> <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong>. – a<br />
programme <strong>of</strong> the Government <strong>of</strong> the Republic <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong>.<br />
The programme was designed with four outputs as summarized<br />
below:<br />
PROGRAMME OUTPUTS AND PROGRESS<br />
DESIRED OUTPUT<br />
Output 1: Potential<br />
leaders <strong>in</strong> the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry<br />
have reached<br />
susta<strong>in</strong>ability and<br />
considerably <strong>in</strong>creased<br />
their outreach to develop<br />
a pro-poor f<strong>in</strong>ancial<br />
sector<br />
Output 2: Strategic<br />
partnerships built with<br />
other donors and the<br />
private sector <strong>in</strong> jo<strong>in</strong>t<br />
support <strong>of</strong> a pro poor<br />
f<strong>in</strong>ancial sector<br />
Output 3: A pr<strong>of</strong>essional<br />
micr<strong>of</strong><strong>in</strong>ance unit at the<br />
BoSL is operational and<br />
is capable <strong>of</strong> ensur<strong>in</strong>g an<br />
optimal enabl<strong>in</strong>g<br />
environment for the<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry<br />
and its eventual<br />
<strong>in</strong>tegration <strong>in</strong>to the<br />
broader f<strong>in</strong>ancial sector.<br />
SUITABILITY OF<br />
FOCUS<br />
This was suitable <strong>in</strong> the<br />
design. Sound-practice,<br />
progressive & susta<strong>in</strong>able<br />
market lead<strong>in</strong>g MFIs <strong>in</strong><br />
other African countries<br />
have provided<br />
demonstration effect for<br />
<strong>in</strong>dustry growth<br />
Very suitable for<br />
maximiz<strong>in</strong>g impact and<br />
reduc<strong>in</strong>g duplication<br />
Probably appropriate for<br />
the then level <strong>of</strong> <strong>in</strong>dustry<br />
development and<br />
absence <strong>of</strong> alternative<br />
apex <strong>in</strong>stitution; but <strong>in</strong><br />
the long term BoSL might<br />
more suitably reta<strong>in</strong> the<br />
supervision/ regulation<br />
role and transfer the<br />
capacity build<strong>in</strong>g role<br />
elsewhere<br />
CURRENT STATUS/<br />
REMARKS<br />
At least five affiliated<br />
MFIs (Hope Micro,<br />
F<strong>in</strong>ance Salone,<br />
CCF/SMT, MM<br />
Community Bank and<br />
MCB) are fully<br />
operationally selfsusta<strong>in</strong>able<br />
while three<br />
(F<strong>in</strong>ance , Hope Micro<br />
and MCB) are f<strong>in</strong>ancially<br />
susta<strong>in</strong>able as well.<br />
Before the programme<br />
started, only two MFIs<br />
had full OSS and none<br />
had full FSS.<br />
Done to a good extent.<br />
Four donors 52 now<br />
f<strong>in</strong>ance MFI capacity<br />
build<strong>in</strong>g and loan<br />
portfolio funds under the<br />
programme<br />
The unit has been set up<br />
but still appears to be<br />
significantly <strong>in</strong> need <strong>of</strong><br />
capacity build<strong>in</strong>g. 53 It<br />
was not realistic to<br />
expect the BoSL to<br />
“ensure an enabl<strong>in</strong>g<br />
environment…” - a<br />
complex result <strong>of</strong> many<br />
layers assigned to an<br />
upstart unit.<br />
52 UNDP, UNDCF, KFW and Cordaid<br />
53 In areas like performance management, <strong>in</strong>stitutional health analysis, micr<strong>of</strong><strong>in</strong>ance<br />
methodologies, <strong>in</strong>ternational trends <strong>in</strong> sound practices, issues related to governance<br />
and regulation, and more staff<strong>in</strong>g
Output 4: Micr<strong>of</strong><strong>in</strong>ance<br />
sound pr<strong>in</strong>ciples<br />
dissem<strong>in</strong>ated, and widely<br />
accepted and adopted.<br />
Very suitable. At a<br />
nascent stage <strong>of</strong> MF<br />
<strong>in</strong>dustry, this needs to be<br />
most important focus for<br />
capacity build<strong>in</strong>g<br />
There has been a fair<br />
attempt, though a lot<br />
rema<strong>in</strong>s to be done. 54<br />
From the above table, the programme has made a remarkable<br />
headway that will need to be taken account <strong>of</strong> <strong>in</strong> the<br />
implementation <strong>of</strong> the follow-on strategy.<br />
Through tra<strong>in</strong><strong>in</strong>g, technical assistance, grants, loans and<br />
dissem<strong>in</strong>ation <strong>of</strong> best-practice <strong>in</strong>formation, MITAF aims at<br />
support<strong>in</strong>g the development <strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance sector <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong> and creation <strong>of</strong> an enabl<strong>in</strong>g environment for it. To do this,<br />
MITAF works with all the other <strong>in</strong>dustry stakeholders at the macro,<br />
meso and micro levels.<br />
MITAF has a lean pr<strong>of</strong>essional staff structure that has so far<br />
delivered a good service to the <strong>in</strong>dustry: the Chief <strong>of</strong> Party and two<br />
other pr<strong>of</strong>essionals <strong>in</strong> the program area. It is expected that the<br />
program will cont<strong>in</strong>ue <strong>in</strong> its current focus and strength till end <strong>of</strong><br />
2009, when it ends.<br />
Judg<strong>in</strong>g from the number <strong>of</strong> tra<strong>in</strong><strong>in</strong>g courses, sem<strong>in</strong>ars, grants and<br />
loans that have been delivered to MFIs, MITAF has been quite<br />
effective. Work<strong>in</strong>g <strong>in</strong> a post conflict situation with f<strong>in</strong>ancial services<br />
direly lack<strong>in</strong>g, there are bound to be high and vary<strong>in</strong>g expectations<br />
among stakeholders, some <strong>of</strong> which have not been fulfilled. Top<br />
among these is a well founded (though <strong>of</strong>ten premature)<br />
expectation, usually by Government, <strong>of</strong> rapid outreach <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance to the poorest people <strong>in</strong> remote rural areas.<br />
Experience elsewhere <strong>in</strong> Africa shows that market driven outreach<br />
<strong>of</strong> micr<strong>of</strong><strong>in</strong>ance services starts with cities and towns, spreads to<br />
other urban and peri-urban areas and f<strong>in</strong>ally to rural areas. This<br />
process can take as long as twenty years.<br />
MITAF’s basic tra<strong>in</strong><strong>in</strong>g <strong>in</strong> areas that most affect performance and<br />
susta<strong>in</strong>ability appears to have triggered a logical first step <strong>in</strong><br />
build<strong>in</strong>g a sound-practiced based micr<strong>of</strong><strong>in</strong>ance sector. Whereas<br />
MITAF has only worked with 10 f<strong>in</strong>ancial <strong>in</strong>stitutions, there is need<br />
to extend sound-practice based tra<strong>in</strong><strong>in</strong>g and technical assistance to<br />
all providers <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance, whoever and wherever they are <strong>in</strong><br />
the county.<br />
MITAF’s <strong>in</strong>ternal procedures appear to be speedy and free <strong>of</strong><br />
excessive bureaucracy, which makes it responsive to <strong>in</strong>dustry<br />
needs.<br />
54 There’s need to make the Sound Practices more comprehensive, update them and<br />
dissem<strong>in</strong>ate them to more immediate and remote stakeholders. Among MFIs, sound<br />
practice sem<strong>in</strong>ars & tra<strong>in</strong><strong>in</strong>g need to be done <strong>in</strong>discrim<strong>in</strong>ately.
C. Impact and Value Addition to Partners<br />
In all assessments <strong>of</strong> this type, one <strong>of</strong> the most difficult th<strong>in</strong>gs to<br />
do is to actually prove impact. The cause, at least <strong>in</strong> part, is the<br />
miss<strong>in</strong>g counterfactual – we cannot accurately tell how the<br />
<strong>in</strong>stitutions would have done if they had not received assistance<br />
from MITAF. Another cause is that MITAF has not been around for<br />
long enough for a clear trend to emerge that would objectively<br />
contrast the pre and post MITAF period performance <strong>of</strong> the partner<br />
<strong>in</strong>stitutions. All this notwithstand<strong>in</strong>g, there are some fairly clear<br />
<strong>in</strong>dications <strong>of</strong> MITAF’s accomplishments. The follow<strong>in</strong>g table<br />
summarises them.<br />
PERFORMANCE<br />
AREA<br />
Governance<br />
Strategic focus<br />
Management<br />
Operations<br />
BEFORE MITAF PRESENT 55<br />
Board members <strong>in</strong><br />
some cases not tra<strong>in</strong>ed<br />
<strong>in</strong> MF related<br />
governance<br />
Hardly any strategic<br />
plans<br />
Low f<strong>in</strong>ancial literacy<br />
among some MFI<br />
managers, hav<strong>in</strong>g<br />
come from a welfare<br />
background<br />
Focus ma<strong>in</strong>ly on<br />
poverty alleviation with<br />
clients as “beneficiaries<br />
Subjective or no<br />
progress monitor<strong>in</strong>g <strong>of</strong><br />
<strong>in</strong>stitutional<br />
achievements<br />
Lend<strong>in</strong>g done with<br />
<strong>in</strong>adequate due<br />
diligence<br />
Board members tra<strong>in</strong>ed <strong>in</strong><br />
both Sound Practices and<br />
MFI Governance,<br />
presumably mak<strong>in</strong>g them<br />
more <strong>in</strong>formed and better<br />
boards for their <strong>in</strong>stitutions<br />
With MITAF’s tra<strong>in</strong><strong>in</strong>g and<br />
requirement for ongo<strong>in</strong>g<br />
assistance, most partners<br />
have developed and are<br />
follow<strong>in</strong>g a systematic<br />
strategic plan<br />
Improved f<strong>in</strong>ancial literacy<br />
after tra<strong>in</strong><strong>in</strong>g by MITAF<br />
and/ or MFP <strong>in</strong> account<strong>in</strong>g,<br />
f<strong>in</strong>ancial management,<br />
f<strong>in</strong>ancial analysis,<br />
performance monitor<strong>in</strong>g<br />
and del<strong>in</strong>quency<br />
management<br />
Balanced focus on the<br />
double bottom-l<strong>in</strong>e;<br />
f<strong>in</strong>ancial susta<strong>in</strong>ability and<br />
poverty alleviation<br />
More objective monitor<strong>in</strong>g/<br />
evaluation based on<br />
bus<strong>in</strong>ess/ strategic plans<br />
done with help <strong>of</strong> MITAF<br />
More due diligence on<br />
borrowers, after the Due<br />
Diligence course facilitated<br />
by MITAF<br />
55 With MITAF’s assistance or follow<strong>in</strong>g their tra<strong>in</strong><strong>in</strong>g
F<strong>in</strong>ancial<br />
endowment<br />
Poverty/ rural<br />
outreach<br />
Little focus on<br />
del<strong>in</strong>quency and<br />
portfolio quality<br />
Product <strong>in</strong>formation<br />
and knowledge was<br />
very scanty, and<br />
delivery methodologies<br />
not well understood by<br />
a number <strong>of</strong> the MFIs<br />
Acute lack <strong>of</strong> fund<strong>in</strong>g<br />
for loan portfolio<br />
growth and capacity<br />
build<strong>in</strong>g<br />
Poverty and rural<br />
outreach quite limited<br />
compared to the<br />
potential clientele.<br />
PAR, an <strong>in</strong>ternationally<br />
recognized portfolio quality<br />
measure, is now used by all<br />
MITAF assisted MFIs to<br />
monitor their portfolio<br />
quality. In most <strong>of</strong> the<br />
<strong>in</strong>stitutions, the portfolio<br />
quality has significantly<br />
improved, though <strong>in</strong> others<br />
a lot still rema<strong>in</strong>s to be<br />
done.<br />
The MFIs now understand<br />
the group lend<strong>in</strong>g<br />
methodologies quite well,<br />
although lack <strong>of</strong> product<br />
variety <strong>in</strong> the market still<br />
means a lot needs to be<br />
done <strong>in</strong> the area <strong>of</strong> product<br />
development.<br />
Still there is serious lack <strong>of</strong><br />
funds, but this is somehow<br />
be<strong>in</strong>g addressed by MITAF<br />
us<strong>in</strong>g funds from its<br />
partners; hopefully the<br />
demonstration effect will<br />
ensure cont<strong>in</strong>ued<br />
advantages for MFIs <strong>in</strong> the<br />
future. MITAF grant fund<strong>in</strong>g<br />
has been used for capacity<br />
build<strong>in</strong>g <strong>of</strong> all the 10<br />
affiliated MFIs.<br />
Additionally, grants and<br />
loans have been disbursed<br />
to qualify<strong>in</strong>g MFIs.<br />
Outreach still modest but<br />
evidently grow<strong>in</strong>g<br />
MITAF has a scheme <strong>of</strong> selection criteria for different k<strong>in</strong>ds <strong>of</strong><br />
assistance to MFIs, which cascades with the maturity <strong>of</strong> the<br />
<strong>in</strong>stitution. Although the scheme itself is subject to improvement 56 ,<br />
this <strong>in</strong> pr<strong>in</strong>ciple should ensure that MFIs affiliated strive to<br />
<strong>in</strong>creas<strong>in</strong>gly adopt sound practices.<br />
D. Contribution to Broader <strong>Sector</strong> Growth<br />
MITAF cooperates with other NSOs, especially MFP, Bank <strong>of</strong> <strong>Sierra</strong><br />
<strong>Leone</strong> and SLAMFI. With MFP, MITAF jo<strong>in</strong>tly runs sem<strong>in</strong>ars and<br />
courses. This is done <strong>in</strong> synergistic ways which also enable crosslearn<strong>in</strong>g<br />
between the <strong>of</strong>ficers <strong>of</strong> the two <strong>in</strong>stitutions. MITAF<br />
supports the establishment <strong>of</strong> SLAMFI and strengthen<strong>in</strong>g <strong>of</strong> the<br />
56 As an example, requirements should be cumulative and <strong>in</strong>cremental from lower to<br />
higher levels <strong>of</strong> relationship or needs.
