Microfinance Development in Liberia - An Initial Assessment

How to develop microfinance in a post-conflict situtation?
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This report analyzes the microfinance sector in Liberia and makes recommendations for its development. The paper argues that microfinance can be taken up in a post-conflict situation only if the following conditions persist:

  • Political stability offering a reasonable degree of security and safety to potential microfinance institutions (MFIs) and their clients;
  • Sufficient economic activity that can use credit services;
  • Relatively stable client population as it impacts the portfolio and repayment rates.

The paper analyzes the demand of and the supply for microfinance services:

  • Supply through formal and informal financial institutions;
  • Demand estimated at:
    • Potential active client base of 62,000 households;
    • Total active loan portfolio of LD $685 million (US $13.7 million).

The report identifies the opportunities for the development of microfinance sector that are characterized by:

  • High unmet demand;
  • Government support to microfinance,;
  • Clear focus of operators in sustainability and outreach.

The paper also highlights the constraints which include:

  • Lack of liberalized financial system;
  • Absence of market leaders in extending credit;
  • Limited capacity of operators and infrastructure support.

Finally, the report recommends:

  • Policy: Review of policies related to interest rate ceilings and reserve requirements for Liberian dollar and U.S. dollar accounts;
  • Programming: Coordination of programs through an investment committee;
  • Institutional Arrangements: A microfinance unit established by the Central Bank of Liberia to ensure optimal development of the microfinance sector as an integrated part of the financial sector.

About this Publication

By Tucker, J.