328rural finance sierra leone

8/6/2019 328rural Finance Sierra Leone

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BANK OF SIERRA LEONE

Sam Bangura BuildingSam Bangura Building


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THE SOUTHERN AFRICA

SUB-REGIONAL WORKSHOP

Innovative Approaches To Rural

Financial Service Provision With

Emphasis On Smallholder

Producers


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THE ROLE OF RURAL AND

COMMUNITY BANKS IN THEPROVISION OF RURAL FINANCE


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PRESENTATION

ByMOHAMED S. FOFANA

Deputy Governor

Bank of Sierra Leone

23rd26th March 2004


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BACKGROUND

ECONOMIC STRUCTURE

Sierra Leone is a low income country emerging from 11years of civil conflict

The country has an estimated population of approximately5.0 million with a GDP growth rate of 6.5 %.

Largely agrarian economy with rural dwellers accounting

for over 70 % of the population

Abundant fertile soil, wealth of Mineral/Marine/ HumanResources

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BACKGROUNDTable 1

2001 2002 2003 *2004GDP at marketprices (Lebn) 1,508.7 1,658.7 1,907.9 2,040.9

GDP at market

prices (US$m)759.9 790.2 849.8 879.8

Real GDP Growth(%) 5.4 6.6 6.5 6.6

Consumer price

inflation (ave.%)3.0 -3.2 8.0 14.0

Population (m) 4.6 4.8 4.9 5.2Export fob

(US$m) 29.2 48.5 60.2 70.5Imports fob

(US$m) 185.5 264.3 284.5 317.5Current A/c Bal.

(US$m) -75.8 -142.0 -153.2 -165.4Reserves excl.gold

(US$m) 51.3 84.7 75.0 74.7

Total externaldebts (US $ M) 118.8 1,467.6 1,630.4 1,640.0

MACROECONOMIC

INDICATORS

*Projection


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OVERVIEW OF THE BANKING SECTOR

Bank of Sierra Leone Sierra Leone Commercial Bank

Standard Chartered Bank

Rokel Commercial Bank

Union Trust Bank

Guarantee Trust Bank

First International Bank

National Development Bank

National Cooperative Bank

Post Office Savings Bank Sierra Leone Housing Corporation

Community Banks

NaCSA Micro Finance Window

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Concern for the socio-economic transformationand growth of the countrys rural financial sector

Taking banking facilities to the rural poor

Creating an institutional capacity for the mobilisation of savings

Delivering credit to small farmerProvision of financial services to rural and medium-scale

operators to increase productivity, income and employment

Eight rural banks were established: the first in 1985Yoni Rural Bank Mattru Rural Bank Marampa-Masimera Rural Bank Sewama Rural Bank

Daru Rural Bank Moamale Rural Bank

Kunike Rural Bank Bombali

Cessation of operation in 1995 due to rebel war

Rationale for the Establishment of Rural Banks

in Sierra Leone3.0


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PERFORMANCE OF RURAL BANKSLet us look at the performance of the Rural Banks using four

operational yard sticks

Paid up Capital

Share Participation

Resource Mobilisation

Lending

Paid-up Capital of the 8 Banks Le 20.01M i.e.41.7% of

Authorised Capital;

3765 Shareholders attracted including NDB

Total deposits mobilised

In 1985 Le0.3m In 1993 Le 95.6m No. of Savers 6524

Lending- No of borrowers 18,517 of which 5,986 i.e.32.3%

were women

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Table 2:

GROWTH IN TOTAL DEPOSITS (CURRENT AND

SAVINGS) IN FOUR SELECTED RURAL BANKS

(Le Million)

Name of Rural

Bank

1985 1986 1987 1988 1989 1990 1991 1992 1993

Yoni .03 2.9 5.7 7.1 5.9 11.8 8.0 20.3 15.8

Marampa-

Masimera

- - 1.1 3.3 5.8 15.4 16.9 11.9 30.9

Kunike - - 1.5 2.3 1.7 2.2 6.1 3.1 5.4

Mattru - - 0.8 3.2 11.6 15.7 17.6 28.3 43.5

Total Deposit 0.3 2.9 9.1 15.9 25.0 45.1 48.6 63.6 95.6

% Change in total

Deposit

866.7 213.8 74.7 57.2 80.4 7.8 30.9 50.3


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Table 3:

