Sub Saharan Africa (SSA)

Microfinance Investment in Sub Saharan Africa

MIVs in Sub Saharan Africa

Microfinance Networks in Sub Saharan Africa

Research on Sub Saharan Africa Microfinance




Return to Global Overview

Microfinance Investment in Sub Saharan Africa

Microfinance and SSA

Since 1995 many Sub Saharan African economies appear to have achieved early stages of economic growth. Their performance has reversed the economic collapses that marked the period from 1975 to 1985, and the economic stagnation from 1985 and 1995. The ability to support, sustain and diversify the sources of these growth indicators will be critical to the elevation of countries to middle and high income countries and to meeting the Millennium Development Goals (MDGs).

In 2007, sub-Saharan Africa experienced economic growth of 6.7 percent and continued to accelerate progress in human development, improve the huge lack of infrastructure, and strengthen governance. Africa also received renewed attention from the private sector, funders, domestic and international investors, and development agencies. Microfinance has been able to capitalize on these positive developments, experiencing strong growth in recent years.

Still, poverty remains a critical challenge for this region. With an average of 70% of the population living under $2 a day, and GNI per capita averaging approximately USD $965 (compared to $38,000 average in the industrialized countries), the region is hardly stable. The combined GDP of SSA in 2008 was US$744 billion, which was equivalent of 28% of China’s GDP, 69% of Brazil’s, or 80% of India’s. In addition, SSA consistently scores the lowest ratings in the Human Development and Millenium Development indices relating to health and education levels. However, the size and strength of sub-Saharan Africa economies are considerably diverse; with the economies of South Africa and Nigeria comprising 56% of SSA’s combined GDP.

On the other hand, a recent study by WWB and the African Microfinance Action Forum (AMAF) found that more people in low-income market segments in countries across Africa are now able to access an increasing range of financial products.  

Astounding progress has been made in the delivery of financial services to low-income ‎markets in Africa over the past ten years, in particular during the past five years. In ‎Ethiopia there was hardly any microfinance a decade ago; has now surpassed the million ‎microfinance client mark and is fast moving towards two million. ‎

Research shows that the African microfinance sector is a dynamic and growing marketplace. Some of the new financial tools have been successful and are beginning to spread. For example, community managed loan funds, are predicted to reach 30 million poor by 2015. In general, since 2005 there has been a spurt of overall growth in microfinance activity in sub-Saharan Africa. The region’s aggregate loan portfolio increased by 69 percent from 2006 to 2007 and savings increase by 60 percent in the same period of time (Diagnostic to Action, 2009). In East Africa alone (specifically Tanzania, Uganda, Ethiopia, and Kenya) the number of borrowers increased by 584 percent y/y in 2007.

Table 1: Snapshot of Microfinance in South Asia*

No. of MFIs

No. of Borrowers (thousands)

Total Population (mill.)

Poor Population (mill.)

Penetration Rates

Borrowers / pop. (%)

Borrowers / poor (%)

