Central Bank of Sudan Microfinance Unit Role & Mission April 2007 Mutwakil Bakri
Why Microfinance Matters? Poverty Map in Sudan: 76% Under Poverty Line,70% in Rural Deprived Areas Demand Gap:only 1-3% of the needy are covered Post-War Era: Consolidated CPA Traditions and Cultural Values
Does Microfinance Work? Grameen Bank Experiment: From $ 26 to $ 6.5 Billions Bankers are already taking note of microfinance: (225 banks in the MF market already) (50 countries implement MF policies) Increasing competition Add to the bottom line Make corporate infrastructure work harder Diversify risk Globally, MFIs outperforming commercial banks MFI ROA ~ 50% higher ( study of 278 MFIs vs. 1,147 banks in 38 countries)
Experiences in Sudan A number of agencies have been involved with small and micro lending in Sudan, each with their own approaches, delivery mechanisms and target groups Sudanese experiences can be classified into 4 broad categories by types of agencies undertaking lending operations. Banks Commercial and Specialized NGOs- local and international- Government Social Funds at federal and state levels Projects
Experiences in Sudan-cont Elnilein Bank extends loans to small producers in general, with emphasis on the industrial and manufacturing sector The Agricultural Bank of Sudan (ABS) has been one of the leading banks in Sudan in terms of capital and geographical coverage. It focussed on extending relatively short term credit to farmers
Experiences in Sudan-cont Savings and Social Development Bank (SSDB) was established as the Savings Bank in 1974 with a leading role in mobilizing savings and extending loans to small producers Social Development Fund Sudan Rural Development Finance Company
Weaknesses Lack of exposure and training in microfinance facilitation and management Procedures are conventional, not tailored to the conditions of the poor (e.g. the client has to open and activate a bank account before receiving a loan; clients are required to issue post-dated cheques for installments; they have to provide adequate and conventional collateral, lengthy procedures, etc.) Efforts depend entirely on individual bank initiatives, not within a national policy
Weaknesses-cont No unified definition of the target group or a set of unified eligibility criteria across banks or even across branches Almost no bank targeted the poorest of the poor Most experiments, with few exceptions, were in urban or semi-urban areas Limited experience in field work and limited links with grass-root organizations (CBOs) and hence limited coverage Banking system is structured to serve those in the formal sector (licenses, clearance from Zakat and taxes, land lease, banking accounts, requirements of cheques and collateral etc.) Little emphasis on the savings component
MFU Vision TO PROMOTE INCLUSIVE FINANCIAL SYSTEM AND SUPPORT THE GROWTH AND DEVELOPMENT OF THE FINAICAL SECTOR AT THE BOTTOM OF THE MARKET
MFU Mission Enabling Environment Strengthen the Capacities of Microfinance Actors Enhance Transparency and Efficiency in the Microfinance Industry Develop Best Practices
Regulatory Aspects Consistent Strategy Deliberate Policies Practical Procedures Institutional Frameworks Technical and Human Capacities
Business Promotion Promote Institutional and Product Diversity:build industry knowledge; improve linkages between stakeholders Business Services and Development Investment Promotion Dissemination of Information
Advisory &Supervisory Mandate Act as a subject matter expert for all policy, regulatory and implementation plans ; providing ongoing assistance and in-depth knowledge of system, process of financial deepening in micro-finance activities Share policy and content, while providing advice and counsel on all issues to stakeholders Full adherence to policy guidelines to ensure:transformation, financial viability, commercialization etc
Activities Ahead Development of sustainable MFI Promoted management efficiency and monitored performance Enhanced role of Banks in providing MF services/products Developed non-banks MFIs Developed non-banks MFIs
Activities Ahead-cont Established MF Network Established Umbrella (Apex Institution ) Established Self Regulatory Organization Strengthened MFI Capacities
Program Pillars Time span: 5 years project. Poverty reduction. The strategy also aims to take proactive steps to support women entrepreneurs who lack support when compared to their male counterparts. Formalization of informal sector Formation of the SMDF
Sudan Microfinance Development Facility SMDF The facility will establish a national multi-donor mechanism which will provide funding to qualified retail microfinance institutions (MFIs) for on-lending as well as capacity building, while moving towards operational and financial self sufficiency The development objective is to increase the availability of affordable financial services to 2,000,000 households by supporting the emergence of commercially sustainable microfinance service providers.
SMDF-cont Microfinance Sector Development :US$17.0 million: This component will assist in developing the microfinance industry. It will provide financial and technical assistance in the following activities: Technical Assistance to New Microfinance Providers (US$5,000,000) Equity, Loan and Grant Financing (US$12,000,000):
Key Factors for Success Political Will Harmony in Policies Relaxed Rules Enthusiasm and Belief Ownership
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