AFRICAN UNION                               UNION AFRICAINE

                                                  UNIÃO AFRICANA

Addis Ababa, ETHIOPIA P. O. Box 3243   Tel: 251 11 5517700   Fax: 251 11



                           DAKAR, SENEGAL
                            30-31 JULY 2008

1.     The African Union Commission organized the workshop to validate the study
on the elaboration of a roadmap/action plan for the development of microfinance in
Africa. The study was commissioned as part of efforts by the African Union to
develop microfinance within the broader context of continental economic growth and
poverty alleviation efforts.

2.    The workshop was held in Dakar, Senegal, from 30 to 31 July, 2008. It was
hosted by the African Institute for Economic Development and Planning (IDEP).


3.      The meeting was attended by 27experts in the field of microfinance from all
five regions of the continent including representatives of microfinance institutions and
regulatory agencies as well as the staff of the AU Commission. The workshop
participant list is herewith attached.


4.    During the opening ceremony, three statements were delivered by Mr. Diery
Seck, Director of IDEP; Dr. René N’Guettia Kouassi, Director of Economic Affairs of
the African Union Commission; and Mr. Boubacar Traore, Director of Cabinet,
representing the Senegalese Minister in charge of Microfinance and SME

       a)    Introductory remarks by the Director of IDEP

5.      In his statement, the Director of IDEP, Mr. Diery Seck, welcomed the
participants while paying tribute to the African Union which for long has been
supporting IDEP particularly its training programme on Regional Integration. He then
recalled the mission and the activities of IDEP and stressed that the Workshop was in
line with its activities.

       b)    Statement by the Director of Economic Affairs, African Union

6.     Taking the floor, after the Director of IDEP, Dr. René N’Guettia Kouassi
thanked the Senegalese Authorities for their interest in resolving the problem of the
financing of development in Africa and thereby promoting mircrofinance as evidenced
by their actual presence at the opening ceremony of the Workshop. He also thanked
IDEP for having always responded positively to the requests of the AU Commission
and to the Consultant, Mr. Henry Oloo Oketch, who in spite of difficult working
conditions, had prepared the document. He then recalled the challenges to be taken
up by the microfinance associations before concluding by stressing the importance
and key role that the microfinance institutions can play in the fight against poverty
and sufferings.

       c)    Statement by the Director of Cabinet

7.     The last in the series of statements was that of Mr. Boubacar Traore who, on
behalf of the Minister of Small and Medium Enterprises (SMEs) and of Microfinance,
expressed his satisfaction at the choice of Senegal to host that major activity. He
then commended the process initiated by the AU Commission within the framework
of the vast field of microfinance which for him was perfectly in line with the dynamism
imprinted by taking into account the concerns of the poorest people. He pointed out
that the meeting was an opportunity to lend support to the international community
which was committed to reducing by half poverty in the world by the year 2015. He
concluded his statement by stressing that the approach to be adopted was to
reconcile the dual economic and social mission of microfinance by taking into
account the sound distribution of roles and responsibilities and the observance of the
principles and good practices obtaining in the sector.


8.     During this session, participants introduced themselves, presenting brief
statements of their organizations and their experiences in the field of microfinance.
From these introductions it was apparent that from East to West and North to South
of Africa the significance of microfinance is not debatable; it is the level of
development that varies from one region to another and one country to another. The
other revelation emanating from these introductions was that Africa has rich and
abundant expertise in issues of microfinance.


9.      Mr. Baboucarr Koma of the African Union Commission made this presentation.
He started by explaining the current African context in which the study was
conducted. Among the key continental objectives being pursued by the African
Union, he highlighted rapid socio-economic development, the attainment of the
MDGs and the integration of Africa in the global economy. He further highlighted
some of the preconditions required for the attainment of these objectives and gave an
overview of efforts being made at the level of the African Union. He highlighted the
challenge of poverty and explained the link between microfinance and poverty
alleviation. He further highlighted some of the key problems of microfinance in Africa,
the objective of the study as well as the expected outcome of the workshop. He
finally called on the participants to make a critical assessment of the Roadmap,
submit comments, propose changes and additions and make concrete
recommendations with a view to improving the quality of the document.


10.     The Consultant, Mr. Henry Oloo Oketch, presented the study report in two
parts; the state of microfinance in Africa and the Roadmap.

