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Establishing commercially-sustainable microfinance in Sudan: Presentation to Oversight Committee. Central Bank of Sudan World Bank Financial and Private Sector Development Consultative Group to Assist the Poorest (CGAP) December 2006. The Sudanese private sector exists throughout the country.

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establishing commercially sustainable microfinance in sudan presentation to oversight committee

Establishing commercially-sustainable microfinance in Sudan:Presentation to Oversight Committee

Central Bank of Sudan

World Bank Financial and Private Sector Development

Consultative Group to Assist the Poorest (CGAP)

December 2006

slide3
But large firms – and particularly foreign invested firms –highly concentrated in one stateReflects underbanked sector throughout country
microfinance can make a difference if based on best practices
Microfinance can make a difference – if based on best practices
  • Microfinance can have a powerful impact on poverty
  • Financial sustainability is necessary to reach large numbers of poor
    • Client discipline
    • Institutional discipline
    • Government and donor discipline
  • Microfinance is about building permanent local institutions
  • Interest-rate ceilings can damage access to credit
  • Government is an enabler, not a direct provider of services
  • Donor funding should complement, not replace, private capital
  • The lack of institutional and human capacity the key constraint
  • Standardized information and reporting, accountability
lessons of international experience
Lessons of international experience
  • Clear strategy owned by Government
    • Donor and Government coordination essential
  • No over-regulation
    • Government role limited to regulating deposit-taking MFIs
    • Promotional functions outsourced to Apex institution
  • Highly focused Apex Institution
    • limited to technical/ financial support, outreach and Sudanization over time
  • Focus on attracting successful international microfinance institutions to Sudan.
    • MFIs with International track record and support from parent bodies perform better
  • Take a long-term approach to investing in microfinance
    • Providers may include NGOs, microfinance and commercial banks (downscaling)
    • the development of viable microfinance capacity is a slow and costly process
    • Expect 3-5 years of financing and tech support to MFIs to the point of financial and operational viability.
international examples
International Examples
  • MISFA Afghanistan
    • $62.5 MM program to finance Apex institution supporting primarily NGO MFIs
    • Three objectives Sustainability, Broad geographic outreach, Afghanization over time
    • Now three years old
    • Approximately 15 MFIs, 200,000 clients, one NGO
  • Ethiopia
    • Initiated 1997 with policy framework
    • Supported by Government, donors and strong association
    • Now 27 MFIs, 1.7 million clients
    • $229 MM portfolio
  • Apex institutions operating in Bosnia ($21 MM, Phase 2 $27), Sierra Leone, Bangladesh, Mexico
institutional approach
Institutional approach

Board of Apex Institution

Seven members, Public-private, representing public agencies,

Sudanese private sector, civil society and donors

CBOS

MF Unit

BOSS

MF Unit

institutional approach8
Institutional approach

Board of Apex Institution

Seven members, Public-private, representing public agencies,

Sudanese private sector, civil society and donors

CBOS

Apex Institution Management Contract

Director and Staff

Transition to Sudanese mgmt over time

MF Unit

BOSS

North Sudan

Operations

South Sudan

Operations

MF Unit

Financing of

New/existing

MF providers

Technical

Assistance to MF

providers

Demand

Creation and

Client support

institutional approach9
Institutional approach

Institution Building and

Management Contractor for Apex

Support on policy framework

Board of Apex Institution

Seven members, Public-private, representing public agencies,

Sudanese private sector, civil society and donors

CBOS

CBOS

Apex Institution Management Contract

Director and Staff

Transition to Sudanese mgmt over time

MF Unit

BOSS

BOSS

North Sudan

Operations

South Sudan

Operations

MF Unit

Financing of

New/existing

MF providers

Technical

Assistance to MF

providers

Demand

Creation and

Client support

Assistance to MFIs and sector

proposed start up process
Proposed start up process
  • IPP presented (Dec)
  • CBOS to legally establish Apex Institution (Jan)
  • Government and Donors nominate Board (Jan)
    • Two government representatives
    • Two representatives of donors (with international microfinance experience)
    • Two representatives of Sudanese civil society
    • One representative of Sudanese private sector
  • Retroactive funding to start early January
  • FPP presented end January (virtual review?)
  • Management team selected by Board
    • International competitive bidding for management team starts Jan
    • Output targets specified in RFP (10 MFIs, 200,000 clients, geographic coverage Sudanization)
    • Selection by end-February
changes to since original presentation
Original IPP

policy obstacles to informal sector

Investment climate assessment

Informality study

Microfinance

Policy

Downscaling

Greenfield

Capacity building

Linkages to larger firms

Outreach and social mobilization

Self-help housing

Current IPP

Streamlined project focused only on:

Building regulatory capacity

Establishing Apex institution

Changes to Since Original Presentation
challenges for sudan project
Challenges for Sudan Project
  • Capacity limitations – clients, MF providers, service providers to sector, Apex institution
    • Now and with planned transition to Sudanese management
  • Vast, underserved market
    • Rural, IDPs, urban informal, pastoralists
  • Challenge to achieve national coverage
  • Project is small relative to magnitude of the problem and similar efforts elsewhere
  • Apex must insist on performance-based funding, avoid disbursement pressure and retain independence
  • Informality and real economy issues must be addressed for microfinance to thrive
the vision
The vision
  • 10-15 microfinance institutions established, serving at least 200,000 clients
  • Several moving toward commercial viability in four years
  • At least ten service providers to sector
  • Vibrant microfinance sector contributes to broad-based growth throughout Sudan
  • It can be done!
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