On April 8 in Contonou, Benin, the Central Bank of West African States (BCEAO) called a meeting to discuss "Challenges and Prospects in Microcredit in Africa." The meeting originated from BCEAO Governor Charles Konan Banny's role as Advisor to the International Year of Microcredit, and followed from the call by the Advisors Group to act on the lack of knowledge about microfinance in Africa, its importance in the fight against financial exclusion, and the role microfinance can play in Africa's development.
The objective of the meeting was to sensitise the participants to the strategic importance of increasing the performance of microfinance institutions (MFIs) by improving their management. Specifically, this entails improving the quality of financial information, and modernising management information systems. The BCEAO believes that this is how microfinance can meet the challenge of building inclusive financial sectors in the region.
"By bringing together the financial sector leaders of West Africa to address the problems that poor people face in accessing financial services, this meeting was indeed of historical significance," said Christina Barrineau, Chief Technical Advisor for the International Year of Microcredit. "The BCEAO is unique as it has taken on a conscious and forward-looking role in developing the sector in a prudent manner. The BCEAO has ten years of comprehensive data on the microfinance activities of the eight West African countries under its auspices."
Participants included the Secretary-General of the International Organization of the Francophonie, the Chairman of the Council of Ministers of the West African Monetary Union, Finance Ministers, Central Bank Governors, the Chairman of the Commission of the West African Economic and Monetary Commission, the Presidents of the African Development Bank and the West African Development Bank, members of the International Year of Microcredit Advisors Group, international organizations and investors, microfinance practitioners and other experts in microfinance.
Opening the meeting, Mr. Konan Banny declared, "This meeting is of particular significance because, on the one hand, it deals with a theme which is both important and topical, and on the other, it underscores what I would call "a universal awareness" of the major role of microfinance in the effort to combat financial exclusion."
The three themes addressed were: "Microfinance in Africa: Current Status, Challenges and Prospects;" "Challenges in Financial Information for Managing MFIs and for Supervisory Authorities;" and "Challenges in Financial Information for Investors and Financial Partners."
Discussion began by noting the fact that while microfinance is expanding, the industry must be consolidated in order to increase its contribution to meeting the Millennium Development Goals. In addition, it will not only be important to increase access to financial services, but to ensure that savings mobilized are used by MFIs as a lower cost form of capital and the increased profitability is used to bring down the costs to borrowers. It was also emphasised that a range of financial services - not just credit - are important in the African context, and that the existing legal framework must be adapted to facilitate the development of the sector. Pointing to the fragile nature of the region's microfinance institutions, the participants felt that ensuring MFI viability is necessary to secure access to financial services for the greatest number of people.
On the basis of these considerations, participants identified plans of action to tackle the obstacles to building an inclusive financial sector, recognizing the importance of financial information as a diagnostic tool and to design solutions. Participants debated and deliberated the necessary conditions and hurdles. Microfinance leaders argued the importance of relaxing regulatory controls, while Central Bank Governors cited their responsibility to maintain financial stability and protect the savings of poor people in the volatile African context. The debate underscored the deep thinking of the contributors on the topic, and the collective passion of all to eradicate poverty in their countries.
At the level of the MFI, the importance of financial information and internal monitoring mechanisms was reaffirmed, while the need to modernise management information systems was stressed. In order to adequately meet client demand, participants also noted that studies of customer needs should contribute to the diversification of financial products.
Participants also stated that microfinance alone cannot eradicate poverty. Microfinance must be supported by a favourable policy environment, and the necessary health, education, communication and transportation infrastructures must be in place.
The contribution of the central banks to building a financial system accessible to the greatest number of people was regarded as essential, including in establishing appropriate legal frameworks and supervision, standardising the financial information produced by MFIs, and in designing management information systems and a database on risk and repayment.
It was hoped that banks and other private investors would increase financing to MFIs, while development partners should maintain their support of MFIs, particularly in building capacity and providing resources to modernise their information systems. The development of credit bureaus was underlined as key to lowering client due diligence costs and risk. A better coordination between donors was also called for. The microfinance associations were encouraged to work together at both national and regional levels in order to increase their visibility, and the services of ratings agencies and accounting and audit firms should contribute to increasing the quality of financial information with regard to reliability and improved financial transparency.
The consensus of the meeting was that while significant progress has been made in microfinance in Africa over the last decade, in order to achieve the Millennium Development Goals, it will be essential to address the challenges identified. According to Mr. Konan Banny, "The major challenge facing us today is to increase access to financial services in order to eliminate one of the major constraints on the economic and social well-being of the most underprivileged, that is financial resources," but he went on to say "I would like to share with you this deep conviction: the prospects of microfinance in Africa are encouraging."
