West Africa English Speaking Sub Regional Workshop Theme: “Innovations in addressing Rural Finance Challeng

1. West Africa English Speaking Sub Regional Workshop Theme: “Innovations in addressing Rural Finance Challenges in Africa” Date:31st March – 2nd April 2008 Venue:Paradise Suites Hotel, Banjul The Gambia Host Institution:Central Bank of The Gambia

2. INNOVATIONS IN ADDRESSING RURAL FINANCE CHALLENGES: THE GAMBIA EXPERIENCE PAPER CONDUCTED FOR AFRACA BY S. Bai Senghor Director Microfinance Department Central Bank of The Gambia Banjul, The Gambia

3. Discussion Points • Introduction • Country Background • Financial Sector Policies • Rural Financial System of the Gambia • Village and Savings and Credit Associations • Credit Unions • Finance Companies • Challenges Faced by Microfinance Institutions • Risk Factors Faced by MFIs in The Gambia

4. Discussion Points (cont.) • Innovations in the Rural Financial System • Apexes as Wholesale Microfinance Institutions • Expanding Outreach in the Rural Areas • Successful Strategies by MFIs Serving Rural Areas • Conclusion and Way Forward

5. Introduction • The Gambia is one of the smallest and least developed countries of the world. • The population has grown rapidly over the last two decades and its population density currently estimated at 128 persons/km2 is one of highest in the world.

6. MAP OF THE GAMBIA

7. Introduction (cont.) • About half of the population reside in the rural areas and • About 80 percent of the household incomes are derived from agriculture with groundnut as the main cash crop.

8. Rural Population

9. Introduction (cont.) • Economic • Poverty Status • Strategy for Poverty Alleviation

10. Financial Sector Policies • Liberalisation and Deregulation • At institutional level • The revision of the Financial Institutions Act (1992) • Operating Rules and Guidelines for both Banking and NBFIs • Legal and Regulatory Framework

11. Category “A” Commercial Banks Insurance Companies Foreign Exchange Bureaus Category “B” Deposit-taking NBFls Private Sector-owned MFIs Grassroots Community-owned MFIs Cooperative Credit Unions NGO MFIs Classification of The Gambia’s Financial SystemFinancial Institutions Act (FIA 1992)

12. The Classification of MFIs

13. Microfinance Sector- Regulated MFIs • No Fiduciary Financial Institution as yet • 5 Finance companies • 70 VISACAs • 67 Credit Unions

14. Finance Companies • Up to 2001 – 1 company (GAWFA) • 2001 to date – 4 additional companies • NACCUG • Gamsavings • Bayba • Reliance

15. Summary of Total Savings, Loans, Asets and membership of Finance Companies

18. VISACAs 2001 (25) 2006 (63) All rural Credit Unions 2006 (67) Rural based and work base/ industrial Savings and credit Associations (VISACAs) and Credit Unions

19. Performance VISACAs & Credit Unions

21. Challenges Faced by Microfinance Institutions • building microfinance institutional capacity • financial strength • Outreach • integration into the domestic financial system / Linkage banking

22. Risk Factors Faced by MFIs in The Gambia • Ownership and governance risk • Management risk • Portfolio risks • Some new institutions

23. Innovations in Rural Finance • Innovations in rural finance refer to changes in the technology, the type of financial services offered, the strategic behaviour of institutions, the institutional arrangements, and the structure of incentives that result in improved viability. • These innovations should contribute towards the reduction of the risks of service provision as well as the per unit transaction costs associated with financial intermediation in order to impact on small agricultural enterprises.

24. Innovations in Rural Finance Three factors play a crucial role in influencing rural finance innovations: • The riskiness of financial transactions • The economic, political and judicial environment • Donor actions and conditionalities that simultaneously force the pursuit of outreach and sustainability.

25. Categories of Innovations in Rural Finance

26. Categories of Innovations in Rural Finance (cont.)

27. Apexes as Wholesale Microfinance Institutions • Definition • It has ten linked components • Cooperative branding strategy - NACCUG

28. Expanding Outreach in Rural Areas • Options available for expanded outreach • The main issues relevant to outreach in Micro finance • Sensitization and training for awareness creation and skills improvement

29. Successful Strategies by MFIs Serving Rural Areas Demand-Oriented Savings and Credit Products with the following features • Low Transaction Costs • Non-Traditional Loan Appraisal and Collateral Substitutes • Peer-lending (group) • Incentive Mechanisms for Timely Repayment

30. Conclusions and Way Forward • Our goal is to create enabling environment and private sector participation in providing financial services in the rural areas. • Commercialisation • Linkage • Sustainability

31. Thank You