Doing Our Part in Africa
Innovative IFC Solutions Expanding
Access to Finance
These programs are primarily developed under IFC PEP Africa
in partnership with:
Doing Our Part in Africa
Innovative IFC Solutions Expanding
Access to Finance
These programs are primarily developed under IFC PEP Africa
in partnership with:
Contents
Introduction
03
Credit Bureaus: The Pivotal Role Played by Credit Bureaus
Feature: Where Credit Bureaus are Due: A New Credit Bureau Act in Ghana
04
06
Housing: IFC’s Africa Housing Program
Feature: Unlocking the Mortgage Market: IFC Recognizes the Importance
of Home and Property Ownership
08
10
Leasing: Leasing Plays a Pivotal Role in the Growth of
Emerging Economies Worldwide
Feature: IFC Leasing Programs on a Roll:
12
14
Microfinance: IFC Supporting Even the Smallest Businesses
Feature: Madagascar’s “Islands of Enterprise” :“One Stop Shop” for Entrepreneurs
16
18
Securities Markets: Stronger Markets, Better Infrastructure
Feature: Transforming Kenya’s Bond Market: Leaveraging Capital for Infrastructure
20
22
SME Banking: IFC Supporting Businesses that Impact Communties
Feature: A Huge Project for Small Businesses: Mining for Growth in South Africa
24
26
Trade Finance: Boosting Africa’s Share of Global Trade
Feature: Trade Finance in Liberia: Trade Finance Product Guaranteed by IFC
28
30
Contacts
32
Introduction
Despite recent steady economic growth in many parts of Africa, millions across the continent still lack
access to basic financial services: credit, savings, money transfers, and even insurance.
Access to Finance remains one of the largest constraints to private sector development in Africa,
where banks have historically focused on large commercial clients, neglecting those at the lower end
of the economic pyramid. IFC Advisory Services in Africa has made access to finance a top priority,
with a dedicated business line operating under the IFC Private Enterprise Partnership.
IFC strives to provide people with opportunity to escape poverty and improve their lives. Removing
the constraints to financial market development in Africa will unleash the productive power of smaller
enterprises and facilitate their migration from the informal to the formal economy.
Throughout Africa our goal is to increase access to finance for small and medium enterprises through
the expansion of financial products and services available. We operate through programs that
emphasize financial institution capacity building, financial information infrastructure strengthening,
and legal and regulatory reform in the financial sector. The areas that we target for development are:
microfinance, small and medium enterprise banking, leasing, housing finance, trade finance, credit
bureau development and securities markets development.
IFC's advisory services in access to finance takes advantage of a capacity to catalyze investment, broad
industry expertise, and powerful local networks to deliver effective and sustainable development in
the financial sector. The following pages introduce the business line's seven product areas and offer
examples of how we are creating opportunity where it's needed most.
We would like to take this opportunity to thank our generous donors, who have made these projects
possible.
Yolande Duhem
IFC Director, West and Central Africa
3
Credit Bureaus
The Pivotal Role Played
by Credit Bureaus
Credit bureaus play a pivotal role in helping speed access to
finance in modern economies.
They strengthen emerging economies by providing banks and
other financial institutions with the information they need to
make informed lending decisions to individual credit
consumers and, smaller retailers, manufacturers, and traders.
Reliable credit information forms the basis for objective,
accurate, and consistent lending decisions, which allow banks to
reduce loan processing time and costs. Ultimately, this leads to
risk-based lending practices, which results in growing portfolios
and lower default rates on the one hand, and more affordable
and more widely accessible credit on the other.
In Africa, the near absence of credit bureaus means banks
hesitate and often refuse to lend to individuals or small to
medium-sized businesses because they know too little about
them. When small or start-up businesses cannot access loans
for new equipment or stock, or cannot take on more employees,
broad economic growth is stifled.
IFC is supporting the development of a private sector credit
reporting infrastructure across Africa to help bring opportunity
to thousands of individuals and smaller businesses.
Through seminars and public awareness campaigns, IFC is
working with market stakeholders to introduce the idea of
information sharing through credit bureaus and to explain the
benefits they bring to lenders and borrowers.
In Kenya, IFC is offering advice as the government considers
amending the banking law to allow for sharing of credit
information. IFC also advised Ghana, which passed a credit
reporting act in 2007. The first credit bureau is expected to
become operational there soon.
In Nigeria, IFC is advising the first bank-sponsored credit bureau
on compiling and providing reliable credit information.
IFC is also encouraging banks to share their information and to
contribute to the establishment of a credit database, which will
result in faster loan processing and more accurate underwriting
decisions.
Central bankers, commercial banking executives, and other
financial industry players are gradually seeing the many advantages
of credit bureaus for sustainable business growth. This is helping
generate momentum for reform that can help change the lives of
millions for the better.—
Reliable credit information forms the basis for objective, accurate, and consistent lending decisions ...
4
How Do Credit Bureaus Work?
Credit bureaus collect information from creditors and other public sources on a borrower's credit history. Upon enquiry the
credit bureaus then aggregate the various sets of information on individuals or small firms to create a comprehensive credit report
that is sold back to the inquiring institution. This information might include credit repayment records, court judgments,
bankruptcies, and more.