Micr<strong>of</strong><strong>in</strong>ance Unit at BoSL. It also collaborates with other<br />
stakeholders like donors and Government through their<br />
representation on the MITAF Steer<strong>in</strong>g Committee. By gett<strong>in</strong>g<br />
<strong>in</strong>volved with these, MITAF contributes towards meso level<br />
<strong>in</strong>dustry growth to improve cohesion, network<strong>in</strong>g, MFI nurtur<strong>in</strong>g,<br />
regulation and an overall enabl<strong>in</strong>g environment for micr<strong>of</strong><strong>in</strong>ance<br />
bus<strong>in</strong>ess.<br />
E. Summary Conclusions and Recommendations<br />
MITAF’s strengths and accomplishments have already been<br />
elaborated. MITAF is be<strong>in</strong>g run the way it was designed – to<br />
develop market leaders that the rest <strong>of</strong> the <strong>in</strong>dustry could look up<br />
to, and thereby <strong>in</strong>culcate sound practices among MFIs. From the<br />
po<strong>in</strong>t <strong>of</strong> view <strong>of</strong> the need to engage <strong>in</strong> <strong>in</strong>dustry-wide capacity<br />
build<strong>in</strong>g, the program has the follow<strong>in</strong>g challenges and<br />
shortcom<strong>in</strong>gs:<br />
- Lean pr<strong>of</strong>essional staff<strong>in</strong>g <strong>in</strong> comparison to the vast<br />
<strong>in</strong>dustry needs;<br />
- Addresses the supply side and there is no <strong>in</strong>itiative that<br />
addresses the demand side. This could cause market<br />
disruptions or disadvantages to the clients due to lack <strong>of</strong><br />
<strong>in</strong>formation<br />
- The proposed exit strategy, by strengthen<strong>in</strong>g SLAMFI to<br />
take over some key MITAF activities, does not appear very<br />
suitable<br />
- Unfavourable op<strong>in</strong>ion by some stakeholders that MITAF<br />
favours MFIs with <strong>in</strong>ternational l<strong>in</strong>kages, to the relative<br />
neglect <strong>of</strong> <strong>in</strong>digenous ones<br />
- Dissatisfaction by some stakeholders with the pace at<br />
which MITAF is help<strong>in</strong>g MFIs to reach out. This arises from<br />
the common 57 but unrealistic expectation that a<br />
programme like this should help the MFIs to atta<strong>in</strong> rapid<br />
rural outreach <strong>in</strong> its first few years.<br />
- Lack <strong>of</strong> consensus among key stakeholders on critical<br />
issues 58 <strong>of</strong> project focus<br />
- Lack <strong>of</strong> a systematic and complete tra<strong>in</strong><strong>in</strong>g/ TA needs<br />
assessment before develop<strong>in</strong>g solutions (though the<br />
solutions developed largely addressed <strong>in</strong>dustry needs so<br />
far)<br />
The Development <strong>of</strong> a Susta<strong>in</strong>able Pro Poor F<strong>in</strong>ancial <strong>Sector</strong><br />
programme has provided a good start<strong>in</strong>g po<strong>in</strong>t <strong>in</strong> capacity build<strong>in</strong>g<br />
for micr<strong>of</strong><strong>in</strong>ance <strong>in</strong> the country. It has also generated some<br />
57 It has also happened <strong>in</strong> other countries that Government and politicians have such<br />
high & unrealistic expectations<br />
58 Like which types <strong>of</strong> <strong>in</strong>stitutions should be funded, massive & rapid outreach viz first<br />
help<strong>in</strong>g the <strong>in</strong>stitutions to be more susta<strong>in</strong>able, grant/ loan recipient selection criteria
positive and negative lessons learnt which the Government and its<br />
development partners should consider <strong>in</strong> implement<strong>in</strong>g an overall<br />
capacity build<strong>in</strong>g strategy. As the MITAF contract draws to a close,<br />
preparations should start to put <strong>in</strong> place a successor programme,<br />
which should be broader <strong>in</strong> scope 59 , larger and more <strong>in</strong>clusive <strong>of</strong><br />
MFIs. The follow-on programme should, at the m<strong>in</strong>imum address<br />
all the follow<strong>in</strong>g aspects:<br />
i. Wider coverage/ dissem<strong>in</strong>ation <strong>of</strong> <strong>in</strong>formation on sound<br />
practices; through sem<strong>in</strong>ars, pr<strong>in</strong>t media, bullet<strong>in</strong>s,<br />
<strong>in</strong>formation shar<strong>in</strong>g events etc<br />
ii.<br />
iii.<br />
iv.<br />
Equitable focus on both <strong>in</strong>stitutional strengthen<strong>in</strong>g and social<br />
performance<br />
More <strong>in</strong>clusive basic tra<strong>in</strong><strong>in</strong>g <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance, to reduce the<br />
chances <strong>of</strong> market spoilage by the <strong>in</strong>stitutions that have not<br />
embraced sound practices<br />
A dist<strong>in</strong>ct w<strong>in</strong>dow for <strong>in</strong>stitutional strengthen (<strong>in</strong>frastructure,<br />
MIS, f<strong>in</strong>ancial & support management systems, tra<strong>in</strong><strong>in</strong>g, on<br />
the job technical assistance,<br />
v. A dist<strong>in</strong>ct w<strong>in</strong>dow for product development and <strong>in</strong>novation<br />
vi.<br />
vii.<br />
viii.<br />
ix.<br />
A dist<strong>in</strong>ct w<strong>in</strong>dow to aid <strong>in</strong>creased/ accelerated rural<br />
outreach (branch<strong>in</strong>g out to more rural areas)<br />
A dist<strong>in</strong>ct w<strong>in</strong>dow for <strong>in</strong>culcat<strong>in</strong>g more bus<strong>in</strong>ess orientation<br />
<strong>in</strong>to the population (thereby boost<strong>in</strong>g the demand side <strong>of</strong><br />
the micr<strong>of</strong><strong>in</strong>ance market)<br />
Development or adaptation <strong>of</strong> a more comprehensive<br />
report<strong>in</strong>g system for all MFIs<br />
Strengthen<strong>in</strong>g <strong>of</strong> SLAMFI as a truly member-based <strong>in</strong>dustry<br />
network organization with roles h<strong>in</strong>g<strong>in</strong>g on advocacy, sound<br />
practice assurance, <strong>in</strong>formation dissem<strong>in</strong>ation and <strong>in</strong>dustry<br />
cohesion<br />
x. Separation <strong>of</strong> wholesale fund<strong>in</strong>g from capacity build<strong>in</strong>g;<br />
leav<strong>in</strong>g the follow-on programme with only functions <strong>of</strong><br />
capacity build<strong>in</strong>g and grant fund<strong>in</strong>g<br />
xi.<br />
xii.<br />
xiii.<br />
A w<strong>in</strong>dow for capacity build<strong>in</strong>g <strong>of</strong> meso level <strong>in</strong>stitutions to<br />
give them the necessary competencies for a grow<strong>in</strong>g MF<br />
market<br />
Provisions for donors to directly fund MFIs with<strong>in</strong> the<br />
framework <strong>of</strong> the strategy (to cater for those donors who by<br />
policy would not put their money <strong>in</strong> a basket)<br />
Systematic tra<strong>in</strong><strong>in</strong>g <strong>of</strong> regulators, Government <strong>of</strong>ficials and<br />
even politicians; especially through exposure visits.<br />
59 Embrac<strong>in</strong>g solutions to the triple problems <strong>of</strong> <strong>in</strong>stitutional capacity build<strong>in</strong>g (<strong>in</strong>clud<strong>in</strong>g<br />
tra<strong>in</strong><strong>in</strong>g, TA etc), promotion <strong>of</strong> remote rural outreach and product development/<br />
<strong>in</strong>novation
3. BANK OF SIERRA LEONE<br />
A. Introduction<br />
This brief <strong>in</strong>stitutional assessment report presents the f<strong>in</strong>d<strong>in</strong>gs <strong>of</strong><br />
the micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g study/ strategy development<br />
team on the Micr<strong>of</strong><strong>in</strong>ance Unit <strong>of</strong> the Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> (BoSL).<br />
The <strong>in</strong>stitutional assessment <strong>of</strong> BoSL was carried out as part <strong>of</strong> the<br />
assessment <strong>of</strong> the overall micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry <strong>in</strong> the country. The<br />
assessment was guided by an abridged and tailored version <strong>of</strong> the<br />
CGAP Guidel<strong>in</strong>es for Appraisal <strong>of</strong> Network Support Organizations.<br />
Because the overall assignment was broad and aimed at the<br />
overall national scene, the reports on <strong>in</strong>dividual <strong>in</strong>stitutions are<br />
concise and limited to the key aspects relevant to overall <strong>in</strong>dustry<br />
assessment. This is therefore not an assessment <strong>of</strong> the whole <strong>of</strong><br />
BoSL, neither is it a detailed assessment <strong>of</strong> BoSL’s Micr<strong>of</strong><strong>in</strong>ance<br />
Unit.<br />
Bank <strong>Sierra</strong> <strong>Leone</strong>’s Micr<strong>of</strong><strong>in</strong>ance Unit was set up as part <strong>of</strong> the<br />
<strong>Sierra</strong> <strong>Leone</strong> Government’s strategy for the Development <strong>of</strong> a<br />
Susta<strong>in</strong>able Pro-Poor F<strong>in</strong>ancial <strong>Sector</strong>, with roles <strong>of</strong> monitor<strong>in</strong>g/<br />
strengthen<strong>in</strong>g MFIs. There is also the Community Banks section <strong>in</strong><br />
the Bank that pilots and nurtures community banks.<br />
B. Objectives and Institutional <strong>Capacity</strong><br />
BoSL is the country’s central bank, with full roles such as banks’<br />
supervision, issue and redemption <strong>of</strong> currency, monetary poly<br />
implementation, banker for banks and collection/ dissem<strong>in</strong>ation <strong>of</strong><br />
f<strong>in</strong>ancial and related <strong>in</strong>formation. In addition, the bank has a<br />
Development Coord<strong>in</strong>ation Department with roles such as<br />
promot<strong>in</strong>g the establishment <strong>of</strong> the stock exchange, establishment<br />
<strong>of</strong> community banks and oversee<strong>in</strong>g <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions.<br />
The Micr<strong>of</strong><strong>in</strong>ance Unit <strong>of</strong> the BoSL seeks to:<br />
- Strengthen the governance <strong>of</strong> community banks through Board<br />
representation on the their boards<br />
- Help the community banks to do bus<strong>in</strong>ess legally and to comply<br />
with the relevant laws and regulations<br />
- Monitor <strong>of</strong> the four pilot community banks to help them identify<br />
areas where they need t improve<br />
- Assist community banks to consolidate their bus<strong>in</strong>esses through<br />
construction <strong>of</strong> bank premises<br />
- Assist community banks to source suitable fund<strong>in</strong>g, like the<br />
current long term debenture loan from BoSL which is <strong>in</strong>tended<br />
to be replaced with equity from shareholders soon<br />
- Help MFIs with guidance and TA <strong>in</strong> products, operations and<br />
performance monitor<strong>in</strong>g
- Improve the human resource competence <strong>of</strong> the community<br />
banks through tra<strong>in</strong><strong>in</strong>g staff and management <strong>of</strong> the community<br />
banks<br />
- Monitor the performance and bus<strong>in</strong>ess <strong>of</strong> MFIs which are not<br />
community banks.<br />
- Guide community banks through technical assistance <strong>in</strong> the<br />
areas <strong>of</strong> governance, management, operations and f<strong>in</strong>ancial<br />
management.<br />
- Work with development partners/ donors to f<strong>in</strong>ance an apex<br />
that will take over all the community banks and some <strong>of</strong> the<br />
roles currently played by BoSL MF Unit.<br />
BoSL is committed to establish<strong>in</strong>g six community banks (two more<br />
after the exist<strong>in</strong>g four) as a pilot project. After that, it is hoped<br />
that demonstration effect should take over and communities<br />
establish community banks for themselves.<br />
The BoSL Micr<strong>of</strong><strong>in</strong>ance Unit has five pr<strong>of</strong>essional staffs, who work<br />
on community banks and “micr<strong>of</strong><strong>in</strong>ance”. Given the volume <strong>of</strong><br />
work that the unit is supposed to do, the consultants agree with<br />
the Director (Development Coord<strong>in</strong>ation) that there are not enough<br />
staff to go round. S<strong>in</strong>ce BoSL’s role is meant to be transitory and<br />
MITAF’s work largely complements BoSL’s <strong>in</strong> these areas, however,<br />
