Microfinance Development in Liberia - An Initial Assessment
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.