Financial sector development - Sida

SIDA gave a total of MSEK 250 over 15 years to the Tanzania Investment Bank. In
practice, the main function of the bank was to channel large amounts of foreign exchange
to improductive parastatal companies which rarely repaid their loans. The Bank has been
evaluated several times with progressively more negative findings.
The Central American Bank for Economic Integration (CABEI), received MSEK 60 in
grants with the purpose of channelling credits to small enterprises. Evaluations have
found that CABEI encountered serious problems given its traditional emphasis on
(political) development goals, and that it would have to be restructured if it is to play a
major role in servicing the private sector with investment capital.
An internationally famous bank, which has received almost MSEK 300 in support from
Sweden is the Bangladeshi Grameen Bank. This Bank started in 1976 as an experiment
in lending to the poor and to women. The Bank explicitly stated the goal to show that poor
people are able to accumulate savings and that they are able to manage repayment of
credits in a disciplined way. Although recent evaluations have warned against actual and
potential problems ahead for the Bank’s continued financial viability, SIDA’s involvement
in the Grameen Bank must overall be labelled a success. It was catalytic in the sense
that SIDA was one of the first to support it, thereby attracting other donors. Today Sida’s
aid has been discontinued, and for a very gratifying reason, namely that, in the words of
the responsible programme officers, ”it is no longer needed”.
A new generation of credit programmes in SIDA’s aid portfolio were the ones directed
towards housing construction and microcredits for the urban poor. The first of these
programmes were started in Costa Rica and Chile in 1987. Later similar programmes in
Nicaragua and Salvador were supported. Presently, a further housing credit programme
in South Africa is under negotiation. In total, approximately MSEK 200 have been granted
to social housing projects, mainly as revolving credit funds, but also for technical
assistance. The catalytic effect of these programmes is much emphasised, consisting
mainly of luring the regular banking sector into the financing of poor peoples’ housing.
The largest of these programmes was the support to housing in slum areas in Costa
Rica, FUPROVI, which with regard to financial strategy has two objectives: to reach the
poor and to achieve long term sustainability of the institution itself. An evaluation found
the project to have succeeded well regarding both objectives. The self-help construction
programme as well as FUPROVI as an institution provide a model to be studied and
applied elsewhere.
SIDA provided MSEK 48 to the Local Development Programme in Nicaragua, PRODEL.
In 1996 an evaluation of this project turned out to be generally positive: ”Amidst
extremely difficult conditions PRODEL has created innovative working institutional
arrangements which contribute to the development of local and municipal capabilities”.
Between 1988 and 1993, BITS granted eight concessional credits, totalling approximately
MSEK 800, to national development banks in India, Thailand, Pakistan, Chile, Tunisia
and Malaysia. BITS worked exclusively with already well established, and solid banks.
The objective was thus not to contribute to building up the financial systems, but rather to
use existing banks as reliable conduits for channelling credits to industry.
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