      A.        The State of Microfinance in Africa

11.   The consultant in his presentation highlighted some key findings as follows;

           i.   Less than 4 percent of African population has access to microfinance
                and only 1 per cent has access to commercial finance;
        ii.     26 million people are benefiting from the services of microfinance;
          iii.   MFI’s have enabled the poor and low income households to save,
                 invest and insure to cope with various types of shocks;
          iv.    MFIs have contributed significantly to education, nutrition, health and
                 negative effects of death;
          v.     Access to financial services by the poor enables them to effectively
                 contribute to economic growth and development; and
          vi.    Provides capital for start-ups and expansion of SMEs through loans and
                 hence contributes to employment creation and private sector

12.     In his presentation, the consultant also made an assessment of how well
established Africa’s microfinance system is. He stated that the microfinance system is
at different development stages in different countries, and he outlined four different
development stages of microfinance across the continent, namely take-off, growth,
maturity and decline. In assessing the level of development of the sector in different
parts of the continent, he focused on the following criteria:

    i.    Institutional diversity that includes cooperatives, MFIs, NGOs, and
          commercial banks;
   ii.    Scale of outreach evidenced by a large number of borrowers, large number
          of savers and a wide branch network;
  iii.    Number of providers that are institutionally and financially self-sustaining,
          with a presence of good leadership, strong governance and effective
          information system ;
  iv.     Diverse product base that could include a host of products and services like
          commercial credit, housing credit, micro-insurance, leasing, agricultural
          finance, savings, money transfer, etc;
   v.     Closeness or distance from international best practices as evidenced by cost
          of lending, return on investments, customer satisfaction, etc;
  vi.     Affordability of Service;
  vii.    Competitiveness;
 viii.    Degree of integration of MFIs into the overall financial system of the country;
  ix.     Degree of integration of MFIs into the overall macroeconomic policy
   x.     Level of co-operation and co-ordination among stakeholders;
  xi.     Quantity and quality of resources dedicated to microfinance;
  xii.    Pool of talent and human resource base; and
 xiii.    Speed and direction of growth of the sector.

         B:      The Roadmap
13.    In his presentation, the consultant highlighted some notable challenges facing
African MFIs, and some of these challenges include limited outreach, limited product

and service range, and lack of conducive environment. He also identified the various
stakeholders and the role each one is expected to play.


14.        The participants made the following observations:

          i.      Where there is ineffective regulation, there is a problem of recruiting
                  capable MFI staff, e.g. Chief Executive Officers (CEOs) and Chief
                  Finance Officers (CFOs);
         ii.      The objective of microfinance is to help in poverty alleviation efforts.
                  However, high interest rates are causing opposite results in some
        iii.      As banks downscale they poach staff from MFI’s weakening the
        iv.       Subsidies from governments hinder development of MFI’s as this
                  promotes dependency and non payment cultures;
         v.       Even though microfinance can contribute significantly to economic growth
                  and development it is not a panacea for all of Africa’s problems;
        vi.       Microfinance cannot be discussed in isolation. It has to be discussed in
                  relation to other challenges such as land reform, access to national
                  resources and ownership issues;
       vii.       The AU should expand the introduction of the Roadmap to include
                  current development challenges and the role of microfinance in the
                  achievement of Africa’s development objectives;
       viii.      The Roadmap should show an assessment of the impact of microfinance
                  on a regional basis based on the field visits;
        ix.       There is need to prioritize the recommendations in the Action plan;
         x.       The statistics in the Roadmap need to be updated on a continuous basis;
        xi.       Government should be sensitized about the role of regulation of MFIs;
       xii.       The Roadmap should specifically address the financial needs of women,
                  the youth and people living with HIV/AIDs;
       xiii.      The Roadmap should include an analysis of the impact of MFIs on
                  poverty eradication, job creation, savings culture, etc;
      xiv.        As some NGOs transform into commercial entities, the AU should
                  facilitate the documentation of such transformation in Africa to provide
                  reference. In the transformation process and mission drift should be
       xv.        The Roadmap should include strategies in business development
      xvi.        There is need to give special attention to the poor, gender and the people
                  excluded from the system;
   xvii.          There is need to clarify the terms “capitalization” to include (financial and
                  technical); and

  xviii.         Within the context of the crosscutting nature of gender issues, it was
                 recommended that gender be mainstreamed in the Roadmap by ensuring
                 that the following gender-specific recommendations are included in each
                       Eliminate gender discriminatory practices contained in new MFI
                       The development of new MFI policies should be home grown, and
                        involve all stakeholders, including women;
                       The proliferation of MFI products from the traditional banking sector
                        should comply with microfinance characteristics and components; and
                       The expansion of current 4% coverage in financial services and 1%
                        in credit services must be scaled up to respond to the urgent need
                        to enhance the micro and SME sector to formal private sector
                        enterprises within the context of industrialization objectives of the
                        African Union.