By Tanya Lobel, Stern School of Business, New York University
Half of the population in Africa lives on less than one dollar a day. More than half the population has no access to safe drinking water. More than two million infants die annually before reaching their first birthday.[1] Such is the harsh reality of the scale of poverty in Africa. The Millennium Development Goals and the objective to halve the proportion of people living in extreme poverty by 2015 has driven a number of regional and national initiatives focused on poverty eradication in Africa based on local needs and priorities.
Microfinance and social entrepreneurship can dramatically change the lives of poor people in Africa. The operations of microfinance institutions have grown significantly over the past decade in Africa and the International Year of Microcredit has tapped into the growing movement to build inclusive financial sectors throughout the developing world as a lasting poverty eradication strategy.
National Committees for the International Year of Microcredit have been established throughout the African continent to lead both countrywide and regional activities. The National Committees are central to the success of the Year and the future of microfinance because they aim to engage country-level microfinance clients, local governments, Central Banks, UN Country Teams, private sector leaders and the NGO community to work towards improving the life of low-income entrepreneurs. The International Year of Microcredit is just a starting point to engage countries to start building inclusive financial systems and National Committees are a platform to create permanent task forces to ensure that an active commitment to microfinance transcends 2005.
To date, nine African countries have established working National Committees and three African countries are in the process of setting up their National Committees. These committees are committed to achieving the vision of the International Year and ensuring that by 2015, 50% of all households within the region will have access to quality financial services.
The National Committees within each country have the flexibility to decide how best to focus their efforts. Conferences have been organized throughout the region as a means to educating a larger audience about microfinance. These events bring together key microfinance practitioners in the region and provide a platform for them to exchange ideas and learn from each others' experiences.
The Inter-African Forum on Microenterprises will take place this November in conjunction with the International Day for the Eradication of Poverty. The forum will provide a tremendous opportunity to promote microfinance as a highly effective tool in the collective effort to alleviate poverty and foster entrepreneurship in Africa. The forum will focus on the perspective and results of the International Year of Microcredit. The meeting will bring together the Year's National Committees from the region and provide a platform to network and exchange ideas, innovations and successes in the various countries' microfinance initiatives during the International Year of Microcredit. The focus will be to discuss continuing barriers faced in extending financial services to poor people in Africa.
Morocco is organizing a number of conferences this year, and earlier this month held a forum entitled "Microfinance and Enterprise Creations", looking at experiences in France, Tunisia and Eastern Europe. This May, Morocco will hold another seminar entitled "The Rate of Interest and Microfinance".
Malawi will also be holding a national conference within the next few months on microfinance. Benin will also hold a one-week microfinance conference this month. Mauritania has organized a National Forum on the challenges facing microcredit and a two day event at end of caravan entitled "Open door to microfinance" with exhibitions, conferences, debates, and the distribution of awards by the President of Mauritania. A conference was also held in Gabon late last year entitled 'Microfinance Impact in the Fulfillment of MDGs in Gabon'.
African countries have also concentrated on using the media as a means for promoting the Year. Benin's National Committee plans to execute a public relations campaign that will include five radio pieces and a National Press Conference. The Kenyan National Committee will publicize the work of microfinance institutions as newspaper supplements in 'The Nation' and 'The Standard'.
Some countries will also focus on local activities to promote microfinance in the areas that it is most needed. The Kenyan National Committee is organizing parades, exhibits, awards ceremonies and educational discussions within eight provinces to promote knowledge of microfinance at the local level. In South Africa, competitions, conferences and exhibitions are being organizing throughout the country.
Africa has the potential for significant growth and development of the microfinance sector. The success of the Year and the establishment of committed National Committees bodes well for the continued focus on Microcredit going forward.
Princess Maxima visits local entrepreneurs
In the third week of February 2005, The Netherlands' Princess Maxima, ING Netherlands Chairman Diederik Laman Trip and Triodos Bank Senior Fund Manager Marilou van Golstein Brouwers visited Africa to promote the International Year of Microcredit and the importance of microfinance in the global fight to eradicate poverty.
As Advisors for the Year, Princess Maxima, Mr. Laman Trip and Ms. van Golstein Brouwers met with local entrepreneurs in Kenya and Uganda and learned how they benefited from microfinance services. They were joined by the Dutch Minister of Development Cooperation, Agnes van Ardenne, and Stein Albregt, Chairman of the Dutch Platform of Micro Finance. The group met officials from the ministries of Finance, Planning and Economic Development, as well as representatives of local microfinance institutions.
