Back and Next - Back and NextMarket Beat- Developmet of a Micro Finance capability In The Gambia
Tuesday, July 1, 2008
This week Market Beat is privileged to bring to you extracts of a discourse delivered at the second anniversary of the Gambia Association of Accountant (GAA). Our sole wish is bring to the fore essential materials and knowledge to the door steps of our reading followship and in so doing let the message reach every Gambian setting and be digested and utilized as a means to an end in the light that its drafters had in mind when they pen these lines.
Economically and financially the Gambia has done and is doing very well and over the years a galaxy of financial institutions, be it banks and others have spread all over the land creating employment, cash flow and capital into the country. In that light, the presences and operation of a body such as the Gambia Association of Accountants (GAA) becomes more pressing. I must salute the courage and dynamism of the people who came together to set the ball rolling for the GAA some odd twenty something years ago, Bravo!
The GAA as a pivotal institution in an emerging economy like ours must redouble its efforts to open up the organizations to all Gambian Accountants and aspiring ones and even student accountants. The GAA must also among others participate in the formulation of microfinance instruments and other financial instrument that will or are operating in his country.
Meaning the GAA through government support must be able to develop and formulated packages and working financial instruments that are Gambia’s own, that is to say they are tailor made to suit Gambian needs and terrain. They must also look at areas of tax, how about developing our own authority in terms of tax laws, becoming independent legal setting as per examination such as in ACCA than relying on UK or International Models.
Most importantly, the GAA must also strive to get their priorities correct and prominent of them all is the welfare of its members at all times. Accountants and accounting is a leading, demanding and sensitive job and occupation so the body that claims to represent them must work extra hard to look after their welfare both at work and in the dynamic emerging world of computing and accounting. I therefore bring the extract s as thus:
Conference Theme: Development of Micro Finance Capability in The Gambia
Representatives of Association of Accountancy Bodies in West Africa (ABWA), President and members of the Executive Committee of the Gambia Association Accountants, Distinguished conference delegates and GAA members, Good morning.
I am most gratified to have been asked by the Gambia Association of Accountants to deliver the keynote address on the occasion of their second Annual Conference. I would first of all like to congratulate the members of GAA for celebrating 29 years of their existence and more for selecting this important theme and thereby providing a platform to discuss and exchange views relating of the development of micro finance institutions in the country.
This conference could not have come at a better time than now when we have witnessed the unprecedented increase in micro finance institutions and when advanced economies are facing a credit crunch resulting in spill over effects in developing countries. It is for this reason that the Government of the Gambia (GoTG) in its quest to eradicate poverty continues to develop sound macro economic tools and policies in order to hedge the most vulnerable groups from this devastating effect.
As you are aware, the main regulator of the micro finance industry in the Gambia is the Central Bank. The Micro Finance Department (MFD) of the Bank continues to play a pivotal role in the development of the micro finance sector. The prudent macro economic management policy adopted by the government over the years has to a very large extent resulted in the mushrooming of so many micro finance institutions.
In line with the changing nature of this sector, the Government has taken a series of measures aimed at further deepening and building more resilient and sustainable MFIs as an effective complement to the formal banking sector. Foremost among these measures are:
-The drafting of a non Bank Financial Institutions Bill to give sufficiently and clear responsibilities to effectively regulate and supervise Micro finance activities.
- The review of the financial institutions Act by the Central Bank of the Gambia.
- The review of the micro finance policy guidelines
-The recent approval of the entrepreneurship development and micro finance project in August 2006
The new measures/directives adopted by the Bank have raised the minimum paid-up capital requirement for micro finance companies and village Savings and Credit scheme(VISACAs) from D0.5M and D3.0M to D10M( D5.0M by June 2008 and D10.0M by June/December 2009) and D0.3M respectively.
This is aimed at having a more competitive sector geared towards meeting the financial requirements of the non-bank sector. Additionally, they are required to operate foreign Exchange businesses if they are required to observe a capital adequacy ratio of 16 percent and a gearing ration of 10.0 under the new policy, micro finance can now licensing requirements. Plans are also underway for the MFD to formulate governance framework, a manual of guidelines and instructions, for prompt and collective Actions.
