Apr 8, 2016, 12:30 PM
Although the Gambian microfinance sector is characterised by good intensions and stakeholders that are passionate about providing increased financial access to all Gambians, a report by a consulting team hired by the Social Development Fund (SDF) of the Government of The Gambia has conducted a research on Financial Service Providers (FSPs) that has discovered fundamental weaknesses in the structure and operations of the FSPs, vis-à-vis Technical Service Providers (TSPs).
According to Mennonite Economic Development Associates (MEDA), there are ongoing high subsidies, uncoordinated policy and donor support, duplication of efforts, and inappropriate incentives among technical service providers and projects competing for the same funding and training opportunities.
“Governance is generally weak, particularly with VISACAs and rural Credit Unions, due to the low literacy levels of rural populations,” the MEDA document known as the Gambian Microfinance (MF) Sector Assessment Report, states.
“Gambian entrepreneurs and rural producers face limited markets and logistical and economic challenges in this very small country,” the report says. “Having multiple actors at many levels of the microfinance sector creates a rather crowded, supply-led context for a very small market.”
The report, prepared for the Entrepreneurship Promotion and Microfinance Development Project (EPMDP) under the Social Development Fund (SDF) of the Government of The Gambia, also makes recommendations that may address the status quo of the country’s microfinance sector.
Joan C. Hall and Ruth Dueck Mbeba, the two MEDA consultants who undertook the research, aided by strategic officials of the MFIs mentioned in the report, said: “Our general recommendations favour a capacity building and sector framework that supports market-led and inclusive financial services, focuses on the end-customers and their changing needs, promotes best practices (for donors and service providers), supports a dynamic approach, instills sound and responsible financial management, is based on improving performance and is sustainable.”
The financial service providers (FSPs) covered in the report are all licensed microfinance retailers, including VISACAs, Credit Unions, Reliance, Gampost, and Gawfa.
Funded by the African Development Bank (ADF), the MF Sector Assessment Report focused on the status of the FSPs in the country in order to identify their strengths and weaknesses, as well as identify specific areas of capacity building interventions required.
The purpose of the assessment is to contribute to helping microfinance actors in The Gambia microfinance institutions to become financially sustainable and for these institutions to support the economically active but financially excluded populations of The Gambia.
The MEDA team of consultants discovered revealing weaknesses and strengths in all the above-mentioned microfinance institutions.
Accounting Standards: Rules to be followed in the preparation of company accounts. The Accounting Standards Board (ASB) sets accounting standards for the
Accounts payable: Amounts owed to trade creditors and included as current liabilities in the balance sheet.
Accounts receivable: Invoiced or billed amounts owing to a business which are outstanding from debtors and included under current assets in the balance sheet.
Balanced scorecard: A form of accounting that not only considers financial data and ratios, but also focuses on the market/customer perspective (e.g. market shares), internal processes (e.g. percentage of sales from new products) and organizational learning and growth, e.g. employee turnover and percentage of customer-facing employees with on-line access to customer information.
Capital budgeting: The process by which companies appraise investment decisions, in particular by which capital resources are allocated to specific projects. Capital budgeting requires firms to account for the time value of money, and project risk, using a variety of more-or-less formal techniques.
Database marketing: The use of information, held on computer systems, to undertake direct and pertinent communication with existing customers and/or prospects in the target audience.
Economic rent: Term used by economists to refer to profits or returns from an activity over and above those that would just be necessary to induce the participant into that activity. Economic rent may be thought of as abnormal, or super-normal profits. But it would be wrong to limit the term to companies – a rent can be any kind of surplus.
Fiduciary: A person or legal body acting on behalf of others who have a beneficial interest in investments or other property. An executor.
General Insurance: Insurance against fire, accident, theft, etc., as distinct from life insurance.
Hot money: Short-term flows of speculative capital, across national borders. Primarily aimed at drawing profit from possible changes in the exchange rate of different countries, hot money can be a problem for policymakers as it can destabilize the exchange rate in the process.
Source: The Penguin Int’l dictionary of business and finance