5
Where Credit Bureaus are Due
A New Credit Bureau Act in Ghana
IFC's expertise has catalyzed Ghana's efforts to implement the
legal framework needed for credit bureaus. IFC offered training
and advice to central bank officials as they prepared the path for
this important market innovation.
In 2004, IFC was invited by the West African country to help
advise on the complicated legal and regulatory framework needed
to allow the establishment of private-sector credit bureau
companies.
Working with a local lawyer and Ghana's finance ministry and
central bank, IFC helped steer the long process of consultation
with public and private stakeholders that led to the drafting and
publication of landmark legislation in 2007.
The new law, the “Credit Reporting Act”, requires banks to share
information with credit bureaus. It includes provisions for
consumer protection and ways of settling conflicts that might
arise from credit reporting.
“IFC was a great facilitator, helping us through the grey areas as we
wrote our Credit Reporting Act and there were definitely a lot of
grey areas,” said Director of the Banking Supervision Department
of the Bank of Ghana, VJ Dela Selormey. “IFC helped with
education and gave us in the banking community and beyond an
appreciation of what credit bureaus can do and how important
they are,” he added.
6
... Working with a local lawyer and
Ghana's finance ministry and central
Improved financial infrastructure can help Ghana take its
economy to the next level. Ghana slashed poverty from 52
percent in 1990 to 28 percent in 2006. To maintain the
momentum, Ghana needs a more sophisticated financial sector
that can support new and growing businesses.
Thousands of small and medium-sized businesses in the
country stand to gain as Ghana's database of credit information
grows. Reliable credit information reduces the risk banks
associate with lending to smaller clients and speeds loan
processing time.
bank, IFC helped steer the long process
of consultation with public and private
stakeholders that led to the drafting and
publication of landmark legislation in
2007.
Despite the benefits credit bureaus promise, Ghana's Credit
Reporting Act faced strong challenges. Skeptical public figures
and business leaders feared the law might be abused to obtain
and publicize personal financial information.
Through a number of seminars and meetings, IFC offered its
expertise to explain the benefits of credit bureaus while
answering concerns about their perceived dangers. Legislation is
clear about who can and who cannot access information and
for what purpose. The law also proscribes penalties if any
information is improperly disclosed.
IFC is supporting Ghana's central bank as it puts the law into
practice to allow the country's first credit bureau to open its
doors. But complicated questions remain. Who should get a
credit bureau license? Should banks share information with all
credit bureaus or only some? IFC is continuing its work with
Ghanaian officials to address all of these concerns.
“Credit bureaus are a hugely important part of a modern
economy and I expect they will make a big difference to
businesses when they look to obtain credit,” said Dela Selormey.
“They will facilitate the granting of credit, increase productivity,
help us to add jobs and improve the overall economy,” he
added.—
7
Housing
IFC's Africa Housing Program
Owning a home is an elusive dream for the vast majority of
people in Africa, even for the middle class living in relatively
stable and rapidly-growing countries on the continent.
Buyers in developed markets may struggle to afford a down
payment, but a well-developed financial system that provides
long-term loans in the form of mortgages has helped millions
get their feet on the property ladder.
Home mortgage lending - borrowing from a bank or other
financial institution against the value of a house - is practically
non-existent across Africa, with South Africa as the sole
exception.
High interest rates, persistent inflation and currency fluctuation
have for decades put the brakes on long-term lending in Africa.
Other problems on the continent include: issues of lack of longterm finance for the banks, the high cost of property
registration, security of title, complex land tenure arrangements,
property valuation, cumbersome foreclosure and tax
regulations, and the tradition of ‘tribal’ or communally owned
land, which complicates the process of lending and purchasing.
In Nigeria, for example, over 80 percent of the country's
population lives in informal housing. A total of only 40,000
loans had been made by 2008.
8
To promote international best practice in mortgage lending,
IFC has developed the ‘Mortgage Toolkit’, a manual
providing detailed guidelines on how to operationalize their
mortgage lending business.
The toolkit helps banks improve and assess the quality of
their mortgage portfolio, promotes transparency and
simplicity in mortgage products and also offers a guide to
risk analysis. It is customized to individual lending
environments and is a useful training tool for banks
interested in mortgage lending.
... The goal is to put houses in the hands of
lower and middle income earners previously
shut out of the market because no long-term
financing was available to them ...
Through its housing program, IFC promotes comprehensive
legal and regulatory reform while seeking to deliver long-term
capital for mortgage lending. The goal is to put houses in the
hands of lower and middle income earners previously shut out
of the market because no long-term financing was available to
them.
IFC recently closed its first comprehensive housing program in
Ghana. The program, launched in 2006, supported the
government's efforts to draft and pass the Mortgage Finance
Act, a new law that is helping boost mortgage lending in the
country: In 2006, only 85 loans were issued; as of 2009, 1,000
loans are in the system.
IFC's housing program is also working in Uganda, where it
supported the country's new mortgage law, which was passed in
2009.
