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PROMOTION OF COMMUNITY BANKS EXPERIENCES AND LESSONS LEARNT THE CASE OF BANK OF SIERRA LEONE

PROMOTION OF COMMUNITY BANKS EXPERIENCES AND LESSONS LEARNT THE CASE OF BANK OF SIERRA LEONE. PRESENTATION BY EDMUND O. KANGAJU COORDINATOR, COMMUNITY BANKS BANK OF SIERRA LEONE TUESDAY, NOVEMBER 23, 2004. 1. INTRODUCTION 1.1 Demographic Structure.

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PROMOTION OF COMMUNITY BANKS EXPERIENCES AND LESSONS LEARNT THE CASE OF BANK OF SIERRA LEONE

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  1. PROMOTION OF COMMUNITY BANKS EXPERIENCES AND LESSONS LEARNT THE CASE OF BANK OF SIERRA LEONE

  2. PRESENTATION BY EDMUND O. KANGAJU COORDINATOR, COMMUNITY BANKS BANK OF SIERRA LEONE TUESDAY, NOVEMBER 23, 2004

  3. 1. INTRODUCTION 1.1 Demographic Structure • Sierra Leone’s population is about 5million • Rural sector forms 80% of the population • Rural economic activities provide employment & incomes for 60% of rural dwellers

  4. 1.2 Financial Services • Rural financial services limited • Littleor no access to credit & savings facilities

  5. 1.3 Rural Banking Scheme • 8 rural banks between 1985 and 1997 Deposits mobilized between 1988 and 1993 increased from Le0.33million to Le572million (exchange rate Le32.51 = US$1 (1988); Le567.33 = US$1 (1993)) • Lending activities – inclusive of credit to women’s group • By 1998, all ceased operations due to rebel war

  6. 1.4 Constraints of Rural Banks • under capitalization • inability to mobilize adequate financial resources from the rural communities • inability to generate sufficient profit • undue political interference prior to the establishment of the banks and during the course of their operations

  7. 2. THE COMMUNITY BANKING SCHEME AND THE EXPERIENCES AND LESSONS LEARNT IN PROMOTING THEM 2.1 The Community Banking Scheme • conceived by Bank of Sierra Leone in August 2002 to replace the erstwhile rural banking scheme • 2 pilot in 2003; presently 4 and another 2 by mid-2005 • products and services offered

  8. 2.2 Experiences and lessons learnt • partly drawn from the bank’s previous experience with the rural banks • those during the pre- and post-establishment period to date

  9. 2.2.1 Lessons learnt from the promotion of the Rural Banks • increasing awareness in the rural areas of the role of rural banks • rural financial intermediaries to be adequately capitalized • need for viability and sustainability • their operations to be handled by the private sector and free from political lineage • capacity building crucial • periodic on-site supervision crucial • adoption of market rates • women to be allowed to participate

  10. 2.2.3 Pre-establishment period • sensitizing the community elders about the new scheme: constraints encountered in getting them to accept the new concept • delays in getting names of promoters/directors • getting the M & A signed • getting the Loan Agreement and Declaration of Trust signed • recruiting the right auxiliary staff from the locality (most of the short-listed applicants lacked the minimum qualification as observed at the interview)

  11. 2.2.3 Post-establishment • the trained managerial staff (considered their emoluments too small viz-a-vis those of large commercial banks) • on-the-job experience viz-a-viz educational qualification • Products & Services • performance in the operations over the period: • Savings mobilization • Income & Expenditure • Lending • Recovery • Monitoring • Board members; scheduling board meetings with the increase in number of community banks viz-a-viz number of staff rendering technical assistance

  12. 2.2.3(a) DEPOSIT MOBILISATION 9 MONTHS’ COMPARATIVE FIGURES 2003 AND 2004

  13. 2.2.3(b) INCOME AND EXPENDITURE COMPARATIVE FIGURES OVER NINE MONTHS’ PERIOD - 2003 AND 2004

  14. 2.2.3(c) EXPOSURES 9 MONTHS’ COMPARATIVE FIGURES 2003 AND 2004

  15. THE WAY FORWARD • 3.1 The need for Bank of Sierra Leone to gradually move away from direct intervention 3.2 The concept of an Apex Institution to coordinate the operations of the Community banks • preparation of a project document • sourcing funds for the establishment of the Apex Institution • capacity building for this institution in the long-run

  16. 4. CONCLUSION • Bank of Sierra Leone presently directly involved • aimed at expediting and enhancing the provision of financial services to the poor and small-scale enterprises towards poverty alleviation and economic development • it is hoped that with the gains acquired by Bank of Sierra Leone in creating community banks and making them viable and sustainable, the private sector will participate in the establishment and governance of community banks • commercial banks are now making frantic moves towards reactivating some of their former branches as a result of the move made by Bank of Sierra Leone

  17. increased awareness of the role of rural and community banks at grassroot level • rural and community banks should best be handled by the private sector and be free from political interference • general acceptability and willingness of rural communities to access efficient formal financial services and to pay for such services • increase in the number of community banks requires a dedicated independent Apex institution to provide the technical support and other services to these banks

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