Documents
Country Feasibility Studies
Sierra Leone
UNDP
Microfinance Assessment Report
Prepared
as a component of the MicroStart Feasibility Mission - March, 1997
Gary Walker,
International Consultant
Table of Contents
A.
List Of Abbreviations And Acronyms
| ADB | African Development Bank |
| CBO | Community-based Organization |
| FAO | Food and Agriculture Organization |
| FASP | Farmers' Association Support Project |
| GGEM | Grassroots Gender Empowerment Movement |
| GTZ | German Technical Assistance Agency |
| IFAD | International Fund for Agricultural Development |
| ILO | International Labour Organization |
| IPAM | Institute for Public Administration and Management |
| MCRDA | Methodist Church Relief & Development Agency |
| NCDB | National Cooperative Development Bank |
| NDB | National Development Bank |
| NGO | Non-governmental organization |
| NIDFO | National Industrial Development and Finance Organization |
| NMJD | National Movement for Justice and Democracy |
| PSDP | Private Sector Development Programme (UNDP/New York) |
| SAPA | Social Action and Poverty Alleviation |
| SLANGO | Sierra Leone Association of Non-Governmental Organizations |
| SLAUW | Sierra Leone Association of University Women |
| SLOIC | Sierra Leone Opportunities Industrialization Centres |
| TSP | Technical Support Provider |
| UNCDF | United Nations Capital Development Fund |
| UNDP |
United Nations Development Programme |
United Nations official exchange rate at time of mission was US$1=Le 850.
Table 1 - Bank Branch Distribution
Table 2 Summary Profile: Selected NGOs and Microfinance - Page 19 (Return to top.)
Sierra Leone is now emerging from a six-year civil war. The peace accord signed on November 30, 1996 was an early achievement of the new, democratically-elected government. While pockets of instability and conflict remain, they are now confined mostly to three fairly small and well-defined areas. In the past two months over 620,000 people have spontaneously returned to their home towns and villages. Most of the country is at peace and the vast majority of people want the peace to last so the country can begin to recover and develop. While the situation is fragile and reversals are possible, cautious optimism seems justified. In such circumstances, a microfinance initiative can be both timely and a highly practical way to help people rebuild and enhance their earning capacity.
Before the war Sierra Leone was already one of the poorest countries on Earth. By 1995 it was ranked 173 out of 174 countries on the UNDP Human Development Index. Child mortality was estimated at 245 per thousand, female illiteracy at 88 percent, 21 percent of children were chronically malnourished and 60 percent were anemic. In 1995 per capita income was estimated at $208. Over 80 percent of the population lives below the poverty line of just $1 per day and about 60 percent live in extreme poverty on less than half a dollar per day.
Despite severe strains on Sierra Leonean society, the sense of mutual obligation and support within extended families and the obligation to share (even if increasingly resented by those with greater earnings), remains powerful. These twin realities of pervasive and often acute poverty and a widespread determination to assure more than individual survival and gain must be understood if a micro-lending programme is to succeed since they represent countervailing pressures toward capital accumulation on the one hand and dispersal of resources often for non-productive purposes on the other.
Sierra Leone has experienced a high rate of failure of development projects over many years. These failures did not begin with the onset of civil war in 1991. In fact, the near absence of development for many years, declining per capita incomes, increasing competition from a rising population for limited resources and strikingly poor governance have contributed powerfully to the erosion of civil society and the emergence of conditions that facilitated open conflict. It is this reality that the government is now trying to combat with its National Action Plan for Poverty Alleviation, its programme of macro-economic reform supported by international development agencies and its policies of support for the private sector. In developing this project document, lessons learned from prior development initiatives have been reviewed and assessed.
Finally, it could be noted that Sierra Leone has a cadre of remarkably skilled and dedicated citizens working tirelessly to improve the lives of ordinary people. While too few in number, they have responded on both a political and developmental level to promote democracy and good governance, help end the war and address the urgent problems of basic human needs. The flourishing of women's associations, their increasingly visible role in public discourse and their pivotal role in ensuring a return to democracy in 1996 give encouragement to those who believe Sierra Leone can heal itself and develop its economy and society. (Return to top.)
C. Description Of The Financial Sector
The financial sector can be characterized briefly as follows:
• The two international commercial banks (Barclays and Standard Chartered) are not involved in the subsector and are not interested in developing microfinance lending activities;
• Of the three other banks in the country, only one (NCDB) has current experience in microfinance and the other two seem inappropriate venues (the Bank of Sierra Leone, which is the nation's central bank, and the NDB, which has just been recapitalized by the government and is still being restructured and needs to demonstrate its viability).
• The Finance and Trust Corporation is a three-year old company with a five-person Board of Directors that invests and lends money.
• The Bombali Rural Bank is the only rural bank still functioning in the country and its capital resources are very modest.
• All effective NGO microfinance lenders identified are operating on a very small scale. The largest group in 1996 had 273 borrowers.
• Some groups claiming to have microfinance revolving fund programmes are, in fact, providing grants or de facto grants since "loans" and repayment are either interest-free or in-kind, or provided with little intention to try to assure repayment.
•Strong women's associations have been identified in the provinces with small existing microfinance programmes, a capacity to manage microcredit and with good expansion potential.
•Urban self-help groups and private small-scale training centers needing to launch their graduates into micro-enterprises are good candidates for the multiplication of small micro-lending programmes.
• A few donor-financed projects have been identified where microfinance project components could be added, including the UNDP "Preventive Development" initiatives and the GTZ-financed Bo-Pujehun Project.
Overall, the subsector is very underdeveloped compared to those in many countries in the region.1 The number of lenders is small, the scale of lending is small, the capacity of the lending institutions is weak, the ability and - sometimes - willingness, to lend outside the western area is very weak and the availability of training to strengthen such institutions is minimal. Continued insecurity in the east and south of the country further constrains the ability to lend on a sustainable basis in those areas but prospects are good that conditions will change within the next few months.
The two major sources of microcredit in the country are individual informal money lenders who charge interest often in excess of 100 percent and "Osusus" (known as tontines in francophone countries) where, for example, ten people put Le 5,000 in a pot and then one of the ten takes the resulting Le 50,000 for his or her own use, promising to put in Le 5,000 at the next group meeting to continue the process. (Return to top.)
D.
Government Development Strategies And The Relevance Of Microfinance
National Action Plan for Poverty Alleviation The government's 1996 action plan for poverty alleviation is built on six pillars: (1) food security; (2) employment creation and income generation; (3) human resource development and capacity building; (4) improving health, education and shelter; (5) improving social safety nets for vulnerable groups and (6) environmental management and infrastructure development.
The action plan also reviewed the "critical issues" linked to the development pillars cited above and identified "the lack of capacity to effectively engage in income generating activities" as among the most important. Among the strategies recommended by the government action plan to remedy this are: (1) "strengthening the existing credit system of rural banks and cooperatives," (2) "development of revolving loan schemes," (3) "establishment of grassroots credit institutions in rural areas," and (4) "providing relevant training especially in management both to credit organizations and recipients." 2
Private sector development and the role of microfinance
Government policy is strongly oriented toward private sector development. Government has stated its intention to build an enabling environment for the Sierra Leonean private sector in order to increase incomes, exports and government revenues through taxation. Microfinance supports this goal by giving numerous micro-entrepreneurs the chance to develop their businesses. Some of them will eventually enter the formal sector and most will generate new incomes for themselves and their employees. (Return to top.)
E.
Prior, Ongoing and Potential Assistance to the Microfinance Sub-Sector
Most of the prior, ongoing and potential assistance to the microfinance sector in Sierra Leone has been in the form of rural agricultural loans and grants. In order to develop sustainable microcredit lending programs in the urban areas, the technical service provider may need to focus on training and educating potential donors on microfinance best practices.