Micro Finance Companies
Micro Finance companies and promoters of VISACAs have recently been briefed on the new policy objectives during which micro finance companies were encouraged to buy shares in the VISACAs of their choice and use them as agencies/branches. It is hoped that encourage a competitive environment which would enhance linkages of MFIs with the banking sector.
The Micro-Finance Industry in The Gambia
The microfinance industry in the Gambia is mainly driven by the promotion and development of micro and small enterprises as well as entrepreneurs both in formal and informal sectors. Current statistics from some Non Bank Financial Institutions (NBFIs) in especially those with rural outreach report an informal sector clientele of up to 65% and which is further growing with the increased demand for value added products both within the country and in the region. Therefore, the development of the microfinance industry is directly linked to poverty reduction through the growth of micro and small enterprises in the country.
Currently, there are five (5) licensed finance companies operating in the Gambia; namely GAWFA, NACCUG, GAMSAVINGS, BAYBA and Reliance Financial Services.
Wholesale Microfinance Intermediaries:
The Microfinance Service Providers in The Gambia
The biggest wholesale microfinance intermediary in the country is Social Development Fund (SDF) which hosts the microfinance schemes from three ADB projects and one from Taiwanese Government.
The other major intermediary is the International Fund for Agricultural Development (IFAD) supported Rural Finance Community Initiative Project (RFCIP) which has put in place a network of VISACAs and provided them with funds for on-lending as well as capacity building to run their operations successfully. Although the RFCIP project has been completed, the fund is continuing to rotate under the guardianship of Department of State for Agriculture (DOSA).
Retailer Non Bank Financial Instructions: Currently there are about twenty microfinance retailers who make loans and provide savings mobilization facilities to various clienteles. The largest Non Bank Financial Institutions (NBFIs) are : The Gambia Women Farmers Association(GAWFA) which is the oldest one and targets only women farmers, the National Association of Cooperative Credit Unions of the Gambia(NACCUG) which is an apex organization of professional credit cooperatives, Gamsavings and Reliance. More informal microfinance providers consist of money lenders and rotating savings and credit associations (ROSACAS).
The money lenders may charge interest rates between 100 and 120 percent per annum. ROSACAS are informal organizations where members periodically save a certain amount of money and the total amount is then loaned to members in turn.
Project in Support of Rural/Micro Finance: The AFDB and IFAD are the main donors supporting the microfinance sector in The Gambia. While the IFAD support for RFCIP focuses on the provision and strengthening of fiianancial services, AFDB has supported the Community Skills Improvement Project (CSIP), the Peri- Urban Smallholder Improvement Project (PSIP) and the Artisanal Fisheries Development Project (AFDP), using microfinance component of the IFAD funded RFCIP concentrated in Lower River Region (LRR) and CRR. The project is reported to have promoted 80 VISACAs reaching an estimated 100,000 ‘clients’, including 45% women.
Commercial Banks: in recognition of the pivotal role that the microfinance sector plays in the economy two commercial banks have recently entered the microfinance industry. They are the Arab Gambian Islamic Bank (AGIB), with its wholesale concessionary credit to the National Youth Service Scheme (NYSS); and Standard Chartered Bank (Gambia) Limited with a line of credit to GAWFA. The schemes they offer are limited to the urban areas and focus on formal sector entrepreneurs and businesses, and are unsuitable for the emerging entrepreneurs of micro-enterprises. This is mainly due to the fact that these commercial banks are not motivated to increase their outreach in the absence of a clear and transparent micro finance policy environment, in addition to the lack of coordination and monitoring mechanisms which makes the rural based entrepreneur riskier than those in the urban setting.
