Western and Central Africa

Rural financeWCA Strategy & Action Plan

M. Manssouri, Country Program ManagerImplementation Workshop, Bamako, 8-11 March 2005

Regional Context

• Benin• Burkina Faso• Cape Verde• Cameroon• Central African Republic• Chad• Congo• Democratic Republic of Congo• Côte d'Ivoire• Equatorial Guinea• Gabon• the Gambia• Ghana• Guinea• Guinea-Bisseau• Liberia• Mali• Mauritania• Niger• Nigeria• Sao Tome and Principe• Senegal• Sierra Leone• Togo

• Presently, IFAD has a loan portfolio of approximately USD 3.35 billion in 90 countries.

• The Western and Central Africa Division currently manages an active portfolio of 51 loan projects totalling about USD 610 million in 16 countries.

• About 1/3 of IFAD resources have historically been devoted to rural finance.

Rural finance in the Region: From Unsustainable Projects to Integrated Systems

1980’s

Centralized Systems(Top-down approach)

Commercial Bank

Development Bank

Project

1990’s

Development of Decentralized

Systems

2000’s

Integrated Systems Development

MFI

MFI

ViabilityOutreach Linkages

Sustainability(participation, Interest Rate)

Integration

Recurrently Insufficient Access to Rural finance in the region

Informal savings & credit

mechanisms

Commercial Banks

Exist but are insufficient

Cannot adapt their financial products to the needs of poor and isolated clients

Official agricultural

credit institutions

Problems of interference and low repayment rates is discouraging

Integrated projects with

credit component

Disappointing results in terms of repayment, sustainability and impact

Lack of access to capital (for income-generating activities, schooling, emergency

situations, social obligations…)

•Few MFIs have reached financial self-sufficiency. Only 40% of MFIs achieved operational self-sufficiency

•The need for capacity and institutional building far exceeds the need for capital

Rural Finance in The Region : Insufficient Access in Rural Areas

West Africa– 272 MFIs reaching 2,351,800

clients

– ECOWAS zone: 20% of households have access to MFI services.

– MFIs have strong rural tradition (esp. in cash crops)

Central Africa

– 1,034 MFIs reaching 414,000 clients

– CEMAC zone: 8% of households have access to MFI services

– MFIs are mainly urban

MFI Resources West Africa Central Africa

Deposits 64% 69%

Shareholder Capital 20% 11%

Credit provision within a projectserious problems encountered when projects directly administer credit programmes

Existing financial networksUsing formal financial institutions as a channel for distribution of direct credit to poor rural populations is not always promising

Support for self-sufficient sustainable MFIs: a long term effort

Support for national rural finance systems through:

– macro-economic stability– a regulatory and political environment that

provides incentive for MFIs– Efficient Partnership among Government,

MFIs/MFAs, funding agencies…

Lessons learned: From unsustainable project to sustainable institutions

Future Challenges: Filling The Gap, Developing the Market, Serving the Rural Poor

•10-20%Other appropriateforms of support

•30-40%Extended micro-finance services

•20%•20%-30%Co-operative banks and specialized lending institutions

Non-viable market

Untapped market

Cash crop zone

population

Urban population

Dispersed, marginal

populations

Economically active populations & viable zones

• Forms of Support

The Rural Finance Strategy

1. To increase viability and outreach of rural finance

2. To strengthen implementation capacity at all levels for more effective rural finance interventions

3. To improve MFI monitoring & reporting and impact assessment of rural finance interventions

3. To improve MFI monitoring & reporting and impact assessment of rural finance interventions

Operationalising the Strategy

How to support quality rural financial institutions to reach the rural poor?

How to build a conducive regulatory environment?

How to meet the unmet needs (agriculture, poorest people…)?

1. Increase outreach and viability of rural finance

2. Strengthen Implementation capacity for more effective rural finance interventions

How to further develop capacities at all levels?

How to improve program implementation?

3. Improve M&E & Impact Assessment

What is the Role of M&E in terms of increasing efficiency, learning, and policy dialogue ?