Global microscope on the microfinance business environment 2012

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59 l The push to increase access to formal fi nancial services in all of Mozambique has been relatively successful: 60 of the 128 districts in Mozambique had bank branches at the end of 2011, up from just 28 in 2004. Over the next three years, this number will grow as international organisations team up with operators on the ground to continue opening branches and MFIs in the most rural provinces. ■ Nigeria Key characteristics of the microfi nance business environment: l A number of new licences have been issued since the closing of 224 illiquid microfi nance banks (MFBs) by the Central Bank of Nigeria (CBN) in 2010. A large portion of the population is still unbanked, particularly in the rural areas, and the CBN is pushing policies, as mandated by the 2011 Revised Microfi nance Policy Framework, to reach those unbanked, for example by encouraging new banks to open in these regions. l Establishing a unit MFB, or an MFB with one branch location, in Nigeria is relatively easy, and in 2011 Nigeria was in the top three countries in Sub- Saharan Africa in terms of the greatest number of greenfi eld MFBs, as reported by CGAP in February 2012. However, large state and even multistate MFBs have still found it diffi cult to transform into national MFBs, although the path towards transformation was delineated in 2010. l There is an increased focus on building capacity within MFB operators. The CBN runs a training programme for MFB management and is requiring that, by 2013, at least three management staff from each MFB have been certifi ed through this programme. There is also a new training programme for non-executive directors, subsidised by the CBN. Key changes and impacts since last year: l Loan disputes are not typically resolved in the court system. While a process exists for bringing cases before a judge, many MFBs choose to resolve their disputes internally because using the court © The Economist Intelligence Unit Limited 2012 <strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012 system can be more expensive than recouping the loan. Many MFBs worry that the legal attention might encourage clients to leave the formal fi nancial system. l MFBs in Lagos state have been calling for a special court to try loan default cases, to which the CBN agreed in 2011. The court has not yet been established, although the CBN is currently backing two bills that have direct ties to improving dispute resolution: the Financial Ombudsman Bill, which would help to resolve fi nancial disputes more quickly, and the Alternative Dispute Resolution (ADR) Bill, which would promote and regulate ADR in Nigeria. These have not yet been enacted into law. l The CBN is experimenting with a cashless banking policy in Lagos state that is intended to aid its monetary policy as well as to improve fi nancial inclusion. Towards this end, the CBN has issued guidelines governing POS transactions, as well as instituted charges on cashing large cheques. Mobile banking remains in its infancy for MFBs. l All MFBs are required to comply with IFRS by 2014, and to begin preparing the National Association of Microfi nance Banks (NAMB) has begun identifying consultants that can help to build accounting capacity within MFB staff. MFBs were required to begin submitting detailed monthly fi nancial reports online by e-mailing them to the CBN, using forms downloaded from the CBN website. By June 2011, however, there has been low compliance and MFBs that have failed in this regard have not been penalised by the CBN. ■ Rwanda Key characteristics and aspects of the microfi nance business environment: l The regulatory and policy environment for microfi nance is now very strong. However, policy improvements have outpaced capacity building in the sector and MFIs will require time to catch up. This is particularly the case for standards of accountancy and governance where the regulations are very clear, although several MFIs still struggle to understand and achieve the required standards.
60 l The government of Rwanda, known for being very proactive, is supportive of microfi nance and has prioritised extending access to fi nancial services for the rural community. l Following the collapse of several MFIs in 2006 and in the light of uncertainties among the rural population, particularly the rural poor, regarding the tax regime, many Rwandans are distrustful of fi nancial institutions and are reluctant to bring savings into the regulated economy. l The majority of MFIs are located in urban centres and competition in rural areas remains limited. Key changes and impacts since last year: l The microfi nance sector continued to expand quickly, despite the fact that two microfi nance banks (Agaseke and Unguka) were upgraded to full bank status in 2011. Total deposits of the microfi nance sector were Rwfr46.6bn (US$77.1m) at end-2011 and the total gross loans were Rwfr42.5bn (US$70.3m). l The international credit card company, Visa, partnered with the Rwandan government in 2011 to launch Branchless Solutions. It is unclear how the mobile banking market will balance out between the mobile-phone operators, the banks and Visa, especially as the regulations mandate that agents must not be exclusive and so there may be a fi rst mover disadvantage. l The CRB Africa, a private credit bureau launched in March 2010, started to collect and distribute credit data from utility companies in 2012. It also started to distribute more than two years of historical information, improving the credit information system. This expansion led to Rwanda moving up in ranking in the World Bank’s Doing Business “getting credit” indicator in 2012, from 32 to 8. ■ Senegal Key characteristics of the microfi nance business environment: l The microfi nance sector remains highly concentrated, with 85% of lending assets held by three major networks. Supervisory authorities’ © The Economist Intelligence Unit Limited 2012 <strong>Global</strong> <strong>microscope</strong> on the microfi nance business environment 2012 main focus is to manage risk in major networks while abolishing non-regulated and weak MFIs. This new policy is likely to lead to higher concentration and improve supervision. l Senegal has a set of sound laws regulating MFIs, but there is a lack of supervisory capacity. Although the regional central bank, Banque centrale des Etats de l’Afrique de l’ouest (BCEAO), supervises the larger MFIs, the national authorities’ supervisory capacity remains limited (despite signifi cant efforts in recent years) and small MFIs fail to comply with new regulations. l Senegal is likely to take the lead in the region in setting up a credit registry within the next two years. l Client protection rules and regulations, both in terms of transparency in pricing and recourse mechanisms, exist, but MFIs fail to comply and authorities seem to tolerate non-compliance. Existing recourse mechanisms are at odds with the social reality of clients. l Transaction costs are high, making it diffi cult to extend services on a large scale, especially to remote and rural areas. Mobile banking presents an opportunity to reduce the costs of network expansion. Microfi nance authorities are actively involved in launching a mobile banking platform for MFIs. Key changes and impacts since last year: l Supervisory authorities operated a signifi cant number of licence withdrawals in 2011, as part of its recent efforts to abolish non-regulated MFIs. l Extensive training programmes took place to improve understanding of new accounting chart and internal auditing practices. This lays the basis for tighter supervision. l BCEAO is making progress, albeit slow, on the credit bureau project. Harmonisation of legislation in all member countries remains a considerable challenge.
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