The entry of microfinance institutions into the remittances market

1. International Network
of Alternative
Financial Institutions
Building a Partnership for DevelopmentBuilding a Partnership for Development
in Africa: the role of Microfinancein Africa: the role of Microfinance
Institutions and the DiasporaInstitutions and the Diaspora
OrganizationsOrganizations
INAFI Africa Consultative Forum, 5-6 November 2007, Held at the
Cotonou International Conference Centre, Boulevard de la
Marina, Cotonou, Benin
The INAFI Africa/ African Diaspora
Cotonou Consultation
background
On 5 and 6 November 2007, INAFI Africa and the Africa Diaspora met at
the Cotonou Conference Centre, Benin. The purpose of this meeting;
attended by 50 delegates, was fivefold.
During the one and half day consultative forum, the two groups were
able to:
1. Establish the feasibility of collaborating together in harnessing
remittances with microfinance to create jobs and enhance
incomes.

2. 2. Define precisely the areas where there are immediate
opportunities where both partners may contribute effectively to
sustainable microfinance and human development.
3. Review worldview experiences and examples of migrants’
involvement in microfinance development.
4. Discuss mutual expectations, fears, and measures necessary to
establish a secure safe and trusted platform for working together.
5. In the few areas of immediate action, identify the lead person(s)
and practical steps towards realization of shared goals.
6. Create the space and time necessary for representatives of the
two organizations to interact and get to know each other better.
The consultative forum was organized to coincide with the global INAFI
Conference on microfinance, remittances and development; also just
held two days later at the same Conference Centre in Cotonou, Benin.
Prior to the INAFI Consultative forum, there had been three explorative
meetings between the 51-member microfinance organizations network
and Diaspora association which had recommended the Cotonou forum.
Besides INAFI Africa, the various Diaspora organizations or associations
had concluded detailed discussions with the global INAFI network and the
Asian and Latin American Chapters of the network about how to tap
migrant remittances to develop microfinance.
action plan
These are the immediate action agreed by the 42 INAFI Africa and Africa
Diaspora delegates to the Cotonou Consultative forum:
• Clear purpose and vision of partners.
• Safety of investments e.g. MFIs must meet basic.
• Reasonable mix of profit and social return e.g. expansion of
access, job creation, and better health services for poor families.
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3. • MFIs to introduce new products of interest to the Diaspora, e.g.
more affordable money transfer services that reach the last mile
and credit guarantee for families and Diaspora in their country of
migration.
• There is need for a system of verification and compliance to back
up the partnership.
1. Building trust was recognized as the first step in building
long-lasting partnership between INAFI Africa member
organizations and the African Diaspora. To this end, the
forum recommended the organization of exchange study
tours for the Africa Diaspora to MFIs and vice versa.
2. The forum identified acquisition of equity in INAFI Africa
MFIs, given their more socially responsible mix of risk and
return, as an important area of opportunity for
collaboration.
3. The forum identified help from African Diaspora in
facilitating foreign exchange guarantees for MFIs against
foreign currency loans from the international capital
markets.
4. Technology was identified as a two-way opportunity for
the Diaspora and INAFI member organizations. On the one
hand, the Africa Diaspora has experts in ICT that can
support the MFIs, upgrade/develop their systems on
reasonable terms. On the other hand, MFIs can adapt
technology and combine this with their wide service
delivery network to provide a platform for a more
affordable money transfer. This way, the partnership gives
an edge to the African Diaspora owned money transfer
companies competing against the global giants like
Western Union Forum.
5. The forum noted to INAFI members that they have a key
role to play in helping to redress the overwhelmingly
negative external image of Africa by reframing their
missions from poverty alleviation to wealth creation and
demonstrating tangible impact on job creation and
enhancing clients’ incomes.
6. The forum called upon MFIs to document their own
successes as intermediaries and their customers and
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4. disseminate this information widely, especially via the
world-wide web.