In Nigeria, IFC is working with Lagos State to streamline the
process of mortgage registration. A comprehensive program
was launched in Burkina Faso.
IFC's Housing Program will also support reform efforts in
Rwanda and Senegal.
With time and continued investment and support, Africa should
develop a mature mortgage market, which will encourage more
housing developments and open the door to home ownership
for more than just the very rich. —
9
Unlocking the Mortgage Market
IFC Recognizes the Importance of Home
and Property Ownership
Afor Kojo Asmah is among a growing number of Ghanaians who
owns his own home.
The 38-year-old graphic designer recently purchased a twobedroom, semi-detached house with a small garden in Ghana's
capital, Accra, where he lives with his wife and two children.
“I'm relieved to finally own my own house,” said Asmah. “I lived in
a small rental apartment for years and the rent kept doubling and
doubling again and all my salary was going to my landlord. I
wondered why I was doing this and decided it was time to buy,” he
added.
Ghana is one of Africa's best-performing economies, averaging
more than 5.0 percent annual economic growth from 1983-2006,
according to World Bank figures. The country has nearly halved
poverty over the past 15 years and has begun to tame inflation.
However, without a significant mortgage finance market, families
with rising incomes haven't been able to purchase their own
homes.
In 2004, the country's only mortgage originator at the time issued a
mere 85 new mortgages.
Ghanaian policy makers and financial institutions realized the time
was right to expand the mortgage market, in part to help meet the
country's growing housing needs. An IFC advisory services
10
... Ghanaian policy makers and financial institutions realized the time was right to
expand the mortgage market, in part to help meet the country's growing housing needs ...
program is helping Ghana's government and mortgage
stakeholders as they strive to untangle and simplify the
complicated legal and regulatory issues that constrain the
growth of mortgage lending and investing.
Ghana's tax code, for example, discouraged home ownership in
favor of rental. If a Ghanaian bought a house as an investment
and rented it out, the mortgage payments were tax deductible.
However, if a Ghanaian bought a house to live in, no tax-based
incentive was granted.
The country's opaque land titling and registration process also
posed a challenge to banks wishing to increase mortgage
lending. Land registration used to take no less than 10 months, a
lengthy wait that discouraged many potential homeowners.
IFC is advising a number of Ghanaian banks, helping them
increase the number of home loans they make. In August 2007,
IFC invested $25 million to support three financial institutions
boost their mortgage operations in Ghana. The banks will be the
first institutions globally to use an innovative IFC mortgage
toolkit. It provides guidance on introducing mortgage products,
helping lenders establish standard loan documents and
implement key steps for originating and servicing mortgage
loans.
In the first six months of 2007, IFC partner banks funded 168
mortgages in Ghana with a value of $7.75 million. These are
small numbers by international standards, but a solid foundation
from which Ghana's mortgage market is expected to grow
rapidly.
“The process of buying my house was very swift. I wonder why
I didn't do it before,” said Asmah. “There is much better
education about mortgages today and many of my friends are
deciding to buy. The best thing is nobody can increase my rent
anymore,” he added. —
11
Leasing
Leasing Plays a Pivotal Role in the
Growth of Emerging Economies
Worldwide
Leasing is an important alternative financial instrument for
Africa, especially for lone entrepreneurs and small to mediumsized businesses that often lack the credit history or sufficient
collateral to access traditional forms of financing.
Across Africa, however, leasing is still in its infancy with very few
active specialized leasing companies and many unresolved issues
surrounding the regulatory regime, taxation and the rights of the
different parties, such as repossession of leased assets.
Leasing also reduces the initial capital requirements of acquiring
equipment, giving small businesses access to expensive
machinery or vehicles.
IFC and its donor partners are supporting efforts to tackle these
problems in the following Sub-Saharan African countries:
Senegal, Burkina Faso, Cameroon, Cape Verde, DRC, Ethiopia,
Ghana, Liberia, Madagascar, Mali, Mauritania, Rwanda, Sierra
Leone and Tanzania.
In recent decades, leasing has played a pivotal role in the rapid
growth of emerging economies worldwide by enabling a huge
number and variety of SMEs to expand and take on more
employees. The benefits to the overall economy from leasing are
obvious.
IFC is working to replicate the success of its leasing initiatives in
Russia, Ukraine and Central Asia in several sub-Saharan African
countries, where small traders, farmers and entrepreneurs stand
to reap huge benefits from the introduction of leasing into the
financial marketplace.
Leasing development is a priority for IFC in Africa because it
provides significant potential for stimulating capital formation
in the region, boosting private sector development, and
reducing overall poverty.
12
Through its rapidly expanding Africa Leasing Facility Program,
IFC is supporting the work of public and private sector
stakeholders to introduce the leasing concept in their markets.
IFC begins by working with governments to improve and clarify
country legislative, tax and regulatory framework. In Ghana,
which boasts a relatively developed leasing market, IFC's support
led to the amendment of its banking act. In Madagascar, a country
where leasing was nonexistent when IFC launched its activities,
stakeholders have created a modern enabling environment for
leasing.
