National Commission
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The Micro-Finance
Programme (MFP)
Overview of NaCSA's Micro-Finance Programme
The provision of micro-finance services to the
poor, especially women, has been identified as
a key strategy in Sierra Leone's post-conflict
recovery efforts. Since 1998 the Government has
supported a number of institutions to on-lend
funds to the poor. The Social Action and Poverty
Alleviation (SAPA) Programme, now the Micro-Finance
Programme (MFP) of National Commission for Social
Action (NaCSA) benefited from these funds and
was able to establish two successful micro-finance
initiatives. Due in part to the successful implementation
of these initiatives, the Government has established
a sound policy framework for micro-finance in
the country.
The MFP is intended to respond to and help implement
government's policy and priorities by strengthening
the overall micro-finance sector. The Programme
will deliver services through a Micro-Finance
Support Centre (MFSC) that will build the capacity
of MFIs through training and technical assistance,
act as a catalyst for improved sector co-ordination
and eventually capitalize credible MFIs.
The MFP is supported by the African Development
Bank for the period from mid-2003 to mid-2008.
This support includes the provision of a micro-finance
advisor for two years and short-term consulting
support. In addition, the World Bank has agreed
to provide technical assistance and the Government
of Sierra Leone is contributing counterpart funds.
Programme Goal and Objectives
Goal
To improve the livelihoods of the economically
active rural and urban poor through increased
access to small-scale financial services for the
development of productive activities throughout
the country.
Objectives
The main objective is to improve the delivery
of sustainable small-scale financial services
to the poor by strengthening MFIs and their programmes.
Specific objectives are to:
* mprove the institutional capacity and performance
of micro-finance service providers throughout
Sierra Leone;
* Promote policy coherence and operational efficiencies
by building and strengthening co-ordination mechanisms
among micro-finance service providers and between
them and other financial institutions;
* Capitalise MFIs that meet specific MFSC criteria.
Operational Principles
The principles guiding the operations of the
MFSC are based on local experiences and global
best practices in the industry. The MFSC will
ensure that discipline, transparency, reporting
and accountability, pricing of product, delinquency
management and control, appropriate techniques/products
and gender considerations are upheld and promoted
among MFIs. The overriding objective is to improve
efficiency and effective delivery mechanisms for
financial services offered to the poor.
Operational Strategies
The MFSC will improve the MF industry in Sierra
Leone through the following strategies:
Training and Technical Assistance
The human resource capacity to design and implement
Micro-Finance Programmes is limited in the country.
As a result, the Centre will support a wide range
of training activities for various levels of personnel
in selected agencies that fulfill the criteria
outlined in the MFP Handbook.
The Centre will also embark on training of trainers
in selected areas of micro-finance operations.
Where training capacity is weak, trained MFSC
staff will deliver some training initially. Core
courses include: Introduction to Best Practices
in Micro-Finance; Lending Methodologies; and Governance
in MFIs. Specialized courses include: Product
Development; Setting Interest Rates; Delinquency
Management and Control; MIS; Internal Control
and Business Planning. Other course areas will
be conducted on request depending on the nature
and availability of the required expertise. In
most cases the MFSC will contract training out
to NGO and private sector training providers.
As follow-up support to the training, technical
assistance in the form of MFSC personnel and/or
external local consultants will be secunded to
such institutions for a period of time to help
build the competence of NGO/MFI staff.
Funding
At present, the MFP has no external source of
funds for capitalization. It relies on funds recovered
from prior MF loans to MFIs under the SAPA Programme.
Initially, for MFIs that satisfy the criteria
established by MFP, funds can be provided for
incremental loans. These can later be converted
to grants on verification of satisfactory use
and continued application of best practices.
Only MFIs with a primary, long-term focus on
micro-finance will be eligible to become partners
to the MFP. NaCSA and the MFI will sign a Co-operative
Agreement that will, amongst other things, make
explicit that NaCSA will not share responsibility
for any losses incurred by the MFI.
Co-ordination and Information Exchange
The co-ordination role of MFSC is to facilitate
the development of a viable, long-term sustainable
industry. The Centre will, therefore, implement
strategies that discourage short-term inappropriate
schemes or schemes that do not promote the implementation
of best practices in micro-finance. The MFSC will
work with all necessary parties to develop and
disseminate the appropriate standards for micro-finance
operations in Sierra Leone. In the area of information
sharing the MFSC will use various means such as:
newsletters, briefing notes, information events,
and development of resource centres. The latter
will provide updated information on micro-finance
activities in the country, including locations
and methodologies of the providers and reference
material on micro-finance.
Programme Implementation
As part of the general procedures for participation
in the MFP, institutions will be required to fulfill
some basic criteria. These include: institution
appraisal (including track record) by MFSC personnel,
pre-qualification, submission of a detailed business
plan, participation in prescribed training courses
conducted by the MFSC, charge market rates of
interest covering all costs, written commitment
to achieve full financial self-sufficiency in
5-7 years and have demonstrated firm control over
loan delinquency and loan losses.
All such institutions are expected to operate
within the policy framework of the National Micro
Finance Policy, adopting sound financial discipline
and other norms in the industry.
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