7. The forum called upon the Diaspora and MFIs to closely
collaborate in campaigning and lobbying for an
appropriate/conducive regulatory environment for their
intended partnership in money transfer, capitalizing
microfinance development, and making a contribution to
sustainable human development.
8. The forum called upon the INAFI member organizations to
lobby for the rightful recognition of the invaluable
contribution by the Africa Diaspora in creating jobs,
addressing poverty, and relief to their families and
communities.
9. An INAFI Africa-wide ICT inventory was recommended to
be done within the next six months. This baseline analysis
shall provide the platform for upgrading, connectivity, and
initiation of money transfer services.
10. An E-group was formed to facilitate ongoing exchange,
dissemination of information, and strategizing between
INAFI member organizations and the African Diaspora.
11. INAFI Africa to provide a hub for e-networking between
the Diaspora and MFIs.
12. The forum proposed the establishment of the following
five committees:
 A committee to define the role and required
capacity for INAFI Africa to provide the leadership
and coordination of the partnership. The
committee will also look into the immediate
resources to support take off of the partnership.
 An ICT group to lead the ICT inventory and
strategy.
 A communication committee to develop a policy
and strategy for disseminating positive case studies
and communicating more generally.
 An investment committee to explore the
opportunities for mobilizing African Diaspora
investment and designing a fund prospectus.
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5.  A committee to focus on immediate money
transfer.
13. MFIs’ capacity to deliver appropriate and affordable
services conveniently was recognized to be of paramount
importance. As a result, the forum called MFIs to pay
attention to their leadership, governance, and service
delivery capacity through appropriate training of their
human resource.
context of action
The Consultative forum noted how microfinance, a new system of
delivering self-sustaining financial services to a previously ignored,
excluded, disadvantaged and poor third world population surreptitiously
emerged three decades ago. The forum acknowledged that the new field
of service dubbed “microfinance” is now a fully-fledged industry worth
some $150 billion. The participants were informed that, although initially
a preserve of relief and non-profit organizations, microfinance is today
delivered by a very diverse group of financial organizations, including the
regulated e.g. downscaling commercial banks, credit unions, and
transformed/specialized microfinance NGOs, etc. as well as unregulated
financial intermediaries.
Participants acknowledged that microfinance is a service now found to be
in every part of Africa. The forum heard that an assessment of the
microfinance sector by the Africa Union in early 2007 identified close to
7,000 active microfinance institutions in the 53 member states. Hence,
the keynote speaker, basing his calculation on the typical average
outstanding loan portfolio of the 51 INAFI Africa member organizations,
noted that Africa’s gross outstanding loan portfolio was close to $10
billion.
While observing this was a huge amount of investment, the INAFI Africa
keynote speaker noted how the annual remittances from the African
Diaspora to the mother continent was even much bigger; at $39 billion
citing a report just released by IFAD and Inter-American Bank2
.
Still further, the forum heard from the INAFI Africa keynote speaker that
despite the huge opportunities for harnessing remittances with
microfinance (and even talent from the Diaspora), there was as yet no
2
2006 IFAD Report
Page 5

6. concrete plan of action. But he strongly urged the forum not to waste any
more time in coming up with a simple, yet concrete first step.
While calling upon the consultative forum to urgent action, the keynote
speaker pointed out to Africa’s disadvantaged position in attracting
financing for the development of its microfinance sector. While also
noting the areas of strength and challenges of Africa’s microfinance
sector – such as the huge size and established technology, etc, he at the
same time expressed a bewilderment as to why Africa has not been as
successful in benefiting from the new capital specifically targeting
microfinance worldwide.