Once an appropriate leasing framework is in place, African
markets typically require specialized leasing expertise and
Leasing development is a
priority for IFC in Africa
because it provides significant
potential for stimulating capital
formation in the region, boosting
private sector development, and
reducing overall poverty.
IFC provides specialized advisory services to lessors, lessees and
other stakeholders while promoting links between SMEs,
equipment suppliers, insurance companies and bank and
nonbank lessors.
Success is measured by charting the increase in the number and
value of leasing transactions. In Ghana, for example, a leasing
program introduced by IFC in 2005 helped grow its Country's
leasing portfolio from $28 million to $108 million in just over
3 years, while the number of lessors has double from 7 to 14 in
only two years. Conservative estimates suggest the potential
leasing market and related funding requirements in West Africa
is about $500 million over the next five years.
IFC also works to build strong national and regional leasing
associations as main advocates of a sustainable leasing industry
and to facilitate domestic and foreign investment in the leasing
sector. A public awareness campaign broadcasts the benefits of
leasing.
By promoting leasing as an alternative form of financing, IFC is
helping to increase access to finance for the cash-strapped
entrepreneur whose business might demand a truck, a plough, a
drill, or even a sewing machine or simple telephone. —
increased financing options. IFC then works to build the
capacity of financial institutions and leasing companies
launching or expanding lease transactions.
13
IFC Leasing Programs on a Roll
From Water Pumps to Bicycles
TANZANIA:
An IFC leasing program in Tanzania is giving thousands of
women entrepreneurs the chance to acquire the equipment they
need to grow their businesses.
Five years ago, Victoria Kisyombe was a government veterinary
officer working in rural Tanzania. Today, she runs Sero Lease
and Finance Limited, a microlease provider with over 5,000
clients.
"Sero Lease and Finance enables women entrepreneurs to
acquire equipment such as water pumps, sewing machines,
millers, and small generators. The majority of our clients have
been able to meet their commitments, proving that lending to
women can be both safe and profitable," said Kisyombe.
IFC, through a local client bank, provided a $1 million loan to
Sero Lease and Finance in 2007, a cash injection that will help
the microleasing firm expand its services to reach more than
30,000 clients by 2010.
Using its financial products and advisory services, IFC is
promoting the leasing industry in Tanzania by supporting financial
institutions like Sero Lease and Finance. IFC's leasing
development work has helped to double Tanzania's leasing market
to more than $80 million.
By promoting leasing as an alternative form of financing, IFC is
helping to increase access to finance for entrepreneurs like
Kisyombe, thereby creating further opportunities for thousands
of smaller businesspeople.
IFC is currently running similar leasing development programs in
other parts of Africa, including Ghana, Rwanda and Madagascar.
These programs address the enabling environment and support
the growth of leasing through regulatory advocacy activities,
targeted investment promotion, and public awareness campaigns.
... By promoting leasing as an alternative form of financing, IFC is helping to increase access
to finance for entrepreneurs ...
14
“I can't imagine going back to my working
life before I got this bicycle,” said Murenzi
durable, eight-gear bicycles with a specially fitted shelf to haul
heavy loads. The program was initiated by USAID, a civil society
organization, and a group called Spread.
RWANDA
A specially-designed bicycle is boosting the income and
bettering the lives of coffee farmers in Rwanda, thanks in part to
the work of IFC's leasing program in the country.
Issac Murenzi, a 48-year-old coffee farmer from southern
Rwanda, knows the back-breaking work involved hauling heavy
bags - some weighing up to 50 kilograms - of freshly-picked
coffee beans, one of the country's most important exports.
IFC has teamed up with Vision Finance, the financial arm of
development organization World Vision International, to
structure a program that allows Rwandan coffee farmers to lease
The bicycles are able to carry up to 200 kilograms of coffee,
about four times what even the strongest farmers can move on
their backs. The bikes also allow farmers to get their harvest to
distant washing stations much faster, meaning the beans will be
fresher and obtain a higher price at market.
So far, 1200 farmers are pedaling the bicycles, which they
purchase for 75,000 Rwandan Francs (about $140) in a lease-toown program backed by IFC. Payments towards the bicycles are
made over the course of a full year, ensuring the cost does not
bite deeply into the farmers' monthly income.
“I can't imagine going back to my working life before I got this
bicycle,” said Murenzi, a father of four. “It was very tiring since
we were either walking or using very old bicycles that we had to
get off and push when climbing up or down steep hills…I don't
even want to think about life without my new coffee bike,” he
added.—
15
Microfinance
IFC Supporting Even the
Smallest Businesses
Over three billion people in developing countries cannot access
loan and deposit services. The problem is particularly severe in
sub Saharan Africa, where only between five and 25 percent of
households have a formal relationship with financial
institutions.
IFC has already supported the establishment of eight
microfinance institutions to bring basic banking services to the
poor in Africa - many of them young women with children to
support- in countries including Cameroon, Congo DRC, Ghana,
Liberia, Madagascar, Nigeria and Tanzania.
The region is also home to just two percent of the world's
microfinance institutions.