15.   In order to ensure that focus on critical issues was not lost in general plenary
observations, the participants were divided into two major groupings based on their
experiences. The two areas of focus were:

           1.    Satisfying demand: products, pricing, accessibility, innovation; human
                 resources; and
           2.    Regulation; Policy; and Capitalization.

16.     In their discussions, the two groups observed that AU’s plan to incorporate
microfinance into the broader realms of economic growth and poverty alleviation
efforts was a welcome and timely move. However, in order to ensure that AU’s efforts
bear fruit, other stakeholders must be sensitized to play their roles more effectively.
Key stakeholders identified by both groups include African governments, MFIs,
country/regional MF networks and other external investors. The groups made
recommendations for each of the stakeholders and these recommendations support
or are additional to recommendations already documented in the Roadmap. The
recommendations cut across several themes, but the major ones are related to
regulation, funding, research and development and capacity building.


17.     The meeting made the following recommendations:

           A.        Recommendations to African Governments
           i.        It was a general consensus that governments need to be part and
                     parcel of microfinance development, especially in providing a conducive
                     environment for microfinance to prosper;
           ii.       While governments should not be direct microfinance providers, they
                     should play a strong facilitation role by ensuring that, effective laws that
                     support development of microfinance are enacted within reasonable

               time limits. They should support development of effective policies, and
               such policies should be geared towards an all inclusive financial sector;
       iii.    Provide and/or motivate MFIs and other financial service providers to
               extend outreach to the rural areas who are greatly disadvantaged
               because of high delivery costs due to inadequate infrastructure;
      iv.      In drafting microfinance policies and regulations there is need for
               adequate consultation of all relevant stakeholders, for example, MFIs,
               cooperatives, relevant government ministries and central banks so that
               best practices can form the basis to inform such a process, and also
               ensure that the policies reflect African realities;
       v.      Some consumer lenders are generally interested in profit and not socio-
               economic growth. Therefore, the governments need to ensure that
               there are laws that protect consumers from worsening poverty
               conditions caused by consumer loans;
      vi.      Given the capacity constraints in the microfinance sector, there is need
               to create/support training institutions that run specialized microfinance
      vii.     There is need to conduct gender disaggregated assessment of the
               resources required to reach the sections of the population that are not
               currently served by MFIs;
     viii.     While African governments pursue liberalization policies, efforts should
               be made to encourage local investors to participate in the microfinance
      ix.      African governments need to work on an enabling environment for
               Microfinance: secure access of low income people to all microfinance
               services and products (including savings, micro-insurance and money
       x.      African governments need to support MFIs by funding capacity building
               initiatives and research; and
      xi.      The African governments should ensure that the central bank regulation
               officers have the necessary capacity to supervise the microfinance

       B.      Recommendations to African MFIs

18.    There is strong evidence to suggest that African MFIs can do better in various
factors despite the shortage of funds; for example, the participants observed that
many of these MFIs import product and service delivery models and do very little in
terms of redesign in order to contextualize them. Some key recommendations
directed to MFIs include:

     i.       The MFIs should put more emphasis on training and capacity building
              staff in order to improve productivity, improve professionalism and quality
              of portfolios;
     ii.      African MFIs should be run along business lines in order to reduce their
              dependency syndrome;

      iii.              There is need for MFIs to set aside funds for conducting of feasibility
                        studies, and strengthening marketing and training functions. This will help
                        them design and diversify products along customer needs, and hence
                        adopt a demand driven approach as opposed to supply driven approach
                        that is currently prevalent across Africa;
      iv.               There is need to explore potential use of ICT to improve scale of
      v.                MFIs that are not allowed by the law to offer all types of products should
                        go into partnership for example with insurance companies and post
                        offices or other relevant institutions until the legal environments change;
      vi.               Need to offer products at reasonable price for the customers (MFIs need
                        to be more efficient);There is need to pay more attention to innovation of
                        products, service and service delivery;

             C.          Recommendations to African country networks

19.   From the discussions the consensus that emerged was that country MF
networks do or should play a critical role. There exist networks in almost every
country, and there are also regional MF networks in existence, but while some
networks are active and vibrant some are dormant. There will be need to coordinate
more at the regional level to ensure synergies are developed across Africa.