The European Union
The EU is currently designing its programme for the next five years (1998-2002). A key priority is job creation and income generation. The EU is examining the possibility of channeling funds through commercial banks (i.e. Barclays and Standard Chartered) and establishing a guarantee fund for business lending. The EU is studying whether a small business window could be created to lend to associations and small-scale individual entrepreneurs.
The EU believes that a Small Business Development Corporation may be needed to guide policy development in this area and provide credit, technical assistance and training. They are also examining prospects for a Rural Enterprises Development Fund for small business lending of approximately $5,000 and above. The EU expects to begin reviewing these possibilities by conducting a needs assessment to determine whether new institutions are required and to define their precise purpose and character.
They have not considered micro-lending as a possible programme component but this sub-sector will probably be reviewed as part of any overall assessment of the financial sector.
The EU also provides micro-loans in-kind to farmers through its Farmers Association Support Project (FASP). The project advances producer inputs to farmers, receives payment in-kind and then either sells or re-lends the goods.
African Development Bank
The ADB through its Social Action for Poverty Alleviation (SAPA) Project has provided capital grants for revolving microcredit funds to selected NGOs with some success. SAPA has been temporarily suspended while it is being reorganized and a new professional staff recruited. Some of the remaining SAPA funds may offer a complementary source of microfinance capital.
A Master Plan for agricultural development was completed in January 1997 3 with ADB support. The Plan includes a proposal for a $12.5 million line of agricultural credit, most of which will be used to finance the foreign exchange costs of input supplies. While microfinance is not mentioned specifically, given the scale of most farming in Sierra Leone some loans for poultry raising, vegetable farming and small-scale irrigation equipment, for example, may be in the microfinance size range.
The Master Plan also proposes an agricultural enterprises project for women with a $2.5 million line of credit for the formation of women's associations. The project would be executed by the Ministry of Agriculture and Natural Resources and directed by an internationally recruited Project Coordinator if project funding is identified 4. The Master Plan has been under development for nearly seven years and implementation prospects are uncertain but the documentation does provide a valuable compendium of information and ideas.
UNDP and other UN agencies
The First Country Cooperation Framework for Sierra Leone (1998-2002) promotes "preventive development at the grassroots level" and stresses, among other things, "encouraging productive activities and a special focus on promoting the private sector at the community level." In the area of poverty reduction, UNDP targets four areas, one of which is defined as follows:
"promoting...sustainable livelihoods through, among other things, strengthening rural financial institutions such as rural banks, cooperatives and farmers associations in order to improve access to credit and other technical support services; support to special financial intermediaries to ensure access to credit by women, rural and urban poor... promoting community participation by supporting local initiatives, including micro-projects through training and skills development." (p. 6)
UNDP has a current project for export promotion. (See Annex 2 describing gara cloth making).
The project manager for the UNDP "preventive development" programme stated that the programme has a total of $900,000 available of which 60 percent is for pilot micro-projects. According to the project manager, a maximum of $150,000 may be used for microcredit initiatives. In addition:
• The UNDP Capital Development Fund 5 is considering a mission to Sierra Leone to address decentralization issues and is using $6 million as a planning figure; some part of these funds may be used for microfinance according to the FAO.
•The UNDP/FAO is reportedly sending a mission to Sierra Leone at the end of March 1997 to review prospects for a rural development programme involving microcredit for farmers' associations as a component.
• An IFAD/UNOPS mission arrived in Sierra Leone on March 16, 1997, inter alia, to review a microfinance proposal for the North Central Agricultural Project. The project zone was a center of conflict during the recent war, making the delivery of rural financial services impossible. The project is proposing to put 55% of available project funds directly into a revolving fund for 1000 village-level farmers' associations (average membership 30 people) , each of which would be provided with a loan of about $5,000 (about $165 per person to plant an average of two hectares). The project staff would supervise lending and repayment 6.
•A UNDP/ILO mission of March 1997 was designing a programme to stimulate income generation and micro-enterprise development that would include a microfinance component, also as part of the UNDP poverty reduction strategy. There is a need for careful coordination within the UN family between UNDP/Freetown, UNDP/PSDP, UNCDF, FAO, ILO and IFAD with respect to microfinance programme development as well as among donors. If different lending principles and policies are pursued by different agencies at the technical level, there is a high risk that some programmes will undermine others, that some client groups could become overwhelmed with more funds than they can absorb and that some geographic areas will be awash in credit while others are neglected. There is also an enormous potential for corruption if programmes grow too rapidly, fed by the donors' need to disburse rather than the clients' ability to absorb and use credit effectively.
Government of Germany
The German government, through its development agency, GTZ, is continuing its Bo-Pujehun Rural Development Project. The project provides support for infrastructure development (e.g., wells, earthen dams, irrigation and drainage); production inputs (e.g., seeds and tools); health, school rehabilitation and vocational training. The project currently has 150 employees of whom about 100 are paid by GTZ. There is one expatriate assigned to the project. There are five field sections with about 20 people in each to cover all the chiefdoms in the project zone.
The project's goal is to attain complete sustainability when German assistance ends in 1999 after nearly 20 years of external support. To achieve this the project is now developing the means to become an independent association or a parastatal with a Board of Governors.
The project does have a microcredit component wherein it provides seeds and other inputs at the start of the agricultural season and is re-paid in kind after the harvest. They have a 98 percent repayment rate. Those receiving vocational training receive a gift upon graduation of start up tools to launch their micro-enterprises. The project would like to reorient itself toward a more business-like approach with respect to trainees, especially since donor funding will end in three years.
The German project manager believes the project is sufficiently well-rooted in the Bo-Pujehun area that it could serve as a conduit for microfinance lending. Despite reported sporadic attacks on vehicles along the main roads in the area, the displaced camps in and around Bo are now virtually empty. Most people have returned to their villages to try to rebuild their homes and begin planting according to the project manager.
International NGO support
A number of international NGOs have provided small amounts of financing for micro-lending using a variety of methods and with varying lending principles. Among these are:
| ActionAid - Canada | Bilance - Netherlands |
| Bread for the World | Canaan Christian Fund - USA |
| Catholic Relief Services | Development and Peace - Canada |
| FORUT - Norway | Opportunities Industrialization Centres - USA (USAID) |
In 1995 $42.56 million of technical assistance was disbursed in Sierra Leone. Of this amount, 18 percent came from Foster Parents Plan International and 4 percent from ActionAid, the two largest international NGO donors that year. Plan International's assistance was on a grant only basis while ActionAid has experimented with microfinance on a small scale with five women's organizations in the Western Area. The repayment rate to ActionAid is currently 86 percent and defaults are said to be declining.
Institute for Public Administration and Management (IPAM)
IPAM is part of the University of Sierra Leone which is legally under the supervision of the Ministry of Education. IPAM has its own budget and is located off-campus. It serves as the country's principal training institute. IPAM has two divisions: administrative and academic. Its academic division has four teaching departments: administration and management; accounting and finance; business studies and enterprise development; and computer studies. It offers long term courses of two years duration taught by full-time staff and leading to a diploma.
In addition, about 40 percent of IPAM's activities consist of short-term courses of a maximum of four weeks duration on a range of topics, including effective project management; business accounting; leadership skills; etc. IPAM's short-term courses are paid for by the fees of participants and are, therefore, demand-driven. Thus, while IPAM provides assistance through training, it is not on a grant basis.
IPAM has conducted a number of training courses on-site for NGOs and for rural associations around the country. About 20 percent of all IPAM training has been for NGO capacity building. Some of this training and training of the staff of the NCDB has been for the management of microfinance programmes. For example, IPAM trained the staff of the NGO FORUT and women's associations identified by them in Rokel, Gloucester and Waterloo.
