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BANK OF SIERRA LEONE

Sam Bangura Building 1


THE SOUTHERN AFRICA
SUB-REGIONAL WORKSHOP

‘ Innovative Approaches To Rural


Financial Service Provision With
Emphasis On Smallholder
Producers’

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THE ROLE OF RURAL AND
COMMUNITY BANKS IN THE
PROVISION OF RURAL FINANCE

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PRESENTATION
By
MOHAMED S. FOFANA

Deputy Governor
Bank of Sierra Leone

23rd –26th March 2004


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1.0 BACKGROUND
ECONOMIC STRUCTURE

 Sierra Leone is a low income country emerging from 11


years of civil conflict

 The country has an estimated population of approximately


5.0 million with a GDP growth rate of 6.5 %.

 Largely agrarian economy with rural dwellers accounting


for over 70 % of the population

 Abundant fertile soil, wealth of Mineral/Marine/ Human


Resources
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MACROECONOMIC
Table 1 BACKGROUND INDICATORS
2001 2002 2003 *2004
GDP at market
prices (Lebn) 1,508.7 1,658.7 1,907.9 2,040.9
759.9 790.2 849.8 879.8
GDP at market

prices (US$m)

Real GDP Growth


(%) 5.4 6.6 6.5 6.6
3.0 -3.2 8.0 14.0
Consumer price

inflation (ave.%)

Population (m) 4.6 4.8 4.9 5.2


29.2 48.5 60.2 70.5
Export fob (US$m)

Imports fob
(US$m) 185.5 264.3 284.5 317.5
-75.8 -142.0 -153.2 -165.4
Current A/c Bal.
(US$m)
* Projection
Reserves excl.gold
(US$m) 51.3 84.7 75.0 74.7
Total external 6
debts (US $ M) 118.8 1,467.6 1,630.4 1,640.0
2.0 OVERVIEW OF THE BANKING SECTOR
• Bank of Sierra Leone
• Sierra Leone Commercial Bank
• Standard Chartered Bank
• Rokel Commercial Bank
• Union Trust Bank
• Guarantee Trust Bank
• First International Bank
• National Development Bank
• National Cooperative Bank
• Post Office Savings Bank
• Sierra Leone Housing Corporation
• Community Banks
• NaCSA Micro Finance Window

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3.0 Rationale for the Establishment of Rural Banks
in Sierra Leone
Concern for the socio-economic transformation
and growth of the country’s rural financial sector
Taking banking facilities to the rural poor
Creating an institutional capacity for the mobilisation of savings
Delivering credit to small farmer
Provision of financial services to rural and medium-scale
operators to increase productivity, income and employment

Eight rural banks were established: the first in 1985


Yoni Rural Bank Mattru Rural Bank
Marampa-Masimera Rural Bank Sewama Rural Bank
Daru Rural Bank Moamale Rural Bank
Kunike Rural Bank Bombali
Cessation of operation in 1995 due to rebel war
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4.1 PERFORMANCE OF RURAL BANKS
Let us look at the performance of the Rural Banks using four
operational yard sticks
Paid up Capital
Share Participation
Resource Mobilisation
Lending
Paid-up Capital of the 8 Banks –Le 20.01M i.e. 41.7% of
Authorised Capital;
3765 Shareholders attracted including NDB
Total deposits mobilised
In 1985 Le0.3m In 1993 Le 95.6m No. of Savers – 6524
Lending- No of borrowers 18,517 of which 5,986 i.e. 32.3%
were women
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Table 2:
GROWTH IN TOTAL DEPOSITS (CURRENT AND
SAVINGS) IN FOUR SELECTED RURAL BANKS
(Le Million)
Name of Rural 1985 1986 1987 1988 1989 1990 1991 1992 1993
Bank
Yoni .03 2.9 5.7 7.1 5.9 11.8 8.0 20.3 15.8

Marampa- - - 1.1 3.3 5.8 15.4 16.9 11.9 30.9


Masimera
Kunike - - 1.5 2.3 1.7 2.2 6.1 3.1 5.4

Mattru - - 0.8 3.2 11.6 15.7 17.6 28.3 43.5

Total Deposit 0.3 2.9 9.1 15.9 25.0 45.1 48.6 63.6 95.6

% Change in total 866.7 213.8 74.7 57.2 80.4 7.8 30.9 50.3
Deposit

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Table 3:
RATIO OF SAVERS TO BORROWERS IN
FOUR SELECTED RURAL BANKS (1985-1993)

