Microbanks have flourished in Nigeria.
In both the public and private sectors, the West African region has many initiatives for
improve countries' microfinance performance. These are sometimes funded by br governments, or foreign donors, and target specific categories of entrepreneurs.
On February 24, Kafo Jiginew, one of the main microfinance institutions in Mali, received a
financing of CFAF 6.5 billion ($11.03 million) from the European Investment Bank (EIB) for providing some 60,000 micro-credits to smallholder farmers, as well as financing for near
of 15,000 people. Last year, $13 million in financing was announced by the EIB for two microfinance institutions present in Senegal and Burkina Faso. In Nigeria, the government
Since 2016, the federal government has launched three different microfinance programmes as part of its Government
Enterprise and Empowerment Programme (GEEP).
Kafo Jiginew, one of the leading microfinance institutions in Mali.
These are the FarmerMoni program (which offers loans to farmers); of the MarketMoni project (qui
is aimed at market associations, women trade associations and cooperatives) and finally the TraderMoni project which offers loans without
guarantee of the order of 10,000 to 100,000 naira to small traders and craftsmen, including sellers
of food products, hairdressers, tailors, carpenters, tricycle drivers and vendors
second-hand clothing.
Despite all these initiatives that aim to provide an income to poor people in order to get them out of the
Precariousness, it is clear that the curve of poverty and inequality in West Africa is far
to have been reversed.
Endemic poverty
According to the NGO Oxfam, West Africa, compared to other regions of the African continent, is home to
the largest number of countries where 30% of the population lives on less than $1.90 a day. This situation
makes it the most unequal region on the African continent. The institution estimates, in fact, that the 1% of
The richest West Africans earn more than the rest of the population of the region combined.
Despite all these initiatives that aim to provide an income to poor people in order to get them out of the
Precariousness, it is clear that the curve of poverty and inequality in West Africa is far
to have been reversed.
In countries with large populations such as Nigeria or Ghana, this situation is still
more significant. In the continent The combined wealth of the five richest people stands at $29.9 billion, more than the entirety
of the country's budget in 2017, Oxfam says. This, while 60% of the population in Nigeria lives on less
of $1.25 per day, the absolute threshold of extreme poverty.
Less than 30% of microcredits benefit women.
"In Ghana, one of the richest men in the country earns more in a month than one of the most
The country's poor could not win in 1000 years. Between 2006 and 2016, the distribution of wealth generated
1000 new millionaires (in dollars) while nearly a million more people have
plunged into poverty," says the NGO.
"In Ghana, between 2006 and 2016, the distribution of wealth generated 1000 new millionaires (in
dollars) while nearly a million more people have fallen into poverty"
These situations effectively exclude a large part of the West African population from access to services
essential for their full development in society, even as the ECOWAS countries
are among the highest growth rates in the world. In view of these statistics, the
The necessary observation is that of the failure of microfinance in the process of improving the level of
life of the West African population. A question can therefore naturally arise: why the
Has microfinance failed to eradicate poverty in West Africa?
Design flaws
For many experts, microfinance its design is inadequate to meet such a challenge.
First, the amounts granted under microcredits are generally too small for invest in real income-generating and job-creating projects. Based on the latest br report BCEAO on the situation of microfinance in the WAEMU, the average outstanding loans per beneficiary in the
region was only 87,236 FCFA ($148.5) at the end of September 2018, before climbing to 97<774 FCFA
($166) at the end of September 2019. In addition, numerous studies have shown that interest rates charged
by microfinance institutions can curb the desire of the poorest to use it, especially since they
already obtain loans through informal means.
Interest rates charged by microfinance institutions can curb the desire of the poorest< to > have recourse, especially since they already obtain loans through informal means
The second problem concerns the measures put in place to improve access to
credit, by reducing the risk of non-repayment. One of the innovations of microcredit was to offer,
in return for loans, pledging the social capital of borrowers (reputation) instead of physical capital (goods) of which the poorest are most often destitute. For this, several techniques such as
than the principle of joint responsibility (which binds individuals who have benefited from a group loan, in case
non-repayment of one of them), dynamic incentives (increase and extension of the
credit in case of refund), or the use of frequent refunds are used.
Unfortunately, the counterpart of these tools has been the reduction in the impact that br microcredits.
Indeed, to avoid finding themselves in a situation of personal bankruptcy, the beneficiaries of the loans
prefer to use their funds for low-risk activities and investments, and therefore less profitable.
This is particularly visible in the case of dynamic incentives that do not benefit from
group insurance or group control benefits, existing in the case of group lending.
Beneficiaries often hide from trade to ensure a quick return of borrowed money.
In the case of frequent repayments, the client's difficulty in investing in activities with a cycle
of production of more than a month, limits the impact of microcredit.
"Therefore, the funds are used for activities with a short maturity (such as trade), but whose
Expected benefits are quite low. Agricultural and manufacturing activities, including the production cycle
is longer, cannot take advantage of microcredit if repayments involve generating a
cash flow over a short period of time," commented Florian Léon, a researcher at the
Ferdi (Foundation for International Development Studies and Research), in a published article
in The Conversation.
"Agricultural and manufacturing activities, which have a longer production cycle, cannot benefit
microcredit if repayments involve generating cash flow over a short
period ".
Moreover, we note that most of the microcredits granted are not used to finance
investments requiring a medium-term return. 50.5% of the appropriations granted by the institutions
of WAEMU microfinance at the end of September 2019 consist of short-term loans. Loans to
medium and long-term accounted for only 31.9% and 17.6% respectively over the period under review.
In addition to these problems, there are cases of misappropriation by beneficiaries of loans obtained for the benefit
non-productive activities, or the difficulty of microfinance institutions to reach the poorest.
Rethinking microfinance strategy in West Africa
Even if it is true that microcredit is not supposed to be the miracle solution to the problem of poverty in
Africa, it must be recognized that this system has still not succeeded in meeting the expectations it has raised in
his arrival on the continent. As a result, there is an urgent need to find new smart solutions to fill
shortcomings of this system in West Africa.
Digitalization offers solutions to make microfinance more efficient.
The rise of digitalization in Africa seems to be a first track for West African leaders. Le
success of platforms such as M-Pesa that relies on the rapid mobile penetration rate for
improving access to microfinance in East Africa could be replicated in the subregion
West African, provided that the right environment is created for such an initiative.
Strengthening the performance of traditional microfinance institutions present in the region
West Africa is also important. This requires an increase in
institutions microfinance in the region, but also and above all by their distribution on the territories according to the
real needs, especially in rural areas where the highest rates of population
poor. Better access to microcredit for women will also have a strong positive impact on the role of
microfinance in poverty reduction. At the end of September 2019, they only benefited from
28.1% of microcredits granted in the WAEMU area.
At the end of September 2019, women benefited from only 28.1% of microcredits granted in space
UEMOA.
"One of the levers is certainly the very philosophy of microcredit, beyond the architecture of
produce. Until now, microfinance institutions have often focused their attention on
reimbursement of customers and the number of them. It is probably necessary to change perspective in order to accept a situation in which microfinance could serve as a springboard for a small fringe
entrepreneurs with strong growth prospects," Florian Léon also suggests. Des
solutions that should put clients back at the heart of the microfinance system,
in accordance with the wishes of its creator.