IPAM does not have its own staff available to conduct short-term training but the Institute does recruit short-term consultants for this purpose. No courses in microcredit have been offered in the past few years due to a lack of demand and IPAM's feeling that the market for this type of training had been addressed to the point of saturation given the paucity of credit available and the limited number of providers. IPAM has not built up any training materials in this area and depends on consultants who use blackboards and flip charts as teaching aids. IPAM sees its added value in microfinance training stemming mostly from its ability to recruit consultants, organize the courses and monitor performance.
The international TSP could review IPAM's capabilities and consider whether IPAM would be a useful partner in the expansion of training and technical support for new microfinance initiatives. (Return to top.)
F. Institutional Framework Of The Financial Sector
Table 1: Distribution of Bank Branches
| Banks |
Branches
|
||||
|
Freetown
|
Bo
|
Kenema
|
Makeni
|
Koidu
|
|
| Barclays |
6
|
--
|
--
|
1
|
--
|
| Commercial Bank |
2
|
1
|
1
|
--
|
1
|
| Standard Chartered |
3
|
1
|
1
|
--
|
--
|
| Union Trust |
1
|
--
|
--
|
--
|
--
|
| NDB |
1
|
1
|
--
|
--
|
--
|
| NCDB |
1
|
--
|
--
|
--
|
--
|
(Return)
The Formal Banking Sector
The financial system consists of four commercial banks, two development banks, one unit rural bank, the Post Office Savings Bank and the Finance and Trust Corporation. The Bank of Sierra Leone is the regulatory authority for the banking system.
The commercial banks
Barclays and Standard Chartered are locally registered subsidiaries of British banks while Sierra Leone Commercial Bank and Union Trust are locally incorporated as public and privately-owned institutions. There are 21 commercial bank branches, two thirds of which are situated in Freetown.
The bulk of the commercial banks' loans and advances are to support international trade, construction and manufacture.
None of the commercial banks has any significant experience in microfinancing and indeed one bank's policy is to avoid any exposure in microcredit because these credits are not considered cost effective administratively and are thought to have high loan repayment risks.
Commercial banks are not keen on lending to groups for on-lending to members within a group. The banks do not have the skills to manage such loan portfolios. In addition, with the concentration of the banking network in Freetown, the commercial banks are not well placed to distribute microfinance credit effectively. However, two of the banks showed some interest in microfinancing provided some comfort is provided for potential loan losses.
The Sierra Leone Commercial Bank is proposing to form a joint venture in conjunction with petty traders and an insurance company to set up a revolving fund that could be accessed readily by market women and professional drivers' associations as group borrowers. Barclays Bank is keen to study their Kenyan microfinance experience to establish whether there are lessons that could be applied to their operations in Sierra Leone.
Non-commercial banks
The operations of the National Development Bank (NDB) and National Cooperative Development Bank (NCDB) are primarily geared to providing economic development. The NDB was set up in 1968, while the NCDB was established in 1971.
The NDB has recently been recapitalized with Le 600 million of which Le 500 million is earmarked as a revolving fund for credit to coffee and cocoa farmers at a cost of 7.5% per annum. There is an additional Le 10 million of revolving credit planned for small business operations in rural areas at a cost of around 10-15% per annum. The average term of the business loan is four weeks and it is expected that moral and societal pressures from traditional leaders would assist in ensuring a high recovery rate. This scheme is expected to be piloted initially in Kenema by early April, 1997.
NCDB started a microcredit programme in 1993 using the group lending approach. The aim of the project is to reduce poverty, create employment and develop sustainable income levels. Currently loans are made to groups ranging in size from 20 to 30 people. The groups select their members and the interest rate charged is around 35% per annum which is 6% per annum higher than that charged by the Bank of Sierra Leone to commercial banks. There is continuous supervision of loans provided by NCDB to the groups and members' commitment is maintained by the requirement that each member opens a savings account with NCDB, pays a contribution to group funds and peer pressure. Loan recovery is reported at 98%.
|
Microfinance
through Rural Outreach: A major limitation on rural banking is the near absence of bank branches outside Freetown (see Table 1 above). At the same time, the post office has 65 outlets all over the country. but cannot lend money. If a banking institution engaged in microfinance were to form a joint venture or simply to collaborate with the post office, that institution could instantly have a network of 65 "branches." An agreement might be fashioned along the following lines: - the bank would review and approve loans to local associations it identifies or that are brought to the bank's attention by NGOs or others; - each association member would open a postal savings account - the bank would authorize the post office to credit each account with the loaned amount and this would be registered in the account holder's passbook. - post office transaction costs would be recovered by a service fee at a rate agreed to by the bank and incorporated as part of the interest rate. - borrowers would withdraw amounts on an as-needed basis and repay through the local post office. Thus the post office is not lending funds but serves as a conduit for funds. - part of the postal service fee would be used as insurance against postal fraud. - the lending bank would receive monthly account statements from the post office Alternatively, a change in the law could be considered so that postal savings banks could develop savings and loan capabilities. |
Apart from NDB and NCDB there is the Bombali Rural Bank at Makeni which
is engaged in giving credit to business operators in rural areas. Loans
are made to associations of traders and skilled craftsmen with the association
paying default repayments on behalf of members. The bank's capital base
is weak at Le 4.6 million paid up as opposed to authorized capital of
Le 20 million. The bank maintains 1,004 accounts and total deposits
of Le 26.7 million. Associations must have accounts with the bank to
qualify for a loan. Interest and facility fee charges are levied. Farmers
associations are given term loans on a crop-year basis. Repayment can
be in kind and the rural bank sells the produce to offset the loan balance.
The rural bank also gives overdraft facilities as working capital for
people engaged in gara cloth and soap making.
Non-Banking Financial Institutions
The Postal Savings Bank
The Post Office Savings Bank is a deposit-taking institution but not authorized to engage in lending activities. Postal savings are put in treasury bills. Total savings deposits currently amount to Le 120 million owned by a total of 6,000 clients. There are 37 post offices and 28 agencies serving the public nationwide.
Finance and Trust Corporation
This Corporation was set up to administer, under contract, various credit schemes for international and local organizations and to operate a credit card scheme. It takes equity positions in firms and lends money to individuals and groups. The company's objective is to provide financial services for micro-, small- and medium-size enterprises. It is a relatively new organization without sufficient experience in microfinance.
Traditional Credit Experience
The Osusu credit system is a group saving scheme that enables participants to receive substantial amounts of money to meet planned heavy expenditure commitments. Each member of the group agrees to make a stipulated amount of savings into a pool at set intervals. The amount collected is in turn disbursed to a member of the group and this process continues until members of the group receive amounts equal to the contributions they made. The cycle of savings and payments is repeated until at such time the group decides to discontinue the scheme. In the francophone countries this is referred to as the tontines system.
NGO Microcredit Experience
About 12-15 NGOs in Sierra Leone among the 79 members of SLANGO have had some experience with microcredit management and several others are planning or thinking about launching credit schemes. None of the identified NGOs has lent to more than 300 clients per year with the exception of NMJD (see Table 2 below). Unfortunately, the NMJD programme is unsustainable since they do not charge interest as a matter of policy. They have also had the lowest repayment rate. The following comments are drawn from responses to the microfinance questionnaire (annex 4) and from discussions with NGO leaders.
Most lending has been to self-formed groups and the majority of lending has been to women. A disproportionate amount of lending occurs in the western area but the concentration of NGO lending in the western area is less pronounced than that of the commercial and non-commercial banks.
The most commonly cited uses of microcredit were for gara cloth dyeing and soap making; rice milling, petty trading, black smithing, bakery development, vegetable growing and setting up food stalls ("cookery shops") in that order.
The four major constraints on micro-lending, in descending order, have been cited by those NGOs queried as: (1) an inadequate amount of money for lending; (2) insecurity in the country (among those lending upcountry); (3) lack of business knowledge among borrowers; and (4) inadequate staff capacity (cited more frequently among those in Freetown trying also to operate outside Freetown). In addition, one NGO cited excessive donor reporting requirements as the leading problem and two others cited this as a medium-range problem. No NGO cited Sierra Leone government regulations as a constraint and only one group indicated that failure to repay loans was a major issue.
