MFTransparency Celebrates the 10th Anniversary of AFMIN in Accra, Ghana
The African Microfinance Network (AFMIN), the association of microfinance networks in Africa, recently organized its 9th annual conference, which also marked the 10th anniversary celebration of the organization. The conference was held in Accra, Ghana on October 5 – 9, 2010. With the theme “Access to Financial Services: Reaching the Poor and Excluded,” the conference gathered over 400 participants from Africa and around the globe.
The opening ceremony included speeches from the AMFIN secretariat, the Ghana Microfinance Network (GHAMFIN) who hosted the conference, and a representative of the President of the Republic of Ghana. The President asked that microfinance institutions remember their core mission of being social businesses, and not solely concentrate on making money. He stressed the importance of institutions being more efficient in order to lower the interest rates of their products. The President also expressed the commitment of the Ghanaian government to implementing policies that will assist the industry. For example, the government has passed the Borrowers and Lenders Act which will aid in the promotion of transparency. Further, Ghana will celebrate its annual financial literacy week in December and work to educate the financially excluded through drama, dance and media. He congratulated AFMIN for its 10th anniversary and encouraged the organization and its members to continue to work for the cause of alleviating poverty in Africa.
The keynote speaker, Mr. Stefan Nalletamby, Coordinator of Making Finance Work for Africa (MFW4A), an African Development Bank initiative, expressed similar sentiments. He shared grave statistics about the high rate of poverty and financial illiteracy on the continent, emphasizing that these problems can be solved through the implementation of strong policies, improvement in financial governance and access to data through the creation of credit bureaus. He challenged the microfinance community to respond to the unmet demand of those who are financially excluded.
The conference focused on client protection, with the topics of responsible and transparent pricing at the forefront of most discussions. MFTransparency was therefore appropriately positioned to present our work at the conference. Alexandra Fiorillo, Vice President of MFTransparency, spoke on a panel during a plenary session titled “Interest Rates, Affordability and Sustainability.” To a room full of members of the African microfinance community, Ms. Fiorillo provided definitions for responsible and transparent pricing and stressed the importance of standardizing loan product prices in annual terms. She explained that such processes go a long way in helping clients better understand the true prices of loans. She also shared good policy practices for promoting consumer awareness. For example, the Central Bank of West African States (BCEAO) mandates interest rate disclosure, while the government of Cambodia has outlawed flat interest rates. She explained that because MFTransparency has the opportunity to work with many countries, we are able to provide policymakers with good practices and lessons learned that to apply for the benefit of microfinance clients in Africa. MFTransparency’s work on the continent has been bolstered by its new partnership with AFMIN, which will assist in the sustainability of our efforts. MFTransparency has so far implemented projects in 4 African countries, with upcoming projects in 13 additional African states scheduled for the coming year.
The other panelists at the conference focused on ways to facilitate declines in interest rates, and emphasized that governments should not cap interest rates but rather allow competition in the market. Presenters also discussed the importance of ensuring the sustainability of MFIs, which can be achieved by accurately calculating interest rates and promoting efficient practices (particularly by leveraging technology) within the institutions.
It was a pleasure to be a part of the AFMIN conference, to be able to analyze some of the most pressing issues facing the microfinance industry in Africa as well as meet some of the hardworking people that are expanding financial access to the poor. After 4 days of hard work, the conference was closed with a 10th anniversary celebration dinner dance where participants ate great food, put on their dancing shoes, honored the most active MFIs with awards and celebrated the achievements of the past year.
The article raises pertient issues regarding the ways and means through which microfinance lending rates can come-down. From my own experience here in Uganda, the high interest rate problem has been two fold;
1. The government interfearance with rural based financial intermediaries (SACCOs) by politicians who have continously argued that the rates SACCOs charge are high and lock out many borrowers. Many of these policians do not understand the process involved in rate setting and thus argue out of ignorance. To me the first step in creating awareness on interest rates and why charging sustainabile rates in vital is to first of all educate the politicians and policy makers. They seem to push for what they actually do not understand.
2. The SACCOs and Small MFIs tend to be inneficient. The cost of inneficieny is transfered to customers in form of high rates on loans. Most of these MFIs have challenges in under-writing loans. This in effect increases their Loan Loss. For as long as MFIs continue not be efficient by failure to manage their risks well, they will continue to hide what they actually charge. Developing capacity of small MFIs then becomes critical in promoting transparent pricing.