As a solution to this problem, the IFRC and the Sri Lanka Red Cross Society (SLRCS) have partnered up with SANASA Development Bank of Sri Lanka in a four-year pilot project providing access to SANASA’s microfinance services, targeting families at the bottom of the economic ladder. The project will begin in the southern district of Matara with a plan to provide 750 poor families with microfinance services. The project’s aim is to facilitate long-term, sustainable livelihoods.

A majority of the selected households rely on unstable sources of income such as seasonal agriculture, fishing and daily labor. According to Tissa Abeywickrama, chairman of the IFRC Movement task force, reducing barriers that prevent access to credit and financial services will reduce future risks.

Currently in Sri Lanka, the poorest families are often excluded from the financial services of village co-op banks and other MFIs because they are considered to be too high-risk. The IFRC has negotiated a broad risk reduction package with SANASA made up of subsidized financial services and social mobilizers from the SANASA Education Campus to train participant families in basic finance including savings, debt and cash flow.

The project will cover a six-month compulsory savings requirement to join SANSA, the purchase of SANASA shares and any admission fees. SANASA Development Bank loans will be offered with lower interest rates (8 percent per annum fixed for the first three years instead of average interest rates of 20 percent). The project will also provide a five-year SANASA insurance bundle covering loss or damage to household or livelihoods equipment, funeral expenses, accidental death and illness, and medical costs.

Participants must attend monthly meetings and maintain compulsory savings to access further services.  According to the IFRC, subsidizing microfinance services for the first few years will enable participant households to become stronger and enable them to access further financial services on their own.

The International Federation of Red Cross and Red Crescent Societies (IFRC) was founded in 1919 and make up the world’s largest humanitarian organization. Based out of Switzerland, the IFRC is involved in programs in more than 150 countries, assisting victims of disasters, refugees, displaced people, and the impoverished. The IFRC has budgeted US 236 million to fund global humanitarian assistance programs for 2009-2010. 

The Sri Lanka Red Cross Society (SLRCS) was begun in 1936 as a branch of the British Red Cross and became a member of the IFRC in 1952. The SLRCS currently covers all 25 of Sri Lanka’s administrative districts with a total of 26 branches. With a total membership of 100,000 including 6,500 active volunteers, SLRCS implements programs of disaster and poverty relief.

SANASA Development Bank (SDBL) was established in 1997 in Colombo, Sri Lanka, targeting low-income communities in both urban and rural areas providing loans, voluntary savings, leasing and fund transfer services. SANASA serves nearly 94 thousand active borrowers with a total loan portfolio of US 59.3 million. Their total assets at the end of 2007 were reported at US 79.3 million. SDBL’s return on assets (ROA) at the end of December 2007 was reported at 1.24 percent with a return on equity (ROE) of 12.62 percent.

By Melissa Duscha

Additional Resources:

International Federation of Red Cross and Red Crescent Societies

International Federation of Red Cross and Red Crescent Societies: Tsunami Four-Year Progress Report

MICROCAPITAL STORY: Indian Government Agency NABARD (National Bank of Rural Development) Sponsors Trip by Indian Banking Representatives to Observe Microfinance in Sri Lanka

SANASA Development Bank (SDBL)                                                                                                                 

Sri Lanka: Community Credit Reduces Risk for PoorestSri Lanka Red Cross Society (SLRCS)

This report uses a series of surveys conducted in Sri Lanka by the World Bank Development Research Group Trade Team to examine the effectiveness of micro-credit as a source of employment generation in developing countries, questioning whether or not the informal sector is a temporary substitute for wage-work or a stepping stone for entrepreneurs with growth potential. The surveys compare the characteristics of self-employed workers without employees, wage workers and owners of larger businesses with employees.

The data pool, taken in Sri Lanka , consists of 618 self-employed workers who do not have employees selected from three districts in south and southwestern Sri Lanka , 456 wage workers from the same geographic area, 528 enterprises used in a grant study, and 424 owners of enterprises hiring between 5 and 50 employees.

