In its 2021-2023 Strategic Plan, the CBL established a Development Finance Section (DFS) – previously existing as the Financial Sector Development Unit (FSDU), The scope of the DFS includes handling of development projects aimed at supporting the economic development objective of the CBL, including interventions in the real sector, and digitalization.
Development financing is one of the requirements for sustainable economic growth in any economy. Access to finance to various sectors of the economy will promote an inclusive economic growth and development in keeping with the third objective of the CBL as enshrined in the new CBL Act. The primary mandate of the DFS is to formulate and implement various policies and promote innovations of appropriate products and create the enabling environment for financial institutions to deliver services in an effective, efficient and sustainable manner. The functions of the DFS include but are not limited to:
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- Implement, monitor, evaluate and report on the progress of specific activities in the 5-year National Financial Inclusion Strategy (NFIS) and the National Financial Education Strategy (NFES) to CBL management and the Board of Governors;
- Develop and lead the implementation of an effective framework to promote development finance programs of the CBL;
- Liaise with other WAMZ central banks on matters related to development financing and financial inclusion;
- Carry out research on specific areas of interest to financial inclusion and development finance in Liberia; and
- Liaise with development partners and international development finance organizations for best practice, peer-learning, knowledge sharing and resource mobilization for development finance and financial inclusion in Liberia.
Subsections and Attachments:
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- Development Finance Concept for Liberia (to be provided)
- Green Finance (to be provided)
- MSME Finance (to be provided)
- Mortgage Finance (to be provided)
- Agriculture Finance (to be provided)
- Small Business Support Program (to be provided)
- Others (to be provided)
- Financial Inclusion
The CBL believes that access to financial services, particularly through digital channels, will improve livelihoods by providing tools to Liberians across all segments of society to borrow, save, make payments, build resilience against shocks, and create an environment for businesses to thrive. Over the last few years, there have been many strategic efforts specifically focused on access to financial services. CBL has led the implementation of two financial inclusion strategies from 2009-2013 and 2014-2018. The former focused on establishing a sustainable microfinance industry to enhance access to diversified financial services, and the latter helped bolster national efforts to promote access to financial services more broadly.
The third and current National Financial Inclusion Strategy (NFIS) 2020-2024 is therefore aligned to support the government’s efforts in achieving the objectives of the national development strategy, the Pro-Poor Agenda for Prosperity and Development (PAPD), which is geared towards poverty reduction and achieving inclusive economic growth and development.
According to the 2017 World Bank Findex data, 35.7 percent of our population have accounts at a financial institution or with a mobile money provider, which is an increase from 18.8 percent of the adult population with an account at a financial institution in 2011. While Liberia has certainly made progress in terms of increasing financial inclusion, much remains to be done. Poverty and exclusion from formal financial services still persist thereby generating social and economic consequences for marginalized segments of the population.
Several countries across the globe now look at financial inclusion as the means for more inclusive growth, wherein, each citizen of the country can use his/her earnings as a financial resource that can be put to work to improve future financial status and livelihood and simultaneously contribute to the nation’s progress. Liberia is part of over 60 countries that have launched or are developing such strategies. Implementation of the NFIS is being guided by a steering committee comprised of representatives from various government agencies, development partners and private sector associations.
Relationship with the Alliance for Financial Inclusion (AFI)
AFI is the world’s leading organization on financial inclusion policy & regulation. A member - owned network that promotes and develop evidence-based policy solutions that improve lives of the poor through the power of financial inclusion. The CBL joined AFI in August 2010 as a principal member and is active in five working groups. Working groups are the key source of policy development and trends in financial inclusion and serve as “communities of practice” on key financial inclusion issues. They are the primary mechanism for generating and hosting knowledge within the AFI network and provide a platform for knowledge exchanges and peer learning that allow policymakers to share, deliberate and deepen their knowledge and understanding of key financial inclusion issues.
CBL has received two (2) AFI policy grants to revise its NFIS and conduct baseline assessment survey. The CBL has announced nine Maya Declaration targets, including quantitative goals to increase formal financial service rates and the reach of mobile financial services among its rural and underserved populations keen on the gender lenses.
National Financial Inclusion Strategy Report and Current Strategy
The 2014-2018 NFIS implementation report shows that although interrupted by the Ebola Virus Disease epidemic the strategy achieved much of its targets. The current National Financial Inclusion Strategy (NFIS), 2020-2024, aims to leverage the progress achieved with previous financial sector development efforts to address the remaining challenges.
