REGULATION OF MICROFINANCE BY THE CENTRAL BANK OF THE GAMBIA

1. REGULATION OF MICROFINANCE BY THE CENTRAL BANK OF THE GAMBIA BY SIAKA BAH MICROFINANCE OFFICER

2. INTRODUCTION • Long history of government sponsored institutional credits • Shift from the supply-led to the demand-driven approach to mf dispensation • Diversification of the intermediation base to include grassroots owned and managed MFIs • Creation of the ACU, RFU and subsequently the MFD

3. Introduction contd • CBG commenced regulation of MFIs in 1995 as empowered by section 41 of the CBG Act 1992. • Success of the ACU-RFU resulted in the proliferation of viable MFIs in rural communities • The BOD of the CBG in April 2001 merged the RFUs under ERD and BSD into the MFD

4. Key Issues • Policy provides for the operations of village-level MFIs while supporting regulations ensure prudence. • Regulatory framework contains rules and guidelines on functions, operations, monitoring and supervision of the various intermediation processes. • Areas covered include: scope of biz, registration/licensing requirements, record keeping, financial information, capital adequacy, reserve ratios, internal and external controls.

5. Categories of MFIs • Five categories classified according to their capital base and financial services offered. • VISACAs • MISACIs • COFBUs • FCs/SCCs • FFIs

6. Rules and Guidelines on Operations of MFIs • Vol.1 gives the macro policy direction of the microfinance market. • Vol. 2 on Policies and Procedures for VISACAs. • Vol. 3 for MISACIs. • Vol. 4 on COFALBUs. • Vol. 5 on FFIs. • Vol. 6 on SCCs/FCs.

7. Capital Requirements • Minimum paid-up capital of D3000 for VISACAs • MISACIs D10, 000 • Com. Finance Bureaus D300, 000 • SCC/FCs D500, 000 • FFIs D1million

8. Supervision of MFIs • To monitor the regulatory issues the CBG supervises MFIs in two ways: • Off-site supervision • On-site examination • In supervision fully registered SACAs, SCCs, and FFIs required to submit financial statements and technical information to the bank on a periodic basis

9. Supervision of MFIs contd • Submission of returns namely: • Quarterly statements on reserve asset/deposit liabilities showing the liquid asset position of MFIs • Quarterly profit and loss statement giving information on the financial condition and sustainability of the MFI • Quarterly loans account statement • Balance sheet and profit and loss account prepared by a qualified auditor or accountant at the end of each year.

10. Supervision of MFIs contd • On-site examination provides an independent check on MFI operations and condition as well as enable verification of off-site supervision data.

11. Constraints • Persistent prevalence of grassroots institutions with weak financial and human base. • Poor savings mobilisation and inability to attract well trained personnel • Low capacity of MFIs to absorb and efficiently utilise refinance funds • Some stakeholders operating outside the established rules and guidelines on policies and procedures.

12. Constraints • The general problem of untimely submission of returns • Credits mainly short term frustrating any medium or long term project ambition of clientele and • The unchecked financing by agencies resulting in a high and undesirable loan/deposit ratios

13. Way forward • Enhance savings mobilisation by MFIs and the reduction of dependence on refinancing • Promotion of beneficiary driven and locally based MFIs • Linking MFIs with the country’s banking system • Reformation of the ownership structure to cater for share capital formation

14. Conclusion • MF market in the Gambia dominated by grassroots owned and managed SACAs • Linkage Banking could help greatly to bridge the gap among MFIs • It is anticipated that the creation of an FFI to start operations in 2007 would help greatly towards continuing the provision of vital services by MFIs

15. THE END THANK YOU FOR YOUR ATTENTION