Angola

2

11

17

6.5

0.1%

0.2%

Benin

16

137

9

2.6

1.5%

5.2%

Botswana

1

0

2

0.8

0.0%

0.0%

Burkina Faso

15

900

15

6.9

6.1%

13.1%

Burundi

7

77

9

5.8

0.9%

1.3%

CAR

1

2

4

2.6

0.1%

0.1%

Cameroon

27

198

19

7.5

1.1%

2.7%

Cape Verde

1

2

1

0.2

0.3%

0.9%

Chad

3

20

11

6.9

0.2%

0.3%

Congo

18

33

4

1.5

0.9%

2.2%

Congo, DR

33

221

62

30.3

0.4%

0.7%

Cote D'Ivoire

18

54

19

8.7

0.3%

0.6%

Eritrea

1

22

4

2.3

0.5%

1.0%

Ethiopia

22

1,741

79

35.0

2.2%

5.0%

Gabon

1

0

1

0.3

0.0%

0.0%

Gambia, The

9

96

2

1.0

5.6%

9.1%

Ghana

65

438

23

6.7

1.9%

6.6%

Guinea

8

97

9

3.8

1.0%

2.6%

Kenya

28

975

38

19.5

2.6%

5.0%

Liberia

1

3

4

1.7

0.1%

0.2%

Madagascar

13

79

20

14.0

0.4%

0.6%

Malawi

8

313

14

9.1

2.3%

3.4%

Mali

19

313

12

7.9

2.5%

4.0%

Mozambique

8

75

21

11.6

0.4%

0.6%

Namibia

1

2

2

1.1

0.1%

0.2%

Niger

6

216

14

8.9

1.5%

2.4%

Nigeria

60

1,514

148

50.5

1.0%

3.0%

Rwanda

9

155

10

5.9

1.6%

2.6%

Senegal

30

389

12

4.1

3.1%

9.4%

Sierra Leone

10

47

6

4.1

0.8%

1.2%

South Africa

7

637

48

15.5

1.3%

4.1%

Swaziland

1

14

1

0.8

1.3%

1.8%

Tanzania

16

249

40

14.4

0.6%

1.7%

Togo

21

121

7

3.1

1.8%

3.9%

Uganda

29

360

31

11.7

1.2%

3.1%

Zambia

6

28

12

8.1

0.2%

0.3%

Zimbabwe

12

53

13

4.6

0.4%

1.1%

Aggregate SSA

533.0

9,593.1

742.5

326

Average in SSA Countries

14.4

259.3

20.1

8.8

1.2%

2.7%

* From: Gonzalez, Adrian, 2008. “How Many Borrowers and Microfinance Institutions (MFIs) Exist?” Microfinance Information Exchange (MIX), Washington, D.C.

Facilitating the substantial growth trends in the microfinance industry are the regulatory changes conducted as governments increased their focus on regulating microfinance. Many countries in the region have included microfinance in banking legislation, broader non-banking financial institution (NBFI) legislation, or microfinance specific laws or regulations. According to a CGAP and MIX report, 31 countries passed new or revised microfinance legislation since 2002, while 24 countries have adopted national microfinance strategies which integrate MFI regulation under the formal financial supervisory institution. In addition, a growing number of countries have placed the supervision of MFIs under the same body that supervises formal financial institutions. The key challenge, however, is implementation of such laws and regulations, especially in the context of low balance and low transaction value as seen in most microfinance institutions (Africa Microfinance Analysis and Benchmarking Report, 2008).

Accompanying the increased number of financial access projects (increase of 61 percent increase 2007 compared to 2006), is an expected drop in external funding. In 2007, funders had a total commitment of $1.76 billion, covering 716 projects in the 48 countries of sub-Saharan Africa, a 12 percent decrease from 2006. This decrease in implies that MFIs which use savings mobilization as a main funding source have experienced rapid growth, while those with low financial intermediation have stagnated outreach (Africa Microfinance Analysis and Benchmarking Report, 2008).

Funders in SSA include a wide variety of actors, though most are non-commercial publicly funded institutions, as CGAP reports that private funds (MIVs) have only invested $69 million in the region (CGAP Funders Survey, 2009). In general, funders focus on supporting retail institutions. Additional projects include supporting financial infrastructure, and supporting policy environments.

Funding instruments in SSA vary depending on the project objective, the country context, other stakeholders, and so on. In 2007 they favored grants (34 percent) and loans (32 percent). Bilateral funders and international NGOs were the main providers of grants, while loans were funded primarily by Development Finance Institutions (DFIs), MIVs, private foundations, multilateral funders and international NGOs. Equity funding (5 percent) and guarantees (3 percent) came largely from DFIs. Although both savings and debt increased, equity increased more rapidly. According to the Africa Benchmarking Report, an infusion of capital in the banks in this region which increased their equity by 309 percent over the last year, accounted for 85 percent of equity increase (Africa Microfinance Analysis and Benchmarking Report, 2008).

