2012 sub-saharan africa regional snapshot

The Premier Source for Microfinance Data and Analysis

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Microfinance Information Exchange

2012 Sub-Saharan Africa Regional Snapshot

January 2013


2

Table of contents

MFIs distribution across SSA

Outreach

Performance drivers

Funding flows

A look at Regional Economic Communities (REC)

Conclusion


3



Outreach

Performance drivers

Funding flows


Conclusion


4

A look at microfinance in SSA

Number of reporting institutionsShade indicates total number of institutions

0 1-9 10-18 19-40Total Number of institutions: 259

The following report is a deep-dive into the 259 institutions that reported to MIX in the 2011 financial year.

Countries included in this report Bank Coop

. NBFI NGO

CEMAC

Cameroon, Central African Republic, Chad, Republic of Congo

0 4 5 1

EAC Burundi, Kenya, Rwanda, Tanzania and Uganda

8 17 24 10

SADC*

Angola, Democratic Republic of Congo (DRC), Madagascar, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe

6 4 11 14

WAMU

Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal and Togo

0 54 8 19

Other Ghana 0 0 12 6Ethiopia 0 0 3 0Nigeria 38 0 0 2Comoros, Guinea, Liberia, Sierra Leone, South Sudan 1 5 2 2

* Tanzania, member of both EAC and SADC, has been included in the EAC sample for the purpose of this report.

http://www.cemac.int/

http://www.cemac.int/

http://www.eac.int/

http://www.sadc.int/member-states/

http://www.uemoa.int/Pages/Home.aspx

http://www.uemoa.int/Pages/Home.aspx


5

Regional concentration of charter types

Number of reporting institutions


Bank



Cooperative NBFI





NGO

While NBFIs and NGOs are spread relatively evenly in SSA, Banks and Cooperatives are respectively absent in West Africa (except in Nigeria) and southern Africa.

Please note the sliding scale by color across the charter types


6

Outreach


Outreach

Performance drivers

Funding flows


Conclusion


7

Growth trends

Access the graphs’ data

In 2011, in terms of both borrowers and depositors, numbers in SSA recovered slightly from previous losses (10% and 9% growth respectively) due to sustained economic growth across the region despite the global economic slowdown.SSA remains the second largest regional market in terms of number of depositors. If this trends continues, then SSA will be the leader in depositors as of 2012.

2009 2010 20110

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Growth of active borrowers

SSA EAP ECA LAC MENA SA

2009 2010 20110

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

Growth of depositors

SSA EAP ECA LAC MENA SA

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=bNGGunay


8

Depositors dominant in SSA

SSA is the only region globally with depositors far outnumbering borrowers at three to one.

Access the graph’s data

SSA

EAP

ECA

LAC

MENA

SA

0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

Borrowers vs. Depositors (2011 FYE)

Number of active borrowers Number of depositors

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=EkG2CS72




9

SSA: Outreach by charter

A deeper look into SSA shows that depositors are dominant across all charter types except for NGOs which are often not allowed to collect deposits. Banks and Cooperatives are the clear drivers with depositors outnumbering borrowers 6:1 and 5:1, respectively.


Bank Cooperative NBFI NGO0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Borrowers and depositors by charter type (2011 FYE)

Number of active borrowers Number of depositors

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=yyAQk72b




10

Heterogeneity in loan balances across charters

NGOs and NBFIs disburse the lowest average loan amounts indicating that they target more low-income clients than Banks and Cooperatives do.


Bank Cooperative NBFI NGO$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Average loan balance per borrower (2011 FYE)

SSA

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=UGeUqjJj




11

Linked with the depth of outreach

Despite the fact that 73% of Cooperatives reporting SP data consider women as part of their target market, Cooperatives are the only charter with less than half of female borrowers. They are also the least rural-focused with less than one-quarter of clients in rural areas. Two drivers of this are the Ivory Coast and Senegal, who account for over one-third of all Cooperatives’ borrowers in SSA. They are especially urban-oriented with only 18% and 14% rural clients, respectively.


