inafi africa cotonou declaration
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The entry of microfinance institutions into the remittances marketTRANSCRIPT
International Network of Alternative Financial Institutions
Building a Partnership for Development Building a Partnership for Development in Africa: the role of Microfinance in Africa: the role of Microfinance
Institutions and the Diaspora Institutions and the Diaspora OrganizationsOrganizations
INAFI Africa Consultative Forum, 5-6 November 2007, Held at the Cotonou International Conference Centre, Boulevard de la
Marina, Cotonou, Benin
The INAFI Africa/ African Diaspora Cotonou Consultation
background
On 5 and 6 November 2007, INAFI Africa and the Africa Diaspora met at the Cotonou Conference Centre, Benin. The purpose of this meeting; attended by 50 delegates, was fivefold.
During the one and half day consultative forum, the two groups were able to:
1. Establish the feasibility of collaborating together in harnessing
remittances with microfinance to create jobs and enhance
incomes.
2. Define precisely the areas where there are immediate
opportunities where both partners may contribute effectively to
sustainable microfinance and human development.
3. Review worldview experiences and examples of migrants’
involvement in microfinance development.
4. Discuss mutual expectations, fears, and measures necessary to
establish a secure safe and trusted platform for working together.
5. In the few areas of immediate action, identify the lead person(s)
and practical steps towards realization of shared goals.
6. Create the space and time necessary for representatives of the
two organizations to interact and get to know each other better.
The consultative forum was organized to coincide with the global INAFI Conference on microfinance, remittances and development; also just held two days later at the same Conference Centre in Cotonou, Benin.
Prior to the INAFI Consultative forum, there had been three explorative meetings between the 51-member microfinance organizations network and Diaspora association which had recommended the Cotonou forum. Besides INAFI Africa, the various Diaspora organizations or associations had concluded detailed discussions with the global INAFI network and the Asian and Latin American Chapters of the network about how to tap migrant remittances to develop microfinance.
action plan
These are the immediate action agreed by the 42 INAFI Africa and Africa Diaspora delegates to the Cotonou Consultative forum:
Clear purpose and vision of partners.
Safety of investments e.g. MFIs must meet basic.
Reasonable mix of profit and social return e.g. expansion of access, job creation, and better health services for poor families.
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MFIs to introduce new products of interest to the Diaspora, e.g. more affordable money transfer services that reach the last mile and credit guarantee for families and Diaspora in their country of migration.
There is need for a system of verification and compliance to back up the partnership.
1. Building trust was recognized as the first step in building long-lasting partnership between INAFI Africa member organizations and the African Diaspora. To this end, the forum recommended the organization of exchange study tours for the Africa Diaspora to MFIs and vice versa.
2. The forum identified acquisition of equity in INAFI Africa MFIs, given their more socially responsible mix of risk and return, as an important area of opportunity for collaboration.
3. The forum identified help from African Diaspora in facilitating foreign exchange guarantees for MFIs against foreign currency loans from the international capital markets.
4. Technology was identified as a two-way opportunity for the Diaspora and INAFI member organizations. On the one hand, the Africa Diaspora has experts in ICT that can support the MFIs, upgrade/develop their systems on reasonable terms. On the other hand, MFIs can adapt technology and combine this with their wide service delivery network to provide a platform for a more affordable money transfer. This way, the partnership gives an edge to the African Diaspora owned money transfer companies competing against the global giants like Western Union Forum.
5. The forum noted to INAFI members that they have a key role to play in helping to redress the overwhelmingly negative external image of Africa by reframing their missions from poverty alleviation to wealth creation and demonstrating tangible impact on job creation and enhancing clients’ incomes.
6. The forum called upon MFIs to document their own successes as intermediaries and their customers and
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disseminate this information widely, especially via the world-wide web.
7. The forum called upon the Diaspora and MFIs to closely collaborate in campaigning and lobbying for an appropriate/conducive regulatory environment for their intended partnership in money transfer, capitalizing microfinance development, and making a contribution to sustainable human development.
8. The forum called upon the INAFI member organizations to lobby for the rightful recognition of the invaluable contribution by the Africa Diaspora in creating jobs, addressing poverty, and relief to their families and communities.
9. An INAFI Africa-wide ICT inventory was recommended to be done within the next six months. This baseline analysis shall provide the platform for upgrading, connectivity, and initiation of money transfer services.
10. An E-group was formed to facilitate ongoing exchange, dissemination of information, and strategizing between INAFI member organizations and the African Diaspora.