Table 2: Funding Structure Trend Data*

SSA Funding

Savings

Commercial Debt

Other Debt

Equity

2006

1,148

243

376

557

2007

1,839

343

680

912

% Increase

60%

41%

81%

64%

*See Research Section for complete report, including the model and detailed country-by-county data.

IAMFI has compiled additional statistical data on each country in this region regarding population size, poverty rates, foreign capital flows, investors’ environment ratings and sovereign ratings. IAMFI members can access these data here.

For more information and details on the sources used to create this section, please see research section below, or click here. 

Back to top


MIVs in Sub Saharan Africa

While most MIVs spread their microfinance investments around the world, listed below are MIVs that chose to focus their investment in the SSA region or in specific countries within the region. To read more general information on MIVs and their challenges see the Microfinance Investment Vehicles section.

MIVs with Exclusive SSA Focus

  • ACCION Investments in Microfinance (AIM) - ACCION International
  • Fonds International de Garantie (FIG) - RAFAD Foundation

MIVs with non-Exclusive SSA Focus

  • Africap Microfinance Fund – AfriCap
  • PlaNet MicroFund – PlaNIS
  • La Fayette Participations - Horus Development Finance
  • Access Holding - LFS Financial Systems

Back to top

Microfinance Networks in Sub Saharan Africa

What are microfinance networks?

A microfinance network is commonly an umbrella organization for multiple microfinance institutions, providing an avenue for cooperation and support. Through these networks, network member MFIs can share ideas, experiences, and solutions common challenges. In addition, networks help facilitate the MFI’s funding and investing procedures by connecting their members with funders and investors. Many times, networks strengthen operational, technical, and financial capacity of MFIs by promoting MFI standards and best practices and training.

Some microfinance networks promote a particular methodology through technical assistance (such as ACCION or Women’s World Banking) and may have a partial or whole equity stake in their members and partners. Country and regional microfinance networks have an additional focus on advocating local microfinance policies and help members transform into regulated deposit-taking financial intermediaries. In these networks, members are partial owners themselves of the network and govern the network through seats on the Board of Directors.

Accion
One of the largest international microfinance Networks, Accion is an NGO that provides technical service and consulting. Headquartered in the United States, ACCION is an innovator in financial access, having pioneered many of the best practices and emerging standards in the industry. It provides a full range of technical assistance and management services, as well as investment and governance support to help financial institutions build institutional capacity and financial strength in order to serve low-income households. Its emphasis on commercial viability and institutional growth has helped its partner MFIs reach scale and financial self-sufficiency. Established in 1961 and a leader in microfinance since 1973. ACCION partners with 32 microfinance organizations throughout Latin America, the Caribbean, Asia and Africa. In 2008, ACCION and its partners served over 3.7 million borrowers, and since 1998 has loaned $23.4 billion to more than 7.7 million people.
Website: www.accion.org
Regions of Operation:East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, North America, Sub-Saharan Africa, South Asia

Africa Microfinance Network (AFMIN)
The African Microfinance Network (AFMIN) is an association of microfinance networks in Africa resulting from an initiative led by African microfinance practitioners to create and/or strengthen country-level microfinance networks for the purpose of establishing shared performance standards, institutional capacity and policy change. AFMIN was formally launched in November 2000 and has established its Secretariat in Abidjan (Republic of Côte d’Ivoire), where AFMIN is legally recognized as an international Non-Governmental Organization pursuant to Ivorian laws. Because of the political unrest in Côte d’Ivoire,AFMINtemporarily relocated its office to Cotonou in Benin.
Website: http://www.afminetwork.org
Regions of Operation: Sub-Saharan Africa

 