With respect to the major constraints on borrowers that lead to late payments and/or defaults, three reasons were cited most frequently: (1) the lack of business knowledge and skills; (2) the lack of markets and (3) cultural pressures to share borrowed funds with family members or pay for family events. In addition, one NGO cited tensions created when men become dependent on successful women borrowers in a male-dominated culture. Finally, two NGOs cited instances where borrowers obtained funds for one activity and then, with predictable results, would try to use it for a different type of business in which they had no prior experience.
NGOs were asked on average how many new staff they believed they would need to hire in order to lend out what additional amount of money per year. The most frequent response was that one full-time staff member is needed to monitor loans of Le 2 million annually. Thus the salary of one such employee would need to be recovered from the interest charged on that amount and would consume about 20-25% of the interest paid, assuming a salary of around Le 33-42,000 per month. If these estimates are correct, and in light of other costs incurred by NGOs in addition to the salary of the micro-loan officer, most NGO microcredit programmes are not sustainable at current rates of interest without external subsidies. Sustainability can probably be achieved at interest rates at or above 35% if the NGOs can also improve their efficiency to raise the loan portfolio of each micro-loan officer to at least Le 2.5 million.
Training of borrowers prior to lending, assessment of self-formed groups in terms of leadership and cohesion, and help with the identification of viable economic undertakings were cited as important success elements by most of those interviewed. The duration of training of borrowers varies from a few hours in one instance to as long as five weeks in another case. Most training is directly related to loan management and basic accounting but some groups also add functional literacy training due to the extremely high rate of female illiteracy in the country. No relationship could be found in responses to the questionnaires between length of training and rate of repayment but there appears to be a correlation between the quality and relevance of training and repayment rates according to those interviewed.
The mission initially assumed that NGOs would be eager to gain access to additional credit in order to expand their micro-lending. In fact, a slight majority indicated they would rather concentrate on providing training and technical support to borrowing groups, monitoring and encouraging repayment and further borrowing and ensuring the success of the micro-enterprise initiatives launched with microcredit. Many NGOs suggested they became involved in micro-lending as much by default as design - the formal banking sector is virtually non-existent outside Freetown; rural banks have collapsed (with one exception) due to the civil war and informal money lenders charge exorbitant rates.
The following table illustrates the range and scale of recent selected NGO experience with microcredit programmes.
Table 2 Summary Profile: Selected NGOs and Microfinance
|
NGO*/Source
of funds
|
Number
of Borrowers 1996/95/94
|
Percent
of repayment 1996/95/94
|
Interest
rate 1996/95/94
|
Percent
of female borrowers
|
| ActionAid/Canada |
200/-/-
|
65/-/-
|
20/-/-
|
90
|
| FORUT/Norway |
150/-/-
|
100/-/-
|
10/-/-
|
100
|
| MCRDA/Bread for the World; local donations |
125/95/69
|
85/85/70
|
5/5/5
|
100
|
| NMJD Canadian NGO |
1250/1250/-
|
08/17/13
|
0/0/0
|
60
|
| NIDFO SAPA; Barclays Bank; other |
70/86/10
|
96/92/50
|
20/25/50
|
39
|
| SLAUW/SAPA |
273/200/35
|
82/91/100
|
19/19/19
|
100
|
| SLOIC/Makeni USAID |
55/-/-
|
100/0/0
|
12/-/-
|
?
|
| GGEM Catholic Relief Serv. |
135/120/70
|
95/88/94
|
30/30/24
|
80
|
| Woolor Kumbaa product sales; subscriptions |
150/100/50
|
25/25/25
|
25/25/25
|
60
|
G. Microfinance In Sierra Leone
As noted above, the availability of microcredit from the banking system, NGOs and local associations and cooperatives remains severely limited while the institutional capacity to deliver it is rudimentary. Osusus, traditional self-formed group-lending entities, play an important role at the village level but the amounts are small and funds are as likely to be used for school fees or ceremonial events as for productive activities. Informal moneylenders are present throughout the country but interest rates are often exorbitant.
Despite the modest institutional infrastructure for micro-lending, there are viable organizations in the country that are able to lend and recover funds on a revolving basis. These institutions can be strengthened and new microfinancing entities can be established. Capacity building within these institutions could be understood as a means to an end which is the integration of microfinance activities into the overall national anti-poverty strategy.
Microfinancing entities in Sierra Leone can be divided into three categories of institutions as follows: financial, non-governmental and associational.
In addition, there are "ghost" NGOs and "ghost" associations - entities in name only where one individual with letterhead paper and a story to tell seeks grants for his or her "organization." These entities can be avoided by checking references and making inquiries with presumed members, other associations, SLANGO and the government.
The three categories of microfinance intermediaries provide a framework for the micro-lending strategy described in section B4 below.
The microfinance institutions (MFIs) design their products based on demand for financial services by the economically active poor. Increasingly, as these financial intermediaries grow in their capacity, the poor, with micro- and small-scale enterprises at the grassroots level, will benefit from enhanced accessibility to financial services, which can significantly increase their household income and improve their standard of living. (Return to top.)
H. Local Organizations Involved In Microcredit
Activities
1. National Cooperative Development Bank:
The NCDB currently has loans outstanding to about 500 people totaling Le 78 million. Start-off loans are Le 50,000 and the maximum is Le 400,000 with an interest rate of 35 percent and a 98 percent repayment rate. Loans are made from funds received from cooperative members with savings at the bank. They have 14 groups of 36 people repaying over 52 weeks with a two-week grace period.
2. Bombali Rural Bank:
The BRB currently has a loan portfolio of Le 7 million outstanding with an on-time repayment rate of 80 percent, a late payment rate of 15 percent and 5 percent defaults. Operating capital is about Le 4-5 million per annum.
3. GGEM:
The GGEM began with a fund of just $5,000 for micro-lending and has demonstrated its capacity to recover loans at a rate of interest that appears to be sustainable using the group solidarity method. Their revolving fund has grown beyond the original amount through intensive management of the loan portfolio and training of borrowers. Their leadership is capable and over time they could grow beyond the Western Area.
4. SLOIC:
The SLOIC has training centers in Bo, Makeni and Freetown. They have limited funds but adequate capacity to help graduates start up their own micro-enterprises. Greater capitalization of revolving funds could help graduates develop their businesses more rapidly, eventually stimulating employment in their businesses.
5. SLAUW:
This organization at present only lends to small groups of primary school teachers and is limited to one-full-time staff person. While their capacity is minimal, they could hire and train staff and they have the advantage of a strong network of well-educated women who are committed to finding ways to help women in less fortunate circumstances. Over three years their repayment rate has averaged 91 percent with a 19 percent interest rate and a 1996 loan portfolio of Le 6 million.
6. Woolor Kumbaa:
Although this group has had a low repayment rate among borrowers, it appears this has been caused by the fact that their area of focus is the one region of the country most seriously affected by the war rather than from mismanagement. Many borrowers lost their homes and farm land, some lost their lives. The mission's impression is that Woolor Kumbaa has a highly motivated leadership that may be able to be among the first to be able to operate successfully in the Kono-Kailahun areas once the conflict ends. Much of the funds that were lent derived from sale of products, membership subscriptions and training fees rather than from donor capital.
7. Kabala Women's Associations:
The FAO-sponsored associations now number 30 and embrace 4,000 women. There is also a central marketing cooperative with an existing modest revolving fund. This group is well-developed with dynamic leadership that can be entrusted to manage its own expanded revolving fund.
8. Kumuyu Women's Association:
This group has its own buildings, has trained over 4,000 women in cooperative management and operates a revolving fund. Loans averaged Le 10,000 and repayment was 100 percent before the war. Buildings were originally constructed with German aid. A key problem now is to recapitalize the loan fund since the war resulted in bankruptcies and displacement of population. The Kumuyu leader is a well-respected and dynamic woman.