The report argues that finance is not the only obstacle to the growth of microenterprises and attributes the low growth rates of enterprises supported by microlending to a variety of demographic factors including educational background, family background, risk aversion, labor history, and general personality traits.

The survey results showed that up to 75 percent of self-employed workers from the sample show similar characteristics to wage workers and are not likely to expand their businesses by adding paid employees, while the remaining 25 percent have traits similar to large business owners, viewed as nascent entrepreneurs. The analysis showed that ability and attitudes differentiated self-employed own-account workers and wage-workers from Small and Medium Enterprise owners.

Since the survey was conducted over a period of two years, growth over time could also be analyzed. Results showed that at least two thirds of self-employed workers in the informal sector should be classified as wage-workers rather than entrepreneurs and were not likely to expand their businesses by hiring employees. Levels of motivation and competitive attitude were the key dividing factors differentiating own-account businesses that progressed into SMEs and those that remained without hired employees.

The report concludes by suggesting a set of differentiated microfinance policies directed toward the self-employed in developing countries. It suggests that for the majority of own account workers unlikely to grow, policies should focus on increasing income, while those identified as having a higher likelihood of growth, policies should focus on aiding in the transition to employer status.

By Melissa Duscha

Based on a nationwide survey of 5,000 Mexican households, this report investigates why so few people in the region have saving’s accounts. The survey sample included clients of savings and credit cooperatives and unbanked households living within the same communities.

Currently in Mexico only about ten percent of the growth domestic product (GDP) is held in savings accounts. Less than 25 percent of the urban population and only six percent of the rural population have saving’s accounts.

Nearly 90 percent of the unbanked households in the sample cited “not having enough money” as a main reason for not having a bank account. All respondents lived in close vicinity to a savings and credit cooperative branch. Only two percent of respondents stated that they did not trust the cooperatives, and one percent mentioned bank fees as a reason.

The banked households in the sample had a per capita annual income that was 40 percent higher on averaged than the unbanked sample households. Eighty-nine percent of banked households in the survey had accounts with formal microfinance institutions.

Forty percent of the total households sampled earned their income as wage-workers with relatively stable incomes. The report concludes that the unbanked households in the survey sample did not use financial services by choice due to a lack of knowledge on the benefits of microfinance services offered by their local savings and credit cooperatives. Potential clients often assumed that they did not have enough money to use available financial services.  

The report recommends the implementation of policies geared toward educating and changing the working unbanked population’s attitude towards savings and loans.

By Melissa Duscha

According to the 2006 MIX Benchmarking Asian Microfinance report, microfinance institutions in Vietnam struggle to attain profitability because of competition from government lending programs. Government lending programs, in an effort to improve household economies, offer highly subsidized loans to microfinance clients pushing the market’s interest rates below 20 percent, thus thwarting the feasible expansion of private institutions and the microfinance sector in general.

The World Bank reports that 20 percent of Vietnam’s population lives in poverty. According to the United Nation’s International Fund for Agricultural Development (IFAD), more than three quarters of the population and 90 percent of the region’s poor live in rural areas with nearly 80 percent of the total population dependant on agriculture for their livelihood. Women in poor rural areas are especially affected, having little or no education and few opportunities for financial services, where poor infrastructure including limited transportation prevents effective outreach.

Before microfinance services can be made available to the country’s rural poor, basic infrastructure improvements need to take place.

IFAD is currently working to provide opportunities for income diversification in rural areas. The development of agro-processing industries and other micro-enterprise projects to boost Vietnam’s local rural economy are currently underway.

The International Fund for Agricultural Development (IFAD) is a specialized agency of the United Nations established as an international financial institution in 1977 in response to the food crisis in Africa that took place during the 1970s. Their mission is to eradicate rural poverty in developing countries. The IFAD works with local people, governments, donors, NGOs and many other partners focusing on country-specific sustainable solutions involving increased access to financial services, markets, technology, land, and other resources.