Microfinance is also a critical component of IFC's strategy in
conflict-affected countries.
Much of Africa's population continues to work and trade on a
cash-only basis, making growth and long-term planning for
hard-working but poor entrepreneurs almost impossible.
Small businesses are often the only enterprises that remain after
fighting has decimated the economy.
Until recently, the trader who needed a loan to buy more
chickens or the woman who wanted to invest profits from a
sewing business had nowhere to turn: the financial sector in
most African countries simply did not offer services for the
poor.
Lack of access to financial services is, therefore, one of the
largest constraints to private sector development in Africa.
Addressing this shortfall requires creating new institutions and
building operational and managerial capacity from the ground
up.
16
IFC expects its microfinance program to support 15 new
microfinance institutions by 2011, reaching approximately
400,000 new borrowers and 22 countries on the continent,
including places like Sierra Leone and Rwanda.
Acting as both a founding shareholder and supporting advisory
services through its partners, IFC helps 'startup' banks build
capacity during their critical early years of operation.
IFC also considers other ways to promote microfinance, including
working with commercial banks wanting to move into
microfinance, and supporting local non-profit organizations
wanting to develop into licensed financial institutions.
... Lack of access to financial services is, therefore, one of the largest constraints to private sector
development in Africa.
Microfinance institutions typically make small loans. As of June
2009, the average loan size in IFC's clients' aggregate
outstanding loan portfolios was $500 - a tiny amount in the
larger financial sector, but a fortune for a young businessman or
woman in a developing country.
The long term goal is to bring microfinance into the mainstream
in Africa, making it an integral part of what banks do. IFC
through these financial institutions is giving people a real chance
to lift themselves and their families out of poverty. —
17
Madagascar’s “Islands of Enterprise”
“One Stop Shop” for Entrepreneurs
The shop is small but busy, hemmed in on a bustling street in
Antananarivo, Madagascar's teeming capital of about 1.5
million people.
The owners, husband and wife Stephen and Miudantsoa,
opened their little “epicerie” 10 years ago and sell a variety of
school supplies, soaps and razors, various household items, and
a small selection of sweet cakes and drinks.
When they wanted to expand their business and attract more
customers by buying a range of new stock, they turned to
AccèsBanque, an IFC partner and investee that specializes in
microfinancing for small businesses.
“We took a loan of 2 million ariary (about $1100) over a period
of 8 months,” said Stephen Raheriarimanda, standing behind
his shop's counter. “A lot of customers were asking for different
products that we didn't have and we thought we had to get them
or we might lose business,” he added.
With the loan, one of more than 3,000 AccèsBanque has made
since launching in Madagascar in early 2007, Stephen purchased
a large quantity of toiletries and other products. “Business is
good and our shelves are full,” he said.
18
IFC is working in Madagascar and in several other African
countries to promote the idea and benefits of microfinance
lending to small businesses and individual entrepreneurs, many of
whom have had no or only limited access to formal banking
services.
Small businesses employ the bulk of the working population in
Africa and their success often underpins the strength of the wider
economy. In Madagascar, IFC is working with several partners to
provide credit and a range of banking services to entrepreneurs
like Stephen and his wife.
IFC has invested $1.5 million in AccèsBanque, which makes loans
from 200,000 to 50 million ariary ($110 to $27,000) to
businesspeople working in the trade, service, transport,
agricultural, construction and other sectors.
The bank also prides itself as a “one stop shop” for entrepreneurs,
offering credit, savings, and payment services while familiarizing
new customers - many have never even had a account - with the
benefits of banking. It hopes to have eight branches, a portfolio of
15,000 customers, and an outstanding loan portfolio of $17.8
million after five years.
...Stephen and Miudantsoa's epicerie has
enjoyed a boost in business since they took
the loan from AccèsBanque.
IFC also provided a comprehensive advisory services package
to AccèsBanque and to its other financial partners, which
included supporting the development of management systems
and helping the institutions build a strong management team.
“IFC is very interested in empowering people, in giving the
market a chance…It has been a pleasure to work with them,
they know the market and environment here in Madagascar very
well,” said AccèsBanque General Manager Martin Spahr.
Stephen and Miudantsoa's epicerie has enjoyed a boost in
business since they took the loan from AccèsBanque. The
couple has also recently bought a small bus to start a transport
business, a move that reflects the entrepreneurial spirit helping
Madagascar's wider economy record strong and consistent
growth figures.
“We are very happy with AccèsBanque because they have been
able to help us develop our business. In the future we want to
grow even bigger,” said Stephen. —
19
Securities Markets
Stronger Markets,
Better Infrastructure
African nations require a massive investment in infrastructure to
grow their economies and lift their people from poverty, but
building infrastructure, whether it's roads, bridges, dams or
housing projects, demands one thing above all else: capital.
...IFC is committed to helping African
Money markets dominate in sub-Saharan Africa, usually in the
form of short-term financing from commercial banks. While
this type of lending is important, the cost of borrowing from
banks is usually high and short-term maturity tenors are
inappropriate for infrastructure projects. The risk associated
with currency fluctuation can also be great.
their securities markets ....