In Kenya, the Advisors met with the Governor of the Central Bank of Kenya, Dr. Andrew Mullei, to discuss policies to increase access to financial services by poor and low income people. In the context of this meeting, Dr. Mullei announced that Kenya is concerned with improving the financing of microenterprises in rural areas. To address this issue, Kenya is reforming its financial sector and amending a series of laws, including two relating to monetary policy and modernizing the National Payments and Settlements System. The Advisors' visit also highlighted the importance and urgency of the Microfinance Bill which is currently being prepared for presentation to Parliament, and covers the supervision and regulation of deposit-taking institutions. The group also visited Kenyan microfinance providers Equity Bank Limited, Jitegemea Credit Scheme, and K-Rep Bank.
According to Her Royal Highness Princess Maxima, "With all of the initiatives underway, Kenya is poised to develop a truly inclusive financial sector that will work to achieve poverty alleviation."
In Uganda, the Advisors met with Central Bank officials to learn about their successes and difficulties in implementing state-of-the-art microfinance regulation. In addition, the group met with representatives from 30 microfinance institutions, ranging from organizations which only provide credit, to more developed institutions that have converted into banks, and including Centenary Rural Development Bank, Uganda Women's Finance Trust, Finca Uganda and the Uganda Microfinance Union. Discussion centered on the obstacles to growth and how to reach the 90% of the population that is still unbanked and lives mostly in rural areas. The Dutch Ministry of Development Cooperation organized a seminar and invited most of the players in the microfinance sector, as well as politicians. The need for a liberalized financial sector was stressed in order to achieve competitive, client-oriented financial institutions. Other issues addressed during the visit included obstacles to good entrepreneurship development, above all for women. Overall, the group felt that the microfinance industry in Uganda is developing well.
International Year of Microcredit Advisors define the objectives of the International Year of Microcredit in its goal of promoting microfinance and entrepreneurship.
Global interest in the International Year of Microcredit 2005 continues to grow. Several initiatives are underway to help meet the Year's objectives of promoting awareness of microfinance and building inclusive financial sectors. All of the initiatives undertaken by the Year are designed to encourage innovation and strategic partnerships. For more information, contact christina.barrineau@undp.org or visit our website at www.yearofmicrocredit.org.
National Committees
An unprecedented global response to the call for building inclusive financial sectors is now underway, through the establishment of National Committees. Member states were requested to establish national coordinating committees to facilitate activities and to create a dialogue on best practices for building inclusive financial sectors in their country. Each National Committee assesses the challenges that poor people confront in accessing financial services and decides upon activities and initiatives to address these issues. Key factors that are stressed throughout this process include membership diversity and partnership, creativity, effectiveness in communication and outreach, the level of governmental support, private sector engagement, and increased public awareness.
To date over 80 countries in all levels of development have pledged their support to the International Year of Microcredit. National Committees or Focal Points have already been established for many countries, comprising high-level representatives from over 30 governments, 60 United Nations local offices, 44 multinational agencies, 137 microfinance networks, as well as key members of the private sector and civil society.
In each country the National Committee has a high degree of flexibility with the activities and events that are coordinated. Already hundreds of conferences and seminars have been planned throughout the Year and 22 countries have even developed a formal public awareness campaign to reach even the remotest region. Such awareness raising activities focus on introducing quality financial services to the poor and lower income people and are designed to reach a wide-ranging audience. Many governments realizing the benefits of microfinance have initiated innovative ideas at promoting the Year.
Global Microentrepreneurship Awards Program
In November of 2004, the Global Microentrepreneurship Awards (GMA) successfully rallied the world to come together and highlight the achievements of and pay tribute to low-income entrepreneurs. It is in this spirit that the 2005 GMA Programme carries on. The overwhelming success of the 2004 pilot-event has led to a formal collaboration between Citigroup, the United Nations, and student groups from universities across the globe that is known as the GMA Student Alliance. More than 30 countries are participating in this year's award programme, bringing together thousands of microfinance clients, students, private and public sector professionals, senior government officials and UN agency staff. Similar to the 2004 programme, stock exchanges throughout the world have also pledged their support. This year over 30 stock exchanges will invite winning contestants to once again ring the opening bell, sending an even stronger signal to the world that building inclusive financial sectors can play an important role in poverty alleviation.
Country Teams have been created to design and coordinate the awards programme specific to each country. Country Teams consists of in-country and out-of-country individuals from the public and private sectors, UN agencies as well as students. The diversity of each individual team allows the contest to be designed in a manner that takes into consideration the unique nuances of the local business and economic environment.
The "Blue Book" Project
The "Blue Book on Building Inclusive Financial Sectors for Development" is scheduled to be completed and published by mid-2005. The "Blue Book" will comprise the results of a series of innovative consultations with a wide variety of financial sector experts, addressing the question of why so many bankable people are unbanked. The project addresses the challenges to building inclusive financial sectors and will provide a compelling analysis of why the vast majority of people do not yet have access to sound financial services. The project will serve as a reference point for governments to collectively discuss strategies, share best practices and improve processes. A final Global Meeting will be hosted by the ILO and held in Geneva in May.
