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BANK OF SIERRA LEONE

BANK OF SIERRA LEONE. Sam Bangura Building. THE SOUTHERN AFRICA SUB-REGIONAL WORKSHOP. ‘ Innovative Approaches To Rural Financial Service Provision With Emphasis On Smallholder Producers’. THE ROLE OF RURAL AND COMMUNITY BANKS IN THE PROVISION OF RURAL FINANCE. PRESENTATION. By

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BANK OF SIERRA LEONE

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  1. BANK OF SIERRA LEONE Sam Bangura Building

  2. THE SOUTHERN AFRICA SUB-REGIONAL WORKSHOP ‘ Innovative Approaches To Rural Financial Service Provision With Emphasis On Smallholder Producers’

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

  4. PRESENTATION By MOHAMED S. FOFANA Deputy Governor Bank of Sierra Leone 23rd –26th March 2004

  5. 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

  6. MACROECONOMIC INDICATORS Table 1 BACKGROUND * Projection

  7. 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

  8. Rationale for the Establishment of Rural Banks in Sierra Leone 3.0 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

  9. 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

  10. Table 2:GROWTH IN TOTAL DEPOSITS (CURRENT AND SAVINGS) IN FOUR SELECTED RURAL BANKS (Le Million)

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

  12. 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

  13. 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

  14. 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 %

  15. Table 6.1(a): DEPOSIT MOBILISATIONFEBRUARY-DECEMBER 2003

  16. Table 6.1(b):LOANS AND OVERDRAFT PORTFOLIOS FOR GROUPS AND INDIVIDUALS AS AT DECEMBER 31ST 2003

  17. 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

  18. 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

  19. 8.0 THE WAY FORWARD • The facilitating role of BSL is temporary and the Bank will gradually relinquish its direct role • An Apex Institution to be established, managed by the Private Sector to oversee the overall development of the Community Banks scheme • The pilot scheme to help the establishment of Community Banks in other rural areas • Creation of Sustainable rural financial intermediaries to facilitate enhanced savings mobilisation • Provision of reasonably priced financial products and services • Enhanced standard of living and poverty alleviation

  20. 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 • Support and build consensus on the development of an inclusive financial system • Establish centralised data bank on Micro finance • Supervise and monitor performance of regulated micro finance operators

  21. 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.

  22. THE END

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