Inversely, NGOs serve the highest percentage of women, and NBFIs have the greatest percentage of rural clients.

Bank Cooperative NBFI NGO0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percent of female and rural borrowers (2011 FYE)

Percent of female borrowers Percent of rural borrowers

http://reports2.mixmarket.org/crossmarket/26452904e53adbb2a2e843540d120f6e




12

Performance drivers


Outreach

Performance drivers

Funding flows


Conclusion


13

Return-on-Assets (ROA) by charter


Across SSA, Banks are the drivers of profitability, but NGOs achieved the strongest ROA growth thanks to a 6 percentage point increase in their financial revenue/assets ratio between 2010 and 2011. During this period, other charters experienced changes of -4 to 0 percentage points.

2009 2010 2011

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

ROA trend

Bank Cooperative NBFI NGO SSA

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=pDjF6R4V


14

Operating costs by charter


Despite having the highest personnel expense/GNI ratio, Banks maintained the lowest personnel expense ratio due to a large asset base. Meanwhile, NGOs, with the second highest personnel expense/GNI ratio, have the highest personnel expense ratio due to a much lower asset base.

Additionally, Banks maintained the lowest operating expense ratio partially because of their high average loan balance. Conversely, NGOs have the lowest average loan balance but the highest operating expenses.

Bank Cooperative NBFI NGO SSA0%

5%

10%

15%

20%

25%

30%

Breakdown of operating expenses by legal status (2011 FYE)

Average of Personnel expense/ assets Average of Depreciation and amortisation expense/assetsAverage of Administrative expense/ assets

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=xqyj86jA




15

A look at scale

Another factor that determines costs is the size of institutions: Large institutions (GLP > USD 8 million), regardless of their legal status, kept operating costs as low as 11%.



Amongst Large institutions, NGOs are the least numerous.Among Small institutions, the majority of the Banks are located in Nigeria.As for Small Cooperatives, over three quarters of them are from WAMU.

Large

Medium

Small

0% 5% 10% 15% 20% 25% 30%

Operating expenses/assets by scale (2011 FYE)

Operating expenses/assets

Large Medium Small0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Breakdown of GLP size by legal status (2011 FYE)

Bank Cooperative NBFI NGOThe data set includes 122 small institutions, 68 medium institutions and 64 large institutions.

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=Dwt3K9Pc

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=RkcQGKES




16

Funding structure by region


Deposits represent a major share of the funding structure of SSA MFIs, second after EAP.

Although SSA has a greater number of depositors than EAP, the average deposit balance per depositor is nine times lower than in EAP.

SSA EAP ECA LAC MENA SA0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Funding structure and financial expense by region (2011 FYE)

Equity Deposits Borrowings Financial expense/ assets

Tota

l Fun

ding

Tota

l Ass

ets

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=iiaGigpi




17

Different determinants for financial expenses


NGOs and NBFIs are the most reliant on external debt

NGOs are not always allowed to collect deposits, they also maintained the highest share of equity due to donated equity (25% of their equity base).

Banks and Cooperatives maintained low amounts of external debt

With deposits accounting for over 70% of their funding structure, Cooperatives have the lowest financial expenses.

Banks have high financial expenses since they bear the highest volume of borrowings in absolute terms as well as the highest cost of borrowings in 2011.

NBFIs have a similar structure to NGOs with a slightly higher focus on deposits.

Bank Cooperative NBFI NGO0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Funding structure and financial expense by charter type (2011 FYE)

Equity Deposits Borrowings Financial expense/ assets

Tota

l Fun

ding

Tota

l Ass

ets

http://www.mixmarket.org/%20profiles-reports/crossmarket-analysis-report?rid=rWmxcot3


18

Funding flows


Outreach

Performance drivers

Funding flows


Conclusion


19

Funding commitment across SSA in 2011

The 10 countries with the highest ROA significantly overlap with the countries that have the highest amounts of committed cross-border funding.

