Microfinance in africa iv fworored as the 2015 deadline for achieving the millennium development goals is fast approaching, the incidence of poverty remains a critical issue in most african countries. By that time saccos were closely linked to the farming cooperatives. Introduction the intent of this report is to provide an overview of the microfinance landscape in south africa. Key indicators 2008 committed amounts of funding by country funding structure trends efficiency and productivity trends by subregion portfolio risk trends benchmark indicators indicator value trend borrowers millons 6. Microfinance is defined by otero 1999 as the provision of financial services to lowincome poor and very poor selfemployed people. North africa mena are the regions where microfinance presence is lowest in terms of the number of institutions, credit portfolio size and. Spatial relationships between location of microfinance. Due to the expansion of microfinance institutions mfis, it has been. Microfinance in africa iv fworored as the 2015 deadline for achieving the millennium development goals is fast approaching, the incidence of poverty remains a critical issue in most african. Microfinance licensed to operate as a unit bank otherwise known as community bank which can only operate branches or cash centres within a local government with the minimum paidup capital of. Usd 19% 81% 66% subsaharan africa was the most deposit dependent region 68% in 20. Microfinance institutions fostering sustainable development. Microfinance, microcredit, ban k regulation, africa, saving s authors emai l address. Commercial banks in tanzania national microfinance bank.
Pdf the impact of microfinance in subsaharan africa. A key feature of microfinance has been the targeting of women on the grounds that, compared to men, they perform better as clients of microfinance institutions and that their participation has more desirable development outcomes pitt and khandker 1998. Ifcs microfinance program for africa aims to increase the number of commercially viable microfinance institutions and broaden access to financial services so that. African countries 263 have chosen to address regulating microfinance through the implementation of specialized microfinance laws or regulations. South africa provides one example of how a countrys amlcft regula tions can be. The microfinance policy mprsf provides for two categories of microfinance bank in nigeria, namely. In fact, the united nations declared the year 2005, to be, the international year of microfinance, in order to remind everyone that millions of people worldwide benefit from. The main objective of microfinance institutions mfis is to provide financial services to the poor and nonbankable population. Microfinance project proposal p r e p a r e d f o r s e f a d v i s o r y b o d y.
There is an ongoing debate over whether the goal of microfinance is poverty reduction or financial inclusion. A report from microfinance information exchange mix and consultative group to assist the poor cgap april 2010 subsaharan africa 2009 microfinance analysis and benchmarking report overview over the last decade, the microfinance sector in subsaharan africa ssa has capitalized on positive developments that have led to increased outreach. The new initiatives include the development of microfinance arrangements involving ngos, commercial banks, savings and loan companies, and other new types. Generally, africa has since the mid 1990s witnessed substantial economic growth occasioned by macroeconomic reforms leading to a more favourable investment climate. The purpose of the summit is to actively engage key stakeholders in discussions relevant to current and future aspects of financial inclusion. The africap microfinance fund makes equity investments in africanbased mfis, as well as financing technical assistance for said mfis. On microfinance and the new microfinance handbook financial services help to smooth cash flows, build assets, invest productively, and, importantly, manage risks. Microfinance institutions mfiswhich encompass a wide range of providers that vary in legal structure. Increasing the outreach of financial services that are affordable and meet the varied ne.
The geographical coordinates of the headquarters of the microfinance bank are. An array of approaches has been used ranging from traditional group based systems to specialised lending by banks, nongovernmental organizations ngos, nonbank financial institutions. What is the evidence of the impact of microfinance on the. Outreach of microfinance in africa nonpoor vulnerable nonpoor poverty line moderate poor extreme poor economically, socially and geographically marginalized groups microfinance clients. The eu banks investments in african microfinance have a big impact on the lives of people like phyllis. I will discuss some of these differences in section 5.
Abdelaziz, undersecretarygeneral and special adviser on africa, as well as mr. The study covered entire nigeria, located from latitude 04 0 10 20n to 0 56 06n and from longitude 02 0 4000e to 14 0 42 00e. D r t m u t e p f a z i m b a b w e this proposal is in response to the current challenge of 6 3 2014 eliminating rural poverty through microfinance. E overview of the microfinance sector in east africa with particular focus on schemes for women engaged in the production and processing of coffee in uganda and kenya. As of december 31, 2018, main has 100 members in 27 countries in africa and in europe. There is a need for the right balance between freedom for the sustainable growth of microfinance institutions, and a correct dosage of monitoring to. Nov 27, 2020 for example, in south africa, 94% of all microfinance loans are used for consumption, meaning, the funds are used to pay for basic necessities.
