Download - 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