Rural Bank Period No. of Savers No of Ratio of Savers


Borrowers to Borrower
Yoni 1985-1993 2,668 4821 1:1.8

Marampa- 1986-1993 1573 9200 1:5.5


Masimera
Kunike 1987-1993 897 2626 1:2.9

Mattru 1987-1993 1386 1870 1:1.3

Total 1985-1993 6524 18517 1:2.8

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5.0 PROBLEMS AND CONSTRAINTS

Rural Banks

Under capitalisation
Inability to mobilise adequate financial resources
 Inability to generate reasonable profit level
Slow rate of growth

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6.0 Rationale for the Establishment of
Community Banks in Sierra Leone
 Mobilize idle rural resources
 Deploy these resources for the extension of supervised credit to small
scale entrepreneurs
 To replace rural banks registered by guarantee
 Other related activities in the rural areas

Two pilot Community banks commenced in 2003


Yoni Community Bank
Marampa- Masimera Community Bank
Four other pilot Community Banks to follow
Facilitated by Bank of Sierra Leone
BSL to eventually relinquish its direct role and Apex
Institution to be established

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6.1 PERFORMANCE OF COMMUNITY
BANKS
As mentioned in the paper, Community Banks have only
operated for about a period of one year in Sierra Leone.
Measurement of their performance using the same indicators
as we did in the Rural Banks will be limited.
Total depositors over 12 Months period for 2 Banks– 1243
Deposits mobilised Le 2896.4m
Lending
No of borrowers - 92
Amount - Le 126.7m
Rate of Interest - 25-35 %
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Table 6.1(a):
DEPOSIT MOBILISATION
FEBRUARY-DECEMBER 2003
Product Yoni Community Marampa-Masimera
Bank Community Bank
No. of Deposits No. of Deposits
Accounts Le, 000 Accounts Le’000
Current 371 1,350,686 190 1,315,104
Account
Savings 471 118,457 211 112,176
Account
Total 842 1,469,143 401 1,427,280

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Table 6.1(b):
LOANS AND OVERDRAFT PORTFOLIOS FOR GROUPS AND
INDIVIDUALS AS AT DECEMBER 31ST 2003
Product Marampa- Yoni Marampa- Yoni
Masimera Community Masimera Community
Community Bank Community Bank
Bank Bank

Total No. Total


Of Loans
13 19 Amount Of
13,550 23,817
Loans
(Le’000)
Total No. Total
Of
12 48 Amount Of
28,500 60,837
O/Drafts O/Draft
(Le’000)
Total No. Total
Of
25 67 Amount Of
42,050 84,654
Exposures Exposures
(Le’000) 16
6.2 PROBLEMS AND CONSTRAINTS

Community Banks

 Inadequate Capital base


 Lack of Communication equipment
 Slow pace of attracting local participants
Once bitten twice shy syndrome
Slow pace of rural recovery after war

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7.0 BENEFITS FROM THE
LESSONS LEARNT
Major problems and constraints faced by rural banks
now addressed:

 Adequately trained personnel now recruited


 Vehicle and motor-bike now provided
 Adequate office equipment now provided
 Electricity and water supply available
 Positive interest rates now maintained

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8.0 THE WAY FORWARD

o The facilitating role of BSL is temporary and the Bank


will gradually relinquish its direct role
o An Apex Institution to be established, managed by the
Private Sector to oversee the overall development of the
Community Banks scheme
o The pilot scheme to help the establishment of
Community Banks in other rural areas
o Creation of Sustainable rural financial intermediaries
to facilitate enhanced savings mobilisation
o Provision of reasonably priced financial products and
services
o Enhanced standard of living and poverty alleviation
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8.1 THE NATIONAL MICROFINANCE POLICY
 National Micro finance policy recently approved by
Government of Sierra Leone
Vision of policy
 Develop and integrate micro finance into the national financial services
mainstream
Bank of Sierra Leone Policy relating to Micro finance
 Provision of Start-up cost of micro finance institution
 Provision of Training for Staff and Management
 Establishment of regulatory, supervisory and monitoring system

Micro finance Unit in BSL


o Support and build consensus on the development of an inclusive financial
system
o Establish centralised data bank on Micro finance
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o Supervise and monitor performance of regulated micro finance operators
9.0 CONCLUSION
The Bank is extending its assistance to the rural sector to enhance
economic growth and encourage rural women to participate in this
process consistent with the Global Millennium development goals of:
 Cutting down poverty by half by the year 2015
 Year 2005 declared as`Micro Finance year’
 sector to enhance economic growth and supporting rural women
to participate in economic growth.
 Bank using community banks and micofinance Poor households
to meet their basic needs
 Support in women’s economic participation in Micro finance
 Bank’s assistance being extended to the rural window to help the
rural poor access banking services
 Bank laying foundation for the attainment of the millennium
Development Goal in Sierra Leone. 21
THE END

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