Financial Sector Development in Africa: Opportunities ... - World Bank

Microfinance in Africa 27
world regions—together with South Asian MFIs (20 percent), Africa
(21 percent) has the smallest percentage of MFIs that responded to the
survey option “yet to carry out financial literacy training,” thus illustrating
that at least the MFIs that took part in the survey understood the importance
of financial literacy and invested in it. 17 A very large-scale example
of a financial literacy campaign is currently being carried out by the
Equity Group Foundation and the MasterCard Foundation. The project
is supposed to cost more than K Sh 1 billion and target women and youth
in particular by engaging 619,500 entrepreneurs over the next three years
(Equity Bank 2010). By 2011, the program has already trained 57,000
people across Kenya (Kass Media Group).
Prudential Regulation
In order to increase the variety of products to include savings, prudential
regulation has to become more viable for both the MFI and the regulator
by being risk-based and incurring less costs. To ensure that the client is
protected from deceptive financial practices, the equilibrium between
more financial access and stability will have to include consumer protection
as well. Particularly for MFI services, this has not yet been the case.
Deposit-taking MFIs. A look at the current funding structure of reporting
MFIs in Africa shows that deposits are the main contributor to funding
(figure 1.11). Equity—both commercial and donated—remains small
overall (21 percent for 2010). MFIs in Africa, in an international comparison,
have been generally successful in mobilizing deposits and have maintained
slightly increasing levels of around 60 percent as a share of total
funding in 2010. Predominantly, these deposits across different MFIs are
voluntary deposit accounts. According to MIX and CGAP (2009), the
funding structure composition strongly varies by organizational form.
Deposits are an important funding base for credit unions and bank MFIs,
while NGOs are a lot more dependent on borrowing as a source of funding.
During the financial crisis, those institutions that relied more on
deposits as their main funding source fared better (MIX and CGAP
2009). A comparison between deposit-taking institutions that were able
to mobilize more deposits—those with more than 20 percent voluntary
savings 18 —and those that were below this threshold shows that institutions
in the first group, despite the crisis, were able to expand their number
of borrowers from 12,000 to 15,500 in 2009. One reason was
certainly the cheaper cost of funds. Another reason was the ability to offer
loans at lower interest rates: the median yield on portfolio was 11 percent