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Innovations in addressing rural finance challenges in Africa

Innovations in addressing rural finance challenges in Africa. Key issues and recommendations Prepared by: Ansumana Darbo –Central Bank of The Gambia Dorothy Nduku – AFRACA. Service delivery methodologies. Various methods are in use by different institutions Individual lending

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Innovations in addressing rural finance challenges in Africa

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  1. Innovations in addressing rural finance challenges in Africa Key issues and recommendations Prepared by: Ansumana Darbo –Central Bank of The Gambia Dorothy Nduku – AFRACA

  2. Service delivery methodologies • Various methods are in use by different institutions • Individual lending • Group lending – Co-guaranteeing and peer pressure • Availability of various guarantee schemes

  3. Challenges in providing financial service to the rural areas • Numerous challenges

  4. Lessons learnt • Innovative initiatives in Nigeria • National Economic Empowerment and Development Strategy (NEEDs) • Microfinance Policy, Regulatory and Supervisory framework for Nigeria • Credit Guarantee schemes • Effective policy mix • Appropriate and effective payment system • Wholesale of funds to banks/MFI & retail • Long term finance for MFIs – bonds & Securitization

  5. Lessons learnt…..2 • Alternative business channels – ATMS, Kiosks, Agents, POS, GSM mobile communication, Mobile banking • SMS banking; advantages –easy, cheap and timely • Moral suasion from regulatory Authorities • Targeting women has intergenerational benefits

  6. Lessons learnt…..3 • ARB Apex bank – Rural community Banks • Group lending methodology-group members guarantee each other • Innovative money transfers/remittance e.g Apex link • Collective efforts through partnership is required to salvage the poor • Government use of donor funds and loans from World Bank as a smart subsidy for the benefit of all citizens

  7. Lessons learnt …..4 • Availability of infrastructure plays a major role in agricultural and rural finance development • Diversification of products and niche markets is important to reduce risk and to take new opportunities

  8. Recommendations & way forward • Clients need varied services; savings, credit, remittance, investments etc • Innovate & embrace technology • Be passionate about rural/microfinance • Create more and stronger bridges between all financial institutions – linkages

  9. Recommendations……2 • Commercial banks to utilize their comparative advantage…downscale, wholesale • Microfinance is a market with huge potential available to all • Develop partnerships and create synergies • Need for climate change awareness and its impacts…develop responsive products

  10. Recommendations……3 • Need to continually improve products • Come up with innovative delivery mechanisms (Rural and Community Banks, Cooperatives-new generation). • Risk management strategies should be put in place • Micro-insurance is necessary for mitigating risks • Creation of favorable macro and microeconomic environment • Creating effective policy mix • Reform finance institutions to provide rural finance

  11. Recommendations…..4 • Promote conducive policy, regulatory and supervisory environment • Create special financial products • Integrate rural finance into domestic/mainstream financial sector/linkages • Make loan application simple • Marketing strategy - Go where the clients are stationed and speak their language

  12. Recommendations……5 • Access to finance is more important than the issue of interest rate charges • Emphasis to be on appraisal, timely disbursement, training, Monitoring • Successful models aimed at increasing the participation of entrepreneurs and small scale farmers are required

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