African Rural and Agricultural Credit Association (AFRACA)
‎TheAfrican Rural and Agricultural Credit Associationis the Association of Central Banks, Commercial Banks, Agricultural Banks, Micro-finance Institutions and National Programs dealing with agricultural and rural finance in Africa. The Vision of the Association is a rural Africa where people have access to sustainable financial services for economic development. The mission ofAFRACAis to improve rural finance environment through the promotion of appropriate policy frameworks, which enables sustainable financial institutions to increase their outreach, improve their provision of financial services and disseminate innovative practices. To achieve this mission,AFRACAhas successfully introduced different classes of services to different categories of members in the areas of Research, Policy, Training and Information dissemination.
Website: http://www.afraca.org/
Regions of Operation: Sub-Saharan Africa

 

Alliance of Micro Enterprise Development Practitioners / Micro Enterprise Alliance (MEA)
A membership association of South African organizations and individuals working in the field of micro enterprise development. The membership includes very small, under-resourced NGOs based in townships and rural areas, established NGOs, private companies, provincial development corporations, large and small banks.
Website: http://www.mea.org.za
Regions of Operation: Sub-Saharan Africa

 

Association of Microfinance Institutions of Uganda (AMFIU)
The Association of Micro Finance Institutions of Uganda (AMFIU) is an umbrella organization of microfinance institutions (MFIs) throughout Uganda. It was founded in 1996 and officially registered in 1999 under the NGO Act and as a company limited by guarantee. The vision of AMFIU is to be a strong and sustainable national network of all Micro Finance Institutions in Uganda. AMFIU 74 ordinary members are organizations whose core activity is delivery of microfinance services. This includes Banks, credit institutions, MDIs, SACCOs, private companies and NGOs. However, AMFIU also has individual and associate members that provide services for the microfinance industry in Uganda.
Website: http://www.amfiu.org.ug/
Regions of Operation: Sub-Saharan Africa

 

Care / Planet Finance Centrale des Risques
Planet Finance Centrale des Risque of Benin was created to help microfinance institutions to manage unpaid debt. The objective of this facility is to allow MFI to use a database of borrowers at risk, to track the credit history of potential customers, to avoid over-indebtedness in the area. The members of the IMF Central have agreed to update and disseminate information on customers in arrears over thirty days.
Website:
Regions of Operation: Sub-Saharan Africa

 

Développement international Desjardins (DID)
DID is a Canadian organization specialized in providing technical support and investment to community-owned and operated institutions worldwide. Its technical support services include drafting legislation for savings and credit cooperatives; setting up new institutions and organizing them into networks; introducing new financial products, and designing supervision strategies. In addition, DID’s investment funds provide financing and investment capital to microfinance institutions and to funds specializing in microfinance. 
Website: http://www.did.qc.ca/en
Regions of Operation: East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, Sub-Saharan Africa, South Asia 

 

Foundation for International Community Assistance (FINCA)
Established in 1984, FINCA is best known for having pioneered the "Village Banking method" and for leadership in microfinance overall. FINCA's birthplace was in Latin America, which remains the largest in terms of clients served. FINCA has become a leader in microfinance services for post-conflict societies and has been among the first to arrive to help shattered communities rebuild. The mission of FINCA International is to provide financial services (including loans, savings and microinsurance) to the world's lowest-income entrepreneurs. FINCA operates in poor communities that other microfinance providers have declined to enter, which results in one of the lowest average loan size in the microfinance industry. Headquartered in Washington DC, it works as a global network across four continents where it has wholly owned subsidiaries. The network reaches 735,000 clients in 21 countries. 
Website: http://www.villagebanking.org
Regions of Operation: Europe and Central Asia, Latin America and the Caribbean, Sub-Saharan Africa 

 

Freedom from Hunger (FFH)
Freedom from Hunger is an international development organization working in seventeen countries across the globe. In 1988, it developed the world's first integrated microcredit, health and nutrition education program. Today, it is best known for its ‘Credit with Education’ program that combines microfinance with health and lifeskills services and serves over 750,000 families in Africa, Asia and Latin America. It partners with more than 50 in-country organizations including credit unions, cooperatives, rural banks and NGOs to provide savings and credit facilities, and integrate education into lending services.
Website: http://www.freedomfromhunger.org
Region of Operation: East Asia and Pacific, Latin America and the Caribbean, Sub-Saharan Africa