Microfinance Market and Products
In The Gambia, the man existing financial services/products offered are: (1) savings mobilisation (voluntary or compulsory, passbooks and term deposits); and (11) credit delivery (short/medium/long-term loans; cash/ in-kind credit; production/consumption credit; and working capital/investment credit. The products offered cover only a small portion of the demand and need further improvements in order to address the recognised need for bigger amounts relevant to diverse economic activities.
Economically and financially the Gambia has done and is doing very well and over the years a galaxy of financial institutions, be it banks and others have spread all over the land creating employment, cash flow and capital into the country. In that light, the presences and operation of a body such as the Gambia Association of Accountants (GAA) becomes more pressing. I must salute the courage and dynamism of the people who came together to set the ball rolling for the GAA some odd twenty something years ago, Bravo!
The GAA as a pivotal institution in an emerging economy like ours must redouble its efforts to open up the organizations to all Gambian Accountants and aspiring ones and even student accountants. The GAA must also among others participate in the formulation of microfinance instruments and other financial instrument that will or are operating in his country.
Meaning the GAA through government support must be able to develop and formulated packages and working financial instruments that are Gambia’s own, that is to say they are tailor made to suit Gambian needs and terrain. They must also look at areas of tax, how about developing our own authority in terms of tax laws, becoming independent legal setting as per examination such as in ACCA than relying on UK or International Models.
Most importantly, the GAA must also strive to get their priorities correct and prominent of them all is the welfare of its members at all times. Accountants and accounting is a leading, demanding and sensitive job and occupation so the body that claims to represent them must work extra hard to look after their welfare both at work and in the dynamic emerging world of computing and accounting. I therefore bring the extract s as thus:
Conference Theme: Development of Micro Finance Capability in The Gambia
Representatives of Association of Accountancy Bodies in West Africa (ABWA), President and members of the Executive Committee of the Gambia Association Accountants, Distinguished conference delegates and GAA members, Good morning.
I am most gratified to have been asked by the Gambia Association of Accountants to deliver the keynote address on the occasion of their second Annual Conference. I would first of all like to congratulate the members of GAA for celebrating 29 years of their existence and more for selecting this important theme and thereby providing a platform to discuss and exchange views relating of the development of micro finance institutions in the country.
This conference could not have come at a better time than now when we have witnessed the unprecedented increase in micro finance institutions and when advanced economies are facing a credit crunch resulting in spill over effects in developing countries. It is for this reason that the Government of the Gambia (GoTG) in its quest to eradicate poverty continues to develop sound macro economic tools and policies in order to hedge the most vulnerable groups from this devastating effect.
As you are aware, the main regulator of the micro finance industry in the Gambia is the Central Bank. The Micro Finance Department (MFD) of the Bank continues to play a pivotal role in the development of the micro finance sector. The prudent macro economic management policy adopted by the government over the years has to a very large extent resulted in the mushrooming of so many micro finance institutions.
In line with the changing nature of this sector, the Government has taken a series of measures aimed at further deepening and building more resilient and sustainable MFIs as an effective complement to the formal banking sector. Foremost among these measures are:
-The drafting of a non Bank Financial Institutions Bill to give sufficiently and clear responsibilities to effectively regulate and supervise Micro finance activities.
- The review of the financial institutions Act by the Central Bank of the Gambia.
- The review of the micro finance policy guidelines
-The recent approval of the entrepreneurship development and micro finance project in August 2006
The new measures/directives adopted by the Bank have raised the minimum paid-up capital requirement for micro finance companies and village Savings and Credit scheme(VISACAs) from D0.5M and D3.0M to D10M( D5.0M by June 2008 and D10.0M by June/December 2009) and D0.3M respectively.
This is aimed at having a more competitive sector geared towards meeting the financial requirements of the non-bank sector. Additionally, they are required to operate foreign Exchange businesses if they are required to observe a capital adequacy ratio of 16 percent and a gearing ration of 10.0 under the new policy, micro finance can now licensing requirements. Plans are also underway for the MFD to formulate governance framework, a manual of guidelines and instructions, for prompt and collective Actions.