The overarching vision is “to build a sustainable financial sector that is deeply rooted in digital financial services (DFS) in order to provide access to and enhance usage of a wide range of affordable financial services.” The NFIS strives to increase access to formal financial services for the population (aged 15 years and older) by 40 percent from 35.7 percent to 50 percent by 2024.
The NFIS Framework is built on three main pillars: i) Access to Financial Services and Credit, ii) Digital Financial Services, and iii) Consumer Protection and Financial Capability. Thus, outlining the key focus areas to achieve the NFIS vision and address the underlying issues that serve as barriers to increasing financial inclusion in Liberia. Through the implementation of the NFIS, the CBL will develop the core underlying financial infrastructure and institutional and consumer capacity necessary to achieve progress towards financial inclusion for all.
Women Financial Inclusion
The CBL’s Maya Declaration was announced in Kuala Lumpur, Malaysia in September 2013. The Bank set several ambitious targets, which it is still pursuing. However, these targets do not give specific attention to women’s financial inclusion. Notwithstanding, women’s financial inclusion has been (and still is) an important pillar of the CBL’s financial inclusion agenda. It is part of the Government’s agenda for women empowerment and gender equality as enshrined in the Agenda for Transformation (AfT) and the current national agenda “Pro-poor Agenda for Prosperity and Development.”
While there may exist limited data on women access to financial services in Liberia, the anecdotal evidence shows that most women in Liberia are in one way or another involved with the informal financial services, such as susu clubs, Village Savings and Loan Associations (VSLAs), and credit unions.
The ongoing reforms of the financial sector by the CBL in the areas of agency banking, microfinance, digital financial services, Rural Community Finance Institutions (RCFIs), credit unions (CUs) and VSLAs provide opportunities for promoting women access to basic but essential financial services.
Notwithstanding the opportunities, there are several barriers for women’s financial inclusion. These challenges include low-income levels, financial illiteracy, culture, educational background, belief systems and women’s role in the household…
Pursuant to the Danarau Plan, the CBL endorsed its commitment to promoting inclusion for women. In said regard, the CBL announced the following commitment to women’s financial inclusion:
- In 2018: Establish a database for women’s financial inclusion:
- Establish data collection methodology to assess the level of women’s access to financial services (i.e., commercial banks, microfinance institutions (MFIs), CUs, VSLAs, and digital financial services; and
- Conduct survey to gather baseline data on women’s involvement in financial inclusion.
- In 2019: Policy Actions
- Based on the outcome and findings of the baseline survey, set targets to increase the percentage of women’s participation in the formal financial system for the first three years (2019-2021);
- Develop policies that will facilitate the inclusion of women in the financial system, including promoting the establishment of specialized financial institutions with focus on the special needs of women;
- Work with the Government to allocate resources in the national budget for women’s financial inclusion as contained in the AfT;
- Incorporate specific sections and policy actions for women financial inclusion in the FSDIP; and
- Work with line ministries, including the Ministry of Gender and Social Protection, to develop a national strategy for mobilization of donor support for women’s financial inclusion.
Attachments
- Financial Sector Development Implementation Plan (FSDIP)
- Assessment Report of the Implementation of the FSDIP
- 2014-2018 NFIS
- 2020-2024 NFIS
- Maya Declaration
- Danarau Action Plan: Gender and Women Financial Inclusion
- NFIS 2020 Implementation Report
- Credit Union
Prior to the civil crisis of the nine-teen nineties that ended in 2003, there were sixty-eight (68) unregulated credit unions that represented a significant source of microfinance in Liberia at the time, there were also three NGOs with microfinance portfolios (credit only) and nine banks. Eight of the nine banks were expatriate banks and were based in Monrovia with a few branches across the counties. Most rural families relied almost exclusively on informal financial intermediaries like rotating savings and credit associations (ROSCAs), Village Savings and Loan Association (VSLA), and informal credit providers like “money lenders” that showed fluctuating degrees of sustainability and limited service offerings.
Howbeit, the existence of the then National Bank of Liberia and the current Central Bank of Liberia (CBL) along with the Liberia Credit Union National Association (LCUNA) the Apex body of all credit unions in the Republic of Liberia, credit unions and informal credit providers sailed unregulated. Consequently, the CBL established a regulation in which LCUNA is the Apex for credit unions and is licensed by the CBL. LCUNA is directed by a board of directors elected by member credit unions at its annual meetings. It has bylaws that prescribe the duties of the officers and the organizational structure of the Apex body. LCUNA performs delegated supervisory functions as may be determined by the CBL. All credit unions must submit a written application to LCUNA for affiliate membership. A credit union shall obtain an affiliation certificate issued by LCUNA and renewable annually to receive services from LCUNA. This member affiliation rule is applicable to all registered credit unions.
