Mohamed S Fofana: Benefits of microfinance in Sierra Leone
Speech by Mr Mohamed S Fofana, Deputy Governor of the Bank of Sierra Leone, at the
Official Opening Ceremony of the ProCredit Bank (SL) Limited, Freetown, 1 February 2008.
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Madam Chairperson
Ministers of Government
Members of the Diplomatic Corps
Members of the Board of Directors,
Senior Management and Staff of the ProCredit Bank (SL) Limited
Heads of Banks and other Financial Institutions
Colleagues from the Fourth Estate
Distinguished Ladies & Gentlemen:
I am happy to be here this afternoon to address this distinguished audience on the official
opening ceremony of the ProCredit Bank (SL) Limited. The Bank of Sierra Leone issued a
licence to ProCredit Bank (SL) Limited to conduct banking business in Sierra Leone on 1st
August, 2007, and the bank opened its doors on 3 August 2007.
Its activities, since that time, have been largely focused on microfinance promotion; taking
deposits from and giving credits to small businesses. This is an important mile-stone in
Sierra Leone's poverty reduction drive, which is consistent with Government's desire to make
the microfinance sub sector of the financial industry viable and responsive to the needs of
the vast majority of Sierra Leoneans.
Madam Chair, Distinguished Guests, the benefits of microfinance are numerous and well
documented, especially as they relate to a country's effort in reducing poverty. I cannot go
through all such benefits this afternoon. I will however attempt to highlight a few.
Credit to small business will enhance the ability of poor households to increase incomes,
build assets and reduce their vulnerability in times of economic stress. With better access to
micro credit services on a continuing basis, the poor, particularly women, become more
active partners and more importantly, pro-active partners, in the development process.
Madam Chair, though micro credit has been used in various forms in the recent past to
address the needs of the most vulnerable in post-conflict Sierra Leone, the providers of the
micro credit have had an uncoordinated framework with each implementing its own scheme.
This sometimes created an unnecessary duplication and waste in the use of scarce
resources.
Thus, in October 2003, Sierra Leone adopted a national micro finance policy which provides
the fundamental framework and direction for stakeholders operating in the microfinance
industry.
Recognizing the importance of micro finance in reducing poverty, and in anticipation of the
growing demand for micro credit products, ProCredit Bank (SL) Limited decided to increase
its outreach depth to a greater number of small businesses in and around Freetown. Only
five months after the commencement of operations at its head office, the bank requested and
was given permission to open a branch in Kissy on 14th December, 2007. And we are
delighted to note that another branch will soon be opened in Lumley - the West end of
Freetown. The challenge after Lumley is for ProCredit to extend its activities in other areas of
the country, which may be more deserving for their services.
By our estimates so far, ProCredit has already made some mark in the domestic Banking
Industry and is poised to do more. As at end January, 2008, the bank's credit portfolio
amounted to about Le8.0 billion; this was disbursed to 1,440 customers. Deposit base during
the same period stood at about Le3.0 billion, with an impressive record of 5,600 deposit
accounts. What is important here is that many of these customers are first-time account
holders who might have found it difficult to open accounts with the traditional commercial
banks. Loan recovery has also recorded a formidable and impressive rate. We therefore
commend the management and staff for this ground-breaking performance.
Microfinance activities now include products such as micro credit, micro insurance, mobile
banking, etc, which are designed to increase the product portfolio and provide customers
with a variety of products that are easily accessible. We believe that with the increased
efforts to further institutionalise microfinance activities in the country, we will soon see a
wider variety of microfinance products for small scale producers.
Madam Chair, I believe this is a befitting occasion to discuss what we, at the Bank of Sierra
Leone, are doing to foster an efficient, sound and stable financial sector, including
microfinance. The Bank of Sierra Leone, in collaboration with MITAF, is drafting guidelines
for the regulation and supervision of deposit-taking Microfinance Institutions. Development in
this area is far advanced. The Bank of Sierra Leone has also recognised the need to bring
the legal framework for regulating the banking sector consistent with international best
practice. Hence, in consultations with our International partners, (ADB, IMF, World Bank,
etc), the Bank of Sierra Leone is undertaking a comprehensive review of the Banking Act
2000, and the Anti-Money Laundering Act 2005 in order to align them with international best
practices and to address some of the weaknesses which have been identified while
implementing them. We anticipate that once these legislations have been amended, the legal
framework will provide a conducive environment for a more robust banking sector.
Going forward, the Bank of Sierra Leone plans to draft operating guidelines for other
specialised institutions, including Merchant and Agricultural banks, in order to broaden the
financial landscape in the economy.
Traditional Commercial banks, on the other hand, should endeavour to increase product
innovation and diversification. The real challenge for all of us is how to enhance savings
mobilisation and effectively channel such savings to their most productive use.
Madam Chair, Distinguished Guests, let me conclude my remarks with a serious appeal to
the entire banking industry for the better packaging of banking products for our clients. This, I
believe will enhance our service delivery, which in turn, will enable us offer more affordable
banking services. Providing affordable banking services has the potential of drawing a larger
number of Sierra Leoneans to the formal financial system, resulting in an expanded banking
clientele. This also has the potential of reducing delivery cost for the banks; hence the
potential to increase profit maximization for both banks and their clients.
Finally, let me thank the Board of Directors and Management of ProCredit Bank for inviting
me to this occasion. I wish you every success in your operations as you compete to make
your presence felt in the industry. I would also like to covey appreciation from the Governor,
who is unavoidable absent on this occasion.
I thank you all for your attention.