By Melissa Duscha

Additional Resources:

CLARA Working Paper No. 4: The Economic Position of Women in Asia, by Dr. Xin Meng

The United Nation’s International Fund for Agricultural Development (IFAD) Rural Poverty Portal: Vietnam

Vietnam News: Asian Women Need More Access to Micro-Loans

The Word Bank: Vietnam: Laying the Foundation for Steady Growth

Microfinance Insights magazine ran an online survey on Human Resources Challenges and Solutions from February through March 2008. 90 respondents from 31 countries participated in the survey. The majority of the respondents (71 percent) were from microfinance institutions including rural banks, large financial firms, and microcredit-focused NGOs. The remaining respondents were from microfinance-focused consulting firms.

According to the Microfinance Insights data sample, 51 percent of surveyed Microfinance institutions cited human capital issues as their most challenging issue, in comparison with financial issues (29 percent) and technical issues (15 percent). Recruiting qualified staff, preventing turnover, and offering relevant training and capacity building initiatives were highlighted difficulties faced by institutions in the survey report.

Respondents cited recruiting the right kind of people as one of their major human resource obstacles with 63 percent of respondents listing strategic thinkers with experience in microfinance as the most difficult positions to fill. Many institutions also had difficulty finding qualified people who were willing to work at the grass-roots level.

According to the survey results, the most important criteria in recruitment for executive-level positions was local knowledge (58 percent) followed by international experience (27 percent). Similarly, for staff-level recruitment, local knowledge was cited as the most important criteria (55 percent), however was closely followed by local language proficiency (54 percent).

In the survey sample, 57 percent of microfinance institutions used monetary performance-based incentives as a means to reduce high turnover rates. Institutions that were not as concerned with turnover rates used non-monetary performance-based incentives such as public recognition for achievements.

Surveyed institutions used capacity building and training as a retention tool with 54 percent of respondents offering employee training one or two times a year and 39 percent of respondents offering training more than four times a year. Frequency of training corresponded with the perceived competitiveness of the hiring environment. More competitive environments had a higher frequency of training.

Participants cited poaching of staff by commercial banks as a major obstacle to employee retention.

A gender gap also exists within participating institutions’ staff and management. In Sub-Saharan Africa and South Asia, the majority of microfinance institutions had less than ten percent women management. Forty-six percent of all MFIs surveyed had less than ten percent women in their management team.

The main methods of recruitment were through advertisements in local magazines, newspapers, online job sites and word of mouth (72 percent). Only about 25 percent of the sample used headhunting firms, business schools, colleges and career fairs. The majority of the sample MFIs stated insufficient availability of job service providers with appropriate knowledge in their region.

By Melissa Duscha

This report examines the potential for small private-sector health care providers including pharmacists, nurses, midwives and doctors to improve access to quality preventive and curative health services in Uganda with the aid of micro-credit and business training.

The study examines 29 private clinics divided into two groups: those that received micro-loans and business training to aid in their business expansion (22 clinics) and those that did not receive aid (7 clinics). Approximately two thirds of the clinics were located in peri-urban areas. Loans were provided by USAID‘s Summa Foundation. Data was collected from 2,387 client-exit questionnaires between October 2001 and November 2002. Questionnaires were based on client-perception of services, quality of care, and client loyalty.

Loans were disbursed to private clinics on a revolving basis. The average loan size was USD 920 to be used as working capital, to purchase drugs or equipment, or to renovate of upgrade the clinic. Most first-time borrowers (82.9 percent) used part of their loan to increase drug stocks, while nearly half of the loan recipients used part of their loan to buy equipment. Twenty-seven percent of loan recipients used part of their loan to renovate or expand their clinics.

Respondents were most concerned with the availability of drugs, fairness of charges, and cleanliness and physical appearance of clinics. Because loan recipient clinics were able to improve their services and increase their drug stocks, they were perceived by clients as being of superior quality than non-loan recipient private clinics and crowded public facilities.

Though private clinics are also an important provider of reproductive health services to women, HIV prevention, and other general health services, clients surveyed were most concerned with the availability of malaria medication. Clients returned to loan-recipient clinics for malaria medication and were willing to pay higher fees for higher-quality services, citing the region’s public health clinics as being overcrowded and undersupplied.