Top 10 ROA countries (with data available for more

than 3 MFIs)

ROA (weighted average)

Funding by

recipient country (Million

USD)Ethiopia 8.17% 161DRC 7.69% 57Nigeria 7.41% 71South Africa 5.61% 6Kenya 4.75% 143Uganda 4.51% 160Tanzania 2.99% 182Ghana 2.09% 128Senegal 1.90% 91Cameroon 1.53% 30

Access the table’s data Graph from the 2012 CGAP Survey on Cross-border Funding for Microfinance

Tanzania, Ethiopia, Uganda, Kenya and Ghana alone account for 30% of commitments.

Amount of cross-border funding (USD)

http://www.mixmarket.org/%20profiles-reports/crossmarket-analysis-report?rid=bDh8ZPxC

http://fr.slideshare.net/CGAP/2012-survey-on-crossborder-funding-for-microfinance



20

Focus on cross-border commitment

The top 10 recipient countries as compared to SSA are attracting significant shares of debt and guarantees (over 60%), but equity is mostly going to other countries.

Dec09 Dec10 Dec11$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Trends by instrument

Debt Grant Guarantee Equity Unspecified

Mill

ion

s

Cross-border commitments in SSA are increasing: while grants and debts dominate, equity is on the rise.

Data from the 2012 CGAP Survey on Cross-border Funding for Microfinance

Mill

ion

s

Debt Grant Guarantee Equity Other$0

$200

$400

$600

$800

$1,000

$1,200

Top 10 recipients, breakdowns by instrument (As of Dec. 2011)

Top10 All SSA



21

Commitment designation

Over one-third of the funding commitments to SSA are for “capacity building” purposes, whereas globally “capacity building” only amounts to 16% of commitments.As a young microfinance market, SSA still has a significant need for capacity building.

Dec07 Dec09 Dec11$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Trends by Funding Purpose

Capacity Building Refinancing Unspecified

Mill

ion

s

Data from the 2012 CGAP Survey on Cross-border Funding for Microfinance



22

Local funding

Over one-third of the funding for SSA is provided by funders within the region, which charge higher interest rates than foreign funders do.


$100,000,000$200,000,000$300,000,000$400,000,000$500,000,000$600,000,000$700,000,000$800,000,000$900,000,000

Types of local lender by legal status (2011 FYE)

DFI Financial Institution FundGovernment Other

DFI Financial Institution Fund Government Other0

20

40

60

80

100

120

0%

2%

4%

6%

8%

10%

12%

Maturity and rate by local lenders (2011 FYE)

Average term (months) Average interest rate

Mon

ths

Amount lent by funder region (2011 FYE)

SSA Others

Data from the 2012 MIX Funding Structure Database – Funding structure database covers 59 institutions of SSA, hence the discrepancy from earlier described borrowings.

NBFIs receive the majority of local funding in SSA, predominantly coming from financial institutions, which carry the highest interest rate (11%) of all local lenders. Over the period 2008-2011, over 80% of NBFIs’ local funding went to Ethiopia and Kenya (38% and 45% respectively).


23

Foreign funding

DFI Financial Institution Fund Government Other0

102030405060708090

100

0%1%2%3%4%5%6%7%8%9%10%

Maturity and rate by foreign lender (2011 FYE)

Average term (months) Average interest rateM

onth

s


$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

Types of foreign lender by legal status (2011 FYE)

DFI Financial Institution FundGovernment Other

Among all charter types, banks are the ones attracting the largest amount of foreign funding (40%).

Among foreign funders, Funds and DFIs are the most active in SSA, accounting for 54% and 28% of all foreign funding respectively. They also carry the highest interest rates.However, foreign lenders overall provide cheaper funding than local lenders at an average rate of 9% per annum vs.10% for local lenders.

Data from the 2012 MIX Funding Structure Database – Funding structure database covers 59 institutions of SSA, hence the discrepancy from earlier described borrowings.