the arrangement should suffice.<br />
The community banks are supposed to be weaned <strong>of</strong> from the<br />
BoSL parentage soon. This will give way to private ownership and<br />
complete self governance <strong>of</strong> the <strong>in</strong>stitutions. If BoSL’s Micr<strong>of</strong><strong>in</strong>ance<br />
Unit were the to be long term nurtur<strong>in</strong>g partner <strong>of</strong> the community<br />
banks and MFIs, it might have needed to enhance its capacity <strong>in</strong><br />
the areas such as:<br />
- Broadness <strong>of</strong> TA coverage, to ensure that it addresses all<br />
capacity build<strong>in</strong>g needs <strong>of</strong> community banks and MFIs<br />
- Practical knowledge <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g through<br />
further tra<strong>in</strong><strong>in</strong>g, exposure visits to other markets and perhaps<br />
resident TA<br />
- Plann<strong>in</strong>g, monitor<strong>in</strong>g & evaluation <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions<br />
- Guidance <strong>in</strong> effective advocacy for more suitable legislation and<br />
regulatory arrangement (for BoSL as a whole, this role could pose<br />
a conflict <strong>of</strong> <strong>in</strong>terest.<br />
S<strong>in</strong>ce the BoSL and other stakeholders agree that this role is<br />
transitory, BoSL might still need capacity build<strong>in</strong>g <strong>in</strong> the above<br />
areas, but not for the purpose <strong>of</strong> cont<strong>in</strong>ually nurtur<strong>in</strong>g community<br />
banks or MFIs<br />
C. Impact and Value Addition to Partners<br />
As already expla<strong>in</strong>ed BoSL’s Micr<strong>of</strong><strong>in</strong>ance Unit promotes<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>stitutions (<strong>in</strong>clud<strong>in</strong>g community banks) through
nurtur<strong>in</strong>g, market mak<strong>in</strong>g, research and development, monitor<strong>in</strong>g<br />
and evaluation. Through BoSL’s efforts and <strong>in</strong>itiative, four<br />
community banks have been set up, <strong>of</strong> which two are operationally<br />
susta<strong>in</strong>able.<br />
Although it might be argued that the central bank is not the right<br />
place to <strong>of</strong>fer TA and nurtur<strong>in</strong>g to f<strong>in</strong>ancial <strong>in</strong>stitutions – and the<br />
community banks still need significant levels <strong>of</strong> nurtur<strong>in</strong>g/ TA -<br />
BoSL has played a significant role and produced a replicable<br />
demonstration effect by start<strong>in</strong>g and nurtur<strong>in</strong>g community banks.<br />
D. Contribution to Broader <strong>Sector</strong> Growth<br />
The BoSL Governor chairs MITAF Investment Committee, which<br />
makes decisions on all capacity build<strong>in</strong>g, grant and loan<br />
<strong>in</strong>vestments by MITA under the strategy for Susta<strong>in</strong>able Pro-Poor<br />
F<strong>in</strong>ancial <strong>Sector</strong>. The BoSL Director (Development Coord<strong>in</strong>ation) is<br />
also a member <strong>of</strong> the MITAF Investment Committee. This way,<br />
BoSL collaborates with Government, donors and project managers<br />
<strong>in</strong> mov<strong>in</strong>g the <strong>in</strong>dustry forward.<br />
By promot<strong>in</strong>g community banks, BoSL has proved to the <strong>in</strong>dustry<br />
that there is at least one explorable option for enhanc<strong>in</strong>g rural<br />
outreach with micr<strong>of</strong><strong>in</strong>ance while the <strong>in</strong>dustry grows.<br />
E. Summary Conclusions and Recommendations<br />
The Micr<strong>of</strong><strong>in</strong>ance Unit at the BoSL has been set up, is work<strong>in</strong>g but<br />
still needs considerable capacity build<strong>in</strong>g. The role <strong>of</strong> BoSL <strong>in</strong> MF<br />
capacity build<strong>in</strong>g should rema<strong>in</strong> transitional and at the earliest<br />
suitable opportunity, its MF capacity build<strong>in</strong>g role should be<br />
transferred to a more suitable <strong>in</strong>stitution. This will leave BoSL, the<br />
supervisor and regulator <strong>of</strong> the f<strong>in</strong>ancial sector, with no conflict <strong>of</strong><br />
<strong>in</strong>terest <strong>in</strong> this area. One recommendation from a 2006 medium<br />
term review, which said the MF capacity build<strong>in</strong>g role should be<br />
transferred to the Bank Supervision Department, should be<br />
critically exam<strong>in</strong>ed for suitability and possible impact. 60<br />
60 Transferr<strong>in</strong>g this role to Banks Supervision would make the stated conflict <strong>of</strong> <strong>in</strong>terest<br />
more immediate and more severe.
MININSTRY OF FINANCE, DEVELOPMENT AND PLANNING<br />
(MOFDEP) -MICROFINANCE UNIT<br />
A. Introduction<br />
MOFDEP Micr<strong>of</strong><strong>in</strong>ance Unit is not a network support organization,<br />
but a Government unit meant to work on policy level issues <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance. By <strong>in</strong>teract<strong>in</strong>g and work<strong>in</strong>g with other <strong>in</strong>dustry<br />
stakeholders, the unit participates <strong>in</strong> the shap<strong>in</strong>g <strong>of</strong> the <strong>in</strong>dustry<br />
for enhanced service delivery. The unit has a seat on the MITAF<br />
Investment Committee and actively participates <strong>in</strong> macro and<br />
meso level <strong>in</strong>dustry forums.<br />
B. Objectives and Institutional <strong>Capacity</strong><br />
The MOFDEP Micr<strong>of</strong><strong>in</strong>ance Unit looks at micr<strong>of</strong><strong>in</strong>ance ma<strong>in</strong>ly from a<br />
human rather than <strong>in</strong>stitutional development perspective. This is<br />
the view most popular with governments s<strong>in</strong>ce it is their rightful<br />
role to require that micr<strong>of</strong><strong>in</strong>ance impacts positively on human<br />
development, particularly poverty alleviation. The unit’s objectives<br />
for <strong>in</strong>volvement <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance therefore revolve around the<br />
perceived need to:<br />
Include poverty focus and impact more prom<strong>in</strong>ently <strong>in</strong> the<br />
criteria for assess<strong>in</strong>g and cont<strong>in</strong>u<strong>in</strong>g to work with MFIs<br />
Extend education on micr<strong>of</strong><strong>in</strong>ance sound practices to the<br />
political, adm<strong>in</strong>istrative and op<strong>in</strong>ion leaders <strong>in</strong> the country<br />
and communities<br />
Ensure more equitable competition for capacity build<strong>in</strong>g and<br />
loan portfolio funds by <strong>in</strong>stitutions, based on their focus on<br />
poverty<br />
Have purposeful rural outreach promoted through<br />
Government and donor <strong>in</strong>volvement<br />
Increase the sound-practice based absorptive capacity <strong>of</strong><br />
the population by rais<strong>in</strong>g their bus<strong>in</strong>ess awareness/ aptitude<br />
through tra<strong>in</strong><strong>in</strong>g and grassroots technical assistance<br />
Educate political and civil service authorities to desist from<br />
push<strong>in</strong>g money for outreach with loan funds before the<br />
<strong>in</strong>stitutions and their exist<strong>in</strong>g and potential clients are ready<br />
Overall, shap<strong>in</strong>g a new direction which is more <strong>in</strong>clusive,<br />
easily understood and effective for micr<strong>of</strong><strong>in</strong>ance capacity<br />
build<strong>in</strong>g <strong>in</strong> the country.<br />
MOFDEP has one ma<strong>in</strong> and two other pr<strong>of</strong>essional staff. The lead<br />
<strong>of</strong>ficer is well versant with the policy and meso level issues <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g <strong>in</strong> the country. The other <strong>of</strong>ficers do<br />
not appear to be as <strong>in</strong>formed. The unit would greatly benefit from<br />
more overall exposure <strong>of</strong> its staff to practical issues <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance policy mak<strong>in</strong>g and capacity build<strong>in</strong>g <strong>in</strong> other<br />
countries, as well as technical issues on the sector. Well <strong>in</strong>formed<br />
staff <strong>in</strong> the unit would play a critical role <strong>of</strong> pr<strong>of</strong>essionally <strong>in</strong>form<strong>in</strong>g
MF policy mak<strong>in</strong>g and liais<strong>in</strong>g between private sector providers,<br />
development partners and MFIs.<br />
C. Impact and Value Addition to Partners<br />
The MOFDEP MF Unit sits on the Investment Committee <strong>of</strong> MITAF,<br />
and participates <strong>in</strong> various policy level forums <strong>in</strong> the country. Its<br />
ma<strong>in</strong> contribution so far has been through arguments for br<strong>in</strong>g<strong>in</strong>g<br />
human development issues at the forefront <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance<br />
capacity build<strong>in</strong>g. This has at times seemed to counteract the<br />
<strong>in</strong>stitutional enhancement focus <strong>of</strong> some other stakeholders. Both<br />
sides need to come to middle ground on this because the two are<br />
both necessary and do not have to be mutually exclusive.<br />
D. Summary Conclusions and Recommendations<br />
It is desirable that the MF Unit at MOFDEP is ma<strong>in</strong>ta<strong>in</strong>ed and that<br />
its staff are adequately tra<strong>in</strong>ed and exposed to the real work<strong>in</strong>gs <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance policy mak<strong>in</strong>g, regulation, capacity build<strong>in</strong>g and<br />
private-public sector partnerships <strong>in</strong> other countries . Experience<br />
elsewhere <strong>in</strong> Africa has shown that when technical staffs <strong>in</strong><br />
Government come to understand the work<strong>in</strong>gs, issues, success and<br />
failure drivers <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance, they become better advocates for<br />
good policy, legislation and regulation. They also help the other<br />
<strong>in</strong>dustry players to understand Government’s viewpo<strong>in</strong>t better, so<br />
that they can synergistically work with rather than contend with<br />
other stakeholders.<br />
CARE INTERNATIONAL IN SIERRA LEONE<br />
CISL is not a MF network support organization, and either is it <strong>in</strong> the<br />
ma<strong>in</strong>stream bus<strong>in</strong>ess <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance capacity build<strong>in</strong>g. As part <strong>of</strong> its<br />
work <strong>in</strong> empower<strong>in</strong>g communities to undertake self <strong>in</strong>itiated family and<br />
<strong>in</strong>dividual economic development and the micro level, CISL assists<br />
communities to start and run <strong>in</strong>dependent Village Sav<strong>in</strong>gs and Loan<br />
Associations (VSLAs). These are local <strong>in</strong>formal f<strong>in</strong>ancial set ups by<br />
women liv<strong>in</strong>g and work<strong>in</strong>g <strong>in</strong> a locality. It is run and governed by the<br />
members, whose ma<strong>in</strong> purpose <strong>of</strong> association is to save money regularly<br />
for <strong>in</strong>vest<strong>in</strong>g <strong>in</strong> bus<strong>in</strong>ess and for a variety <strong>of</strong> other reasons.<br />
Currently, CISL assists VSLAs <strong>in</strong> Tonkolili, Ko<strong>in</strong>adugu and Bombali <strong>in</strong> the<br />
NW <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong>. There are 30 VSLAs with a total <strong>of</strong> 900 members.<br />
The program (CISL’s assistance with capacity build<strong>in</strong>g <strong>of</strong> VSLAs) runs for<br />
a period <strong>of</strong> 12 months after which the VSLA is weaned <strong>of</strong> to cont<strong>in</strong>ue<br />
susta<strong>in</strong>ably. The current phase or cycle will benefit the 900 client after<br />
which the scheme plans to widen support and geographical area to help<br />
6,000 people <strong>in</strong> about 200 VSLAs elsewhere <strong>in</strong> the country.<br />
Under the VSLA support scheme, CISL gives no grants or loans but just.<br />
It just <strong>of</strong>fers technical assistance to help people come together, develop<br />
cohesion, buy a safe box and start sav<strong>in</strong>gs and later lend to themselves.