LCUNA shall advise and assist its credit unions by providing programs and services that will enable credit unions to serve members more effectively. These may include, but not be limited to, such areas as education and training, management consultation, accounting and auditing services, standardized systems, brokering of investments, supplies and forms, marketing and procurement, risk management, payment and settlement systems, insurance, liquidity management and advocacy of credit unions before the government and the general public.
LCUNA and other credit union leaders adopted the strategy of forming four new Regional Credit Unions (RCU). They agreed that through the creation of these new regional centers, or RCUs, LCUNA and donor support could be channeled more efficiently and effectively to promote growth and create a more unified credit union structure and movement. After a community-based engagement and development process, implementation began in May 2013. RCUs were built in each of the regions to offer services to members as well as wholesale financial services to credit unions, farmer cooperatives and VSLAs. The four regional credit unions (RCUs) are Multi-National Credit Union (MNCU), Trust Savings Credit Union (TSCU), United Progressive Savings Credit Union (UPSCU) and Unity Savings Credit Union (USCU).
The World Council of Credit Unions with funding via UNCDF’s MicroLead programme as partners to CBL and LCUNA helped to revive the credit union system in Liberia. The Microlead Liberia Program, funded by UNCDF and implemented from 2013 – 2016, resulted in the construction of four regional credit unions to expand outreach to rural areas and unbanked Liberians throughout the country through points of service and group outreach. By March 2016, the four regional credit unions had established their headquarters/offices with modern banking halls, eight branch offices and 14 points of service, covering 14 of Liberia’s 15 counties.
The credit unions reached 6,436 individuals, including 427 groups such as VSLAs, cooperatives, schools and small businesses. Outreach to these groups, ranging in size from 25 to 35 members, with some groups reaching 150 individuals, increased the growth potential of the regional credit unions. In working with VSLAs, inroads were made in reaching female participants.
In addition, the passage of credit union regulations was a critical program achievement, providing a path toward sustainable credit unions. When the Microlead Program began working in Liberia, the credit unions were operating without a regulatory system to provide safety and soundness to the movement and promote streamlined operations. The program worked with the CBL and other stakeholders to complete the draft credit union regulations. Signed on December 4, 2015, the regulations spelled out the requirements and the prudential standards for the credit unions to be licensed provide local stakeholders with a clear path forward in building on the foundation laid by the program.
In 2017, the CBL conducted a diagnostic assessment of the microfinance sector that rebranded the financial sector into tier categories and the credit unions were categorized into Tier 2: 2a, 2b and 2c based on their minimum capital requirements.
- Tier 2a will include all CUs whose assets reach the threshold of equal or greater than 1,000,000 US Dollars (or its equivalent in Liberian Dollars).
- Tier 2b will include all CUs that shall hold an initial minimum paid up capital of equal or greater than 50,000 US Dollars (or its equivalent in Liberian Dollars) and is less than 1,000,000 US Dollars (or its equivalent in Liberian Dollars).
- Tier 2c will include all CUs whose assets reach the threshold of equal or less than 49,999 US Dollars (or its equivalent in Liberian Dollars).
No person/institution shall operate a Credit Union without a license from the CBL. The CBL shall issue a final license to an applicant to operate as a credit union that has satisfactorily met all requirements or may issue a provisional license to an applicant that has not met all the licensing requirements. The provisional license shall be subject to the terms and conditions specified in Sections 12-13 of the December 4, 2015 regulations.
Currently, according to 2020 report submitted from LCUNA, there are 239 credit unions with a total membership of 62,285 with a gender composition of 23,014 males and 39,271 females. The three types of credit unions are community based, agriculture and employees.
Contact
Yarkpazuo M. Gbusiwoi
MANAGING DIRECTOR
LIBERIA CREDIT UNION NATIONAL ASSOCIATION
(LCUNA)
REDLIGHT, PAYNESVILLE, MONROVIA, LIBERIA
WEST AFRICA
+231-886597949/77597949
Attachments
- Credit Union Regulations
- Credit Unions Listings and Details (to be provided)
- Village Savings and Loan Associations
Traditionally, Village Savings and Loan Association (VSLA)/ Savings Groups (SGs) promotion has been led by national and international NGOs and a large extension network of community-based trainers. But recently, governments have deepened their engagement in SGs promotion, through laws and policies, with regulators setting the rules on how Savings Groups can operate and access formal services and through direct investments and priority setting through SGs integration into strategies and programmes. This integration has been witnessed in programs and/or policies related to Financial Inclusion, Social protection, and women empowerment.