11. INAFI Africa to provide a hub for e-networking between the Diaspora and MFIs.
12. The forum proposed the establishment of the following five committees:
A committee to define the role and required capacity for INAFI Africa to provide the leadership and coordination of the partnership. The committee will also look into the immediate resources to support take off of the partnership.
An ICT group to lead the ICT inventory and strategy.
A communication committee to develop a policy and strategy for disseminating positive case studies and communicating more generally.
An investment committee to explore the opportunities for mobilizing African Diaspora investment and designing a fund prospectus.
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A committee to focus on immediate money transfer.
13. MFIs’ capacity to deliver appropriate and affordable services conveniently was recognized to be of paramount importance. As a result, the forum called MFIs to pay attention to their leadership, governance, and service delivery capacity through appropriate training of their human resource.
context of action
The Consultative forum noted how microfinance, a new system of delivering self-sustaining financial services to a previously ignored, excluded, disadvantaged and poor third world population surreptitiously emerged three decades ago. The forum acknowledged that the new field of service dubbed “microfinance” is now a fully-fledged industry worth some $150 billion. The participants were informed that, although initially a preserve of relief and non-profit organizations, microfinance is today delivered by a very diverse group of financial organizations, including the regulated e.g. downscaling commercial banks, credit unions, and transformed/specialized microfinance NGOs, etc. as well as unregulated financial intermediaries.
Participants acknowledged that microfinance is a service now found to be in every part of Africa. The forum heard that an assessment of the microfinance sector by the Africa Union in early 2007 identified close to 7,000 active microfinance institutions in the 53 member states. Hence, the keynote speaker, basing his calculation on the typical average outstanding loan portfolio of the 51 INAFI Africa member organizations, noted that Africa’s gross outstanding loan portfolio was close to $10 billion.
While observing this was a huge amount of investment, the INAFI Africa keynote speaker noted how the annual remittances from the African Diaspora to the mother continent was even much bigger; at $39 billion citing a report just released by IFAD and Inter-American Bank†.
Still further, the forum heard from the INAFI Africa keynote speaker that despite the huge opportunities for harnessing remittances with microfinance (and even talent from the Diaspora), there was as yet no
† 2006 IFAD Report
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concrete plan of action. But he strongly urged the forum not to waste any more time in coming up with a simple, yet concrete first step.
While calling upon the consultative forum to urgent action, the keynote speaker pointed out to Africa’s disadvantaged position in attracting financing for the development of its microfinance sector. While also noting the areas of strength and challenges of Africa’s microfinance sector – such as the huge size and established technology, etc, he at the same time expressed a bewilderment as to why Africa has not been as successful in benefiting from the new capital specifically targeting microfinance worldwide.
For instance, he noted that Africa’s microfinance industry has experienced rapid growth in the past 12 years. He also noted that competition in microfinance has evidently stiffened over the period due to a fast learning clientele and the entry into the emerging market by all sorts of operators, including formal financial institutions that once shirked the lower end market segment. However, along with this expansion and growth, he acknowledged that the industry has begun to experience multiple challenges at different fronts, e.g.:
Declining growth in new customers as well as the outstanding loan portfolio
Declining portfolio yield
Increasing level of financial cost as a proportion of total expenditure
The consultative forum heard about some of the most likely causes for this overall trend, which included amongst other:
Shortage of funds to scale up, or strengthen institutional human capital
Due to a change in focus, i.e., commercialization of services, some microfinance organizations now prefer to invest in other ways rather than giving out loans to the poor
Notable drift or change in target clientele and delivery system
Product failure and subsequent recalling of loans
Low demand for loans due to unsuitable terms, including perceived high interest rates, declining profits in the micro/small-scale enterprise sector due to low entry barriers and too many firms competing for same market
The consultative forum observed how, for the first time in three decades, Africa reported a net decline in client base in 2005. In Uganda, there was
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a drop of 15 percent in client base! Delegates agreed that Africa’s future microfinance system was clearly challenged to find new strategies if it is to grow and prosper.
Within the region itself, it was noted that access to microfinance also varies by country and sub-region. The microfinance system in Tunisia, for example, is reaching more of the country’s population than the systems in Senegal, Togo, Uganda, or Ethiopia. Throughout the region, not just the number of new institutions entering the market is diminishing, but also the number of first-time microfinance customers joining the system is either declining or stagnated. Furthermore, whereas 75 percent of microfinance institutions in Asia are concentrated in rural areas, in Africa 65 percent are concentrated in the urban areas. In addition to the limited and unbalanced outreach, the microfinance system in Africa also lags behind other regions in performance.