For instance, he noted that Africa’s microfinance industry has
experienced rapid growth in the past 12 years. He also noted that
competition in microfinance has evidently stiffened over the period due
to a fast learning clientele and the entry into the emerging market by all
sorts of operators, including formal financial institutions that once
shirked the lower end market segment. However, along with this
expansion and growth, he acknowledged that the industry has begun to
experience multiple challenges at different fronts, e.g.:
• Declining growth in new customers as well as the outstanding
loan portfolio
• Declining portfolio yield
• Increasing level of financial cost as a proportion of total
expenditure
The consultative forum heard about some of the most likely causes for
this overall trend, which included amongst other:
• Shortage of funds to scale up, or strengthen institutional human
capital
• Due to a change in focus, i.e., commercialization of services, some
microfinance organizations now prefer to invest in other ways
rather than giving out loans to the poor
• Notable drift or change in target clientele and delivery system
• Product failure and subsequent recalling of loans
• Low demand for loans due to unsuitable terms, including
perceived high interest rates, declining profits in the micro/small-
scale enterprise sector due to low entry barriers and too many
firms competing for same market
The consultative forum observed how, for the first time in three decades,
Africa reported a net decline in client base in 2005. In Uganda, there was
Page 6

7. a drop of 15 percent in client base! Delegates agreed that Africa’s future
microfinance system was clearly challenged to find new strategies if it is
to grow and prosper.
Within the region itself, it was noted that access to microfinance also
varies by country and sub-region. The microfinance system in Tunisia, for
example, is reaching more of the country’s population than the systems
in Senegal, Togo, Uganda, or Ethiopia. Throughout the region, not just the
number of new institutions entering the market is diminishing, but also
the number of first-time microfinance customers joining the system is
either declining or stagnated. Furthermore, whereas 75 percent of
microfinance institutions in Asia are concentrated in rural areas, in Africa
65 percent are concentrated in the urban areas. In addition to the limited
and unbalanced outreach, the microfinance system in Africa also lags
behind other regions in performance.
Table B: Global Distribution of Investment Funds (in US$, millions)
Source: McKinsey, 2007; Micro Rate, 2007
With regard to resources for funding growth, Africa is also the region that
is most lacking; having received the least amount of the nearly $1 billion
funds invested yearly since 2000. Even though the level of investment in
Africa’s microfinance system has increased lately; from about 1.3 percent
of total funds invested in 2003, to 5.3 percent by 2005, the absolute
amount of external capital to Africa targeting the sector is
disproportionately small compared to investments going to Asia’s and
Latin America’s microfinance systems; the two regions attracted nearly
six percent and 41.8 percent of the growth capital in 2006 (table A). Yet,
more than 90 percent of the 120 microfinance institutions surveyed by
CGAP in Africa in 2004 cited lack of capital as their single most important
constraint to growth.
Region Private funds Public investors All
Investors
Total
Debt Equity Debt Equity Guarantees
Eastern Europe & Central Asia 35.6 73.5 323 68.2 2 502.2
Latin America & Caribbean 162.8 67.4 150.9 13.4 63.3 457.9
Sub-Saharan Africa 31.2 14.9 1.7 6.1 9 62.9
East Asia & Pacific 23.9 1.2 6 3.7 0.9 35.7
South Asia 27.7 1 0 5.3 1.1 29
Middle East & North Africa 1.8 0 0 0 7 8.8
Total 276.9 158 481.6 96.6 83.3 1,096.5
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8. Many of the operators lack sufficient resources to finance their
investment needs. Therefore, to meet these needs, they are depending
on the same international capital markets, either from official sources or
from private capital sources.
Aside from being relatively expensive and hard to get, however, both
gross foreign development aid and foreign direct investment are far
much less than migrant remittances worldwide. In 2006, for instance,
total global remittances, of which close to $39 billion came to Africa, was
$300 billion, compared to the $232 billion in foreign capital. This volume
of migrant remittances to the developing world alone was almost twice
the amount of total development aid from all formal sources. As a
proportion of the gross domestic product in 2006, remittances were the
largest source of external capital in many developing countries. It is
further believed that about another 50 percent or even double the
formal volume of remittances flows to developing countries like Africa
through informal channels. This makes migrant remittances a potentially
very important source of capital for human development. How to harness
this large source of funding to narrow the funding gap facing the
microfinance sector is the overall purpose of this pertinent consultative
forum held in Cotonou, Benin.
