BIFSA

1
BuildingInclusive Financial Sectorsin Africa
Blue Book Panel Discussion 17 July 2006
Richard Weingarten UNCDF Executive Secretary
2
UNCDF Summary Investing in the LDCs

• UNCDF makes investments in the Least Developed
  Countries
• Currently working in 28 Least Developed
  Countries.
• Current investment portfolio about 125 million.
• Our Mission Reduce poverty in these countries
  and help them achieve the Millennium Development
  Goals.
• Our Method Investing at the local and national
  levels in our two Practice Areas Local
  Development and Microfinance.
• Our Approach Long-term outlook seeking local
  and national capital formation and human
  development.
• Our Capital Flexible, high risk and innovative.

3
Where UNCDF Works
Currently working in 28 LDCs
4
UNCDF and the Blue Book

• UNCDF was deeply involved in the preparation of
  the Blue Book
• Sponsor and host of International Year of
  Microcredit.
• Sponsor and facilitator/convener with UNDESA of
  the Blue Book global consultative process.
• Preparation of final Blue Book with UNDESA.
• UNCDF current focus
• Disseminating Blue Book globally.
• Began with Dakar Conference June 5-6.
• All UNDP offices.
• UN Advisors Group on Inclusive Financial
  Sectors.
• Using Blue Book at country level to build
  inclusive financial sectors on the ground.
• Blue Book as tool and guide for Policy
  Makers.
• Blue Book as instrument for developing national
  vision of inclusive finance.
• Regional focus on Africa Building Inclusive
  Financial Sectors in Africa.

5
Financial Exclusion in Africa

• More than 50 of Africans (approximately 300
  million people) live in extreme poverty.
• Only 4 of the total population in Africa has a
  bank account.
• Number of bank deposits per person in Africa is
  far below other regions.

Number of Deposits per 1,000 population
Madagascar
Venezuela
Thailand
Greece
Austria
Source Demirguc-Kunt, Asli, World Bank, 2005.
6
Financial Exclusion in Africa
Continued

• Only 1 of Africans have a loan or credit
  facility with a formal financing institution.
• Number of loans per person in Africa is far below
  other regions.

Number of Loans per 1,000 population
Madagascar
Venezuela
Panama
Greece
Austria
Source Demirguc-Kunt, Asli, World Bank, 2005.
7
Financial Exclusion in Africa
Continued

• Minimum deposits and fees required to open
  checking accounts in Africa, in relation to GDP
  per capita, are significantly higher than other
  regions.

Minimum Amount to Open Checking Accounts (() of
GDP per capita)
Uganda
Malawi
Ghana
Bolivia
Bulgaria
Source Demirguc-Kunt, Asli, World Bank, 2005.
8
Weak Financial Sectors in Africa

• Financial sectors in most African countries are
  under-capitalized, underdeveloped, and in need
  of restructuring.1
• Liquidity of many African economies is extremely
  limited.
• Limited currency convertibility and high exchange
  rate risk weaken many African economies.
• Informal sector remains dominant in much of
  sub-Saharan Africa, although MFIs are growing.2
• Financial services infrastructure in Africa lags
  progress in other parts of the developed world.
• Policy, Regulatory and Supervisory Frameworks
  need considerable strengthening in many African
  countries.

1. Office of Finance, US Department of Commerce,
International Trade Administration. 2. CGAP,
UNCDF studies.
9
Weak Financial Sectors in Africa
Continued

• Access to domestic and international capital
  markets for governments and financial service
  providers is very limited.
• 17 of the bottom 20 countries on the Capital
  Access Index are in Africa.