RATIO OF SAVERS TO BORROWERS IN

FOUR SELECTED RURAL BANKS (1985-1993)

Rural Bank Period No. of Savers No of

Borrowers

Ratio of Savers

to Borrower

Yoni 1985-1993 2,668 4821 1:1.8

Marampa-

Masimera

1986-1993 1573 9200 1:5.5

Kunike 1987-1993 897 2626 1:2.9

Mattru 1987-1993 1386 1870 1:1.3

Total 1985-1993 6524 18517 1:2.8


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PROBLEMS AND CONSTRAINTS

Rural Banks

Under capitalisation

Inability to mobilise adequate financial resources

Inability to generate reasonable profit level

Slow rate of growth

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Rationale for the Establishment of

Community Banks in Sierra Leone

Mobilize idle rural resources

Deploy these resources for the extension of supervised credit to smallscale entrepreneurs

To replace rural banks registered by guarantee

Other related activities in the rural areas

Two pilot Community banks commenced in 2003Yoni Community Bank

Marampa- Masimera Community Bank

Four other pilot Community Banks to follow

Facilitated by Bank of Sierra Leone

BSL to eventually relinquish its direct role and Apex

Institution to be established

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As mentioned in the paper, Community Banks have only

operated for about a period of one year in Sierra Leone.

Measurement of their performance using the same indicators

as we did in the Rural Banks will be limited.

Total depositors over 12 Months period for 2 Banks1243

Deposits mobilised Le 2896.4m

Lending

No of borrowers - 92

Amount - Le 126.7m

Rate of Interest - 25-35 %

PERFORMANCE OF COMMUNITY

BANKS

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DEPOSIT MOBILISATION

FEBRUARY-DECEMBER 2003

Product Yoni Community

Bank

Marampa-Masimera

Community Bank

No. of

Accounts

Deposits

Le, 000

No. of

Accounts

Deposits

Le000

Current

Account

371 1,350,686 190 1,315,104

SavingsAccount

471 118,

457 211 112,176

Total 842 1,469,143 401 1,427,280

Table 6.1(a):


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Table 6.1(b):LOANS AND OVERDRAFT PORTFOLIOS FOR GROUPS AND

INDIVIDUALS AS AT DECEMBER 31ST 2003

Product Marampa-Masimera

Community

Bank

YoniCommunity

Bank

Marampa-Masimera

Community

Bank

YoniCommunity

Bank

Total No.Of Loans 13 19

TotalAmount Of

Loans

(Le000)

13,550 23,817

Total No.

Of

O/Drafts

12 48 TotalAmount Of

O/Draft

(Le000)

28,500 60,837

Total No.

Of

Exposures

25 67 TotalAmount Of

Exposures

(Le000)

42,050 84,654


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BENEFITS FROM THE

LESSONS LEARNTMajor problems and constraints faced by rural banksnow addressed:

Adequately trained personnel now recruited

Vehicle and motor-bike now provided

Adequate office equipment now provided

Electricity and water supply availablePositive interest rates now maintained

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THE WAY FORWARD

o The facilitating role of BSL is temporary and the Bank

will gradually relinquish its direct role

o An Apex Institution to be established, managed by the

Private Sector to oversee the overall development of the

Community Banks scheme

o The pilot scheme to help the establishment of

Community Banks in other rural areas

o Creation of Sustainable rural financial intermediaries

to facilitate enhanced savings mobilisation

o Provision of reasonably priced financial products and

services

o Enhanced standard of living and poverty alleviation

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National Micro finance policy recently approved by

Government of Sierra LeoneVision of policy Develop and integrate micro finance into the national financial services

mainstream

Bank of Sierra Leone Policy relating to Micro finance Provision of Start-up cost of micro finance institution

Provision of Training for Staff and Management

Establishment of regulatory, supervisory and monitoring system

Micro finance Unit in BSLo Support and build consensus on the development of an inclusive financial

system

o Establish centralised data bank on Micro finance

o Supervise and monitor performance of regulated micro finance operators

THE NATIONAL MICROFINANCE POLICY8.1


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THE END

328rural finance sierra leone

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