The study concluded that private health clinics run by mid-wives, nurses, pharmacists and doctors fill an important gap in Uganda’s health care needs. These private clinics are often constrained by lack of funds.

By Melissa Duscha

As reported by the World Bank, currently, 38 percent of Uganda’s population lives in poverty, two thirds of which are small farmers. In the past decade, Savings and Credit institutions (SACCOS) have been established in rural areas in an effort to reduce poverty, however, poor outreach and weak infrastructure remain huge obstacles.

Poor roads in remote rural areas prevent timely transportation of produce and lack of education and technology to reduce pest disease often cause preventable crop failure. The majority of the rural poor rely on subsistence farming geared towards satisfying the needs of their family. Their traditional methods most often do not enable them to overcome poverty. Because of the high risks involved, farmers are unwilling to invest in larger, more profitable holdings.

The country’s current period of relative economic stability presents a feasible opportunity to reduce rural poverty. Currently, only about 10 percent of the rural population has access to financial services.

In order to improve outreach, first basic infrastructure issues must be resolved, according to a 2004 Consultative Group to Assist the Poor (CGAP) effectiveness review. In a country where only 9 percent of the population has access to electricity, agricultural finance strategies must go beyond the establishment of microfinance institutions. “Worth while agricultural projects” as stated by General Salim Saleh first must be facilitated by improved access to basic services.

By Melissa Duscha

Additional Resources:

All Africa: Uganda: Saleh Wants Micro Finance to Boost Agriculture

Rural Poverty Portal: Rural Poverty in Uganda

World Bank Country Overview: Uganda

World Bank Development Data: Uganda at a Glance

World Bank: Uganda Microfinance Sector Effectiveness Review

The newly signed law is targeted at the country’s agricultural sector, allowing small and medium enterprises to purchase equipment needed to operate more efficiently. According to a 2006 IFC report, the most common leased assets in the Kyrgyz Republic were trade equipment (42%), agricultural machinery (28%) and equipment for food processing (14%).

Previously, the value added tax (VAT) system in the Kyrgyz Republic hindered the growth of the leasing sector. The Kyrgyz tax code levied value added tax for assets imported into the country for lease, however fixed assets imported by commercial institutions for their own manufacturing purposes were exempt from paying import VAT.

The IFC has been involved in the development of leasing in Kyrgyzstan as part of its plans to strengthen the country’s overall financial sector. In 2005, the IFC launched a three-year technical assistance leasing project in Kyrgyzstan. The IFC has worked with the Kyrgyzstan government through technical assistance to create a regulatory framework, expand public awareness of leasing, and build the capacity of local microfinance institutions to provide leasing services.

The IFC is currently planning to provide financial support to create model leasing institutions in the region, and are working with Bai-Tushum Financial Foundation, one of Kyrgyzstan’s leading microlending institutions to develop their leasing operations, policies and procedures in an effort to expand financial services to the country’s low-income rural regions. In 2006, the IFC provided Bai-Tushum with USD 2.2 million in financing to facilitate the institution’s expansion and eventual transition into a commercial bank.

The leasing project in Kyrgyzstan is part of the IFC Azerbaijan- Central Asia Leasing Facility AS Project, a USD 30 million credit facility and three-year advisory services program. As of December 2007, the 13 participating institutions’ leasing transactions totaled more than USD 93 million.

Bai-Tushum is a non-bank financial institution established in 2000 with the mission of contributing to the sustainable development of the Kyrgyz economy by providing financial services to farmers and other micro, small and medium size entrepreneurs. The institution currently has 10,695 active borrowers with a gross loan portfolio of USD 23.4 million and total assets of USD 34.7 million. Their return on assets (ROA) at the end of 2007 was reported at 5.68 percent with a return on equity (ROE) or 23.31 percent.

Established in 1956, the IFC, a member of the World Bank Group, provides loans, equity, structured finance, and risk management products to support private sector investment and expansion in developing countries.