The concept tra<strong>in</strong>s the people to be self reliant from right from the start,<br />
and empowers them to develop their own f<strong>in</strong>ancial solutions. CISL’s exit<br />
strategy is simply to pull out after 12 months, which can be a problem if<br />
the VSLA’s member capacities are not developed enough dur<strong>in</strong>g this<br />
period.<br />
As the <strong>Sierra</strong> <strong>Leone</strong>an economy recovers and the f<strong>in</strong>ancial sector grows,<br />
VSLAs could eventually give way to SACCOs, which can be excellent<br />
community based f<strong>in</strong>ancial organizations if well governed and run.<br />
The VSLA scheme is a good <strong>in</strong>novation for remote rural people to<br />
develop suitable f<strong>in</strong>ancial services for themselves. It is, however, not<br />
likely to be the right model for massive outreach or for a pro-poor<br />
f<strong>in</strong>ancial sector that <strong>in</strong>tegrates <strong>in</strong>to the ma<strong>in</strong>stream f<strong>in</strong>ancial services<br />
<strong>in</strong>dustry.
APPENDIX 5: POLICY, LEGAL AND REGULATORY<br />
ENVIRONMENT<br />
A. INTRODUCTION<br />
As part <strong>of</strong> the assignment to study the micr<strong>of</strong><strong>in</strong>ance sector <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>, the consultants reviewed the relevant legal and regulatory<br />
environment for the f<strong>in</strong>ancial sector, and their suitability for the<br />
development <strong>of</strong> a pro-poor micr<strong>of</strong><strong>in</strong>ance sector. The follow<strong>in</strong>g are the<br />
f<strong>in</strong>ancial sector related laws and policy documents that the consultants<br />
exam<strong>in</strong>ed:<br />
i) The Bank<strong>in</strong>g Act 2000<br />
ii) Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> Act 2000<br />
iii) Other F<strong>in</strong>ancial Institutions Act 2001<br />
iv) Anti Money Launder<strong>in</strong>g Act 2005<br />
v) National Micr<strong>of</strong><strong>in</strong>ance Policy (2003)<br />
vi)<br />
Relevant documents from other countries, <strong>in</strong>cluded <strong>in</strong> the Annex to<br />
this report.<br />
A detailed review <strong>of</strong> the above documents and <strong>in</strong>terviews with<br />
stakeholders gave the consultants a good understand<strong>in</strong>g <strong>of</strong> the country’s<br />
legal, regulatory and policy environment for the micr<strong>of</strong><strong>in</strong>ance sector <strong>in</strong><br />
<strong>Sierra</strong> <strong>Leone</strong>. In the sections below, concise critical analyses are<br />
presented <strong>of</strong> the documents <strong>in</strong> the aspects that are relevant to<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry development. In the appropriate sections <strong>of</strong> the<br />
tables, clauses to which the issues relate are cited and proposals for<br />
adjustment, based on <strong>in</strong>ternational sound practices or aspects that have<br />
worked elsewhere to promote stability <strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry, are<br />
presented.<br />
B. THE BANKING ACT 2000<br />
The Bank<strong>in</strong>g Act 2000 comprehensively provides for regulation and<br />
supervision <strong>of</strong> deposit tak<strong>in</strong>g <strong>in</strong>stitutions by the BoSL. It has clear and<br />
detailed provisions for application, licens<strong>in</strong>g, supervision, f<strong>in</strong>ancial health,<br />
prudence <strong>in</strong> operations & f<strong>in</strong>ancial management, report<strong>in</strong>g, restriction/<br />
license variation, conservation, receivership, liquidation and term<strong>in</strong>ation/<br />
closure <strong>of</strong> licensed <strong>in</strong>stitutions.<br />
On the whole, the Act has adequate provisions consistent with the<br />
<strong>in</strong>ternationally recognized roles <strong>of</strong> such a monetary authority <strong>in</strong> a<br />
contemporary economy. There are, however, a few specific provisions<br />
that the consultants th<strong>in</strong>k might not be favourable for the development <strong>of</strong><br />
a market based micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry or the wider f<strong>in</strong>ancial sector. The<br />
table below summarizes them.
CLAUSE<br />
ISSUE/ PROPOSAL<br />
5 (4) BoSL to <strong>in</strong>spect suspected unlicensed <strong>in</strong>stitutions that<br />
illegally take deposits only with a warrant from a<br />
magistrate This might cause delays or leakages <strong>of</strong><br />
<strong>in</strong>formation to the culprit <strong>in</strong>stitutions. Better if BoSL has the<br />
express legal mandate to <strong>in</strong>spect any suspected culprits<br />
without warn<strong>in</strong>g or warrant.<br />
8 (2) Irregular sav<strong>in</strong>gs collection is not considered to be deposit<br />
tak<strong>in</strong>g. In future, some <strong>in</strong>stitutions might take advantage<br />
and engage <strong>in</strong> tak<strong>in</strong>g huge sav<strong>in</strong>gs by creat<strong>in</strong>g irregularity<br />
<strong>of</strong> pattern and artificial differences between sav<strong>in</strong>gs tak<strong>in</strong>g<br />
events. Better to prohibit any k<strong>in</strong>d <strong>of</strong> deposit tak<strong>in</strong>g from<br />
the public by non licensed <strong>in</strong>stitutions.<br />
10 (1&2) Some f<strong>in</strong>ancial service cooperatives to be licensed as banks<br />
and others as “other f<strong>in</strong>ancial <strong>in</strong>stitutions” 61 . Banks are all<br />
better <strong>of</strong>f as limited companies, separate from cooperative<br />
f<strong>in</strong>ancial organisations, which usually tend to be area or<br />
occupation based.<br />
19 (1) The Governor to determ<strong>in</strong>e the m<strong>in</strong>imum paid up capital <strong>of</strong><br />
licensed <strong>in</strong>stitutions This can at critical times result <strong>in</strong>to<br />
well meant, lenient benchmarks which are unhealthy for the<br />
sector. Better for the m<strong>in</strong>imum paid up capital to be stated<br />
<strong>in</strong> the Act itself, even if this has to be reviewed every few<br />
years.<br />
28 No daily/ weekly liquidity position reports among the<br />
returns. A bank might be very solvent, very pr<strong>of</strong>itable but<br />
face an impact<strong>in</strong>g negative situation because <strong>of</strong> temporary<br />
illiquidity. Better to <strong>in</strong>clude daily, weekly or bi-weekly<br />
liquidity position reports among the returns.<br />
33 (2) 5m and 1m <strong>Leone</strong>s for an <strong>in</strong>stitution and an <strong>in</strong>dividual<br />
(respectively) fail<strong>in</strong>g to implement a BoSL directive<br />
Seems too low unless this is for every day <strong>of</strong> cont<strong>in</strong>u<strong>in</strong>g<br />
default.<br />
34 (5-12) Not clear whether at the time <strong>of</strong> appo<strong>in</strong>t<strong>in</strong>g the<br />
conservator, the <strong>of</strong>ficers, directors and all other executives<br />
<strong>of</strong> a licensed <strong>in</strong>stitution are ipso facto dismissed. If this is<br />
not the case, then stubborn directors or executives could<br />
make the work <strong>of</strong> the conservator very difficult.<br />
37 (1-4) 62 Good provisions for m<strong>in</strong>imum liquidity requirements,<br />
although the relevant report<strong>in</strong>g requirement is not<br />
stipulated <strong>in</strong> the Returns to be submitted by LIs. Better to<br />
<strong>in</strong>clude specific liquidity reports, daily or at most weekly,<br />
among the returns by LIs under Clause 28 <strong>of</strong> the Bank<strong>in</strong>g<br />
Act 2000<br />
61 Provided for <strong>in</strong> both the Bank<strong>in</strong>g Act 2000 and Other F<strong>in</strong>ancial Institutions Act 2001<br />
62 In relation to Clause 28 <strong>of</strong> the Act
CLAUSE<br />
ISSUE/ PROPOSAL<br />
44 (1) Former director or executive <strong>of</strong> a LI, fully or partly<br />
responsible for its mismanagement, to be prohibited from<br />
becom<strong>in</strong>g a LI director. This is good but limited. The<br />
prohibition should be extended to even former directors or<br />
executives responsible for the failure <strong>of</strong> non licensed<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions and other companies outside the<br />
f<strong>in</strong>ancial sector.<br />
44 (2) Governor to have discretion whether a former director/<br />
executive <strong>of</strong> a failed <strong>in</strong>stitution can become a director <strong>of</strong> a<br />
LI Better not to have this discretion and just have a clear<br />
provision that such persons are <strong>in</strong>eligible to be directors <strong>of</strong><br />
LIs.<br />
44 (3) Governor to have the discretion whether an <strong>in</strong>dividual can<br />
be a director <strong>in</strong> two LIs For good practice, no persons,<br />
even subject exceptional discretion, should be a director <strong>in</strong><br />
two LIs. BoSL should not have discretion to grant a person<br />
permission to sit on the boards <strong>of</strong> two LIs<br />
44 (4) Requires LIs only to <strong>in</strong>form rather than seek permission to<br />
have a new director. Whereas Schedule 1 (1-3) under the<br />
Act stipulates the “Fit and Proper” qualities <strong>of</strong> a bank<br />
director, the requirement to “<strong>in</strong>form” appears weak <strong>in</strong><br />
terms <strong>of</strong> effectiveness <strong>in</strong> ensur<strong>in</strong>g that every director <strong>of</strong> a<br />
LI is fit-and-proper. Better for each LI to seek clearance <strong>of</strong><br />
BoSL for each director, <strong>in</strong>clud<strong>in</strong>g change or replacement <strong>of</strong><br />
directors.<br />
C. OTHER FINANCIAL SERVICES ACT 2001<br />
This Act provides for licens<strong>in</strong>g, regulation and supervision <strong>of</strong> <strong>in</strong>stitutions<br />
carry<strong>in</strong>g out f<strong>in</strong>ancial activities other than bank<strong>in</strong>g. It covers all other<br />
f<strong>in</strong>ancial service providers <strong>of</strong> whatever nature but by implication leaves<br />
out those that are not cooperatives, companies or statutory bodies. Thus<br />
f<strong>in</strong>ancial <strong>in</strong>stitutions <strong>in</strong> the country must be regulated by BoSL if they are<br />
coops or companies but those that are registered by MoFDEP as NGOs<br />
are <strong>in</strong> pr<strong>in</strong>ciple outside the loop <strong>of</strong> BoSL supervision. This has created a<br />
bit <strong>of</strong> confusion which could develop <strong>in</strong>to a bigger problem: MFIs that are<br />
cooperatives or companies are <strong>in</strong> pr<strong>in</strong>ciple regulated by BoSL while NGOs<br />
are not, even when they are engaged <strong>in</strong> similar bus<strong>in</strong>esses<br />
The overall challenge <strong>of</strong> this Act is that it seeks to regulate all <strong>in</strong>stitutions<br />
engaged <strong>in</strong> f<strong>in</strong>ancial services. It is doubtful if BoSL has the capacity, both<br />
quantitative and qualitative, to effectively engage <strong>in</strong> prudential regulation<br />
and supervision <strong>of</strong> all such <strong>in</strong>stitutions. 63 It is too broad <strong>in</strong> coverage.<br />
Details <strong>of</strong> challenges aris<strong>in</strong>g from this as well as from other legal/<br />
