ARFRACA A Synthesis of The 2007-2008 Sub-Regional Workshops By Andrew E. Temu Rapportuer A Synthesis of The 2007-2008 Sub-Regional Workshops By Andrew.

ARFRACA

A Synthesis of The 2007-2008 Sub-Regional Workshops

ByAndrew E. Temu

Rapportuer

ARFRACA

3. West Africa, English Speaking Sub-Regional Workshop31st March to 2nd April 2008 - Gambia [Central Bank of Gambia ]

4. East Africa Sub-Regional Workshop22nd to 24th July 2008 – Addis Ababa Ethiopia [Com. Bank of Ethiopia]

A Synthesis of Sub-Regional Workshops

1. West Africa, French Speaking Sub-Regional Workshop17th to 19th September 2007 – Burkina Faso [FCBP]

2. Southern Africa -Sub-regional Workshop20th to 22nd November 2007 - Mozambique [BoM]

The 2008 Theme For Sub-Regional Workshops

A better understanding of rural markets & agric. financing risksTake stock of successes and challenges in rural financeExplore strategies and products for rural financial institutions

Specific recommendations to promote innovations for rural finance

INNOVATIONS TO ADDRESS RURAL FINANCE CHALLENGES

EXPECTED ACHIEVEMENT:

EXPECTED OUTPUTS:

West Africa –French Speaking


Adapted Objective

Innovations in Addressing Rural Finance Challenges

1. Measures to Increase Productivity of FI Personnel – Senegal 2. Risks of Financing LI Clients: Exp of Poor Rural Women – B. Faso3. Expanding Networks – Best Practices and Challenges - Burundi4. Innovations in Offering Quality FS to Rural Clients - Senegal5. MF Services Delivered by Classical Banking system - CGAP

Thematic Presentations

• Mainly focussed on actions by FIs:

• FIs should jointly establish RISK DATA BASES• Emphasised on HR training and keeping up-to date• Performance Assessments and Motivations


Key Recommendations

Southern Africa

AFRACA Southern Africa SRWAdapted ObjectiveAdapted Objective

Innovations in Addressing Rural Finance Challenges

Innovations for Rural Areas and Costs of Services – Joan DavidExperiences of Reaching Women in RF – Anna Maria

Rural MF and How it can Reach Rural Enterprises – Dr. NovaliaExperiences of Commercial Bank of Zimbabwe – D. Mandivenga

Best Conditions for The Rural Family – Martinho FernandesInnovative Approaches for Quality Savings for Rural Poor – L. Mwanza

Facing Innovation Challenges – Mary M. Nandazi

PresentationsPresentations

1. A need for a unified platform for all banks to ensure increased outreach via ATMs;

2. Promote the use of cost effective technologies e.g. Mobile phones to enable money transfer;

3. Proactively adopt policies and strategies for Rural Development

4. Develop local solutions fitting into local contexts

5. Break the myth that Agriculture is a Risky Activity

6. Acknowledge that MF is not a panacea, only one tool for RD

AFRACA Southern Africa SRW

Key Issues and RecommendationsKey Issues and Recommendations

East Africa AFRACA Sub-Regional WorkshopEthiopia

East Africa

Adapted Objectives

1. Creating common understanding of the role of rural finance in food production and increasing agricultural productivity in Africa

2. To learn and share the innovations in rural finance

3. Identify the challenges of innovations in rural finance

4. Recommend interventions to promote innovations in rural finance

East AfricaHighlights of 11 Presented Papers

1. Innovations in the delivery of FS in Ethiopia by Wolday Amh - A strategic approach through policy and bank interventions

2. The experience of CBE by Haftu Dimtsu and Abreham Tesfaye - A Strategy to expand outreach by CB linkages with MFIs &

SACCOS

3. Innovations in Addressing RF Challenges–Ethiopia: Birhanu Taye - Illustrating a countries MF Policy & development of MFIs

4. Policy for improved RF services – Ethiopia: Getahun Nana- Policy development paying attention to the risky rural market-


5. Policy Initiatives for Improved RFS –Tanzania: Flora Rutabanzibwa - Basics and premise for a specific Rural Financial Services Strategy

6. Wholesale lending for MF operations – Kenya: Newton Nithiga -An institutional experience and recommendations of HOW to do it

7. Enhancing proximity of FS to rural people – Uganda: M. Katamba - Illustration of how R-MFPs delivered by the Uganda Finance Trust

8. Providing access to FS for small scale farmers – Kenya: by Job Kemei - A case of a Non-Bank development Finance Corporation


9. Institutional Assessment in financing Rural Ethiopia Value Chain – Atakilti Kiros -Performance, Opportunities and Challenges in Financing VC

10. MFI – Bank Linkages – Ethiopia: Mekonen Yelewemwessen -Deployment of savings mobilization (70%) and concessional lending to extend FS to micro and rural population

11. Women as players in the financial sector by Hikmit Abdela - Socio Economic role and the burden on Women and Justification for special focus on gender in RF.