In order to understand the stakes of microfinance, let us shed light on its history. These institutions need to attract domestic savings. Women and microfinance the emergence of the savings and credit cooperative organisations saccos in tanzania dates back to the years 1965 whereby it was the first stage to the emergence of microfinance institutions chaoberoff et al. Jun 03, 2008 microfinance is now widely used in africa, where among its pioneers is care international uk, barclays partner in developing financial services for the katine project. Although the recent financial and economic crises adversely affected many african economies, microfinance grew on the continent at a remarkable pace even at. Introduction to microfinance institutions mfis part i. Jul 23, 2020 the covid19 pandemic highlights the need for regulation of kenyas microfinance lenders, habil olaka, ceo of the kenya bankers association, tells the africa report only kenyan lenders which are licensed to take deposits are subject to central bank regulation, and only these lenders qualify for support from the countrys central bank. Overview of the outreach and financial performance of 2 methodology survey of african microfinance institutions microfinance is the supply of loans, savings, money transfers, insurance, and other financial services to lowincome people. Survey of african microfinance institutions microfinance is the supply of loans, savings, money transfers, insurance, and other financial services to lowincome people. Microfinance institutions mfis and other financial service. Based on the experience of selected countries, this paper identifies the main contributors to the expansion of microfinance institutions mfis in africa, which include. Africa, or mena, region intensified its activities, providing access to financial services.
Spatial relationships between location of microfinance banks. Microfinance has proven to be a successful practice and plays a major role in the development of many african nations. Kenya microfinance needs to be regulated, says ceo of kba. An overview of the history, financial access, challenges and key players 1. Robinson champions with passion, logic, and plentiful examples from her years of experience. The accessibility of microfinance for small businesses in. Additional approval requirements create long delays. Microfinance profitability university of birmingham.
Although mfis may be flourishing in commercial terms, few are profitable. Implications for development and performance of the industry africa region working paper series no. This means borrowers arent generating new income with the initial loan, which means they have to take out another loan to pay off that loan, and so forth and so forth. Microfinance investment in brief stability, a growing middle. Microfinance summit 2019 titled, microfinance contributions to financial inclusion. Microfinance and business development support develop africa. Its declared aim is to make the case for largescale commercial microfinance,a cause that dr.
Microfinance business environment ranking of world leading microfinance destinations, kenya leads the african continent as ever before, also ranked fifth in selected 55 countries known for microfinance business in the world. Paradigm shift the microcredit sector in south africa. Microfinance in africa international finance corporation. An additional four sudan, zimbabwe, cape verde, and guinea bissau drafted or have begun the process of drafting microfinancespecific legislation. Ifcs support of microfinance in africa started in 1997 with an equity investment in krep, a kenyan microfinance institution that has since transformed into a commercial bank that still serves micro and small businesses.
Microfinance licensed to operate as a unit bank otherwise known as community bank which can only operate branches or cash centres within a local government with the. In fact, the united nations declared the year 2005, to be, the international year of microfinance, in order to remind everyone that millions of people worldwide benefit from microfinance activities. This bank could probably constitute to the closest to state bank that the country has. Cgap mix africa microfinance analysis and benchmarking. Main microfinance african institutions network is an international nonprofit association created in 1995 in abidjan by the initiative of several institutions with a long experience in microfinance andor the promotion of microenterprises in africa. The idea of microfinance has now spread in latin america, asia, eastern europe, and africa but the best known micro finance programs come from the asian, dr.