9. Bo-Pujehun Rural Development Project:
With the war winding down the project is expanding back into rural chiefdoms around Bo and Pujehun. The project leadership believes it could execute related project activities for other donors - such as a revolving credit scheme - using the human and physical infrastructure developed in this area during nearly 20 years of German aid. The project will be assisted by GTZ for three more years and has well-established local staff making this one of the only operations in the area with effective rural outreach. (Return to top.)
I. Conclusion
1. Resurgence of Conflict
Although a peace agreement has been signed to bring to an end the six year civil war, there have not been any firm arrangements for an effective cease fire. Some parts of the countries are still experiencing sporadic fighting. However, with the recent change in the leadership of the Revolutionary United Front (RUF), the risk of a resurgence of sustained fighting has been significantly reduced.
2. Institutional Capacity and Skills Deficiencies
Unless the capacities of most intermediary micro finance institutions are strengthened, it will be difficult for them to maintain a high level of loan recovery at competitive rates of interest and assure the sustainability of revolving funds.
3. Misappropriation of Funds
There is always a risk that funds will be misappropriated. Procedures must, therefore, be established to ensure that loan proposals are appraised properly and disbursements are used as authorized.
4. Uncoordinated Replication of Microfinance Initiatives with Conflicting Principles
The potential for rapid multiplication of microfinancing initiatives in Sierra Leone offers both promise and risk: promise that many thousands more people will have access to start-up capital for micro-enterprise activities but risk that uncontrolled and uncoordinated expansion could result in the failure of many efforts due to subsidized credit pushing out commercial credit, poorly trained delivery agents undermining the credibility of other programmes, etc. (Return to top.)
J. Profile of Selected NGOs with Experience in Microfinance
1. Grassroots Gender Empowerment Movement (GGEM)
GGEM is a small NGO registered with the Ministry of Planning and Economic Development. Between 1992-96 they executed a fairly sizable loan to 135 clients and recovery rate was at least 88% and at best 94%. This record is very good and recommended for further support.
2. The National Industrial Development and Finance Organization (NIDFO)
NIDFO was a private liability company with a loan portfolio. Between 1989-96 the repayment rates rose from 38.9% to 95.8%. However the loan portfolio has been suspended until further notice. NIDFO is unable to handle microfinance scheme for now.
3. The Sierra Leone Association of University Women (SLAUW)
SLAUW is a local NGO registered with SLANGO in 1976. The organization started microfinance scheme in 1994. Repayment rates are as follows: 1994: 100%; 1995: 91% and 1996: 82%. This organization has good experience in microfinance scheme. It is recommended for further support.
4. Action Aid Sierra Leone (AASL)
AASL is an international NGO registered with the Ministry of Planning and Economic Development in 1998. It started microcredit scheme in 1995 and in 1996 had 65% of the loan recovered at an interest rate of 20%. Although the recovery rate is low on the initial loan the organization has expressed interest in the microfinance credit. Therefore could be tried with some support.
5. Canaan Christian Fellowship Fund (CCFF)
CCFF is an international NGO registered with the Ministry of Planning and Economic Development in 1995. It started microcredit scheme in 1995 with a loan of LE 50,000 and recovered Le 37,500 (25%). Interest rate of 10%. The recovery rate of 25% is very low even though the interest rate of 10% is relatively small. This is not so good in microfinancing. I therefore would advise other areas of assistance to the organization.
6. Methodist Church of Sierra Leone (MCSL)
MCSL is a local NGO registered with the Ministry of Planning and Economic Development. It started credit scheme in 1993 with a recovery rate of at least 65% and at best 85%. Interest rate is 5%. The church organization has fairly good experience in microcredit scheme but the interest rate of 5% may not help growth of capital for extension of assistance to others without subsidy.
7. Woolor Kumbaa Rural Growth and Development Foundation Centre (WOKUDEFO)
WOKUDEFO is a local development company (NGO) registered with the Administrator General, Ministry of Planning and Economic Development, Local Government and Community Development Ministry and SLANGO in 199=79/93. Microcredit scheme started in 1984 as a revolving fund. Repayment rate was fairly consistent in kind (seedlings) before the war. Storage was totally destroyed by rebels in 1991. This organization is a grassroots one which started in the right direction but disrupted by the effects of war. It has created impact in a large part of the eastern region and retained activities in the western area among the displaced. Their experience is good and therefore recommended for support.
8. Campaign for Solidarity and Development (FORUT - Sierra Leone)
FORUT - Sierra Leone is a n international NGO registered with the Ministry of Social Welfare and the Ministry of Planning and Economic Development in 1990. They have provided loans to 160 clients at an interest rate of 10% and recovery rate is 100% in 1996. The organization has experience in microfinance geared towards women in development. It should be considered for support.
9. Freetown City Komra Bank
The Komra Bank is conceptual at this stage. The mission is told that a consultant is working on the documentation. The understanding is that the Bank will be funded by the workers. The mission feels it is a great idea to have such an institution set up to facilitate credit scheme among the workers. The interest in the microfinance scheme is recognized.
10. Network Movement for Justice and Development
The organization is a local NGO registered with the Ministry of Planning and Economic Development in 1995. They started microcredit scheme in 1990 with repayment rates of 8%, 17%, 13%, and 10% over the years. The source of funding is from Development and Peace Canada (NGO). The organization operates microcredit scheme at not interest and recovery rates are very low. It does not therefore have the characteristic for growth and expansion without heavy subsidy from source. (Return to top.)
K. Profiles of Selected Community-Based Organizations
Kono District
1. Mafindor Women's Development Association (Yiyan Kendor)
Yiyan Kendor is a local association for Community Development registered with the Ministry of Local Government and Community Development, 1992. A multiple of 5 groups total 75 members engaged mainly in peasant farming, cottage activities and osusu within Mafinador Cheifdom and there is no defaulter since involving thousands of leones. The solidarity among group members is a success factor.
2. Toli Farmers Association (TOFA)
TOFA is a local community association registered with the Local Government and community development in 1990. 3 groups of 50 members operate an osusu to support development and other activities within to Toli chiefdom. Main activities are peasant farming, crafts, and commerce. 100 % success due to close community relationship and family tradition of being each others' keeper.
3. Kono Farmers Federation Women Branch
This is a local association involving 60 groups in the 14 chiefdoms, a total membership of 700 women, with Martha Gborie of Vaama village as Head Woman. They were beneficiaries of the "Kabba 500 millions". All is not well in the Federation which was only used to purchase produce for other organizations.
4. Progressive Women's' Association (PROWA)
This association is district based with the following interventions: - Education (nursery) - Traditional Birth Attendants (TBA) - Agriculture. The activities first started in 1996 with respect to Kono and has been supported by the Gender Ministry. There are two categories of members; 40 adults and 74 children with Mrs. Kamanda as chairlady. The need of the Koidu Community is being fairly satisfied.
5. Kei Women's' Association
This is a chiefdom based organization registered with the Local Government and Rural Development in 1995 with a membership of 70 in 6 small groups under the leadership of Mrs. Mani as Coordinator. Activities are peasant farming, cash crop raising, cattle, commerce and osusu operation to support production. The organization is characterized with high percentage of success.
6. Basama Women's Association
This is community based, registered with the Ministry of Local Government and Rural Development in 1996 with Finda Jimisa as Coordinator. Activities include gardening, trading, training, and osusu operation with a membership of 60. High success has been reported with respect to the osusu operation.
7. Gbane Kandor Women's' Association
This is a community based association registered with the Ministry of Local Government and Rural Development in 1995. Its main activities include: 1) peasant farming, 2) petty trading, 3) cottage industrial activities including soap making and tailoring, and 4) osusu operation and communal labor. 100% success is declared for the last two years both in communal activities and the osusu operation.
