AFRCA Technical Workshop

1. AFRCA Technical Workshop November 2008 Dar-es-salaam A Summary of Key Issues & Take Away Insights

2. Key Issues Day 1 of AFRACA Tech. Workshop There were 7 Presentations under 3 sub-themes Rural Finance Challenges and Innovations - 2 papers, one a synthesis of sub-regional workshops Selected Innovations from the region & experiences -2 Papers, one on governance – decentralisation policy Role of SACCOS in Rural Finance - 3 papers, on the ground Coops & SACCOS experiences

3. Discussions Benefitted from Official Opening Speeches Background and Objectives of the Workshop • Ms. Flora Rutabanzibwa – BoT, convener • Mr. E. Mkwawa – DCB, Host • Mr. Kone, AFRACA Chairman Key guidance from: • Hon. Mizengo Pinda – The PM of The UR Tanzania • Imperatives of the Agriculture Sector and Rural Finance {The Speech is a must read - once more!}

4. Aspects Covered Why Innovations in Rural Finance? & What are the drivers of Innovations? - Financial and market risks are in inherent rural areas Low income and low capital bases in rural areas are a challenge Shortfalls in the governance of rural institutions Dispersed populations, exacerbated with undeveloped infrastructure Socio-cultural specificities of the rural clientele base Significance of disadvantaged groups in rural areas: women, youth Consensus: Innovations are needed, the issue is ‘how best’ and not ‘why’ Justifications for RF innovations differ from those of main stream finance Types of Innovations Noted and Identified as applied in Africa: Products, Organisational, Policies, Regulations, Technological and Methodological.

5. General Issues • Agriculture remains the main stay of rural dwellers and hence a key entry point for strategies to development and poverty reduction • It was thus re-emphasised that Agriculture is the Key Real Sector that ought to be targeted by RF innovations. • Country Governance and Administrative structures, including measures such as decentralisation have a role to providing conducive environment for RF innovations • Credit guarantee, if designed well basing on institutional development and linkages with CBs can work to address agricultural lending challenges • Banks and Cooperatives Movements have a role; however, continued innovations are needed in improved legislations, new products, depositors protection, managerial and organisational arrangements. • SACCOS work worldwide but need: proper legislation for federation, pursue savings before credit, and deposits safety

6. Critical Observations on RF Innovations • Drivers of innovations: • A significant role has been played by donor agencies and NGOs; to a smaller extent by Governments • Fewer innovations emanated directly from profit seekingFinancial Institutions • Sustainability of Innovations • There is a need to be cost conscious and articulate continuity after donor support • Role of Government: • Key should be on providing an Enabling Environment

7. Innovations: The way Forward • Overall: • There is a broad range of identified of innovations that may be ‘scaled-up’ and ‘out’ • Short run imperatives: • A multi-stakeholder task and responsibility, • A need for more coherent and augmenting efforts • Long run goal: • ‘Ideally’ competition should be the ultimate driver • Success Precondition: • Stable macro-economic environment • Sound fiscal and monetary policies

8. Day 2: AFRACA Tech. Workshop • Global Financial Crises • 1 Presentation and 6 DGs statements • Expanding Outreach to Rural Areas • 3 presentations: Research and Practice

9. Day 2 Global Financial Crises : Focus on Effects on Africa • AID • Declining aid from US • Signs that same declines will be experienced for European Donors • The effects will also permeate to International NGOs activities • Economic implications • FDI will decline • Declining opportunities to tap on international financial markets • Lowered earnings of African foreign reserves in American Banks • Turbulences in foreign exchange markets • Remittances and Transfers • Diaspora remittances will fall

10. Global Financial Crises : A Focus on Effects on Africa • Effects on African Real Economies • Exports decline – slowing global economy • Tourism • Commodity prices’ crash • Shocks in stock markets • Recovery pace may be hindered by lowered trade finance • Warnings against Complacency • We should expect lagged effects; crisis not ending tomorrow • Noted measures by CB in Nigeria, Uganda, Mozambique • A need to join-in and pursue coordinated global response • Raising public awareness is useful to contend with impacts • What are additional roles of Governments? : Fiscal Measures

11. Day 2: Expanding Outreach to Rural Areas • There is need to address the disconnect between research and practices for effective RF innovations • Capacity building of young researchers and dissemination are crucial • Need for organisations such AFRACA to extend activities to research • Few Research Areas mentioned: Insurance, Micro-housing finance • Lessons from practices and challenges of an Agricultural Bank • public owned but operating commercially, • fully regulated by CB, • anchored on rural branches and focusing strongly on Agriculture. • Re-emphasised the importance of the following for DFIs to work: • Stable economy, • Lo inflation enviroments: Vagaries of hyperinflation, and • Need for adequate capitalisation for rural banks

12. What have we achieved: Take Away • Learnt more about challenges in providing RF services • Relationships between real economy (agriculture) and finance • Appreciated the peculiarity of rural and agricultural based economies and the need for targeted products and services, hence the need to innovate • Re-affirmed the need for continued innovations; nonetheless for it happen direct and indirect incentives are pertinent • Learnt on the diverse nature of RF innovations • It is possible that some participants would follow-up certain noted innovations • Appreciated the differentiated roles of • Central banks and regulatory bodies • Commercial banks , Non-Bank FIS, NGOS [national and international] • Community banks, Cooperatives, SACCOS and grassroots MFIs

13. What have we achieved: Take Away • Related Macro-economic Management Imperatives and Development of Rural and Microfinance & Innovations • Stable economies, low inflation etc • Our awareness regarding implications of developments in ‘beyond-the-border-financial markets’ to domestic economies and RF • The Globalized Financial Crises • International Non-Governmental Funds and local MFIs • Brought up new areas for considerations • AFRACAS roles – research wing • Products to explore more – insurance and housing microfinance