24



Outreach

Performance drivers

Funding flows


Conclusion


25

Zoom at regional economic community level

Cooperatives, fostered by the PARMEC law, dominate the sector in WAMU.Expectations for landscape diversification grew with the new microfinance law and NBFIs are starting to emerge.

For-profit institutions (NBFIs and Banks) are shaping the landscape in the East African Community (EAC), accounting for over half of all reporting institutions.

MFIs distribution in WAMU (Dec. 2011)*

Cooperative Bank NBFI NGO

MFIs distribution in EAC (Dec. 2011)*

Cooperative Bank NBFI NGO

Access the charts’ data

*The charter type distribution is based on the count of MFIs reporting to MIX in 2011, by charter type

http://reports2.mixmarket.org/crossmarket/26452904e53adbb2a2e843540d119dd3




26

Current status of new microfinance law adoption in WAMU

PARMEC law

Adopted in 1993 by the Council of Ministers of WAMU, the PARMEC law established the conditions governing the exercise of mutual or cooperative savings and credit institutions in the community.In 1996, a framework agreement was adopted to guide registration for non-mutualist MFIs excluded from the law.

New law

The new law (the Regulatory law of Decentralized Financial System) was adopted in 2007 by the Council of Ministers and replaces the PARMEC law. Primarily, it implements a single licensing scheme for all charter types.At the national level, each WAMU member country is obligated to pass the law.

SenegalLaw n°

2008-47 adopted in 2008

TogoLaw n°

2011-009 adopted in 2011

Bissau GuineaLaw

n°9/2008 adopted in 2008

Ivory CoastLaw

n°2011-367

adopted in 2011

NigerLaw n°

2010-04 adopted in 2010

BeninLaw n°

2012-14 adopted in 2012

MaliLaw n°10-

013 adopted in 2010

Burkina FasoLaw

n°023-2009/AN

adopted in 2009

http://www.bceao.int/IMG/pdf/recueil-des-textes-legaux-et-reglementaires-regissant-les-sfd-de-lumoa.pdf

http://www.bceao.int/IMG/pdf/recueil-des-textes-legaux-et-reglementaires-regissant-les-sfd-de-lumoa.pdf


27

Returns by REC

Access the graphs’ data

WAMU EAC CEMAC

SADC SSABy 2011, EAC was the only REC to maintain a positive ROA.While SADC is on the rebound, WAMU and CEMAC each had declining ROAs in 2011.Without Namibia, SADC’s ROA would be positive in 2009 and 2010, and -1% in 2011.

WAMU achieved the lowest financial revenue possible due to the low level of interest rates MFIs can charge (a price cap, aka the TEG, is set at 27% for all MFIs).

WAMU EAC CEMAC SADC SSA0%5%

10%15%20%25%30%35%40%45%50%

Expenses and Revenues (2011 FYE)

Total expense/ assets Financial revenue/ assetsAverage of Yield on gross portfolio (nominal)

'09 '10 '11 '09 '10 '11 '09 '10 '11 '09 '10 '11 '09 '10 '11-20%

-15%

-10%

-5%

0%

5%

10%

Returns on assets (2011 FYE)

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=5VMTwKEF


28

Zoom on Ghana, Ethiopia and Nigeria

Due to the June 30 FYE in Ethiopia, annual figures have not yet been captured for that market. Please refer to MIX’s Ethiopia country page for a more comprehensive view on that market as of March 31, 2011.

Remainder of SSA64%

Nigeria17%

Ghana5%

Ethiopia14%

Total borrowers (2011 FYE)

Ghana Ethiopia Nigeria0%

10%

20%

30%

40%

50%

60%

Expenses and revenues (2011 FYE)

Total expense/ assets Financial revenue/ assets

Average of Yield on gross portfolio (nominal)

Ghana, Ethiopia and Nigeria, not captured in the analysis by REC, together account for over a third of SSA’s total borrowers.

All three countries achieved an increase in ROA in 2011 after a decrease in 2010.