regulatory documents are summarised under section G <strong>of</strong> this report. The<br />
table below summarises specific issues <strong>in</strong> the Other F<strong>in</strong>ancial Institutions<br />
Act that might need re-exam<strong>in</strong>ation.<br />
63 Includ<strong>in</strong>g new ones as they come up
CLAUSE<br />
ISSUE/ PROPOSAL<br />
2 Requirement for a license for all f<strong>in</strong>ancial activities <strong>in</strong>clud<strong>in</strong>g<br />
non deposit ones. Not necessary to regulate credit-only<br />
<strong>in</strong>stitutions that lend out <strong>of</strong> their own resources and take no<br />
deposits. On the contrary, this could limit early stage<br />
growth <strong>of</strong> credit-only, pro-poor/ rural f<strong>in</strong>ancial <strong>in</strong>stitutions.<br />
3 (4) Requirement <strong>of</strong> a warrant from the magistrate might reduce<br />
effectiveness <strong>of</strong> BoSL’s work<strong>in</strong>g this regard. Elements <strong>of</strong><br />
surprise and speed, which are vital <strong>in</strong> this respect, are to<br />
some extent sacrificed. Better to give BoSL express<br />
authority to hold surprise checks without any warrant<br />
5 (a, b & c) Only companies, cooperatives and statutory bodies can<br />
apply for a license under the Act. The problem is that<br />
<strong>in</strong>stitutions can just choose an alternative form <strong>of</strong><br />
registration, like NGO, to escape licens<strong>in</strong>g requirements.<br />
8 (1&2)<br />
“… The Governor may by statutory <strong>in</strong>strument exempt any<br />
f<strong>in</strong>ancial <strong>in</strong>stitution or group <strong>of</strong> f<strong>in</strong>ancial <strong>in</strong>stitutions from<br />
any requirements <strong>of</strong> this Act as to licens<strong>in</strong>g…” This could<br />
prove <strong>in</strong>appropriate. What one <strong>in</strong>stitution gets an<br />
exemption from may also be claimed by others, who could<br />
raise populist or political arguments <strong>of</strong> discrim<strong>in</strong>ation if they<br />
are not granted. Better not to have this discretion clause<br />
and to have the provision very clear as a “must” for all.<br />
Unclear on regulatory differences between deposit tak<strong>in</strong>g<br />
and non deposit tak<strong>in</strong>g f<strong>in</strong>ancial <strong>in</strong>stitutions. Better to<br />
differentiate between deposit tak<strong>in</strong>g and non deposit tak<strong>in</strong>g<br />
<strong>in</strong>stitutions <strong>in</strong> regulation.<br />
The above issues under both the Bank<strong>in</strong>g Act and the Other F<strong>in</strong>ancial<br />
Services Act were discussed with the stakeholders <strong>in</strong> the first workshop<br />
dur<strong>in</strong>g the third week <strong>of</strong> February 2008 and the participants largely<br />
agreed with the observations. A related and particularly important f<strong>in</strong>d<strong>in</strong>g<br />
is that the four community banks, created and overseen by BoSL’s<br />
Development Coord<strong>in</strong>ation Department, are all licensed but not<br />
effectively supervised. This goes aga<strong>in</strong>st sound practices for bank<br />
licens<strong>in</strong>g and regulation. Community banks were orig<strong>in</strong>ally meant to be<br />
regulated under the Bank<strong>in</strong>g Act. Later, BoSL found the Bank<strong>in</strong>g Act “too<br />
strong” for the community banks and it was decided that they be<br />
regulated under the Other F<strong>in</strong>ancial Services Act. There are no <strong>of</strong>ficially<br />
gazetted regulation or supervision guidel<strong>in</strong>es under the Other F<strong>in</strong>ancial<br />
Services Act. Inspection <strong>of</strong> community banks is not regular 64 . Two <strong>of</strong> the<br />
community banks are do<strong>in</strong>g so badly that under normal effective bank<br />
regulation, they would by now be under a Conservator, receivership or<br />
direct management <strong>of</strong> BoSL. The regulatory environment for<br />
micr<strong>of</strong><strong>in</strong>ance, therefore, needs significant improvements.<br />
64 Accord<strong>in</strong>g to one community bank, they underwent a real <strong>in</strong>spection, followed by a<br />
comprehensive <strong>in</strong>spection report for the first time <strong>in</strong> three years recently.
D. ANTI MONEY LAUNDERING ACT 2005<br />
The Anti Money Launder<strong>in</strong>g Act 2005 is <strong>in</strong> a sense a moral and legal<br />
check on the transactional activities <strong>of</strong> f<strong>in</strong>ancial <strong>in</strong>stitutions, to ensure<br />
that they are not facilitat<strong>in</strong>g crime by keep<strong>in</strong>g and transmitt<strong>in</strong>g money<br />
obta<strong>in</strong>ed through crim<strong>in</strong>al activities. Every country that wants to rid its<br />
f<strong>in</strong>ancial sector <strong>of</strong> this k<strong>in</strong>d <strong>of</strong> “dirty money” now has similar legislation –<br />
either with<strong>in</strong> the bank<strong>in</strong>g laws or as stand-alone statutes. The provisions<br />
<strong>of</strong> the Act are sound for the purpose, and if strictly implemented would<br />
ensure that f<strong>in</strong>ancial <strong>in</strong>stitutions, <strong>in</strong>clud<strong>in</strong>g MFIs, are not used to launder<br />
crim<strong>in</strong>ally obta<strong>in</strong>ed moneys. The provisions there<strong>of</strong> are suitable for<br />
growth <strong>of</strong> the sector.<br />
E. BANK OF SIERRA LEONE ACT 2000<br />
The Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> Act 2000 provides for the legal status,<br />
objectives, authority, responsibilities, governance, management and the<br />
bus<strong>in</strong>ess/ operations, <strong>of</strong> the Central Bank. Specifically, the Act provides<br />
for the follow<strong>in</strong>g broad areas with regard to BoSL:<br />
- Establishment and Objects <strong>of</strong> the Bank<br />
- Governance structure, policy and procedures<br />
- Internal management and adm<strong>in</strong>istration<br />
- Capital adequacy<br />
- Operations and bus<strong>in</strong>ess<br />
- Currency issu<strong>in</strong>g authority<br />
- Implementation <strong>of</strong> the monetary policy for macro economic stability<br />
- Management <strong>of</strong> the national monetary system<br />
- Relationship with Government.<br />
If followed strictly by BoSL and the Government, the Act would enable<br />
BoSL to work effectively as an overseer and regulator <strong>of</strong> the f<strong>in</strong>ancial<br />
sector, further creat<strong>in</strong>g the environment for safe and orderly growth <strong>of</strong><br />
the whole f<strong>in</strong>ancial sector (<strong>in</strong>clud<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance). By itself, this Act is<br />
not <strong>of</strong> much effect to MFIs, save to the extent that it establishes BoSL as<br />
the supreme monetary and supervisory authority over the whole f<strong>in</strong>ancial<br />
sector. The specific issues related to BoSL’s relationship with the f<strong>in</strong>ancial<br />
sector (<strong>in</strong>clud<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance) are discussed under section B above.<br />
F. NATIONAL MICROFINANCE POLICY 2003<br />
The National Micr<strong>of</strong><strong>in</strong>ance Policy (NMP) is a systematic policy document<br />
developed by GoSL with its development partners and other<br />
stakeholders. The policy aims at develop<strong>in</strong>g an enabl<strong>in</strong>g framework and<br />
help<strong>in</strong>g market led, poverty-responsive and largely accessible<br />
micr<strong>of</strong><strong>in</strong>ance services to flourish. Based on lessons learnt from earlier
Government micr<strong>of</strong><strong>in</strong>ance programs 65 , Government <strong>in</strong>itiated this policy<br />
with the broad view <strong>of</strong>:<br />
Reorganiz<strong>in</strong>g the micr<strong>of</strong><strong>in</strong>ance sector for <strong>in</strong>creased viability<br />
and responsiveness<br />
Aid<strong>in</strong>g development <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance sector as a vehicle for<br />
rural f<strong>in</strong>ancial services <strong>in</strong> the short and medium term<br />
Incorporat<strong>in</strong>g and entrench<strong>in</strong>g Best Practices <strong>in</strong>to the overall<br />
micr<strong>of</strong><strong>in</strong>ance policy<br />
Promot<strong>in</strong>g the evolution <strong>of</strong> a viable, market based, accessible<br />
and susta<strong>in</strong>able micr<strong>of</strong><strong>in</strong>ance sector<br />
Stopp<strong>in</strong>g Government’s direct <strong>in</strong>volvement <strong>in</strong> provision <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance, and conf<strong>in</strong><strong>in</strong>g Government’s role to creat<strong>in</strong>g an<br />
enabl<strong>in</strong>g environment for MFIs to grow.<br />
Government’s vision <strong>in</strong> the policy is to develop and eventually <strong>in</strong>tegrate<br />
micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>to the formal f<strong>in</strong>ancial sector. The overall goal is to<br />
enhance the development <strong>of</strong> productive activities through effective<br />
delivery <strong>of</strong> micr<strong>of</strong><strong>in</strong>ance services to the economically active poor. The<br />
stated objectives are to <strong>in</strong>crease poor people’s access to f<strong>in</strong>ancial<br />
services, provide susta<strong>in</strong>able livelihood for unemployed citizens<br />
(especially women), mobilize resources (sav<strong>in</strong>gs, foreign capital, grants)<br />
for <strong>in</strong>vestment <strong>in</strong> the sector and to strengthen the l<strong>in</strong>ks between the<br />
formal and <strong>in</strong>formal sectors.<br />
To achieve all the above, the Policy sets out the follow<strong>in</strong>g pr<strong>in</strong>ciples to be<br />
adhered to by all micr<strong>of</strong><strong>in</strong>ance <strong>in</strong>dustry stakeholders:<br />
i. Discipl<strong>in</strong>e among all stakeholders<br />
ii. Transparency among all stakeholders<br />
iii. Timely, accurate report<strong>in</strong>g and accountability<br />
iv. Free pric<strong>in</strong>g, unencumbered by controls<br />
v. Effective portfolio management and del<strong>in</strong>quency control<br />
vi. Promotion <strong>of</strong> appropriate products and techniques<br />
vii. Gender consideration (especially women empowerment)<br />
viii. Good governance.<br />
The above pr<strong>in</strong>ciples are sound and well thought out. In practice,<br />
however, not every stakeholder can be expected to always be discipl<strong>in</strong>ed,<br />
transparent and prudent. That is why effective regulation and supervision<br />
<strong>of</strong> <strong>in</strong>stitutions that take public deposits is a must. For the case <strong>of</strong><br />
community banks <strong>in</strong> <strong>Sierra</strong> <strong>Leone</strong>, this function is yet to be established<br />
and do<strong>in</strong>g so will be key to the safety and soundness <strong>of</strong> the micr<strong>of</strong><strong>in</strong>ance<br />
sector.<br />
65 The NGO Program and the Chiefdoms Program, both adm<strong>in</strong>istered by SAPA(a<br />
component <strong>of</strong> NaCSA that was changed <strong>in</strong>to MFP)