East Africa: Summary of Issues

+Governments role; should not be a direct service provider+Continued improvement of regulatory frameworks in the region+ Provision of required public goods: roads, telecommunication

+Global food crises & enhanced importance of Agricultural Finance+Value Chain Finance addressing needs of diverse agriculture actors

Regulatory Matters, Policy and Bus. Environment for RFS

Agriculture

+ Increase rural outreach, emphasis on savings instruments+ Special focus: SMEs, Youth and Women & Other disadvantaged+ Technology based services and products

East Africa: Summary of IssuesServices and Products: Substantial Work is needed to:

West Africa English Speaking AFRACA Sub-Regional Workshop - Gambia

West Africa English Speaking

Adapted Objectives

1.Share experiences in innovations for Rural Financial Services.

2. Make recommendations for further development of rural financial markets.


Highlights of 14 Presented Papers

1.Innovation in addressing RF Challenges – Gambia: Bai Senghor - Technology, Strategic Planning, Institutional arrangement

2. Policy initiatives for improved RFS – Nigeria: Paul N. Eluhaiwe - Characteristics, hindrances and approaches to RFS provision

3. Commercial Banks in Microfinance – Gambia: Seeku Jaabi - Linkages Modalities of a Commercial Bank’s participation in Micro-finance

4. Commercial Banks as partners in serving the un-banked poor – Insights from practice s by ECOBANK; Partnership with ACCION

5. Alternative Business Channels to Bank the Un-banked:By Ismaila Faal- IT based services: ATM, PoS Terminals, GSM Mobile, Mobile Banking etc



6. Climate Change: Opportunities and Challenges, Gambia – S. Jaabi - Tapping on climate change as an opportunity: Diverse Products

7. Risks & Costs of FI’s operations in Ghana: K. Owusu-Twumasi - Innovative Strategies and approaches to minimize risks and costs - E.g Apex Link Domestic Transfer - rural community focused transfer tool

8. Bank of Sierra Leone experience: Rosaline Gobio-Lamin-Strategies to serve a rural set-up without grassroots institutions

9. Standard Chartered Bank MF Strategy: Assantou Barry- A $500mn Microfinance facility to serve 4 million people

10. Micro-finance in Islamic Banking: Mamodou Jobe- Adaptability of MUDARABA, MURAHABA, MUSHARAKA models



11. Trust Bank SMS Banking Innovation, Gambia: Dodou Nyang-Account Mgt: Balances, Forex, Order C/books, Stop Checks

12. GSM Communication in Modern Banking –AFRICELL, P. Braima-Market Information, Prices by SMS through the GSM services

13. Gambia Women Finance Association (GAWFA): Katty Jatta-Inter-generational Benefits, pro-rural women finance

14. IFAD’s Rural Finance Experience: Alassan Bah-Viable Self Sustaining Networks for Village Based Financial Services

West Africa-English: Recommendations

Consideration of Client Characteristics in Innovating for RFS

APPRECIATE AND BEAR IN MIND THAT Rural poor are bankable Access is more important than the cost to the poor Rural poor require and demand for a diverse range of services

Alternative Methods - Innovations in Services and Products

RECOGNIZE THAT: MFIs are sustainable if designed properly Build in risk management strategies while delivering RFS Embrace Technology Simplify products and processes Tap on linkages between Commercial Banks and MFIS

Foster to integrate MFIs in the Financial System for sustainability Develop partnerships and create synergies Go where clients are: physical presence in rural areas Emphasize appraisals, timely delivery & training on loan products

West Africa-English: Recommendations

Organizational and Institutional Aspects

Policy Framework and Business Environment for RFS

Ensure favourable macro-economic environments Avail good policy, Reg. frameworks and supervisory services Integrate Rural Finance into the Mainstream Financial Sector Improve Rural Infrastructure: Roads, Telecommunication

Innovations in Rural Finance: What are they?

NEW CREATIONS OF SOCIAL AND ECONOMIC SIGNIFICANCEOften it is a combination of existing elements

COMPRISES RADICAL IMPROVEMENTSBut can entail gradual improvements over time

INNOVATIONS MAY BE EITHER OR A COMBINATION OFTechnical, Managerial, Institutional, Policy & regulatory

INNOVATIONS ARE TRIGGERED VARIOUSLYMost commonly by challenges being experiencedOpportunities offered by technology, environment etc.

Innovations to Address What? or Why 2007/08 AFRACA Series ?