By Melissa Duscha

Additional Resources:

IFC Helps Improve Leasing Regulatory Environment in Kyrgyz Republic

IFC Helps Kyrgyz Microfinance Institution Transform into Commercial Bank

IFC: Leasing in Kyrgyz Republic: An Overview of the Market

International Finance Corporation (IFC): Azerbaijan- Central Asia Leasing Facility AS Project

International Finance Corporation (IFC): Leasing in Kyrgyzstan

The World Bank: International Finance Corporation (IFC): Kyrgyz Republic

Zambia is one of the poorest countries in the world with 64 percent of the population living on less than one dollar a day, and an unemployment rate of 50 percent. Eighty-five percent of workers work in agriculture. Those that work in industry are mostly involved in copper mining. Currently, 70 percent of the population depends on the informal sector for their livelihood. Over one third of the adult population is self employed.

An extensive survey on the Zambian financial sector conducted by Fin Scope and released in 2007 concluded that two thirds of the country’s adult population had no access to financial services.

The range of financial products offered in the region is very narrow and focuses mostly on credit services.

In a 2005 publication by the United Nations Capital Development Fund (UNCDF), Webby Mate, the Executive Secretary to the Association of Microfinance Institutions of Zambia (AMIZ) expressed the need for microfinance institutions to mobilize public voluntary deposits in order to facilitate sustainability an improved outreach. Currently, as reported by FINCA Zambia, MFIs are required by government regulation to register as either deposit-taking or credit-only institutions and credit-only institutions are not allowed to mobilize client savings. However, the Bank of Zambia turns a blind eye to forced savings by credit institutions for low-income clients.

According to a case study published in 2006 by Chiara Chiumya of the University of Manchester, the majority of microfinance institutions in Zambia are donation dependant projects, many of which are run by church groups and are not self-sustaining. Micro-credit is largely seen as a type of welfare largely due to the fact that many projects in the country give out soft loans charging very little or no interest.

The Zambian financial sector suffers from poor outreach caused by lack of basic infrastructure in rural areas. Bank branches and financial institutions are concentrated along the Zambian railway lines, and for the most part in urban and peri urban areas. Rural areas have unreliable electricity supplies and the country’s telecommunications system is poorly developed, causing a significant communication obstacle. Thus operation costs in rural areas are a deterring factor to rural development. Nearly half of Zambia’s 73 districts do not have any access to financial institutions.

By Melissa Duscha

Additional Resources:

Association of Microfinance Institutions of Zambia (AMIZ) MIX Market Profile

FinMark Trust

FinMark Trust, FinScope: Access to financial products in Zambia: an analysis based on FinScope data, February 2007

http://www.finmark.org.za/Documents/Zambia_B_I_MFI.pdf

Department for International Development (DFID)

The Regulation of Microfinance Institutions: A Zambian Case Study, Chiara Chiumya, 2006

http://microfinancegateway.org/files/46210_file_Complete_Thesis.pdf

Survey of MFIs in Zambia:

The Association of Microfinance Institutions of Zambia (AMIZ) is the apex network of the Zambian microfinance sector, established in 1998 as an umbrella project of the World Bank Action Research Champion Team. AMIZ currently reports to MIX market.

Contact Information:

Address: 609 Longolongo Road, 6^th floor Godfrey House

Lusaka, 10101

Zambia

Phone: 260-1-236258

260-97-159174

Fax: 260-1-236258

Email: amiz@zamtel.zm

PRIDE Zambia

PRIDE Zambia is a non-profit (NGO) established in 2000 with a mission to be the premier financial services provider to small micro medium enterprises (SMME) markets in Zambia. There are currently 10 branch networks in six towns across the country. Their products include loans, fund transfer services and training and consulting. PRIDE’s largest funder is SIDA. At the end of 2006, they had 3,687 active borrowers according to their MIX market profile. Their gross loan portfolio was reported at USD 1.5 million with total assets of 1.46 million and a return on assets of -5.15 percent. Their return on equity was reported at -107.68 percent as of 2006.