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9. GROUP 1
NAME
Diaspora
/INAFI
Country/Region Organization Contact Address
Email Phone Fax Post Box
1 Papa Aly Ndior INAFI Senegal ACEP acep@orange.sn
papandior@yahoo.fr
338697550
(221)7764468
19
(221)338252
935
BP:5817
Dakar-Fann, Senegal
2 Barutwanayo
Moussa
INAFI Burundi CECM cecm@cbinf.cm
mousssab@yahoo.fr
(257)2224927
2213375
(257)222133
75
BP:6665
Buj.Burundi
3 Ndeye Mariane
Thioye
INAFI Senegal FDEA fdea@orange.sn
ndeyemariane@yahoo.fr
(221)33825-
20-58/33824-
71-53
77569-35-48
(221)33825-
92-87
BP:3921
Dakar
Senegal
4 Abdou Mawa
Ndiaye
Diaspora Spain CASC mawandiaye@yahoo.fr 34.93 692272 c/come.g 42
Bxs,08003
Barcelona
5 Timothy Xerxes
Munyao
INAFI Kenya KADET Timothy.munyao@kadet
.co.ke
(254)733-
747203
Box 1676-
00200,Nairobi,
Kenya
6 Tossou Felix INAFI Benin FED Felix2000@yahoo.fr 97-447364 01BP 309
Cotonou
7 Moses
Ehigiamusoe
INAFI Nigeria LAPO lapobn@yahoo.co.uk (234)5260007
2
(234)526000
756
PMK.1729
Benin City
Edo State
Nigeria
8 Adanmado
Franck
INAFI Benin ASSOPIL assopil@yahoo.fr (229)2136064 BP:1291
Page 9

10. 95455633 Calavi
9 Bikashy
Chowdhury
Barua
Diaspora
ORG
The Netherlands BASUG Bikash.chowdhurybarua
@basug.nl
www.basug.nl
(31)-0-6-
290855/88
(31)-0-70-
3818204
Dr.j.Presserstr-30
2552 LN,
The Hague
The Netherlands
10 C-E Chikezle Diaspora
ORG
UK AFFORD Chukwu-emeka@afford-
uk.org
+44207587
3919
+44-7847
400001
11 Phyllis Mbungu INAFI Kenya SMEP pmbungu@smep.co.ke (254)20-
55761
(254)20-
55768
Box 64063
-00620
Nairobi Kenya
12 Liberat Diaspora
Org
Netherlands Ropabu info@repabu.nl +31-0-6-
422755811
Maissata Nd.
Niasse
INAFI SENEGAL INAFI
INternational
maissata@inafiinternati
onal.org
maissatan2@yahoo.com
(221 )77 618
0252
(221)
8604222
BP: 374 Dakar-Fann,
Senegal
GROUP 2
1 A. Cheruiyot INAFI Kenya K-Rep acheruiyot@k-rep.co.ke (254)20-
4343495
4343493
Box 10528-00100
Nairobi
Kenya
2 Mohmoud M. Diaspora Somalia HIRDI basaweyne@yahoo.com +31-
640270728
Postbus 9004
1180 MA Amstelveen
The Netherlands
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11. 3 OzdenYalim Diaspora Turkey/Netherlands MIND o.yalim@chello.nl +31(0)651005
724
Rapenburgerstr.78
1011 MK
Amsterdam, NL
4 Joaquin
Changue-Hay
Diaspora ESPANIA ASOC:RIEBAPU
A
liebabua@ergway.com
5 Mamadou
Lamine Gueye
INAFI Senegal CAURIE-MFI mgueye@crssn.org (221)3395230
86
(221)339551
4339
BP:3024
Thies-Senegal
6 Mindanda
Mohogu
Diaspora DR Congo/Netherlands AFRIK
FINANCE
mindanda@yahoo.com +31-
0610064174
Melis Stoke Lan
1542
2541 ET
Den Haag