8. Spart Growers Association
This organization is community based, registered with the Ministry of Local Government and Rural Development. They are engaged in vegetable growing, osusu and communal labor. The organization first started in 1997 and are producing for Koidu Town consumers. There seems to be no problem with their activities except that they need more money to expand the activities, such as inland valley swamp rice growing.
9. Concerned Parent Farmers Association
This is a local community organization registered with the Ministry of Local Government and Rural Development in 1996, to undertake activities such as 1) swamp rice growing, 2) vegetable gardening, 3) communal labor, and 4) petty trading. They are 24 in number. The activities are supported from proceeds and subscriptions. Individuals belong to osusu groups within the community. This is a mixed sex association who have decided to work together amicably on an equal basis. Of the 24 member team, 16 are women and 8 are men.
10. Mota Integrated Development Association
MOINDA is a community based organization registered with Ministry of Local Government and Rural Development and Ministry of Planning and Economic Development. Its activities are training in: 1) entrepreneurship, 2) management, 3) appropriate technology in collaboration with Woolor Kumbaa/SLOIC, 4) prepare business plans, 5) operate a revolving fund and extend credit, 6) collect data and conduct resource studies. Collaboration with Woolor Kumbaa in Kono increases the chance of success in capacity building and monitoring.
11. UMC Tankoro Girls Bakery Association
This is a community based association registered with the Ministry of Local Government and Rural Development in 196. They are 200 women returnees from refugee and displaced camps and are engaged in catering and gardening for the Koidu market. They have received some assistance from the church which is now being revolved and would like to extend credit to others in need. Their interest in microfinance should be encouraged since they have a base of a revolving fund.
12. Denkola Social Club
This organization is community based, registered with the Ministry of Local Government and Rural Development in 1990. There are 120 members with Ms. Fatmata Turay as chairlady. Their activities include soap making and marketing. Support from subscriptions and proceeds. They would like to extend credit to others in need in the nearest future. The Denkola Social Club's interest in microfinance should be closely watched with the interest of possible support to enter microfinance.
13. Ambiance Social Club
Ambiance is a community based organization whose registration is in the pipe line. They have been operating since the beginning of 1997 and they are now 117 members with Tennemah Sesay as chairlady. Planned activities are training and development activities. They will be cooperating with the line ministries and departments in relevant areas. Their source of funding is expected from donors. Ambiance's interest in micro-finance is unclear.
Western Area
14. Jui Vocational Training Centre
(Freetown Contact Person: Mariama Bangura) This is a vocational training group providing tailoring skills, gara/tie dye and soap making and promotion of basic literacy. Funded from French Food Aid but would wish to provide working captial for its graduates through a credit scheme. Could profit from technicla training supprot from pre-qualified contractor and ultimately an injection of additional funds for on lending to its graduates.
15. National Association for Elderly Women
(Freetown Contact Person: Kamie Kabia) This is a vocational training center managed by experienced women in eduation and medical health. Women trained in gara making, soap making and adult literacy. Could profit from pre-qualified contractor technical support and funding.
16. Kabala Assocaition of Women's Produce Cooperatives
(Contact Person: Fatmata Mara) FAO sponsored. 30 cooperatives plus one central marketing cooperative.. There are 4000 women members. Weel-developed microcredit activity and can profit from an injection of funds.
17. Kamuyu Women's Assocaiton
(Contact Person: Patricia Forki Socoy) Trains women in cooperative management. Experienced in management of microcredit.
18. Binkolo Growth Centre
Binkolo Provides training in skills for handicapped. Could benefit from training in this field from pre-qualified contractor and an injection of funds.
19. Kabala Youth Training Centre
Provides training in carpentry to unemployed youths. No experience in microcredit managment but could profit from training pre-qualified contractor, technical support.
Southern Region
20. Hangha Town Women's Organization, Kakua Cheifdom, Bo
(Contact Person: John Konneh) This group of 15 women has been in operation for 3 years. Working capital operation are funded by osusu contribution ("equity"). Turnover is Le 1.2 million and savings of Le .2 million made. Activities include gara/tie-dye and soap making. Not experienced in microcredit but have had good experience in running a small scale business enterprise. Can profit from microcredit provided adequate training is given on funds management.
21. Nyanga Development Association, Kakua Chiefdom, Bo
(Contact Person: Mabinti Ketta) A group of 15 women and 2 men that was formed over 6 years ago. Activities include tailoring, gara and soap making and the processing of gari. Working capital is financed by subscriptions from group members. Can profit from microcredit provided adequate training is given on funds management.
22. Mangeha Nyanga Twouie Gbayenge, Tinkoko Chiefdom, Bo
(Contact Person: Musu Jah-Bockarie) A group of 13 women and 6 men formed 10 years ago. Engaged in agricultural production: cassava farm, rice, potato and groundnuts. Also engaged in the processing of gari. Operations are financed by member of the group. Can profit from microcredit provided adequate training is given on funds management.
23. Ndiamoh Women's Development Association, Kakua Chiefdom, Bo
(Contact Person: Maria Brooks-Tucker) Groups consists of 18 women and 2 men. Engaged in vegetable gardening, piggery and soap making. Self financed. Can profit from microcredit provided adequate training is given on funds management.
24. Rural Women's Vocational Training Centre, Bo
(Contact Person: Mary Martin) Group consists of 20 women and 5 men and is engaged in food processing and preservation, sewing gara, soap making and basic literacy programmes. Can profit from microcredit provided adequate training is given on funds management.
25. Gbora Yama Club, Kakua Chiefdom, Bo
(Contact Person: Iyesatta Massaquoi) These 11 women and 4 men in this club trade in palm oil. Self financed. Can profit from microcredit provided adequate training is given on funds management.
26. Wabitor Women's Development Association, Kaua Chiefdom
(Contact Person: Josephine Bassie) The group consists of 20 women and 5 men and engaged in soap making, sewing and weaving of indigenous cloth. Self financed. Can profit from microcredit provided adequate training is given on funds management.
27. Borboran Farmers Union, Bandalahun Panga, Kabondeh Chiefdom, Pujehun
This group was formed 6 years ago and has 34 women and 7 men. They are engaged in agricultural activities: oil palm plantation, rice, cotton and fishing. Self financed. Can profit from microcredit provided adequate training is given on funds management.
28. Niawana Women's Development, Panga Krim Chiefdom
(Contact Person; Jane Gbonda) Group formed 10 years ago and has membership of 20 women and 5 men. They are engaged in gara, sewing, soap making and farming. Self financed. Can profit from microcredit provided adequate training is given on funds management.
29. Mato Development Organization, Kpaka Chiefdom, Pujehun
Contact Person: Lyesatta Caulker) The group comprises 25 women and 5 men and is engaged in oil palm production and gari making. Self financed. Can profit from microcredit provided adequate training is given on funds management.
30. Old Town Women's Association, Panga Kbondeh Chiefdom
(Contact Person: Madam Christiana Jah) Group has a membership of 20 women and 10 men and is engaged in fishing and farming. Self financed. Can profit from microcredit provided adequate training is given on funds management.
Eastern Region
31. Simbaru Chiefdom Women Development Association, Boajibu, Kenema District
(Contact Person: P.C. Mamie Gamanga) Group consists of 30 women and 5 men. It is engaged in agricultural activities and basic literacy training. Self financed. Can profit from microcredit provided adequate training is given on funds management.
32. Lanbayama Agriculture and Development Project, Kenema
(Contact Person: Betty Kamara) Group has 30 women and has been in operation for 3 years. Operations include gara and soap making, vegetable gardening, swamp rice. Can profit from microcredit provided adequate training is given on funds management. (Return to top.)
Please complete this brief questionnaire only if your organization currently has a microcredit program in operation.
