The microfinance sector in Sierra Leone offers an opportunity for very high-impact investments in microfinance institutions that provide low-income people with access to critical financial services to help them grow their businesses, support their families, and build their communities.
By contributing to the rebuilding of Sierra Leone’s micro and small business economy, through investments using the Microfinance Investment and Technical Assistant Facility (MITAF), investors can contribute in a decisive way to creating a competitive environment to ensure the most efficient provision of financial services.
Experience shows that when donors and investors coordinate their efforts in a country, particularly in a post-conflict country, such as Sierra Leone, returns are high all around. Duplication of efforts is reduced or eliminated, both in terms of the services provided and in terms of administration. Common donor criteria promote sector best practices. Finally, coordinated investments can lead to significant leverage by encouraging those investors with less sector or regional experience to invest in Sierra Leonean microfinance.
The facility offers strong technical capacity to support investments, and provides on-the-ground services such as loan appraisals and recommendations, monitoring and technical support to Microfinance Institutions (MFIs). It allows the flexibility of making grants, loans, equity or technical assistance to MFIs. Through MITAF, investors also have the ability to contribute to the creation of a favourable environment, including the establishment of an enabling legal and regulatory framework, by working closely with the Bank of Sierra Leone, ministry of Finance and the ministry of Development and Economic Planning.
Eleven years of war resulted in a sharp decline in social indicators, putting Sierra Leone at the bottom of the United Nations’ Human Development Index. More than 80 percent of the population lives below the poverty line, earning less than US$1 per day. While financial services are a key component to rebuilding the country, few small and micro-entrepreneurs have access to even basic credit or savings. To address this situation, international donors and the Government of Sierra Leone are working together to find ways to rapidly increase the availability of financial services to the poor. A “National Microfinance Policy”, given government approval in 2003, is providing a guide for sector development. The Bank of Sierra Leone is pursuing a robust and innovative strategy to increase the rural financial infrastructure through community banks. The on-going privatization of large corporations, including banks, opens the possibility for bank downscaling in the future. An association of microfinance institutions has been established to exchange information and advance sector development.
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