The Data Project
Although there is a broad consensus that microfinance is widely and increasingly used, there is little hard data about who provides it, in what form it is provided, who receives it and at what cost. Hard data, by itself, will give incentive financial market development and aid governments, donors, banks and the media in identifying opportunities to broaden and improve financial access for all people. The breadth and scope of microfinance makes collecting this information a difficult task - one that requires the combined efforts of governments, private financial institutions, consultancies and the major international public financial institutions. Current efforts are not comprehensive and all would benefit from a pooling of resources.
In the fall of 2004 the data project brought a small group of expert statisticians and researchers from the Bretton Woods Institutions and the United Nations, together with governments and the private sector to address current data gaps, anticipate future needs and build agreement on the best way to move forwards. The World Bank has agreed to develop indicators on the quality of financial access, and the Human Development Report has agreed to report on the data collected.
"Made by Microentrepreneur" Products
A collection of 25 products, labeled with the logo of the Year, will convey to the public the importance of microentrepreneurs and will be sold through an "online boutique" on the website www.shopmicro.org. The chosen products will represent various world regions, male and female entrepreneurs, young and older craftspeople, various media as well as different market segments. The story of the product and artisan will be told in a pamphlet with the purchase of each product to illustrate the link to microfinance. National Committees and partner organizations are also invited to market and sell these products.
The online store currently has products from Macedonia, Colombia, Rwanda and Bangladesh. The store seeks involvement from microfinance institutional leaders, corporate partners and celebrities who will promote the products.
Newsletter
Microfinance Matters is a monthly web publication from the United Nations Capital Development Fund that was started by the Secretariat in January 2004. The newsletter now reaches over 6,000 direct subscribers and expects to have a circulation of more than 10,000 by the end of 2005. In addition to our subscription list, the newsletter is also distributed through various microfinance outlets, reaching an estimated additional readership of well over 50,000 people worldwide. Microfinance Matters takes advantage of the Year to promote innovative partnerships, raise public awareness, and share effective practices and expertise on building inclusive financial sectors. By inviting reader opinions, the newsletter is developing into a platform for discussion and debate. Contributors to date range from Central Bank Governors to Ambassadors to microfinance clients.
Film Projects and Public Service Announcements
The film short: "Microfinance: In Their Own Voices," a collection of client stories produced by Sterling Van Wagenen, will be distributed to UN Information Centers and target broadcasters. The film is already in demand from many parties, including National Committees, conference organizers, universities and others to promote microfinance messages. In addition, the Secretariat has offered input into a number of documentary film and television productions on microfinance. Films on microfinance produced for the Year will be made available on the Year website.
Public Service Announcements for the Year have been filmed featuring Anggun, Souad Maasi , and Karina. Anggun's PSA aired at the Pavarotti and Friends Concert in Johannesburg, South Africa on April 2 to an audience of 20,000. The PSAs were produced by Citigroup and are available in English, French, Spanish and Indonesian. Citigroup has agreed to distribute the PSAs internationally with its advertising package. The PSAs will also be distributed through the Year website, microfinance providers, and National Committees throughout the world. Plans are underway for an additional promotion campaign through posters, postcards and decals and to secure additional mainstream celebrities to promote the objectives of the Year.
Patrons Group
The Emissary and Spokespersons Groups raised awareness of the objectives of the Year starting with the launch event last fall in New York. Princess Mathilde of Belgium has participated in an array of activities including visits to microfinance clients in China, Mali, and India and speaking engagements at universities in Europe, Asia and the United States. Princess Maxima of the Netherlands recently visited entrepreneurs, MFIs and government and Central Bank officials in Uganda and Kenya. Anggun has engaged in promotional trips to Indonesia, performed in benefit concerts, and has promoted the logo of the Year on her most recent album. Three new celebrity spokespeople are expected to support the Year as Emissaries within the next few months.
Year of Microcredit Website
The official website of the Year (www.yearofmicrocredit.org) provides extensive information about the Year, its objectives and activities, National Committee contact information and a calendar of national, regional and international events. The site serves newcomers to microfinance, industry practitioners, UN country teams and agencies, and donors. Organizations may link to the website (guidelines on how to do this are available on the site). The site also includes multiple languages to support our international audiences. Key areas include an events calendar, media resources, an interactive microfinance education area, an experts forum, international contact information for all Year country teams, and information about key sponsors and patrons group.
Special Events
Hundreds of microfinance meetings, conferences, forums and other events are being organized and scheduled to celebrate the Year and raise debate on how to improve financial services for those people living in poverty. Please see the official Year website for an updated calendar of events and activities.
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