Table B: Global Distribution of Investment Funds (in US$, millions)
Region Private funds Public investors All
Investors
Total
Debt Equity Debt Equity Guarantees
Eastern Europe & Central Asia 35.6 73.5 323 68.2 2 502.2
Latin America & Caribbean 162.8
67.4 150.9 13.4 63.3 457.9
Sub-Saharan Africa 31.2 14.9 1.7 6.1 9 62.9
East Asia & Pacific 23.9 1.2 6 3.7 0.9 35.7
South Asia 27.7 1 0 5.3 1.1 29
Middle East & North Africa 1.8 0 0 0 7 8.8
Total 276.9
158 481.6 96.6 83.3 1,096.5
Source: McKinsey, 2007; Micro Rate, 2007
With regard to resources for funding growth, Africa is also the region that is most lacking; having received the least amount of the nearly $1 billion funds invested yearly since 2000. Even though the level of investment in Africa’s microfinance system has increased lately; from about 1.3 percent of total funds invested in 2003, to 5.3 percent by 2005, the absolute amount of external capital to Africa targeting the sector is disproportionately small compared to investments going to Asia’s and Latin America’s microfinance systems; the two regions attracted nearly six percent and 41.8 percent of the growth capital in 2006 (table A). Yet, more than 90 percent of the 120 microfinance institutions surveyed by
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CGAP in Africa in 2004 cited lack of capital as their single most important constraint to growth.
Many of the operators lack sufficient resources to finance their investment needs. Therefore, to meet these needs, they are depending on the same international capital markets, either from official sources or from private capital sources.
Aside from being relatively expensive and hard to get, however, both gross foreign development aid and foreign direct investment are far much less than migrant remittances worldwide. In 2006, for instance, total global remittances, of which close to $39 billion came to Africa, was $300 billion, compared to the $232 billion in foreign capital. This volume of migrant remittances to the developing world alone was almost twice the amount of total development aid from all formal sources. As a proportion of the gross domestic product in 2006, remittances were the largest source of external capital in many developing countries. It is further believed that about another 50 percent or even double the formal volume of remittances flows to developing countries like Africa through informal channels. This makes migrant remittances a potentially very important source of capital for human development. How to harness this large source of funding to narrow the funding gap facing the microfinance sector is the overall purpose of this pertinent consultative forum held in Cotonou, Benin.
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GROUP 1
NAME
Diaspora/INAFI
Country/Region Organization
Contact Address
Email Phone Fax Post Box
1 Papa Aly Ndior INAFI Senegal ACEP [email protected]
338697550
(221)776446819
(221)338252935
BP:5817
Dakar-Fann, Senegal
2 Barutwanayo Moussa
INAFI Burundi CECM [email protected]
(257)2224927
2213375
(257)22213375
BP:6665
Buj.Burundi
3 Ndeye Mariane Thioye
INAFI Senegal FDEA [email protected]
(221)33825-20-58/33824-71-53
77569-35-48
(221)33825-92-87
BP:3921
Dakar
Senegal
4 Abdou Mawa Ndiaye
Diaspora
Spain CASC [email protected]
34.93 692272
c/come.g 42
Bxs,08003
Barcelona
5 Timothy Xerxes Munyao
INAFI Kenya KADET [email protected]
(254)733-747203
Box 1676-00200,Nairobi, Kenya
6 Tossou Felix INAFI Benin FED [email protected] 97-447364 01BP 309
Cotonou
7 Moses Ehigiamusoe
INAFI Nigeria LAPO [email protected] (234)52600072
(234)526000756
PMK.1729
Benin City
Edo State
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Nigeria
8 Adanmado Franck