Netherlands
GROUP 3
1 Samuel Baguma INAFI Uganda UTRUST
FINANCE
Samuel.baguma@u-
trust.co.ug
(256)7725024
24
(256)237046 Box 6972
Kampala,Uganda
2 Millicent Odongo Diaspora Kenya/Netherlands CFD modongo@hotmail.com +31-
615187150
3 Godfrey Jokonya INAFI Zimbabwe ZAMBUKO gjokonya@zambuko.co.z
w
(263)4333950
/302495
(254)433364
1
Box 1183
Harare
4 Wilson Obomanu Diaspora Nigeria ASDA woboms@yahoo.com +31-0-6-
27207817/81
27
5 Ndeye Sophie Ba INAFI Senegal PAMECAS nsdiaw@pamecas.org (221)33839
8660
(221)835320
6
BP:15354
Dakar, Senegal
Page 11

12. 6 Sylvia van den
Bag-Ortega
Diaspora Bolivia/Netherlands AYNI
MIND
Sylvia@ayui.nl +31-
302735157
7 Leah Mansaray Diaspora Sierra Leone ACCESS POINT
CASH
leah@accesspontcash.co
m
+44-7939-
455-782
GROUP 4
1 Mohamed A.
Hussein
INAFI Somaliland Amaahkakaal
MFI
amaahkalkaal@yahoo.co
.uk
(252)-52 3691
2 Mekka
Abdelgabar
Diaspora Sudan/Holland Women Org.
Netherlands,
Darfur
tjanisufi@gmail.com
tijanisufi@gmail.com
+31-
703606458
+31-
31703627139
416
2501 CK
The Hague
The Netherlands
3 Andrew Odunga INAFI Tanzania PRIDE-
TANZANIA
odunga@pride-tz.org (255)27250-
2945
(255)272504
050
Box 13900
Arusha
Tanzania
4 Ahmadou
Tidiana Diallo
Diaspora
Espagne
Senegal APCISAD
KANDEENA
ahmadttd@hotmail.com +34-627196
788
+34938/
467605
5 Khady Sakho Diaspora
MFI-
FRANCE
Senegal MECSEF(Mutue
l d’Epargne et
d Credit des
Séne galais de
France)
mecsef@laposte.net
xadi@free.fr
mecsef@mecsef.com
+3367445482
8
6 Tony Fosu
Appiah
INAFI Ghana SINAPIABA
Trust
afosu@sinapiaba.com (233)2081224
59
(233)513248
3
Box 4911
Kumasi
7 Akiyeni Maximin Diaspora Benin ONG of naxakiyemi@yahoo.fr (229)9093126
Page 12

13. Diaspora (229)930469-
03
GROUP 5
1 Bardouille Raj Diaspora North America Canada Cornell University rajbardouille
@yahoo.com
(905)507-
0815
1919-25 Kingsbridge
Garden Circle
Mississanga,Ontario
LSR 481,Canada
2 Anthony Githinji INAFI Kenya SISDO githnjianthony@gmail.c
om
(254)722-
818811
(254)20-
3871531
Box 76622
Nairobi,Kenya
3 Vicky Bishubo INAFI Tanzania PRIDE-
Tanzania
vicky@pride-tz.org (255)713533
727
(255)22-
2185031
Box 65266-00508
Dar-es-Salaam
Tanzania
4 Kane Yaya Migrant France/West Africa PSEAU kano@ydean.org
kane@pseau.org
+33-42876006
5 Dan Thierry INAFI Benin Vital Finance dthiec@yahoo.fr
vitambco@leland.bj
(229)9791723
0
6 Sam Afrane INAFI Ghana SINAPI ABA
Trust
samafrane@yahoo.com (233)20-
8121004
7 Ali Haji Abdullah INAFI Somalia Amaahda
Danyarta
amaahdadanyarta@hot
mail.com
sedalifarah@yahoo.com
(252)252-
826391/
(252)252-
796083
Page 13