Broad strategies for policy implementation <strong>in</strong>clude:<br />
a) Establish<strong>in</strong>g a market oriented f<strong>in</strong>ancial services policy<br />
environment conducive for deepen<strong>in</strong>g and broaden<strong>in</strong>g<br />
micr<strong>of</strong><strong>in</strong>ance<br />
b) Establish<strong>in</strong>g a legal framework that promotes f<strong>in</strong>ancial<br />
<strong>in</strong>termediation<br />
c) Implement<strong>in</strong>g a national policy for review, design,<br />
implementation, management, supervision and monitor<strong>in</strong>g <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance support programs<br />
d) Coord<strong>in</strong>at<strong>in</strong>g the micr<strong>of</strong><strong>in</strong>ance sector.<br />
Development <strong>of</strong> the National Micr<strong>of</strong><strong>in</strong>ance Policy was a very well advised<br />
<strong>in</strong>itiative, and the contents <strong>of</strong> the policy are based on tested and proven<br />
sound pr<strong>in</strong>ciples <strong>in</strong> micr<strong>of</strong><strong>in</strong>ance. Particularly, Government’s withdrawal<br />
from direct micr<strong>of</strong><strong>in</strong>ance provision and its commitment to create a<br />
conducive environment and to aid the growth <strong>of</strong> a market based<br />
micr<strong>of</strong><strong>in</strong>ance sector are very good developments. There now needs to be<br />
a review <strong>of</strong> the legal and regulatory provisions, to ensure that they are <strong>in</strong><br />
l<strong>in</strong>e with the goals, objectives and strategies <strong>of</strong> this policy. The regulatory<br />
environment needs to be further improved by articulat<strong>in</strong>g and sanction<strong>in</strong>g<br />
regulatory/ supervision guidel<strong>in</strong>es for deposit tak<strong>in</strong>g micr<strong>of</strong><strong>in</strong>ance<br />
<strong>in</strong>stitutions and implement<strong>in</strong>g effective supervision.<br />
G. CONCLUSIONS AND RECOMMENDATIONS<br />
Conclusions<br />
i) Government policy<br />
The stated Government policy fully agrees with <strong>in</strong>ternationally<br />
established sound practices for micr<strong>of</strong><strong>in</strong>ance at the macro/ policy level:<br />
governments should not engage <strong>in</strong> direct provision <strong>of</strong> f<strong>in</strong>ancial services<br />
but should create conducive environment for the private sector to do so.<br />
ii) Key sound practices <strong>of</strong> prudential regulation<br />
Among the generally agreed sound pr<strong>in</strong>ciples <strong>of</strong> f<strong>in</strong>ancial sector 66<br />
regulation are:<br />
- Do not legislate what you cannot regulate and do not regulate what<br />
you cannot supervise<br />
- <strong>Capacity</strong> <strong>of</strong> the regulator/ supervisor needs to be adequate to cover<br />
effective supervision <strong>of</strong> all regulated <strong>in</strong>stitutions<br />
- Prudential regulation is necessary basically to protect public<br />
depositors and to prevent systemic breakdown <strong>of</strong> the f<strong>in</strong>ancial<br />
sector. Non prudential regulation can cover the role <strong>of</strong> ensur<strong>in</strong>g<br />
orderly growth <strong>of</strong> the f<strong>in</strong>ancial sector. There is thus no need for<br />
prudential regulation <strong>of</strong> non deposit tak<strong>in</strong>g <strong>in</strong>stitutions<br />
- Small, localised/ community based, user-owned sav<strong>in</strong>gs and credit<br />
<strong>in</strong>stitutions, as long as they only take deposits from their members/<br />
shareholders, need not be regulated by the central bank. In many<br />
cases, supervision under the registrar <strong>of</strong> cooperatives or a<br />
66 Especially for micr<strong>of</strong><strong>in</strong>ance
delegated <strong>in</strong>stitution could suffice.<br />
- The overall cost <strong>of</strong> regulation and supervision should be justified by<br />
the benefits aris<strong>in</strong>g from it.<br />
- MFI legislation has limited use as a promotional tool for<br />
micr<strong>of</strong><strong>in</strong>ance growth, but works to ensure that the sector is sound<br />
and safe.<br />
- Excessive coverage <strong>of</strong> <strong>in</strong>stitutions by the regulator has the risk <strong>of</strong><br />
licens<strong>in</strong>g (giv<strong>in</strong>g legal authority to) weak <strong>in</strong>stitutions that cannot be<br />
effectively supervised; licens<strong>in</strong>g criteria should thus be a balance <strong>of</strong><br />
the ease <strong>of</strong> entry for f<strong>in</strong>ancially susta<strong>in</strong>able MFIs and the capacity <strong>of</strong><br />
the supervisory authority to provide effective prudential regulation.<br />
- MFI licens<strong>in</strong>g/ prudential supervision works best when it is narrowly<br />
focused on targeted to enabl<strong>in</strong>g mature, susta<strong>in</strong>able <strong>in</strong>stitutions to<br />
take sav<strong>in</strong>gs and mobilize capital<br />
- While self governance mechanisms suffice for smaller f<strong>in</strong>ancial<br />
cooperatives, full prudential regulation is necessary as they reach<br />
the f<strong>in</strong>ancial size <strong>of</strong> licensed f<strong>in</strong>ancial <strong>in</strong>termediaries<br />
- Regulatory policy should have a s<strong>in</strong>gle focus, while application <strong>of</strong><br />
the regulatory function can be delegated to different regulatory<br />
units or <strong>in</strong>stitutions with specialised responsibilities<br />
- <strong>Capacity</strong> build<strong>in</strong>g <strong>of</strong> regulatory authorities and development <strong>of</strong><br />
effective regulatory tools is essential for effective regulation <strong>of</strong><br />
micr<strong>of</strong><strong>in</strong>ance<br />
- Development <strong>of</strong> f<strong>in</strong>ancial regulatory framework should be<br />
accompanied by development <strong>of</strong> other bus<strong>in</strong>ess related laws and<br />
regulations <strong>in</strong> areas like property rights(like land ownership),<br />
contract enforcement, taxation, collateral security execution and<br />
realisation, securities regulation and consumer protection.<br />
It appears that because BoSL is supposed to supervise all f<strong>in</strong>ancial<br />
service providers <strong>in</strong> the country, it could f<strong>in</strong>d it very difficult to do this<br />
while adher<strong>in</strong>g to the above mentioned pr<strong>in</strong>ciples.<br />
iii) Conflict <strong>of</strong> <strong>in</strong>terest for BoSL<br />
It is understandable that due to a shortage <strong>of</strong> suitable <strong>in</strong>stitutions to<br />
implement the establishment and nurtur<strong>in</strong>g <strong>of</strong> community banks, BoSL’s<br />
Development Coord<strong>in</strong>ation Department undertook this role. As an <strong>in</strong>terim<br />
measure, this was suitable. In the long run, however, the central bank is<br />
better <strong>of</strong>f with a dist<strong>in</strong>ctive supervisory role <strong>in</strong> its relationship to f<strong>in</strong>ancial<br />
<strong>in</strong>stitutions. Experience elsewhere <strong>in</strong> Africa has shown that as the<br />
f<strong>in</strong>ancial sector grows, the central bank’s nurtur<strong>in</strong>g and fund wholesal<strong>in</strong>g<br />
roles come <strong>in</strong>to conflict with its regulatory roles –even when they are<br />
done under separate departments.<br />
iv) Opportunity for the growth and nurtur<strong>in</strong>g <strong>of</strong> community based<br />
<strong>in</strong>itiatives<br />
Experience <strong>in</strong> several African countries shows that local people have a<br />
tendency to <strong>in</strong>itiat<strong>in</strong>g basic f<strong>in</strong>ancial service set ups which grow with<br />
time. Additionally, some welfare organizations and NGOs also <strong>of</strong>ten
develop basic micr<strong>of</strong><strong>in</strong>ance as a sidel<strong>in</strong>e activity, which also grow and<br />
mature with time.<br />
v) Dual registration and related implications<br />
NGOs are currently registered under MoFDEP. Companies and<br />
cooperatives are registered under their respective legislations. Accord<strong>in</strong>g<br />
to the Bank<strong>in</strong>g Act 2000 and Other F<strong>in</strong>ancial Institutions Act 2001, only<br />
the companies and cooperatives engaged <strong>in</strong> f<strong>in</strong>ancial services can apply<br />
for BoSL licens<strong>in</strong>g and subsequent supervision. This gives a silent escape<br />
route for the NGOs engaged <strong>in</strong> a similar bus<strong>in</strong>ess.<br />
vi) Deposit <strong>in</strong>surance<br />
One <strong>of</strong> the benefits <strong>of</strong> f<strong>in</strong>ancial sector regulation to the public is that they<br />
can to some extent be shielded from losses when regulated <strong>in</strong>stitutions<br />
fail. The Other F<strong>in</strong>ancial Institutions Act 2001 does not provide for a<br />
Deposit Insurance scheme to cater for this.<br />
Recommendations<br />
1. Ma<strong>in</strong>ta<strong>in</strong> the Bank<strong>in</strong>g Act 2000 and Other F<strong>in</strong>ancial<br />
Institutions Act 2001 and the Other F<strong>in</strong>ancial Institutions Act, but<br />
the latter should be amended to cater only for relatively large, nondeposit<br />
tak<strong>in</strong>g f<strong>in</strong>ancial <strong>in</strong>stitutions.<br />
2. Non prudential regulation for sizeable, non deposit<br />
tak<strong>in</strong>g <strong>in</strong>stitutions with total assets exceed<strong>in</strong>g say a billion <strong>Leone</strong>s.<br />
This should be done under the Other F<strong>in</strong>ancial Institutions Act,<br />
amended to exclude SACCOs and small MFIs with less than a billion<br />
<strong>Leone</strong>s <strong>in</strong> total assets.<br />
3. Separate regulation for SACCOs (prudential but far<br />
simpler and less str<strong>in</strong>gent than the Bank<strong>in</strong>g Act) should be done<br />
under the Cooperative Act 1977 (if need be, sufficiently amended to<br />
cater for appropriate prudential regulation <strong>of</strong> cooperatives engaged<br />
<strong>in</strong> f<strong>in</strong>ancial services). Explore possibilities <strong>of</strong> br<strong>in</strong>g<strong>in</strong>g community<br />
banks under this umbrella<br />
4. Streaml<strong>in</strong>e registration <strong>of</strong> f<strong>in</strong>ancial <strong>in</strong>stitutions so that<br />
all those regulated under the Bank<strong>in</strong>g Act and Other F<strong>in</strong>ancial<br />
Institutions Act 2001 are required to be registered as companies.<br />
5. Apart from those <strong>in</strong>stitutions that should be subjected<br />
to non-prudential regulations under the Other F<strong>in</strong>ancial Institutions<br />
Act, leave out all the other organisations <strong>in</strong>volved <strong>in</strong> credit only<br />
operations<br />
6. Nurtur<strong>in</strong>g work currently done by BoSL Micr<strong>of</strong><strong>in</strong>ance<br />
Unit should be eventually shifted to another <strong>in</strong>stitution (National<br />
Development Bank)<br />
7. Address all comments and issues raised <strong>in</strong> the two<br />
tables under sections B and C <strong>of</strong> this report.