Only securities markets, where bonds and equities are issued and
traded, can provide the large amounts of long-term local
currency capital necessary for building major infrastructure
projects.
With South Africa as the exception, securities markets across
Africa are mostly tiny entities tangled up in red tape and crippled
by imperfect regulatory systems. Tanzania boasts only 12 listed
companies and Uganda eight while Rwanda has only recently
launched a stock exchange.
Even regional economic giant Kenya claims only 56 listed
companies. In 2009, the country had nine corporate bonds
outstanding, with combined value of $150 million - a mere 0.6
percent of GDP.
20
governments and central banks develop
IFC is committed to helping African governments and central
banks develop their securities markets. The goal is to link
private-sector businesses with the capital they need to finance
major development projects.
IFC, in partnership with Sweden's Sida, the World Bank and
private sector partners, launched the Efficient Securities
Markets Institutional Development program in 2006 to nourish
securities markets in Africa.
Through its advisory services programs, IFC is helping to
simplify and strengthen the regulatory environment in places
where bringing a new issue to market is a long and often costly
process. The work also involves strengthening secondary
markets and building the capacity of market participants.
In Kenya, Rwanda, Tanzania and Uganda, ESMID offers
advisory services to securities regulators, central banks, stock
exchanges and intermediaries. Specifically, ESMID is working to
simplify regulations and procedures for issuing and trading
bonds; to establish an appropriate market structure; to
strengthen secondary markets; to build capacity of market
participants and to facilitate the regionalization of the markets.
IFC has been instrumental in helping develop securities markets
worldwide by providing advice, building constituencies,
financing transactions in securitizations, and structuring
collateralized transactions. IFC also invests in the necessary
information infrastructure, such as rating agencies, to help bring
African markets up to world standards.
The program rolled out in Nigeria in 2009 and plans to expand
to other countries in the future. —
21
Transforming Kenya's Bond Market
Leveraging Capital for
Infrastructure
Kenya's economy has been on the march. Economic growth in
the East African country climbed from 3.0 percent in 2003 to
7.1 percent in 2007, thanks in part to good macroeconomic
management, progress in structural reforms, and improved
investor confidence.
Yet, Kenya remains hampered by inadequate infrastructure.
Like most African countries, Kenya must funnel huge sums of
money into roads, bridges, houses, and other large projects if it
hopes to maintain and increase growth.
Kenya's government announced in 2007 that it would partner
with IFC to deepen and reform the local bond market. Kenya is
seeking to mobilize the private sector to provide long-term local
currency financing for sectors such as infrastructure and
housing.
“The problem with the markets is that liquidity is low and bonds
are not being easily or efficiently traded,” said Jackson Kitili, a
director at Kenya's central bank. “The goal we share with IFC is to
develop our bond markets and promote the trading of bonds,
which will be a huge benefit to our overall economy by moving
capital where it is needed,” he added.
Cumbersome laws and regulations makes issuing bonds in Kenya
an expensive and lengthy process that takes an average of nine
months. Only eight corporate bonds were listed in 2007 with a
combined value of $83 million, or a mere 0.3 percent of GDP.
Certain types of transactions -- such as asset backed securities that
would enable companies with weak balance sheets but viable
projects to tap financing through the capital markets - have been
impossible to issue.
...IFC is working to transform Kenya's bond market into a reliable and deep source of
capital to meet the country's current and future infrastructure requirements ...
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IFC is working to transform Kenya's bond market into a reliable
and deep source of capital to meet the country's current and
future infrastructure requirements.
In partnership with Sweden’s Sida, the World Bank and private
sector partners, the Efficient Securities Markets Institutional
Development program is working to simplify regulations and
strengthen securities markets in Kenya and in several other
African countries. IFC is also supporting the introduction of
new types of securities to the market.
... Kenya's government announced in
2007 that it would partner with IFC to
deepen and reform the local bond market.
The ESMID program is designed to improve liquidity, reduce
risks, and increase the overall flow of information between
various institutions participating in the securities markets. —
23
SME Banking
IFC Supporting Businesses that
Impact Communities
Smaller businesses provide jobs and income for millions across
Africa, though they often struggle to obtain the long-term
financing and basic financial services they need to grow.
The AMSME Program provides support to commercial banks
seeking to establish or expand their MSME banking services while
maintaining or improving the quality of their portfolio.
Most banks in Africa have paid little attention to smaller
companies, perceiving them as risky lending clients. Those
banks and other financial institutions keen to add small
businesses to their portfolios often find they lack the capacity
and expertise to do it. Instead, they have traditionally channeled
excess liquidity into bonds or large, established companies.
IFC combines its investment packages with advisory services and
provide banks with short-term experts and long-term advisors to
help them overcome obstacles working with small businesses.
Family, friends or unregulated lenders often provide the only
source of start-up or expansion capital for Africa's smaller
businesses.
IFC, through its Africa Micro, Small, and Medium-Sized
Enterprises Finance Program (AMSME Program), is helping
banks tailor products to suit smaller businesses, giving them the
chance to grow, plan ahead, and take on more employees.