INAFI Benin ASSOPIL [email protected] (229)2136064
95455633
BP:1291
Calavi
9 Bikashy Chowdhury Barua
Diaspora
ORG
The Netherlands BASUG [email protected]
www.basug.nl
(31)-0-6-290855/88
(31)-0-70-3818204
Dr.j.Presserstr-30
2552 LN,
The Hague
The Netherlands
10 C-E Chikezle Diaspora
ORG
UK AFFORD [email protected]
+44207587 3919
+44-7847 400001
11 Phyllis Mbungu INAFI Kenya SMEP [email protected]
(254)20-55761
(254)20-55768
Box 64063
-00620
Nairobi Kenya
12 Liberat Diaspora Org
Netherlands Ropabu [email protected] +31-0-6-422755811
Maissata Nd. Niasse
INAFI SENEGAL INAFI INternational
(221 )77 618 0252
(221) 8604222
BP: 374 Dakar-Fann, Senegal
GROUP 2
1 A. Cheruiyot INAFI Kenya K-Rep [email protected]
(254)20-4343495
4343493
Box 10528-00100
Nairobi
Kenya
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2 Mohmoud M. Diaspora
Somalia HIRDI [email protected]
+31-640270728
Postbus 9004
1180 MA Amstelveen
The Netherlands
3 OzdenYalim Diaspora
Turkey/Netherlands MIND [email protected] +31(0)651005724
Rapenburgerstr.78
1011 MK Amsterdam, NL
4 Joaquin Changue-Hay
Diaspora
ESPANIA ASOC:RIEBAPUA
5 Mamadou Lamine Gueye
INAFI Senegal CAURIE-MFI [email protected] (221)339523086
(221)3395514339
BP:3024
Thies-Senegal
6 Mindanda Mohogu
Diaspora
DR Congo/Netherlands
AFRIK FINANCE
+31-0610064174
Melis Stoke Lan
1542
2541 ET
Den Haag
Netherlands
GROUP 3
1 Samuel Baguma
INAFI Uganda UTRUST FINANCE
(256)772502424
(256)237046
Box 6972
Kampala,Uganda
2 Millicent Odongo
Diaspora
Kenya/Netherlands CFD [email protected]
+31-615187150
3 Godfrey Jokonya
INAFI Zimbabwe ZAMBUKO [email protected]
(263)4333950/302495
(254)4333641
Box 1183
Harare
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4 Wilson Obomanu
Diaspora
Nigeria ASDA [email protected] +31-0-6-27207817/8127
5 Ndeye Sophie Ba
INAFI Senegal PAMECAS [email protected] (221)33839
8660
(221)8353206
BP:15354
Dakar, Senegal
6 Sylvia van den Bag-Ortega
Diaspora
Bolivia/Netherlands AYNI
MIND
[email protected] +31-302735157
7 Leah Mansaray Diaspora
Sierra Leone ACCESS POINT CASH
+44-7939-455-782
GROUP 4
1 Mohamed A. Hussein
INAFI Somaliland Amaahkakaal MFI
(252)-52 3691
2 Mekka Abdelgabar
Diaspora
Sudan/Holland Women Org. Netherlands,
Darfur
+31-703606458
+31-31703627139
416
2501 CK
The Hague
The Netherlands
3 Andrew Odunga
INAFI Tanzania PRIDE-TANZANIA
[email protected] (255)27250-2945
(255)272504050
Box 13900
Arusha
Tanzania
4 Ahmadou Tidiana Diallo
Diaspora
Espagne
Senegal APCISAD
KANDEENA
+34-627196 788
+34938/
467605
5 Khady Sakho Diaspora
Senegal MECSEF(Mutuel
[email protected] +33674454828
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MFI-FRANCE
d’Epargne et d Credit des Séne galais de France)
6 Tony Fosu Appiah
INAFI Ghana SINAPIABA Trust
[email protected] (233)208122459
(233)5132483
Box 4911
Kumasi
7 Akiyeni Maximin
Diaspora
Benin ONG of Diaspora
[email protected] (229)9093126
(229)930469-03
GROUP 5
1 Bardouille Raj Diaspora
North America Canada Cornell University [email protected]
(905)507-0815
1919-25 Kingsbridge
Garden Circle
Mississanga,Ontario LSR 481,Canada
2 Anthony Githinji
INAFI Kenya SISDO [email protected]
(254)722-818811
(254)20-3871531
Box 76622
Nairobi,Kenya
3 Vicky Bishubo INAFI Tanzania PRIDE-Tanzania
[email protected] (255)713533 727
(255)22-2185031
Box 65266-00508
Dar-es-Salaam
Tanzania
4 Kane Yaya Migrant France/West Africa PSEAU [email protected]
+33-42876006
5 Dan Thierry INAFI Benin Vital Finance [email protected] (229)97917230
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6 Sam Afrane INAFI Ghana SINAPI ABA Trust
(233)20-8121004
7 Ali Haji Abdullah
INAFI Somalia Amaahda Danyarta
(252)252-826391/
(252)252-796083
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