 

Grameen Foundation
The Grameen Foundation USA is a non-profit, tax exempt organization based in Washington D.C., USA aimed to increase MFI outreach and capabilities. The Foundation’s microfinance program support includes funding, technical assistance and training for MFIs. In addition, the foundation helps to secure financing through capital markets, develop strategies to attract and maintain a workforce, and social performance evaluation to track poverty alleviation while technology initiatives focus on helping MFIs increase efficiently and serve more people. Partners include MFIs, credit unions, cooperatives and poverty-focused organizations.
Website: http://www.grameenfoundation.org
Regions of Operation: East Asia and Pacific, Latin America and the Caribbean, Middle East and North Africa, North America, Sub-Saharan Africa, South Asia 

 

International Network of Alternative Financial Institutions (INAFI)
A network of NGOs from Africa, Asia and Latin America. It facilitates interaction amongst, and improvement of services and activities of member institutions, provides consulting services, and organizes regional and international seminars. It also maintains a specialized data bank on microfinance topics. 
Website:
Regions of Operation: East Asia and Pacific, Latin America and the Caribbean, Sub- Saharan Africa 

 

Micro Finance South Africa (MFSA)
The MLA, was established in 1996, as an umbrella organization in the micro lending industry. Founded to help structure the industry and to help regulate and lay down ethics and values to members in the industry. All MLA members operate on a sound basis and fair business principles. MFSA is the largest representative of professional microfinanciers in South Africa.Website: http://www.mfsa.net
Regions of Operation: Sub-Saharan Africa

 

Small Enterprise Education Promotion Network (SEEP)
Based in Washington, DC, the SEEP Network is a leading international network and promoter of best practice in enterprise development and financial services. Its mission is to connect microenterprise practitioners in a global learning community. Since its inception in 1985, it has worked to research and document best practices and convene key industry stakeholders in its well known annual conference. The primary way it undertakes practitioner-driven research is through working groups composed of its members which number 77 across 180 countries.
Website: http://seepnetwork.org
Regions of Operation: East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, Sub-Saharan Africa, South Asia 

Back to top


Research on Sub Saharan Africa Microfinance

FinAccess National Survey 2009

Studying Kenya’s changing financial landscape. The survey provides information to policy makers about the main barriers to access, as an impetus for necessary reforms. It also provides information to the private sector about market opportunities, and in particular insight into the types of products that will suit newly identified, underserved market segments. This is information is backed by solid empirical basis to track progress and evaluate the effect of various government-led and donor-led initiatives;

Published by: FSD Kenya and Central Bank of Kenya

June 2009

Download Article

 

Making Insurance Markets Work for the Poor: Microinsurance Policy, Regulation and Supervision - Uganda Case Study

Role of regulation in development of microinsurance market in Uganda. The Ugandan experience highlights the challenges of expanding microinsurance access in a poor developing economy with an underdeveloped financial sector. Low-income individuals need to be won over through positive experiences in credit life insurance to break their mistrust of insurance. The introduction of a new regulatory regime offers an opportunity to facilitate financial inclusion.

Smith, A., Hendrie, S., Bester, H. and Rukondo, M.,

Published by: CGAP Working Group on Microinsurance

12 Jan 2009

Download Article

Access to Finance in Nigeria: Microfinance, Branchless Banking, and SME Finance

Identifying key issues to improving access to finance.This report analyzes access to finance in Nigeria, and identifies key issues for microfinance, branchless banking and SME finance. Important issues across all three sectors include increasing transparency, strengthening capacity and promoting financial infrastructure and consumer protection. Branchless banking can be improved by promoting interoperability of the retail payment system, and ensuring that mobile payments guidelines address key issues such as the use of agents.