Average of Sub-components for 2005 Capital Access
Index by Region
SourceCapital Access Index, Milken Institute,
2005.
10
Towards Inclusion MFIs in Africa
Share of borrower growth from sustainable
institutions
Source MIX Market 2003 data as of October 21,
2005. Data presented are averages. EAP East Asia
and the Pacific ECA Eastern Europe and Central
Asia LAC Latin America and the Caribbean MENA
Middle East and North Africa S. Asia South
Asia.
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Towards Inclusion MFIs in Africa
Continued
Cost per Borrower and Saver / GNI per capita
bold cost per borrower / GNI per capita. italic
cost per saver / GNI per capita.
Source MIX. Overview of the Outreach and
Financial Performance of Microfinance
Institutions in Africa.
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Towards Inclusion MFIs in Africa
Continued
Savings-to-Liabilities Ratios (weighted by
liabilities)
Source MIX. Overview of the Outreach and
Financial Performance of Microfinance
Institutions in Africa.
13
Towards Inclusion MFIs in Africa
Continued
20 largest African MFIs, by number of borrowers
ACSI Ethiopia 289 DECSI Ethiopia 226 MRFC
Malawi 180 TEBA - South Africa 158 CRG
Guinea 110 Kafo Jiginew Mal 94 FECECAM
Benin 83 OMO Ethiopia 71 EBS Kenya
65 OCSSC Ethiopia 62 MUSCCO Malawi 56 K-Rep
Kenya 45 CERUDEB Uganda 45 Sinapi Aba Trust
Ghana 42 WAGES Togo 38 FINCA Uganda
37 PADME Benin 36 FUCEC Togo 31 UMU
Uganda 28 CMS Senegal 28
Source MIX. Overview of the Outreach and
Financial Performance of Microfinance
Institutions in Africa.
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Towards Inclusion MFIs in Africa
Continued
Global Trends for 86 African selected MFIs,
2001-03
Source MIX. Overview of the Outreach and
Financial Performance of Microfinance
Institutions in Africa.
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Building Inclusive Financial Sectorsin Africa
(BIFSA)

• BIFSA Programme Objectives
• To generate employment, economic growth, and
  human development by increasing access to
  financial services for poor and low income people
  and by encouraging and supporting micro and small
  enterprises.
• To build inclusive financial sectors in
  Sub-Saharan Africa that provide sustainable
  access to financial services for poor and low
  income people and for small and micro enterprises.

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BIFSA Programme Methods

• BIFSA seeks to accomplish its objectives by
• Investing in the development and implementation
  of inclusive financial sectors in sub-Saharan
  Africa based on nationally developed and owned
  strategies for inclusive finance.
• Investing in national and regional Financial
  Services Providers (FSPs) in sub-Saharan Africa
  who will provide a broad range of financial
  products and services to poor and low income
  people and to micro and small enterprises.
• Developing partnerships and collaborations with
  donors and private sector financial institutions
  who can provide human, financial, and technical
  resources.
• Utilizing UNDP and UNCDF comparative advantages
  and operational capabilities at HQ, Regional, and
  Local levels.

17
BIFSA Programme Methods
Continued

• BIFSA is a Joint Programme UNDP Bureau of
  Africa and UNCDF
• UNDP Government access, convening power and
  country presence.
• UNCDF Technical expertise, Programme leadership
  and country presence.
• Joint Programme funding and resource
  mobilization.

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National Strategies

• BIFSA Programme is a Financial Sector Development
  approach that follows three steps set forth in
  the Blue Book

• 1. Conduct Financial Sector Assessment.
• Gather data (Regulatory and Household) on access
  to financial services to establish a baseline
  and measure results.
• Evaluate legal, regulatory, and policy
  frameworks.
• Evaluate financial services infrastructure
  requirements.
• Evaluate human and institutional capacity and
  constraints.
• 2. Develop National Policy, Strategy and Action
  Plan.
• Legal, regulatory, policy environments.
• FSPs required to provide products and services
  and to strengthen financial sector.
• Financial services infrastructure requirements.
• FSP investment requirements.
• Coordinating, implementing, and monitoring
  requirements.
• 3. Execute National Implementation Plan.

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National Strategies
Continued

• The BIFSA Programme seeks to maximize National
  Ownership
• Multistakeholder, participatory dialogue is key.
• Stakeholders include
• Government and Legislators.
• Central Banks.
• Financial Institutions.
• Dialogue as a prelude to action
• Take stock of the state of financial sector
  development.
• Analyze constraints.
• Collaborate with external partners.
• Mobilize technical and financial support.
• Build a shared vision.
• Analyze policy options and formulate policy.
• Recognize variations among countries.
• Implement, review, pursue.

• NGOs, FSPs and TSPs.
• Donor and development partners.
• Civil Society and Consumers.

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National Strategies
Continued

• BIFSA Programme focuses on sustainability
• Government and policy maker capacity.
• Regulatory and supervisory capacity.
• Institutional and human capacity at FSPs level.
• Investments in FSPs.
• Financial services infrastructure development.

21
Priority Countries Through 2010
22
Conclusion

• UNCDF is working to disseminate and implement
  the recommendations of the Blue Book.
• We are focusing our efforts on Building
  Inclusive Financial Sectors in Africa where the
  need and challenges are greatest.
• We are working closely with UNDP everywhere we
  work and we are seeking to establish partnerships
  and collaboration with other development and
  private sector partners.
• The work is just beginning and there is certainly
  much to do!