Address: Plot 742, Cha Cha Cha Road, South End

P.O.Box 36263

Lusaka

Zambia

Phone: +260 1 231257/231349/50

Fax: +260 1 231251

Email: pride@coppernet.com

Website address: http://www.pridezambia.org/

CETZAM Opportunity is a non-bank financial institution established in 1998 with the mission of providing financial services and training resources to the poor through a financially viable nationwide micro-finance institution. With the aid of DFID, CETZAM became the first sustainable and regulated microfinance institution in Zambia on a national scale. CETZAM offers credit in the form of trust bank loans (group loans), solidarity group loans (smaller groups), and individual loans. CETZAM also offers insurance and training and consulting. They are affiliated with Opportunity International and the Association of Microfinance Institutions of Zambia (AMIZ). As of 2008, their number of active borrowers decreased by half to 2,410 clients. MIX Market reports their gross loan portfolio at USD 1.6 million with total assets of USD 2.25 million at the end of 2007. Their return on assets (ROA) was reported at -6.72 percent with a return on equity (ROE) of -10.76 percent.

Address: 4th Floor Mukuba Pension House,

Dedan Kimathi Road,

Private Bag E 760

Lusaka

Zambia

Phone: 00-260-1-222980

00-260-1-222991

Fax: 00-260-1-222961

Email: info@cetzam.com.zm

bmulenga@cetzam.com.za

FINCA Zambia was established in 2001 and is currently registered as a non-bank financial institution with a mission to provide financial services in the form of micro credit and savings to Zambia’s productive low-income population. FINCA Zambia currently has nearly 12,000 active borrowers of which 78 percent are women. Their current gross loan portfolio as reported by MIX Market is at USD 1.9 million with total assets of USD 3 million. Their return on assets (ROA) was reported at -17.34 percent with a return on equity (ROE) of -42.46 percent. FINCA Zambia is affiliated with AMIZ and FINCA International. They are rated by ACCION’s CAMEL rating system however, their current rating was unavailable.

Address: Plot 1215/3 Mukonteka Close

Off Great East Road

Rhodes Park

Lusaka

Zambia

Phone: +260-1-251736

Fax: +260-1-251736

Email: finca@finca.co.zm

MicroBankers Trust (MBT) is a non-bank financial institution established in 1996 with a mission to provide financial services in the form of savings, loans and training and consulting to vulnerable women and men for enterprise development. The MIX Market reported 7 thousand active borrowers at the end of 2006 with a gross loan portfolio of USD 873,000 and total assets of USD 2 million. Their return on assets (ROA) was reported at -16.91 percent with a return on equity (ROE) of -18.57 percent.

Address: No 57 Zambezi Road

Roma

Postal code 51122

Lusaka

Zambia

Phone: +260-1-291-393

Fax: +260-1-290-852

Email: mbt@microlink.zm

Pulse Financial Services Limited is a non-bank financial institution established in 2001 providing loan and insurance services. PULSE was initially funded by CARE UK in 1995 and expanded with the assistance of DFID, registered as Pulse Holdings Limited in 2001. As reported by MIX Market, PULSE had 2,851 active borrowers at the end of 2006 with a gross loan portfolio of USD 600,000 and total assets of nearly USD 700,000. Their return on assets (ROA) was reported at 7.64 percent with a return on equity (ROE) of 8.86 percent. PULSE is also affiliated with AMIZ.

Address: Plot No. 9696 East Road, Off Munali Road

Chudleigh

P.O Box RW 51269

Lusaka

Zambia

Phone: +260-1-295-642

+260-1-295-667

Fax: +260-1-295-642

Email: info@pulse.com.zm

Other Listed MFIs in Zambia (Note: These MFIs do not currently report to MIX):

African Development Foundation
Sithabile Ndiweni, Harare
phone: 795525 or 700249

http://www.whitehouse.gov/omb/expectmore/summary/10004614.2005.html

CUSA-Zambia
Credit Union & Savings Association of Zambia
M.M. Milupi
phone: 260-1-22-8745 or 6 fax: 260-1-22-3837

Desai Revolving Fund Project
(Young Women’s Christian Council of Zambia)