Micro Finance Companies
Micro Finance companies and promoters of VISACAs have recently been briefed on the new policy objectives during which micro finance companies were encouraged to buy shares in the VISACAs of their choice and use them as agencies/branches. It is hoped that encourage a competitive environment which would enhance linkages of MFIs with the banking sector.
The Micro-Finance Industry in The Gambia
The microfinance industry in the Gambia is mainly driven by the promotion and development of micro and small enterprises as well as entrepreneurs both in formal and informal sectors. Current statistics from some Non Bank Financial Institutions (NBFIs) in especially those with rural outreach report an informal sector clientele of up to 65% and which is further growing with the increased demand for value added products both within the country and in the region. Therefore, the development of the microfinance industry is directly linked to poverty reduction through the growth of micro and small enterprises in the country.
Currently, there are five (5) licensed finance companies operating in the Gambia; namely GAWFA, NACCUG, GAMSAVINGS, BAYBA and Reliance Financial Services.
Wholesale Microfinance Intermediaries:
The Microfinance Service Providers in The Gambia
The biggest wholesale microfinance intermediary in the country is Social Development Fund (SDF) which hosts the microfinance schemes from three ADB projects and one from Taiwanese Government.
The other major intermediary is the International Fund for Agricultural Development (IFAD) supported Rural Finance Community Initiative Project (RFCIP) which has put in place a network of VISACAs and provided them with funds for on-lending as well as capacity building to run their operations successfully. Although the RFCIP project has been completed, the fund is continuing to rotate under the guardianship of Department of State for Agriculture (DOSA).
Retailer Non Bank Financial Instructions: Currently there are about twenty microfinance retailers who make loans and provide savings mobilization facilities to various clienteles. The largest Non Bank Financial Institutions (NBFIs) are : The Gambia Women Farmers Association(GAWFA) which is the oldest one and targets only women farmers, the National Association of Cooperative Credit Unions of the Gambia(NACCUG) which is an apex organization of professional credit cooperatives, Gamsavings and Reliance. More informal microfinance providers consist of money lenders and rotating savings and credit associations (ROSACAS).
The money lenders may charge interest rates between 100 and 120 percent per annum. ROSACAS are informal organizations where members periodically save a certain amount of money and the total amount is then loaned to members in turn.
Project in Support of Rural/Micro Finance: The AFDB and IFAD are the main donors supporting the microfinance sector in The Gambia. While the IFAD support for RFCIP focuses on the provision and strengthening of fiianancial services, AFDB has supported the Community Skills Improvement Project (CSIP), the Peri- Urban Smallholder Improvement Project (PSIP) and the Artisanal Fisheries Development Project (AFDP), using microfinance component of the IFAD funded RFCIP concentrated in Lower River Region (LRR) and CRR. The project is reported to have promoted 80 VISACAs reaching an estimated 100,000 ‘clients’, including 45% women.
Commercial Banks: in recognition of the pivotal role that the microfinance sector plays in the economy two commercial banks have recently entered the microfinance industry. They are the Arab Gambian Islamic Bank (AGIB), with its wholesale concessionary credit to the National Youth Service Scheme (NYSS); and Standard Chartered Bank (Gambia) Limited with a line of credit to GAWFA. The schemes they offer are limited to the urban areas and focus on formal sector entrepreneurs and businesses, and are unsuitable for the emerging entrepreneurs of micro-enterprises. This is mainly due to the fact that these commercial banks are not motivated to increase their outreach in the absence of a clear and transparent micro finance policy environment, in addition to the lack of coordination and monitoring mechanisms which makes the rural based entrepreneur riskier than those in the urban setting.
Microfinance Market and Products
In The Gambia, the man existing financial services/products offered are: (1) savings mobilisation (voluntary or compulsory, passbooks and term deposits); and (11) credit delivery (short/medium/long-term loans; cash/ in-kind credit; production/consumption credit; and working capital/investment credit. The products offered cover only a small portion of the demand and need further improvements in order to address the recognised need for bigger amounts relevant to diverse economic activities.
Author: by Momodou Camara
See Also - See Also