H. LIST OF DOCUMENTS REVIEWED<br />
i) The Bank<strong>in</strong>g Act 2000 – Freetown, <strong>Sierra</strong> <strong>Leone</strong><br />
ii)<br />
iii)<br />
iv)<br />
Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> Act 2000 – Freetown, <strong>Sierra</strong> <strong>Leone</strong><br />
Other F<strong>in</strong>ancial Institutions Act 2001 – Freetown, <strong>Sierra</strong> <strong>Leone</strong><br />
Anti Money Launder<strong>in</strong>g Act 2005 – Freetown, <strong>Sierra</strong> <strong>Leone</strong><br />
v) National Micr<strong>of</strong><strong>in</strong>ance Policy (2003) – Freetown, <strong>Sierra</strong> <strong>Leone</strong><br />
vi)<br />
vii)<br />
viii)<br />
ix)<br />
Regulat<strong>in</strong>g and Strengthen<strong>in</strong>g Tier 4 Micr<strong>of</strong><strong>in</strong>ance Institutions <strong>in</strong><br />
Uganda (Compiled by the Tier 4 Work<strong>in</strong>g Subcommittee <strong>of</strong> the<br />
Micr<strong>of</strong><strong>in</strong>ance Forum), Published by AMFIU; 2005<br />
Sound Practices <strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance – A compilation <strong>of</strong> National and<br />
International Sound Practices <strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance AMFIU; 2005<br />
Policy Statement on Micr<strong>of</strong><strong>in</strong>ance Regulation – Bank <strong>of</strong> Uganda,<br />
Kampala, 1999<br />
Consensus Micr<strong>of</strong><strong>in</strong>ance Policy Guidance: Regulation and<br />
Supervision (CGAP, 2002)<br />
x) The Rush to Regulate: Legal Frameworks for Micr<strong>of</strong><strong>in</strong>ance<br />
(Christen, Robert Peck, Richard Rosenberg – 2000)<br />
xi)<br />
xii)<br />
Who Benefits from Regulation – Micr<strong>of</strong><strong>in</strong>ance Regulatory Impact<br />
Assessment <strong>in</strong> Uganda (Andrew Obara, Eva Mukasa and Stefan<br />
Staschen – for DFID Uganda, Aug 2007)<br />
How to Regulate and Supervise Micr<strong>of</strong><strong>in</strong>ance: Key issues from an<br />
International Perspective (Alfred Hann<strong>in</strong>g & Edward Katimbo<br />
Mugwanya, Kampala – 2000)
APPENDIX 6: LIST OF DOCUMENTS REVIEWED<br />
Nb. Report/Document name,<br />
date and author<br />
1 Micr<strong>of</strong><strong>in</strong>ance <strong>Sector</strong><br />
Development <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong> – An Assessment –<br />
June 2003<br />
Peter Kooi and John Tucker<br />
2 Development <strong>of</strong> a<br />
Susta<strong>in</strong>able Pro-Poor<br />
F<strong>in</strong>ancial <strong>Sector</strong> <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong> (2004-2009).<br />
UNCDF<br />
3 Mid-Term Evaluation<br />
September 2006<br />
Development <strong>of</strong> a<br />
Susta<strong>in</strong>able Pro-Poor<br />
F<strong>in</strong>ancial <strong>Sector</strong> <strong>in</strong> <strong>Sierra</strong><br />
<strong>Leone</strong>. Project SIL/03/C01<br />
Ann Duval and Frankl<strong>in</strong><br />
Bendu<br />
November 2006<br />
4 Monitor reports received<br />
from MITAF<br />
5 MITAF: Bus<strong>in</strong>ess evaluation<br />
and statement <strong>of</strong><br />
requirements.<br />
Sep. 2007<br />
6 MITAF donor break down<br />
chart<br />
7 MITAF: Commercial banks<br />
<strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance (Taskforce)<br />
8 MITAF narrative report and<br />
performance reports for<br />
July-September 2007 plus<br />
annexes A-X<br />
9 MITAF:MFI performance<br />
summary June 2006<br />
10 Micr<strong>of</strong><strong>in</strong>ance Policy Review<br />
<strong>Sierra</strong> <strong>Leone</strong> 2002 CGAP<br />
11 The Anti-Money Launder<strong>in</strong>g<br />
Act 2005<br />
Date<br />
received<br />
Before<br />
mission 1<br />
Before<br />
mission<br />
1<br />
Before<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Comment<br />
ARD,CEDA, CCF, Hope,<br />
MMCB, MCB, SCB,<br />
YCB, ProCredit, Care,<br />
Community banks<br />
related, <strong>in</strong>clud<strong>in</strong>g IT<br />
<strong>in</strong>vitation to tender<br />
Nb. <strong>of</strong><br />
pages<br />
32<br />
30<br />
81<br />
31<br />
23<br />
26<br />
Dur<strong>in</strong>g<br />
1<br />
mission 1<br />
Dur<strong>in</strong>g From Craig 50<br />
mission 1<br />
Download Elect. version 30<br />
12 The Bank<strong>in</strong>g Act 2000 Download Elect. version<br />
Deposit tak<strong>in</strong>g<br />
13 The Bank <strong>of</strong> <strong>Sierra</strong> <strong>Leone</strong> Download Elect. version<br />
Act 2000<br />
14 <strong>Sierra</strong> <strong>Leone</strong> monetary Download Elect. version<br />
survey<br />
15 <strong>Sierra</strong> <strong>Leone</strong> National Download Elect. version 22<br />
Micr<strong>of</strong><strong>in</strong>ance Policy. October<br />
2003.<br />
16 NaCSA newsletter “Credit<br />
L<strong>in</strong>es” Nb. 001, 002, 003,<br />
004<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Hardcopy<br />
4*20<br />
80
17 MFIs nb. <strong>of</strong> clients Dur<strong>in</strong>g<br />
mission 1<br />
18 MITAF fund<strong>in</strong>g criteria Dur<strong>in</strong>g<br />
mission 1<br />
19 PrCB leaflets Dur<strong>in</strong>g<br />
mission 1<br />
20 MFP account<strong>in</strong>g tra<strong>in</strong><strong>in</strong>g Dur<strong>in</strong>g<br />
handouts A1-A10<br />
mission 1<br />
21 MFP f<strong>in</strong>ance tra<strong>in</strong><strong>in</strong>g<br />
Dur<strong>in</strong>g<br />
handouts FA5-FA11<br />
mission 1<br />
22 MFP, Micr<strong>of</strong><strong>in</strong>ance best Dur<strong>in</strong>g<br />
practices tra<strong>in</strong><strong>in</strong>g courses mission 1<br />
for board members and<br />
senior management <strong>of</strong> MFIs<br />
23 NaCSA, HIV/AIDS tra<strong>in</strong><strong>in</strong>g Dur<strong>in</strong>g<br />
<strong>of</strong> tra<strong>in</strong>ers workshop<br />
mission 1<br />
24 NaCSA, Operations Manual Dur<strong>in</strong>g<br />
mission 1<br />
25 MFP, Del<strong>in</strong>quency<br />
management and control<br />
tra<strong>in</strong><strong>in</strong>g workshop<br />
26 MFP, Report on <strong>in</strong>formation<br />
shar<strong>in</strong>g sem<strong>in</strong>ar for<br />
micr<strong>of</strong><strong>in</strong>ance stakeholders<br />
27 Appraisal for Micr<strong>of</strong><strong>in</strong>ance<br />
Institutions, a Technical<br />
Guide, CGAP<br />
28 Format for appraisal <strong>of</strong><br />
Network Support<br />
Organizations, a Technical<br />
Guide, CGAP<br />
29 Other f<strong>in</strong>ancial services Act,<br />
SL 2001<br />
30 MITAF tra<strong>in</strong><strong>in</strong>g <strong>in</strong>vitations<br />
and agendas<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
Dur<strong>in</strong>g<br />
mission 1<br />
31 SLAMFI Bus<strong>in</strong>ess Plan Dur<strong>in</strong>g<br />
mission 1<br />
32 Segbwema Community Dur<strong>in</strong>g<br />
Bank<br />
mission 2<br />
33 Marampa Masimera<br />
Community Bank<br />
34 Governance Needs<br />
Assessment <strong>of</strong> MFIs <strong>in</strong><br />
Uganda (AMFIU, Kampala,<br />
2005)<br />
Dur<strong>in</strong>g<br />
mission 2<br />
Before<br />
mission 1<br />
Elect.version 25<br />
Elect. version 3<br />
Elect. version<br />
Elect. version<br />
Hard copy 2005 64<br />
Hard copy 2005 42<br />
Hard copy 2005 86<br />
Hard copy 2005 81<br />
Hard copy 2005 41<br />
Elect. versions<br />
Elect. version 50<br />
Certificate <strong>of</strong><br />
Incorporation<br />
Reports and Accounts<br />
per 31 st Dec. 2005<br />
Reports and Accounts<br />
per 31 st Dec. 2004<br />
Memorandum and<br />
Articles <strong>of</strong> Association<br />
Strategic Bus<strong>in</strong>ess Plan<br />
2008-2010<br />
Elect. Version<br />
35 Sound Practices <strong>in</strong><br />
Micr<strong>of</strong><strong>in</strong>ance – A<br />
compilation <strong>of</strong> National and<br />
International Sound<br />
Before<br />
mission 1<br />
Elect. Version & hard
Practices <strong>in</strong> Micr<strong>of</strong><strong>in</strong>ance<br />
AMFIU; 2005<br />
36 Match<strong>in</strong>g Grant Facility for<br />
<strong>Capacity</strong> <strong>Build<strong>in</strong>g</strong> (MCAP)<br />
Design Document (Andrew<br />
Obara & Eva Mukasa for<br />
Government <strong>of</strong> Uganda,<br />
2004)<br />
37 Uganda Micr<strong>of</strong><strong>in</strong>ance<br />
Effectiveness Review (CGAP<br />
) – Ruth Goodw<strong>in</strong>, Till Bruet<br />
& Alexia Laortue 2004.<br />
38 CAGP Focus Note 37:<br />
F<strong>in</strong>ancial Inclusion 2015 –<br />
Scenarios for the Future <strong>of</strong><br />
Micr<strong>of</strong><strong>in</strong>ance. CAGP,<br />
Wash<strong>in</strong>gton DC<br />
Before<br />
mission 1<br />
Before<br />
mission 1<br />
Before<br />
mission 1<br />
Elect. Version<br />
Elect. Version<br />
Hard copy
APPENDIX 7: LIST OF PERSONS INTERVIEWED<br />
Number Institution Name and Title Contact details<br />