1. Name of Organization _______________________________________
2. Address __________________________________________________
3. Telephone ________________Fax (if any) _______________________
4. Year established __________Total Budget 1996 Le _______________
5. Number of full-time professional staff working on microfinance activities _____
6. Number of full-time support staff working on microfinance activities (typists/messengers, etc.) ____
7. Approximately how many of your staff have received formal training in the administration of microcredit programs and for what duration? Describe briefly.
8. Please estimate the number of borrowers assisted by year:
1996 ____ 1995 _____1994 _____1993 _____1992 ____
9. In what year did your microcredit program begin? ______
10. What has been the average repayment rate by year as a percentage of all borrowers?
1996 _____1995 _____1994 ____ 1993 _____1992 ____
11. What has been the average interest rate charged during these years?
1996 _____1995 ____ 1994 ____ 1993_____ 1992 ____
12. Please estimate the percentage of borrowers who are:
women _____men _____under age 25 _____farmers ______
13. How is borrowed money used? Please place a number "1" next to the most common use, a "2" next to the second most common use, etc.
_____ Purchase seeds/tools/fertilizer for farming
_____ Purchase one day old chicks or other livestock for production
_____ Purchase equipment or supplies for fish catching, drying or other productive activities related to fishing
_____ Purchase other tools or equipment for productive activities (please specify the five most common activities on the line below listing the most common use first, for example: rice milling, gara dying, soap making, blacksmithing in that order)
_____ Purchase fresh fish, dried fish, fish products for resale
_____ Purchase agricultural goods for trading/resale
_____ Purchase other goods for resale (trading in clothes, household goods, other manufactured products)
_____ Other borrowing purposes. Please list any other major uses of borrowed funds below:
14. Please tell us about your organization's lending policies by placing an "x" next to the statements that are true for your group:
_____ We only lend to self-formed groups.
_____ We only lend to individuals
_____ We lend both to individuals _______ % and groups _______%
_____ We lend only in the Western area (greater Freetown)
_____ We lend in all or most parts of the country _____ We lend mostly in the following areas (list the three largest by name, for example: Bombali District, Kenema, etc.) _____________ ________________ ____________________ .
_____ Our policy is to give a lending preference to women
_____ Our policy is to give a lending preference to handicapped
_____ We lend equally to men and women
_____ Our policy is to give a lending preference to productive activities (as opposed to trading)
_____ Our lending policies are totally demand-driven and we do not have preferences regarding the use of borrowed funds
_____ We have targeted displaced people for lending
_____ We have targeted returning refugees for lending
_____ We have targeted demobilized soldiers for lending
_____ We do not target categories of people for lending such as refugees or ex-soldiers but base our lending decisions only on our estimate of the group or individual's ability and willingness to repay.
Please briefly describe any other major lending policies of your group that have not been covered by the questions above, including policies that may establish criteria for selection of borrowers or villages of borrowers
15. What have been the major problems or constraints facing your credit program? Please place a "1" next to the biggest problem, a "2" next to the second biggest problem, etc. _____ Insecurity in the country makes it difficult to reach borrowers
_____ Inadequate amount of money for lending
_____ Small size of our staff makes monitoring and supervision difficult
_____ Lack of business knowledge among borrowers
_____ Government regulations and reporting requirements take up too much of our time
_____ Our funds are provided by a donor but the donor requires too much reporting making it difficult for us to have enough time to implement our program properly
_____ Defaults in repayment
_____ Other ___________________________________________________
16. Does your group provide credit management training to borrowers before lending money? ____ Yes _____No If yes, what kind of training and for how long?
17. What has been your experience with such training? Place an "x" next to each statement that is true
_____ We believe basic training in accounting and business management makes an important difference in our repayment rate
_____ Basic training seems to help a bit but family pressures and general poverty pressures are so great that the problem of repayment comes less from a lack of knowing what could be done than from a different set of priorities (example: need to buy rice for hungry family members)
_____ Basic training is helpful but regular retraining, follow up, periodic monitoring of loan repayment and support to borrowing groups seems to be a more critical factor for success than the training alone.
Do you have other comments on training of borrowers?
18. What is the source of your lending funds? (Please name the government ministry, donor group, international NGO or other source or sources)
19. For how long into the future is this funding source assured?
20. Will your lending program be self-sustaining through a revolving fund when external support ends? _____ Yes _____ No. Please explain.
21. From your observations, what have been the most important constraints on borrowers in repaying loans? (Please rank using "1" for most important, etc.)
_____ Lack of knowledge of basic business skills
_____ Lack of markets to sell goods
_____ Lack of support from group members if lending is to a group
_____ Low quality of goods being produced
_____ Cultural or social pressures (please explain) __________
_____ Other constraints (please list)
22. How do you handle delinquent payments? Place an "x" next to all statements that are true.
_____ If a payment is late we usually wait a week or two to see if the payment is made
_____ If a payment is late we follow up directly and vigorously the next day.
_____ We accept partial payments
_____ We do not accept partial payments
_____ If a payment is late we contact the borrower directly
_____ If a payment is late we contact the group and encourage them to decide on a course of action
_____ Other (please specify) ______________________________________________________________________________
______________________________________________________________________________
23. If more funds became available in Sierra Leone for microfinance, how and how effectively could your organization use these funds for micro-lending? Specifically, (fill in the blanks):
In the last 12 months we loaned out about Le _______.
We could increase our lending over the next 12 months by __________ percent if we had additional funds.
To use these additional funds effectively we would need to hire ______ more professional staff since we estimate we need one professional staff member to supervise lending for every Le ______________ lent out for a total of ________ new borrowers per year.
We would / would not (circle one) need additional training to assure effective use of the funds. If training is needed, would this be needed only for new staff / for most or all staff (circle one).