Lima Bank LTD
V. Kasapato
phone: 228073 or 5 fax: 228077

National Savings & Credit Bank of Zambia
Mr. G.J. Chembe, director
phone: 2601-228-985 fax: 260-1-223-296

Village Industry Service
Joyce Mapoma
phone: 260-1-228653 or 4 fax: 260-1-225303

WFTZ
Women’s Finance Trust of Zambia Limited
Ms. M.M. Yeta
phone: 260-1-227-335 fax: 260-1-227-184

ZCF Finance Services Ltd
Charles Chitembo phone: 221628 or 261579 fax: 227335 or 261631

Zusa Senanga
Inonge Lewanika
phone: 260-1-225789 fax: 260-1-225789

Zambia Microfinance Sector Recent Publications:

All Africa: Zambia: The Call to Support Small and Medium Enterprises

http://allafrica.com/stories/200805280422.html

Association of Microfinance Institutions of Zambia (AMIZ) MIX Market Profile

Banking Sector Reform and Financial Regulation: It’s Effects on Access to Financial Services by Low Income Households in Zambia, Chiara Chiumya, September 2004

http://www.competition-regulation.org.uk/conferences/southafrica04/chiumya.pdf

CEZAM: Microfinance and Gender Equality: Are We Getting There?

http://www.sarpn.org/documents/d0002613/Gender_microfinance_Mutalima.pdf

CGAP Working Group on Microinsurance, Good and Bad Practices, Case Study No. 10, Madison Insurance: Zambia

http://www.microfinancegateway.org/files/27602_file_cstudy10.pdf

Development Economics and Public Policy: Working Paper Series: Paper No. 13, Banking Sector Reform and Financial Regulation: It’s Effects on Access to Financial Services by Low Income Households in Zambia, Chiara Chiumya, University of Manchester, November 2004

http://ageconsearch.umn.edu/bitstream/30552/1/de050013.pdf

FinMark Trust: Access to Housing Finance in Africa: Exploring the Issues: Zambia, David Gardener, Kecia Rust, May 2007

http://www.finmark.org.za/documents/2007/MAY/HFAfrica_Zambia.pdf

FinMark Trust, FinScope: Access to financial products in Zambia: an analysis based on FinScope data, February 2007

http://www.finmark.org.za/Documents/Zambia_B_I_MFI.pdf

Implementation Structure of the Financial Sector Development Plan (FSDP), Government of Zambia

http://www.boz.zm/FSDP/FSDP_ImplementationStructure.pdf

International Monetary Fund (IMF) Country Report: Zambia: Poverty Reduction Strategy Paper

http://siteresources.worldbank.org/INTZAMBIA/Resources/zm_prsp_06.pdf

International Monetary Fund (IMF): Zambia and the IMF

Loan Officers and Loan ‘Delinquency’ in Microfinance: A Zambian Case, Rob Dixon, John Ritchie and Juliana Siwale, April 2006 (available for purchase here)

MICROCAPITAL STORY: Bank of Zambia Warns of Action Against Unlicensed Microfinance Institutions

http://microcapitalmonitor.com/cblog/index.php?/archives/354-Bank-of-Zambia-Warns-of-Action-Against-Unlicensed-Microfinance-Institutions.html#extended

Microinsurance and HIV/AIDS in Zambia: A Case Study of Madison Insurance Company Zambia Ltd.

http://www.un.org/esa/sustdev/sdissues/finance/egm2007/presentations/agnes.pdf

MIX: Overview of the Outreach and Financial Performance of Microfinance Institutions in Africa

http://www.mixmbb.org/Publications/002-REG/AFRICA/02-AFRICA%20OTHER%20REPORTS/MIX_2003_African_Microfinance_Study_EN.pdf

PAPER WRAP-UP: Loan officers and loan “delinquency” in Microfinance: A Zambian case, by Rob Dixon, John Ritchie, and Juliana Siwale.