Knowledge transfer from the experts to the bank is a key
consideration of the AMSME Program, this ensures sustainability
of the program efforts beyond the life of the projects.
Gender related lending is an integrated part of the AMSME
program and lending to women receives special attention in all
advisory service projects run by IFC's AMSME program.
Areas covered by the program include Strategy development, Risk
and credit management, Product development, HR and Training
development, and IT systems improvements. The program also
... IFC combines its investment packages with advisory services and provide banks with
short-term experts and long-term advisors to help them overcome obstacles working with
small businesses.
24
provides targeted advice to participating banks in areas such as
credit scoring, management information systems, change
management, financial management and accounting and
treasury procedures.
When banks expand their client base, diversify their risk and
generate new sources of income, small businesses benefit from
a range of financial products and services as well as from
increased competition in the sector.
IFC's AMSME program has supported 15 banks in 13 countries
across Sub-Saharan Africa. Since the Program launched with its
first partner bank in Burkina Faso in 2007, it has helped its
partners disburse more than 20.000 loans throughout Sub
Saharan Africa. The loan numbers are expected to increase
significantly since IFC began partnering with Ecobank in 2009,
a major west African banking group.
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A Huge Project for Small Businesses
Mining for Growth in South Africa
IFC is teaming up with Lonmin, one of the world's largest
platinum producers, to bring skills and thousands of jobs to a
region in northwest South Africa that suffers from 40 percent
unemployment.
Working with IFC, Lonmin is implementing a comprehensive
supplier development program that includes training and support
for local entrepreneurs. A key element of the program is helping
small and start-up businesses access capital to buy equipment and
goods demanded by world-class mining standards.
The ambitious project aims to help Lonmin work more closely
with local communities and engage a variety of smaller
businesses throughout its supply chain. Lonmin is committed to
increasing the involvement of historically disadvantaged South
Africans in their operations.
One of the main barriers to growth in the area is that local
suppliers do not have sufficient access to funds to help them grow.
IFC is playing a key role in helping businesses gain the capital they
need.
“IFC has a tremendous track record and excellent programs and
expertise in capacity building inside communities and in
developing local supplier solutions,” said Lonmin's Chief
Executive Officer, Brad Mills. “They bring a technical
dimension to community development that we felt would be
very valuable to have, supplementing our skills,” he added.
To meet the specific financing demands of small businesses, IFC
has adopted a two-part strategy. IFC works directly with
entrepreneurs, helping them develop solid business plans and
management systems. One of these new local companies, an ore
transport firm, has already received over $2million in financing
with IFC's help.
Lonmin operates in a region known as the “platinum belt”, an
area that is home to 350,000 people who live in small towns and
informal settlements. Small businesses operating in the region
often lack the skills and capital necessary to take on larger, more
complex projects.
IFC also works closely with banks. IFC is providing advice and
training to ABSA Bank to help it broaden its lending portfolio to
include small businesses. A second Lonmin local contractor
working in construction has received a loan through this
partnership.
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...Working with IFC, Lonmin is
implementing a comprehensive supplier
development program that includes
training and support for local
entrepreneurs ...
To date the results are strong. Lonmin has signed eleven
contracts worth over $30million with local businesses and
expects to grow those numbers further. Lonmin will continue
to contract local businesses in the construction, transport and
services industries, giving back to the community by creating
long-term employment.
The project also illustrates a major plank of IFC's strategy in the
mining sector in South Africa and beyond: delivering tangible,
long-term benefits to local communities.—
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Trade Finance
Boosting Africa’s Share
of Global Trade
Global trade has boomed since the end of World War Two,
growing from about $80 billion in the early 1950s to more than $9
trillion today, but Africa has been left behind.
Sub-Saharan Africa's share of global trade has actually slipped in
the past 50 years, although high oil and commodity prices have
recently arrested the slide.
IFC developed a trade finance program to boost African and other
emerging markets' share of global trade. IFC provides banks with
risk-guarantee coverage, enabling participating banks to offer
loans and other lines of credit to companies seeking to engage in
foreign trade.
The long-term goal of the program is to increase developing
countries' share of global trade while supporting “south-south”
flows of goods and services: countries in Africa cannot hope to
grow their economies to their full potential and reduce poverty
until they become fully engaged in world markets.
The program has proved especially important for maintaining
trade flows from Africa during the global financial crisis, which has
caused global volumes to slump.
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Since 2006, IFC's trade finance program has included 53
issuing banks as participants in 27 African countries,
including Burundi, Democratic Republic of Congo,
Liberia, and Sierra Leone. The program has provided
guarantees of $ 1.9 billion for banks in Africa,
supporting $ 2.9 billion worth of trade in the region.
The trade finance program ultimately benefits African
companies by creating partnerships with banks that might
otherwise be unable to back large, trade-related transactions.
IFC partial or risk guarantees are offered on a wide variety of
instruments, including letters of credit, advance payment
guarantees and pre-export financing.
Guarantees are particularly important in Africa, where many
banks and businesses have been unable to tap the potential of
trade to drive economic development and reduce poverty.