Concluding Remarks
Overall do you believe that additional funds can be absorbed effectively for microfinance in Sierra Leone? If yes, please explain briefly why you believe this:
Abu, Desmond Komba Woolor Kumba NGO
Allie, Benedict Council of Churches of Sierra Leone
Bangali, S.E. Methodist Church of Sierra Leone
Bangura, Mariama Coordinator, Jui Women's Vocational Training Centre
Bayoh, Sorie Director, Small Enterprise Development (SED) Loan Program, SLOIC, Makeni
Bond, Helen ActionAid
Brandon, Victor Director, Human Resource Centre
Cole, Kumba Mrs. Vice President, Goderich Fishing Association
Conteh, Robert Director, Bank of Sierra Leone
Daramy, K.K.S. Managing Director, Sierra Leone Postal Services Ltd. (including national postal savings bank)
Davies, Claris Executive Director, Sierra Leone Association of NGOs (SLANGO) 228497
Decker, Cecilia Field Coordinator, GGEM
Dewan, Dr. Hari C. FAO Representative in Sierra Leone
Fischer, Conrad J. Charge d'Affaires, Embassy of Germany
Forki-Sawkoh, Patricia Director, Kamuyu Women's Development Cooperative Association (Port Loko)
French, Syvester Association of Indigenous Artisans of Sierra Leone
Gamanga, Mammeh Paramount Chief, Boajibu Chiefdom
Gheikweni, Hawanatu Ginger Hall Women's Cooperative
Gilpin, Raymond Research Director, Bank of Sierra Leone
Glass, Colin Deputy British High Commissioner
Grant, David Director, Bombali Rural Bank, Makeni
Hirsch, John Ambassador, United States of America
Jalloh, Mrs. President, Goderich Fishing Association
Jambai, Alhaji A.E. Deputy Minister of Local Government and Community Development
Janneh. Ali F. Teacher, Kabala Youth Training Center
Jasabe, Chris Managing Director, Sierra Leone Export Development and Investment Corporation
Jusu-Sheriff, G.M. Women's Association for National Development (WAND)
Kabia, Kaymie Director, National Association for Elderly Women
Kallon, I. Director, Self-Employment Assistance Programme, SLOIC, Makeni
Kallon, Abdoulai National Industrial Development and Finance Organization (NIDFO)
Kamara, Aminata PLAN International
Kamara, I.O. Deputy Director, Finance and Trust Corporation
Kamara, Brima Director, Department of Cooperatives, Ministry of Trade and Industry
Kamara, Unisa Secretary, Jui Women's Vocational Training Center
Kamara, Samura M. Financial Secretary, Ministry of Finance
Kanu, Agnes Director, CARITAS Women's Programme, Makeni
Kanu, Sayo B. Managing Director, Sierra Leone Commercial Bank
Kargbo, Mamadu Managing Director, National Cooperative Development Bank
Kasaghan Bai Seborah Paramount Chief, Bombali Seborah Chiefdom, Makeni
Klinge, Klaus-Peter Financial Controller, Bo-Pujehun Rural Development Project (GTZ)
Koker, Val FORUT (NGO)
Koroma, B.A. Chief Regional Officer, North Central Agricultural Project
Koroma, Edmund Director, Economic Policy and Research Unit, Ministry of Finance
Koroma, Jonas Director for Training, Bombali Rural Bank, Makeni
Koroma, Paul Training Coordinator, Network Movement for Justice and Development (NGO)
Koroma, Peter O. Vice Chairman, SLANGO
Koroma, Rugiatu Director, Tetehkay Women's Development Project, Makeni
Koroma, Alpha Fisherman, Goderich Fishing Association
Lahai, Josephine Sierra Leone Opportunities Industrialization Council (SLOIC), Makeni
Lloyd-Davies, Emyr Director, Barclay's Bank
Lwangwa, Elizabeth Resident Representative, UNDP
Macauley, Lilian Sierra Grassroots Agency (NGO)
Manneh, Lamin UNDP Regional Economist
Marah, Fatmata Chairlady, Board of Governors of the Women's Producer Association of Kabala
Mason, Gwen Director, Grassroots Gender Empowerment Movement (NGO)
Massah, Eddy B. Women's Chapter, Freetown City Council
McCormack, Eunice Sierra Leone Association of University Women
McGaffey, David Economic and Commercial Officer and Liaison with UNDP, Embassy of the United States
Momoh, Jobson Sierra Grassroots Agency (NGO)
Moore, Henrietta Women's Chapter, Freetown City Council
Ngegba A.S. Credit Officer, Finance and Trust Corporation
Nyirongo, McLeod Deputy Resident Representative, UNDP
O'Neil, Mr. Deputy Managing Director, Sierra Leone Postal Services Ltd.
Porras, Emilio Perez Ambassador, Head of Delegation of the European Union
Razzak, Fatmata FAO Project Coordinator, Kabala Women's Vegetable Cooperatives Development Project
Robinson, Naomi UNDP Project Manager, Capacity Building for Preventive Development Project
Rogers, Veronica UNDP Project Manager, Gender and Development Project
Rogers, Cyril Consultant to the Jui Women's Vocational Training Center
Rogers-Wright, Llewellyn Head of Department of Administration and Management, Institute for Public Administration and Management (IPAM)
Samura, Manso Permanent Secretary, Ministry of Agriculture
Sawyer, Davidson Director for Risk Management, Barclay's Bank
Sesay, Khadie Ms. Chairperson, National Commission for Democracy
Sesay, Ibrahima Technical Field Supervisor, CARITAS, Makeni
Sesay, Joseph Sam Agricultural Director, Planning, Evaluation, Monitoring and Statistics Division, Ministry of Agriculture, Forestry and the Environment
Sheriff, I. Artisanal fish exporter, Goderich
Skriver, Anders C. Junior Professional Officer, UNDP
Smithsam, Anthony Assistant Director, SLOIC, Makeni
Smythe, Amy Minister of Gender and Children's Affairs
Stewart, Letty Sierra Leone Association for the Development of Adult Education (SLADEA)
Swaray, Stephen Governor, Bank of Sierra Leone
Tholley, Ambrose Deputy Director, CARITAS, Makeni
Thomas, J.A. Representative, Swedish International Development Agency
Town Chief Kabala
Town Chief Port Loko
Tsikirayi, Stanley Head of Corporate Banking Group, Standard Chartered Bank of Sierra Leone
Tucker, Janet Network Movement for Justice and Development (NGO)
Turay, Alimatu Coordinator, Women and Youth in Need Project, Makeni
Turay, Mohamed M. Managing Director, National Development Bank Ltd.
Wanyandeh, Andrew Chief Technical Advisor, Sierra Leone Export Development and Investment Corporation (ITC/UNCTAD)
Williams, Gracie Sierra Leone Association of University Women
Will, Harry Minister of Agriculture, Forestry and the Environment
Wilson, Joyce Project Officer for Microfinance, National Cooperative Development Bank
Bank of Sierra Leone, Financial Intermediation in Sierra Leone: Expanding the Scope of Financial Services (Freetown: BSL 1996?). (31)
"Best Practice in Financial Services to Microentrepreneurs," in What Works - A Women's World Banking Newsletter, vol 4, #2 April 1994. (5)
Commercial Bank of Sierra Leone, Report of the Steering Committee on the Formation of an Investment and Credit Finance Company (Freetown: CBSL, 1995). (33)
Committee of Donor Agencies for Small Enterprise Development, Micro and Small Enterprise Finance: Guiding Principles for Selecting and Supporting Intermediaries (Washington, DC: The World Bank, October 1995). (4)
Finance and Trust Corporation, Prospectus for Investment Certificate, Stock, Bonds and Other Financial Services (Freetown: F&TC, 30 June 1996). (30)
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Gara cloth dyeing facts: - over 80% of producers are women; - more than 10,000 people are involved in at least 21 associations - quality varies but much of it is strikingly good - about 95% of raw materials are imported - most producers do not have established sales outlets - prices are too high for most local people, especially compared to imported used clothing - even with current facilities production could be tripled if markets were found - gara is over-priced by producers who buy for Le 6,000 per yard and sell for Le 15-40,000 believing foreign tourists will be the main buyers when in fact the country's modest tourism market has collapsed - when local gara is exported it has had an excellent reception and rapid sales - production is constrained by a lack of credit and lack of basic business skills among many producers - the overwhelming need is new markets since the local market cannot sustain even current production levels. P.M. Machere, Ibid.
The critical missing link for micro-enterprise sustainability is sometimes the connection between producers and markets. Too often reports are written analyzing markets, consultants reiterate the need for outlets for goods but sustained export links, especially for artisan products, frequently fail to materialize. This disconnection between production and markets is worrisome in Sierra Leone especially for gara cloth tie-dyeing. Gara making is one of the most popular women's activities and is a long-standing tradition in the country. The questionnaire submitted to NGOs involved in microfinance revealed that credit for gara cloth dyeing was probably the single most common purpose for borrowing. There are three options to address this problem:
• try to expand the local market,
• try to reduce production and diversify into other products and
• try to develop regional and international export markets.
The answer to the gara surplus is to do some of all three.
First, the TSP could help associations of borrowers to learn to calculate their real costs, risks and likely profit margins from different activities. The lack of alternative ideas is frequently cited as a reason why so many women produce gara cloth. If there are more profitable options, the volume of production may lessen, thereby easing market pressures. Second, the TSP could talk with the Sierra Leone Export Development and Investment Corporation 7 (SLEDIC) to see if there are ways to promote local consumption (perhaps with appeals for patriotic citizens to wear more locally made clothes) and to expand exports.
Since gara cloth production is considered a desirable income generating activity and it is popular with women (there are many more than 10,000 artisan producers 8), an export strategy may be needed. It is an article of faith in the microfinance literature that microcredit could aim to finance productive and trading activities only for local markets in order to avoid complexity. Nevertheless, in the single instance of gara cloth dyeing, developing export markets could have an enormous impact on large numbers of women producers, the product quality is already high in many cases and there are international NGOs that specialize in niche marketing of artisan products that could be very helpful. 9 (Return to top.)