The Regulation of Microfinance Institutions: A Zambian Case Study, Chiara Chiumya, 2006

http://microfinancegateway.org/files/46210_file_Complete_Thesis.pdf

The Regulation of Microfinance in Zambia, Chiara Chiumya

March, 2006

The Role of Microfinance in Addressing the HIV/AIDS Pandemic in Zambia: The Rainbow Model Provides a Future for AIDS Orphans, Francesco Strobbe, European Central Bank

http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_04/news_pandemic.php

The World Bank: Zambia Resources

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/ZAMBIAEXTN/0,,menuPK:375673~pagePK:141159~piPK:141110~theSitePK:375589,00.html

The World Bank Policy Research Working Paper 4061: Access to Financial Services in Zambia, Jose de Luna Martinez, November 2006

http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2006/11/08/000016406_20061108094235/Rendered/PDF/wps4061.pdf

This paper was published as an introduction to the use of microfinance services in developing sustainable infrastructure to provide drinking water, sanitation and hygiene services to poor communities in developing countries. Water supply and sanitation activities are not traditionally targeted by microfinance institutions because they are not seen as income-generating businesses. Recently, more and more microfinance institutions argue that sustainable businesses can be established in water supply and sanitation projects.

Currently, microfinance institutions have low levels of awareness and information about how to develop the water, hygiene and sanitation sectors. This paper stresses the importance of the non-financial services required to up-start the water, hygiene and sanitation sector such as training, counseling, and sensitization, and other forms of social marketing. Still, a major barrier to the market for water, hygiene and sanitation is the connection costs that often must be paid in one lump-sum.

Centre Régional pour l’Eau Potable et l’Assainissement à faible coût (CREPA) reported in 2005 that their Côte d’Ivoire branch partnered with La Société de Distribution d’eau de Côte d’Ivoire (SODECI), the country’s public water utility, to provide microfinance services in the form of a USD 10,800 loan to pay for connection to drinking water for 300 households (USD 36 per household) in the capital city of Abidjan. This group loan was coupled with a capacity building program provided by CREPA aimed at mobilizing household savings to pay back the loan and ongoing water bills. The connection fee loan was paid back by the 300 households within 17 months. CREPA is introducing this group-lending scheme to other West African countries, currently piloting a program in Burkina Faso.

In the West African country of Togo, the microfinance market for the water sector started in 2001. Currently, microfinance is successfully being used to install household water points using shallow boreholes (USD 3,000 each) and rainwater tanks (USD 1,000 each). There is an interest rate of 21 percent plus a 2 percent charge for administrative services. Despite the seemingly high costs, households have demonstrated the ability to repay the loans within a short timeframe. Seventy percent of the loans were repaid within six months using revenue accumulated from selling the drinking water within the community. As of 2007, over 1,200 households in Togo’s capital city of Lomé have their own water points. The area’s microfinance/water sector involves six microfinance institutions, five private drilling companies, NGOs, the Centre Régional pour l’Eau Potable et l’Assainissement à faible coût (CREPA) and the Water Ministry.

In India, Lesotho, Vietnam, Bangladesh, Pakistan and Burkina Faso, microfinance has been used for sanitation-related services including construction of public toilets, manual latrine-cleaning services, and suction truckers used to empty pit latrines.

A major obstacle for the sanitation sector is the prevalence of highly subsidized pilot projects that are unable to make the transition into self-sustaining entities.

In a low-income neighborhood in Burkina Faso, a savings-credit initiative was set up for the household management of domestic waste. At first, the payback rate was very low with only 5 out of 28 families making payments due to lack awareness for the need of sustained sanitation services. After an awareness campaign from CREPA and NGO EAST, beneficiaries developed a more solid commitment to the program and repayment rates are currently at 80 percent and anticipated to increase to a profit-making level.

With village shared sanitation facilities, supply-chain micro-businesses can also be set up providing soap, toilet parts, sewage management and construction.

By Melissa Duscha

Additional Resources:

Centre Régional pour l’Eau Potable et l’Assainissement à faible coût (CREPA)

International Water and Sanitation Center (IRC)

Netherlands Water Partnership (NWP)

La Société de Distribution d’eau de Côte d’Ivoire (SODECI)