Banks in Africa are typically required to post cash as collateral
for trade-related transactions, so companies often find the cost
of trading with overseas counterparts prohibitive. IFC's trade
finance program addresses this problem by reducing the cost
and risks that African companies face when trading with other
countries.
The advisory services arm of the trade finance program is
crucial to helping participating banks build capacity in the areas
of trade finance and international trade operations.
IFC provides advice and training on how to set up efficient
processes and services for trade financing, transferring current
international best practices in trade finance to local markets.
IFC can arrange for the placement of trained trade finance
professionals in client banks for up to two years, entrenching the
confidence and knowledge necessary for African banks and
companies to at last become full partners in global markets.
... countries in Africa cannot hope to grow their economies to their full potential and reduce poverty
until they become fully engaged in world markets ...
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Trade Finance in Liberia
Trade Finance Product Guaranteed
by IFC
A rubber company in war-torn Liberia is enjoying a boost in
production and is looking to expand operations thanks largely
to IFC's trade finance program, which works closely with banks
to promote and develop emerging markets' share of global
trade.
With a trade finance product guaranteed by IFC, Liberia's Bank
for Development and Investment (LBDI) enabled the Morris
American Rubber Company to secure 400 jobs, import
processing equipment from Malaysia and lay plans to open a
factory to produce tire-grade rubber.
"Even though our company is one of the few that survived the
war, prevailing conditions meant that we were unable to grow
the business beyond just collecting rubber and supplying
unprocessed product to tire manufacturers, such as Firestone,"
said Keith Jubah, general manger of Morris American. “Now
that there is stability and peace in the country, we are more
confident about expanding our operations to include 'value
addition' to the raw product,” he added.
Liberia has been shackled by its “cash economy” status,
meaning credit and loan guarantees are hard to come by and bigticket imports - such as processing equipment - a virtual
impossibility to secure.
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IFC's trade finance program provides partner banks with partial or
risk guarantees covering payment risks on letters of credit,
advance payment guarantees, and on many other transactions.
Overall, the program is working to build confidence in Liberia's
economy and help attract desperately-needed overseas
investment.
A company like Morris American, whose workers are mostly excombatants with little formal education, could not have imported
... IFC has provided advice and training
on how to set up efficient processes and
services for trade financing ...
machinery and can now continue with the plans to grow the
business," he added.
In addition to delivering guarantees to financing, IFC has
provided advice and training for staff in LBDI's new trade
department and helped draft the department's operating
procedures.
expensive equipment without the letter of credit opened by the
LBDI and backed by IFC. Many of the company's workers
might have lost their jobs, leaving them with scarce employment
options.
"The supplier in Malaysia, who had never worked with LBDI
but knew of IFC, felt confident that they would receive payment
because of this guarantee, said James Boker, LBDI vice
president of credit. “Our client is now in possession of the
“Being part of IFC's Global Trade Finance Program has put us
in a strong position to open letters of credit for our clients that
can be accepted by larger commercial banks overseas that may
not necessarily know LBDI,” said Mathew Clarke of Liberia's
Bank for Development and Investment.
“These letters of credit are guaranteed by IFC, which gives the
correspondent banks more confidence when dealing with us.
IFC has provided advice and training on how to set up efficient
processes and services for trade financing. This advice has
helped us set-up a well functioning department with fully trained
staff,” he added.—
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Contacts
INTERNATIONAL FINANCE
CORPORATION
2121 Pennsylvania Avenue, Nw
Washington, DC 20433, USA
Telephone: (202) 473 3800
Fax: (202) 974-4384
SOUTH AFRICA, JOHANNESBURG
14 Fricker Road
Illovo Boulevard
Illovo 2196
P.O. Box 411552, Craighall 2024
Johannesburg, South Africa
Telephone: (27-11) 731 3000
Fax: (27-11) 268-0074
Credit Bureaus:
Securities Markets:
Moyo Violet Ndonde
Tel: 5735+5355+3219 / 255-22-216-3200
Email: [email protected]
Evans Makini Osano
Tel: (254-20) 2759 425
Email: [email protected]
Housing:
SME Banking:
Wambui Chege
Tel: (27-11) 731 3161
Email: [email protected]
Rubin Japhta
Tel: (27-11) 731 3052
Email: [email protected]
Leasing:
Trade Finance:
Riadh Naouar
Tel: 5774+7124 / 221-33-859-7124.
Email: [email protected]
Gboyega Adebola Songonuga
Tel: (27-11) 731 3133
Email: [email protected]
Microfinance:
Julie Sitawa Sisenda
Tel: (27-11) 731 3173
Email: [email protected]
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About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives.
We foster sustainable economic growth in developing countries by supporting private sector development,
mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. For
more information, visit www.ifc.org.
Creating Opportunity through Partnerships
Donor Categories: Governments, Private Sector and Multilateral Agencies
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SOUTH AFRICA, JOHANNESBURG
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14 Fricker Road, Illovo Boulevard
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PO Box 41283, Craighall 2024
Johannesburg, South Africa
Telephone: (011) 731 3000
Fax: (011) 268 0074
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