1 NaCSA Sylvanus Joe<br />
Jannah,<br />
Executive Director<br />
Mob: 076-620900/033-419392<br />
Land: (232-22)228524<br />
Email: sylfannah@nacsa-sl.org<br />
sylfannah@hotmail.com<br />
2 MITAF Alphonso Campbell<br />
Deputy Director<br />
(Also met <strong>in</strong> his<br />
earlier capacity as<br />
Act<strong>in</strong>g NaCSA<br />
Director) <strong>in</strong> Nov<br />
2007)<br />
Mob: 076-680726<br />
Land: (232-22)226032<br />
Email: olade8@yahoo.com<br />
3 NaCSA Francess Kondoh Mob: 076-640096<br />
Email:<br />
kondohfrancess@yahoo.co.uk<br />
4 NaCSA Mr. Conton Sesay<br />
Commissioner<br />
5 DEC Frankl<strong>in</strong> Bendu<br />
Project Officer<br />
6 DEC Claudi Ferrer<br />
Project Officer<br />
7 BoSL Rosal<strong>in</strong>e Gobio-<br />
Lam<strong>in</strong><br />
Director<br />
Development<br />
Coord<strong>in</strong>ation<br />
Department<br />
8 MITAF Craig Fe<strong>in</strong>berg<br />
Outgo<strong>in</strong>g Chief <strong>of</strong><br />
Party<br />
9 MITAF Pearson<br />
Kalungulungu<br />
Incom<strong>in</strong>g Chief <strong>of</strong><br />
Party<br />
10 BoSL Mr. Mohammed<br />
Massequoi<br />
Na<br />
Mob: +232 33 417 334<br />
Land: +232-22-<br />
234060/234061/236418<br />
Fax: +232-22-236414/236416<br />
Email:<br />
Frankl<strong>in</strong>.BENDU@ec.europa.eu<br />
Tel: +232 22 236422/+232 30<br />
543606<br />
Fax: +232 22 236416<br />
Email:<br />
claudi.ferrersavall@ec.europa.eu<br />
Mob: 076-607-981, 033-701<br />
381<br />
Land: 226 501 Ext. 1080<br />
Direct: 223 695/290 484<br />
Mob: +232 (0) 76 758 023<br />
Land: +232 (0) 22 236 337<br />
Email: cfe<strong>in</strong>berg@esglobal.com<br />
craigfe<strong>in</strong>berg@hotmail.com<br />
Mob: +232 (0) 76254595<br />
0232 (0) 33 491 619<br />
Land/Fax: +232 (0) 22 236 337<br />
Email: pearsonk@esglobal.com<br />
Mob: 033 480016<br />
077 830423
Senior Manager,<br />
Community Banks<br />
11 BoSL Claudia Sam<br />
Manager MFIs<br />
12 MOFDEP James Romeo<br />
Koroma<br />
Pr<strong>in</strong>cipal Plann<strong>in</strong>g<br />
Officer<br />
13 MOFDEP Mohamed A.<br />
Edmond<br />
14 ProCB Thomas Lendzian<br />
General Manager<br />
15 SLAMFI Santigie D. Kanu<br />
Chairperson<br />
16 HOPE Santigie D. Kanu<br />
Executive Director<br />
17 FS Ben Noballa<br />
Director<br />
18 ARD Alie Forna<br />
Director<br />
19 ARD David Kamara<br />
Operations Manager<br />
20 ARD Sheik Ichriss<br />
Korona<br />
F<strong>in</strong>ance Manager<br />
21 CARE Mrs. Amani M´Bale<br />
Poveda<br />
Youth & Livelihood<br />
Coord<strong>in</strong>ator LINKS<br />
22 UNDP Mr. Abdulrahman<br />
Bob Conteh<br />
National<br />
Micr<strong>of</strong><strong>in</strong>ance Officer<br />
Mob. 033324631<br />
Mob. 076 683 911<br />
Email:<br />
jamesromeokoroma@yahoo.com<br />
Mob. 033-377 637<br />
Mob. +232 (0) 76957376<br />
Email:<br />
t.lendzian@procreditbanksl.com<br />
Mob: +232 76 611345<br />
Land: +232 22 241 381<br />
Email: kanu.sd@gmail.com<br />
Mob: +232 76 611345<br />
Land: +232 22 241 381<br />
Email: kanu.sd@gmail.com<br />
Mob: 076 654 729<br />
Email: benn@archq.org<br />
Mob: 076 626 489<br />
Email:<br />
ardsierraleone@yahoo.com<br />
Mob: 076 489 991<br />
Email: dkay73@gmail.com<br />
Email: sheikichriss@yahoo.co.uk<br />
Mob: 076 563 182<br />
Land: +232 22 234<br />
227/228/246<br />
Fax: +232 22 234 280<br />
Email: ambale@sl.care.org<br />
Mob: +232 22 33 253885<br />
Land: +232 22 231311 Ext. 224<br />
Email:<br />
abdulrahman.conteh@undp.org<br />
23 MarMCB<br />
Osman Sesay<br />
Act<strong>in</strong>g Manager<br />
Michael Conteh<br />
Senior loans <strong>of</strong>ficer<br />
Sunil Khamal<br />
Resident Technical<br />
Advisor<br />
Mob: 076-920670/077-881-965<br />
Mob: 077-852-448<br />
Mob: 076-761-874
24 Yoni<br />
Chiefdom<br />
25 MatMCB<br />
26 Jong<br />
Chiefdom<br />
(Bonthe<br />
District)<br />
27 Kpenda<br />
Kemo<br />
Chiefdom<br />
(Bonthe<br />
District)<br />
28 YCB<br />
Mrs. Memumatu M.<br />
Bangura<br />
Chairlady, Womens<br />
W<strong>in</strong>g<br />
Mr. Osman<br />
Mansaray<br />
Court<br />
Chairman/Elder<br />
Paramount Chief Bai<br />
Koblo Queen II<br />
Mrs. Am<strong>in</strong>ata S.<br />
Kamara<br />
Vice Chairlady,<br />
Womens W<strong>in</strong>g<br />
Vanty B. Jaa<br />
(Manager)<br />
Abdulai Juana (Loan<br />
Officer)<br />
Chief Syl B Goba<br />
(Chiefdom Speaker<br />
and Act<strong>in</strong>g<br />
Paramount Chief)<br />
Samuel Serry -<br />
Security Officer<br />
Mamie Foday<br />
resident<br />
Lansana Pendema –<br />
resident.<br />
Edward S.A. Kargbo<br />
General Manager<br />
Lorisa Canillas<br />
Resident Technical<br />
Advisor<br />
Mob: 076-607-984<br />
Mob: 076-983-081<br />
Email:<br />
lorisa_canillas@yahoo.com<br />
29 SCB Abdul Karim<br />
Kamara<br />
Accountant<br />
Segbwema<br />
Chiefdom<br />
30 CEDA<br />
Mr. Alhaji Sheku<br />
Senesie<br />
Permanent Chief<br />
Mohamed E. Jalloh<br />
Director<br />
Mrs. Fatmata<br />
N´Do<strong>in</strong>je<br />
Operations Manager<br />
31 BoSL Mrs. Fatmata<br />
Sanlcoh<br />
Bank<strong>in</strong>g Officer<br />
Community<br />
Development<br />
Division<br />
Mob: 076-219120/077-850613<br />
Mob: 076-929-059<br />
Email: cedabo2020@yahoo.com<br />
Mob: 030-23 75 43
32 BoSL Mr. Davidson O.<br />
Kormoi<br />
Senior Manager<br />
Micr<strong>of</strong><strong>in</strong>ance<br />
Division<br />
33 MOFDEP Mr. Mohamed K.<br />
Lebbie<br />
Mob: 076-648-579<br />
Mob: 076-516-845<br />
Email:<br />
lebbie_koutibie@yahoo.com<br />
34 NaCSA Mr. Charles Rogers<br />
Deputy<br />
Commissioner<br />
35 Jalahun<br />
Chiefdom<br />
36 Jong<br />
Chiefdom<br />
(Bonthe<br />
District)<br />
37 Kpenda<br />
Kemo<br />
Chiefdom<br />
(Bonthe<br />
District)<br />
38 Marampa<br />
Chiefdom<br />
39 Calaba/<br />
Allen Town<br />
Chiefdom<br />
40 Lumpa Via<br />
Waterloo<br />
Chiefdom<br />
Mr. Alhaji Sheku<br />
Senesie, Permanent<br />
Chief<br />
Chief Syl B Goba<br />
(Chiefdom Speaker<br />
and Act<strong>in</strong>g<br />
Paramount Chief)<br />
Samuel Serry -<br />
Security Officer<br />
Mamie Foday –<br />
Resident<br />
Lansana Pendema –<br />
Resident.<br />
Chief PC Bai Koblo<br />
Queen II<br />
(Paramount Chief)<br />
Mr. Usman<br />
Manarray (Court<br />
Chair <strong>of</strong> the<br />
Chiefdom)<br />
Mrs Memunah Maruf<br />
Bengura (Women’s<br />
Leader <strong>in</strong> the<br />
Chiefdom)<br />
Mrs. Am<strong>in</strong>ata<br />
Kamara (Deputy<br />
leader <strong>of</strong> women <strong>in</strong><br />
the Chiefdom)<br />
Chief Foday B.<br />
Sama ( Tribal Head)<br />
Chief Lansana<br />
Seifua ( Deputy<br />
Tribal Head)<br />
Chief Al<strong>in</strong>sarry S B<br />
Kabbu II (Tribal<br />
Head)
APPENDIX 8: MFI PERFORMANCE SUMMARIES<br />
MFI Performance Summary December 2005<br />
F<strong>in</strong>ance<br />
Salone<br />
Hope<br />
Micro<br />
ARD<br />
CCF/SM<br />
T<br />
CEDA YCB MMCB MCB SCB TOTAL<br />
Active Borrowers<br />
for Group Loans<br />
n/a<br />
10,946 5,149 3,432 1,050 1,254 567 511 333 23,242<br />
Outstand<strong>in</strong>g<br />
Loan Portfolio<br />
$US<br />
1,014,52<br />
5<br />
324,335 682,134 248,181 55,187 147,622 154,885 103,817 66,340 2,797,026<br />
PaR > 30 days 0.77% 1.79% 12.65% 3.88% 0.69% 4.99% 3.70% 1.04% 0.35%<br />
OSS 104% 90% 87% 90% 132% NA NA NA NA<br />
Write-<strong>of</strong>f ratio 0% 1.43% 0% 0% 0% 0% 0% 0% 0%<br />
Operat<strong>in</strong>g<br />
Expense Ratio<br />
Active Borrowers<br />
for Individual<br />
Loans<br />
# Active Salary<br />
Loan Clients<br />
44.71% 7.45% 5.10% 2.90% 2.40% NA NA NA NA<br />
NA NA NA NA NA 107 154 64 40 365<br />
- 30 - - - 456 23 29 106 644<br />
# Active Savers NA NA NA NA NA 1,011 1,079 539 754 3,383<br />
Outstand<strong>in</strong>g<br />
deposits $US<br />
NA NA NA NA NA 107,667<br />
134,001<br />
NA 34,375 276,043
MFI Performance Summary September 2007<br />
F<strong>in</strong>ance<br />
Salone<br />
Hope<br />
Micro<br />
ARD CCF/SMT CEDA YCB MMCB MCB SCB ProCredit TOTAL<br />
Active Borrowers for<br />
Group Loans<br />
13,990 17,846 4,328 4,625 1,168 689 1,057 814 1,699 - 46,216<br />
Active Borrowers for<br />
Individual Loans<br />
Active Borrowers for<br />
Salary Loans<br />
Outstand<strong>in</strong>g Loan<br />
Portfolio US$<br />
49 220 - - - 66 123 130 187 306 1,081<br />
- - - - - 269 386 72 91 - 818<br />
1,930,725 583,385 461,645 498,026 60,270 150,244 190,007 152,476 256,822 643,171 4,926,771<br />
PaR > 30 days 5.04% 15.30% 2.71% 4.45% 3.91% 15.83% 30.39% 27.54% 87.00% 0.00% 2<br />
OSS 112% 110% 89% 108% 73% 128% 105% 101% 32% 6% 9<br />
FSS 112% 99% 68% 75% 63% 90% 100% 101% 26% 6% 7<br />
Write-<strong>of</strong>f ratio 0.00% 0.35% 9.76% 5.66% 0.64% 0.00% 0.00% 0.00% 0.00% 0.00%<br />
Operat<strong>in</strong>g Expense<br />
Ratio<br />
Outstand<strong>in</strong>g Deposit<br />
Amount US$<br />
52% 64% 37% 15% 80% 65% 39% 18% 133% %<br />
- - - - - 248,219 268,282 187,719 410,177 213,120 1,327,517<br />
Active Savers - - - - - 1,683 1,811 1,385 2,131 1,678 8,688