'09 '10 '11 '09 '10 '11 '09 '10 '110%

2%

4%

6%

8%

10%

12%

Return on assets (2011 FYE)

Ghana Ethiopia Nigeria

http://www.mixmarket.org/mfi/country/Ethiopia


29

Is risk decreasing in SSA?

2009 2010 20110%

2%

4%

6%

8%

10%

12%

Risk trends in SSA (2011 FYE)

Portfolio at risk > 30 days Write-off ratio


There has been a substantial decrease in PAR>30 over 2011 thanks to efforts in WAMU and EAC. In EAC, Kenya and Burundi particularly shaped this trend: PAR 30 decreased in each country by 12 percentage points.

http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=ViQymgvS




30

Risk level by REC

High risk in SADC is mainly driven by Malawi, Zambia and Mozambique.EAC is the only regional economic community maintaining a PAR>30 below 5%.

Ivory Coast is a driver of high risk for WAMU. The share of the portfolio written off in 2011 reflects the impact of the 2010 disputed elections and ensuing political crisis.


Ivory Coast 2009 Ivory Coast 2010 Ivory Coast 20110%

5%

10%

15%

20%

25%

30%

35%

Risk in Ivory Coast


WAMU EAC CEMAC SADC SSA0%

2%

4%

6%

8%

10%

12%

Risk by REC (2011 FYE)


http://www.mixmarket.org/profiles-reports/crossmarket-analysis-report?rid=S7ZTi9WH




31

Conclusion


Outreach

Performance drivers

Funding flows


Conclusion


32

Conclusion

Despite localized high risk levels, overall risk is decreasing in SSA.

Each charter type is clearly shaping the landscape where it is most prevalent.

Foreign funding remains prevalent and represents the most attractive funding conditions in SSA.

SSA’s positive ROA trends are led by East Africa.


33

Data sources

Performance of microfinance

providersMIX Market

Funding structure MIX Market Funding Structure Data

Cross-border funding CGAP Cross-Border Funding Survey

SSA Financial inclusion map MIX: Mapping Africa Financial Inclusion

WAMU status of microfinance law

adoptionBanque Centrale des Etats de l’Afrique de l’Ouest

http://www.mixmarket.org/mfi/region/Africa

http://www.mixmarket.org/mfi/region/Africa

http://www.mixmarket.org/profiles-reports/funding-structure-report

http://www.mixmarket.org/profiles-reports/funding-structure-report

http://www.cgap.org/publications/current-trends-cross-border-funding-microfinance

http://maps.mixmarket.org/africa/

http://www.bceao.int/IMG/pdf/2012_-_etat_d_adoption_de_la_loi_portant_reglementation_des_sfd.pdf

http://www.bceao.int/IMG/pdf/2012_-_etat_d_adoption_de_la_loi_portant_reglementation_des_sfd.pdf


34

Acronyms

CEMAC Communauté Economique et Monétaire de l'Afrique Centrale: Cameroon, Republic of Congo, Equatorial Guinea, Gabon, Central African Republic, Chad.

ECA Eastern Europe and Central Asia

EAC East African Community: Burundi, Kenya, Rwanda, Tanzania and Uganda.

EAP East Asia and the Pacific

DFI Development finance institution

LAC Latin America and the Caribbean

Large Gross Loan Portfolio > 8 million USD

Medium Gross Loan Portfolio between 2 and 8 million USD

MENA Middle East and North Africa

NA North America

PARMEC Projet d'Appui à la Réglementation des Mutuelles d'Epargne et de Crédit

REC Regional Economic Community

SA South Asia

SADCSouthern African Development Community: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

Small Gross Loan Portfolio < 2 million USD

SSA Sub-Saharan Africa

WAMU West African Monetary Union: Benin, Burkina Faso, Bissau Guinea, Ivory Coast, Mali, Niger, Senegal and Togo.

WE Western Europe


35

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2012 sub-saharan africa regional snapshot

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