HIGH TRANSACTION COSTS TO INSTITUTIONS & CLIENTS-Physical access / Poor Infrastructure-Asymmetric Information-Moral Hazards-Dysfunctional markets-Financial literacy

HIGH RISKS IN RURAL FINANCE AND AGRIC. COMMODITY MARKETS-Systemic Risks E.G. Biological Nature of Agricultural Production-Unpredictable Weather-Climate Change [Floods and Draughts]

VOLATILE CASH FLOWS AND LOW RISK BEARING ABILITY-Markets Risks: World Agricultural Commodities Prices-Poverty: Low Income and Capital Bases

Examples of Innovations from the 2007/2008 Series

• - Micro Banko – FDM Mozambique, Specialised rural microfinance institution• - Commercial Banks linking with MFIs – Ethiopia, Gambia• - Community Bank in Zimbabwe • - NATSAVE - Zambia, special policy and strategy to have rural branches• - Central Bank of Nigeria – Legislated that CBs must have rural branches• - RURAL FINANCE STRATEGIES – Ethiopia, Tanzania

Challenge: High Transaction Costs

Elements Nature of Innovative Solutions

New Products/Services

Organisations Policies / Regulatory

Frameworks

Physical Access

INNOVATIONS

- ATMs- Kiosks- PoS Terminals

- 2 Tier Links- Rural Kiosks- Agents- Mobile Bank

- RFP & Strategies- Bank Acts - IR Polices- Relaxed licensing- Lowered Taxes- Branch Policies

Challenge: High Transaction Costs

Elements Nature of Innovative Solution

Product/Service Organisation Policy

Assy. Information

-IT Based-Wholesale loans

Tel. Com . Policy

Infrastructure IT based services Rural FIs Networks

Rural Dev. Policy

IDENTIFIED INNOVATIONSGSM Financial Services: Mobile phones deployed for transactions E.g. MPESA – Kenya: Money TransferWhole sale Lending : Trust Bank of Gambia links with Rural MFIsUganda F T : Mobile savings, Micro-InsuranceAFRICELL Model : Price Information, Funds TransferALDOM : Apex Link Domestic Transfer

Rural Finance Network : NATSAVE in Zambia, deliberate opening rural branchesRural Infrastructure Strategies by various countries

Challenge: Low Income Cash Flow and Capital Bases

Elements Nature of Innovative Solutions

Product/Service Organisation Policy / Regulate

Lack of Collateral due to low capital base

AlternativeSecuritization

Group LendingSolidarity GroupsSocial Sanctions

RFS

Small savings SMS Banking Non-salary A/CLow Min. Balance

Village BankingNGO cum FIMicro Deposit Inst.

IDENTIFIED INNOVATIONS

AFC Kenya : Group Finance, Wholesale Finance, Contract Farming

DECSI Ethiopia: Debit, Credit and Savings institutions

Uganda Finance Trust : Mobile Savings Mobilisation

Challenge: Low Income Cash Flow and Capital BasesElements Nature of Innovative Solution

Product/Service Organisation Policies

Small loan sizes

Wholesale Lending

Financial Linkages

CB Equity Financing MFIs


LINKAGES AND WHOLESALEJitegemee Trust :2 Tier Linkages, Apex supporting total needs of MFISWholesale Lending : Comm. Bank Wholesales Loans to MFIs for onward lendingECOBANK – W. Africa : In 23 countries- wholesale, retail, partners with ACCION

CB EQUITY FINANCEStraus Commission1966 in SA: Compelling CB to finance & advise rural MFIsStan. Chartered 500mil Francs for MFIs

High Risk Commodity and Financial Markets

Element Nature of Innovative Solution

New Products & Services Organ. Policies/Reg. F

Finance Risks

Ag Markets Risks

GuaranteesCheck Clearing Services

Value Chain FinanceMovement of fundsCommodity Prices Information


Ghana’s ARB Apex: Supporting rural MFIs Cheque clearing, Funds transfer, IT support, CB AFRICELL : Micro Industry Price InformationAFC Kenya : Business Partnering and Contract FarmingDev. Finance: : IFAD’s support to VISACAsDECSI : Value Chain Finance

AFRACA 2007-2008 Series ResultsA Synthesis

Challenges & Rural Constraints

Challenges & Rural Constraints

Theoretical & Generic

Solutions

Theoretical & Generic

SolutionsPractices and Experiences:

Lessons from2007/08 AFRACA Series

Practices and Experiences:Lessons from

2007/08 AFRACA Series

Way Forward?Way Forward?

1. High Risks RFM /Agr.2. High Trans. Costs4. Volatile Cash Flows5. Small savings & loans 6. Low capital base7.Social cultural

1. High Risks RFM /Agr.2. High Trans. Costs4. Volatile Cash Flows5. Small savings & loans 6. Low capital base7.Social cultural

1. Products2.

Organisations

3. Policies

1. Products2.

Organisations

3. Policies1. New Products: IT Based2. New Policies: MFP & RFS3. Org Innovations: e.g. CB – MFI links

1. New Products: IT Based2. New Policies: MFP & RFS3. Org Innovations: e.g. CB – MFI links

Scaling-up?Scaling-up?Thank you for the attention

ARFRACA A Synthesis of The 2007-2008 Sub-Regional Workshops By Andrew E. Temu Rapportuer A Synthesis of The 2007-2008 Sub-Regional Workshops By Andrew.

Documents

rural finance slide

rural finance innovations

rural poor

rural areas

rural enterprises

rural development

role of rural finance

southern africa slide