Background beginning in the 1970s, a microfinance revolution swept through asia and latin. Overview of the outreach and financial performance of. Microfinance in africa ii acknowledgement the publication microfinance in africa was jointly prepared by the united nations office of the special adviser on africa osaa and the nepad planning and coordination agency nepad agency under the leadership of mr. The traditional microfinance is characterized by a lending of funds to the poor b external donor funding c uses the grameen bank model and d less participatory and community driven. The microcredit sector in south africa an overview of the. In africa, poverty is a multifaced problem caused by low literacy levels, limited resources, low health and. However, there is still general agreement that microfinance helps improve the lives of the. Africa, or mena, region intensified its activities, providing access to fi. Quantitative changes were observed in the income th ey earned, land ownership and accumulation of assets. In 1967, tanzania was declared a democratic socialist state in the arusha declaration. The provision of formal financial services to low income households. It is bounded to the north by niger republic, northeast, east, south and. A short history of microfinance katine the guardian. Experience and lessons from selected african countries presentating the development of the microfinance sector in africa.
Yunus began a microfinance program among women in bangladesh in 1976, following the widespread famine in 1974 abdulrahman, 2007. In east africa alone, the eib works with 11 microfinance institutions in kenya, tanzania, uganda and rwanda, supplying eur 125 million of credit to 278,270 final beneficiaries, 42% of them women and 29% of them young people. Jun 01, 2018 also, it hypothesizes that geographical endowments latitude, land area, landlocked, and population density determine banking sector development in subsaharan african countries. Microfinance in east africa schemes for women in the coffee sector geneva. Do transnational initiatives overlook fundamental questions of competition and intermediation. Mar 12, 2012 microfinance is seen as a key development tool, and despite the current deepening crisis within the industry, it continues to grow in subsaharan africa. Background beginning in the 1970s, a microfinance revolution swept. While the emergence of microfinance in the mid2000s, led by. Uganda ranked second in africa and eighth in the world. Part of the debate stems from the lack of studies pdf that show microfinance as an effective poverty reduction tool. African microfinance is as diverse as the continent itself. In this definition, the word formal refers to a formal institution as the supplier of the service. Despite this progress, some regulations are inadequate, and implementation, including licensing, remains challenging, especially in west africa.
Microbanking in africa however remains a difficult business. The africap microfinance fund makes equity investments in african based mfis, as well as financing technical assistance for said mfis. Abstract microfinance has proved to be one of the effective tools for poverty reduction in developing. Concept note microfinance scaling up in africa african. Microfinance handbook reflects a lesson we learned many years agothat sharing knowledge and best practices is so important to help providers, policy makers, and others to continue to innovate, adapt. Microfinance is about building permanent local financial institutions. Amlcft regulation world bank document world bank group. They demonstrated that the poor could be relied on to repay their loans, even without collateral, and hence that microfinance was a potentially viable business. Stateofthesector report 3 acronyms akf aga khan foundation asca accumulating savings and credit association bp banque populaire care cooperative for assistance and relief everywhere, inc.
Ifc expects its microfinance program to reach 22 countries by 2011. Microfinance is generally seen as a way to fix credit markets and unleash the productive capacities of poor people dependent on selfemployment. Microfinance the provision of financial services in limited amounts to lowincome persons and small, informal businesses is increasingly being offered by a variety of formal financial institutions, including banks and nonbanks, either as their core business or part of a. Schreiner and colombet 2001 share a similar view when they view micro financing as an attempt to improve access to small deposits. Latin america and caribbean africa middle east and north africa eastern europe and central asia south asia east asia and paci. Evolution and effects of the legal and regulatory framework. The microfinance industrys gross loan portfolio glp. Microfinance was first trumpeted as a way to unleash the productive capacities of poor people dependent on selfemployment e. Typically these are lowincome, selfemployed or informally employed individuals, with no. Microfinance project proposal development thinking. Specifically, based on the geographical endowments, this study expects that subsaharan african countries closer to the equator have greater propensity to have less.
Assessing institutional characteristics on microcredit. For the purposes of this study, we have applied the broadest definition of microfinance. The impact of microfinance bank on small and medium scale. Microfinance is seen as a key development tool, and despite the current deepening crisis within the industry, it continues to grow in subsaharan africa. The bank originated from the reconstruction of the nbc national bank of commerce, through parliamentary act after the mandate of the nbc was terminated following the monopoly it had in commercial banking in the country lindvert et al. The third and last section of the paper concludes with recommendations for policy makers.
1705 526 263 194 159 1547 350 1660 1330 1453 1026 1086 553 936 576 1681 1531 1140 1230 277 628 1537 407 1674 692 139 148 984 1575