Isern, J., Agbakoba, A., Flaming, M., Mantilla, J., Pellegrini, G. and Tarazi

Published by: CGAP

January 2009

Download Article

Africa Microfinance Analysis and Benchmarking Report 2008

This report analyzes the development of African microfinance in 2007, focusing on growth trends, national and regional regulatory environments, funding flows and structure, and MFI performance. It also provides information on the four subregions, namely, Central, East, Southern and West Africa.In 2007, sub-Saharan Africa experienced economic growth of 6.7 percent. It also attracted attention of the private sector, funders, domestic and international investors, and development agencies.

Published by: CGAP  and Microfinance Information Exchange - the MIX

2008

Download Article

Diagnostic to Action: Microfinance in Africa

Examining major achievements, challenges and growth trends in the microfinance sector. This diagnostic found that more people in low-income segments across Africa are now able to access an increasing range of financial products even in very harsh environments. The primary condition for success appears to be related to leadership and regulation. It is essential to develop an accurate picture of microfinance in Africa in order build international recognition in investing in Africa, and to spell out the role of governments in formulating policy and providing enabling regulatory frameworks. Publishing this study is the first step to an African articulation of its own strategy to solving its problems.

Published by: WWB and Africa Microfinance Action Forum (AMAF)

2008

Download Article

Attracting Microfinance Investment Funds: Promoting Microfinance Growth through Increased Investments in Kenya
Policy recommendations and sources of alternative funding for Kenyan MFIs. This paper analyzes why MFIs are facing problems in effectively and efficiently delivering financial services in Kenya, and suggests solutions. Competition for accessing funds and its limited availability have undermined MFIs’ capability to expand their financial services activities in the country. The paper explores the feasibility of microfinance investment funds (MIFs) as key drivers for channeling alternative sources of funding to the sector.
Jeffrey Ben Matu
Published by: Duke University
April 2008
Download Article

Transversal Analysis of MFI Performance in Africa
External performance evaluation and rating of MFIs. This study was commissioned by the African Microfinance Transparency (AMT). It is based on data from rating reports produced for AMT members as well as rating reports of several non-member African MFIs. The study draws conclusions on characteristics of African MFIs and microfinance sector in the region. The analysis shows that African MFI s are becoming more mature and professional, and have a better grasp of their loan portfolios and operational costs.
Published by: African Microfinance Transparency (AMT)
September 2008
Download Article

2007 CGAP Regional Funder Survey: Sub-Saharan Africa
CGAP survey of funder projects, specific country activities, and funding instruments. This report summarizes the results of a CGAP survey of funders working in Africa to increase access to finance. A total of 40 respondents provided self-reported information on their general projects, specific activities in each country and funding instruments. The report recommends that funders maximize their effectiveness in supporting access to finance in Sub-Saharan Africa, by collaborating with other funders, and by analyzing their own strengths and weaknesses in terms of strategic clarity, staff capacity, knowledge management, appropriate instruments and accountability for results.
Published by: Consultative Group to Assist the Poor - CGAP
2008
Download Article

Implementing FATF Standards in Developing Countries and Financial Inclusion: Findings and Guidelines
This report considers the impact of the implementation of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) controls on financial inclusion in five countries - Indonesia, Kenya, Mexico, Pakistan and South Africa. Key findings in the report include: Financial inclusion and an effective AML/CFT regime are complementary financial sector policy objectives; Imposition of AML/CFT controls have an impact on access and usage of financial services in the countries concerned; Countries are finding ways to limit AML/CFT risk while promoting financial inclusion. Based on these findings, the paper develops a set of guidelines to assist authorities in developing countries to design effective AML/CFT regimes that are compliant with Financial Action Task Force (FATF) standards and support financial inclusion.

Hennie Bester, Doubell Chamberlain, Louis de Koker, Christine Hougaard, Ryan Short, Anja Smith, Richard Walker
Published by: First Initiative
February 2008
Download Article


 

Back to Top