20.          Specific recommendations made for networks include:

                   i.    At the country level, the networks should play a more feasible
                         coordinating and facilitating role bringing stakeholders together in all
                         issues that affect the development of microfinance in the specific
             ii.         There is need for country networks to sensitize and expose auditors to
                         unique features of microfinance to enable them effectively audit
                         microfinance institutions;
         iii.            National and regional networks need to focus on capacity and
                         institutional building of African MFIs; and
        iv.              The regional networks should promote exchange among African MFIs
                         and ensure that they are covering all African regions.

         D.              Recommendations to the African Union

21.    The participants were unanimous that the African Union should be a more
active partner in promoting the cause of microfinance in Africa, and they made the
following specific recommendations:

             i.          The AU should facilitate the elaboration of an African Microfinance
                         Charter and an implementation mechanism;
             ii.         The AU should facilitate the creation of a code of conduct for
                         microfinance in Africa;

iii.     Integrate the microfinance policies of the RECs in line with other
         integration programmes manifested on the continent;
iv.      The AU should lobby Member States to integrate microfinance into the
         financial sector and promote the establishment a diversified, viable and
         perennial microfinance sector as an integral component of the national
         financial system;
v.       The AU should encourage Member States to promote Public-Private
         partnership (PPPs) especially in the area of infrastructure development
         in order to improve scale of outreach by MF service providers;
vi.      The AU should institutionalize an annual African Microfinance Forum;
vii.     The African Union should ensure lobbying to make it possible to
         generate internal financial resources (in Africa e.g. AfDB);
viii.    The AU should add a page on microfinance on their website (database
         for MFIs, consultants in microfinance, links to national and regional
         networks etc.);
ix.      Provide support for training and research centres in Africa in the main
         languages; based on practitioners experience (directly and by
         convincing governments to do the same);
x.       The AU should support MFIs in exploring alternative ways of raising
         capital e.g. savings mobilization, better use of Diaspora remittances,
xi.      There is need to develop strategies for the development of sustainable
         microfinance in conflict and post-conflict countries;
xii.     Provide scholarships for MFIs staff to attend training courses;
xiii.    Provide funding for MFIs to do research and support documentation of
         impact of microfinance on development, for example, through the use of
         case studies;
xiv.     Support translation of training material in major languages (support
         second and third line trainers);
xv.      Support ICT use by MFIs (funding and linkages to donors such as
         Gates foundation, CGAP and others);
xvi.     Set up Innovation grants to encourage MFIs to innovate in microfinance
         (products, services, use of technology etc.);
xvii.    Set priorities by region/sub region;
xviii.   Promote exchange, internship and volunteer programmes among MFIs
xix.     Support the coordination of regional networks;
xx.      The AU should assist in the development of benchmarks, standards
         and ratings. In this process, existing benchmarks, standards and ratings
         should be used as a basis;

Definition of microfinance

22.   The workshop agreed on the following definition of microfinance:

        “Microfinance is the provision of a broad range of financial products and
        services to people with low incomes who, by virtue of their social and
        economic status, are excluded from conventional financial institutions. Such
        provision must be sustainable both for the microfinance institutions and for
        the borrowers.

        Microfinance is a key component of financial systems and aims at changing
        and improving the lives of people with low incomes, creating jobs and
        contributing to the development of both the local and the national economy.”


23.     In his closing remarks, Dr. Rene N’Guettia Kouassi, Director of Economic
Affairs, speaking on behalf of the Chairperson of the African Union, thanked all
participants for having taken part in the validation workshop. He also thanked the
Senegalese Authorities as well as the Director of IDEP for their various roles in the
success of the workshop.

24.      He expressed his satisfaction with the commitment shown by the microfinance
practitioners and called for support to the African Union in its pursuit to develop
microfinance on the continent with a view to bringing about development and
attainment of the Millennium Development Goals. He said the discussions were very
fruitful and further expressed satisfaction with the definition of microfinance agreed
upon at the workshop. He indicated that the recommendations of the workshop will
help to improve the Roadmap which will eventually be presented to the relevant
decision making bodies of the African Union for adoption. Following this, focus will be
on implementation. He called on all stakeholders to take active part in the
implementation of the Roadmap.


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