The development of VSLAs in Liberia began with the launch of the Inclusive Financial Sector Program at the Central Bank of Liberia between 2005-2007. The program was designed to build up on the groundwork laid by preceding Financial Inclusion related Projects. The focus of the project therefore was to provide support to financial Inclusion in Liberia as outline in the National Financial Inclusion Strategy (2008-2012). The objective was to build a sustainable microfinance sub-sector integrated in the financial sector to secure diversified and affordable financial services for all.
The primary objective of the five-year strategy was to create viable microfinance providers that facilitated sustained financial access to Liberians who had no access to the formal sectors both un-service and underserviced in rural and semi-urban areas through the delivery of a diverse range of financial services (loans, saving, remittance, micro insurance, etc.) that are client responsive and cost effective. These services were to be provided by different types of well-governed, professional, and sustainable financial institutions at the micro level that would have gradually integrated into the formal financial system through an enabling regulatory and supervision framework of the CBL and other relevant regulatory bodies.
To enhance sustainability, efficiency, outreach and good governance, the micro level financial service providers received assistance from supportive service providers such as the microfinance Network, the University of Liberia, the LISF Project, Liberia Credit Union National Association (LCUNA), and the government.
In accordance with the objectives outlined in the strategy, an Annual Work Plan (AWP) was developed containing four main components. Three of these components addressed financial inclusion at the macro, meso and micro levels. Whilst the fourth component addressed the issue of increase resource mobilization for the sector.
The rational for the promotion of the VSLA methodology is essentially to serve as an initial step in upgrading village level financial activities that women are already engaged into to the formal sector. VSLAs are usually more attractive to participants than Rotating Saving and Credit Associations (ROSCAs) / Susu groups, because they offer interest on savings and provide Micro Insurance and Loans in useful and varying amounts, usually more than the borrower’s saving. This is done in ways that are convenient to the borrower with varying lengths of time. In this way, members’ funds are constantly earning interest and not just sitting idle or being directed towards consumption. The savings, insurance and loan facilities allow the members to meet their small-short terms financial needs for income generating activities, social obligations, and emergencies without having to borrow from a money lender, take an expensive supplier advance, or rely on their relatives. This offers a tremendous boost to social security. Though VSLAs are not as widespread as (ROSCAs) / Susu groups, they are more complex to administer and require a system of record-keeping.
To this end, the Danish Government provided funds to the Government of Liberia in line with the Millennium Development Goals Global call to action. Within the context of this initiative, the joint program entitled “Gender Equality AND women’s Empowerment/GE-WEE” was sign between the Government of Liberia and the Danish Government in February 2009. The aim of the program was to directly contribute to the development of sustainable, innovative financial services to the poor and low-income population and micro, and small enterprises with a special focus on women.
Consequently, 175 women were initially trained in savings mobilization and loan methodology over a one year period in Grand Cape Mount (Bamblala & Madina Districts); Sinoe (Greenville & Gakloh) and Maryland (Pleebo & Harper) counties respectively. Over the last few years, there have been many strategic efforts specifically focused on access to financial services.
SGs/VSLAs are key to providing access to financial services for people living in areas where financial institutions typically ignore and where the cycle of poverty prevails. The poor need financial services for the same reasons as anyone else: to manage risk (e.g. health emergencies, crop failures, etc.), build assets, invest in productive activities, manage cash flows, and smooth incomes. Traditional microfinance institutions and banks have not, for the most part, been able to provide such services because it is too expensive to reach into remote rural areas (although cell phone/ Digital financial services technology is showing promise).
Hence, the goal of the CBL is to link and transition such groups into the formal financial sector to ensure access to innovative financial products and services; thus, deepening financial development and financial inclusion. Having a closer relationship with these institutions has broader strategic significance of the CBL. For instance, given that more than ninety percent of the currency in circulation is outside the formal financial sector, something which has been posing problems for monetary policy implementation and liquidity management, getting these informal saving vehicles to subscribe to special products/offerings of the formal financial sector would bring more of the currency outside banks into the formal financial sector.
In view of the foregoing, the CBL is currently working on various methodologies to link the informal financial groups such as VSLAs into formal financial sector. One key focus area is the introduction and usage of digital solutions to replace the traditional use of “boxes” for saving groups’ monies. The plan is to leverage digital technology to design products that will be appropriate to the various informal groups, mainly targeting women. The use of digital financial services will help to secure their savings, link them to formal financial services providers that could see them as a group with attractive assets and potential client base for business which the CBL intends to facilitate.
The CBL has developed a proposal to rollout this activity and is seeking donor’s support in this area.
Important Documents:
CONTACT: 0555-960-562