By George D. Kennedy, Liberian Observer
The Microfinance Unit of the Central Bank of Liberia has clarified that the L$200 million Loan Extension Assistance Facility (LEAF) scheme launched recently by the CBL will not be implemented by any commercial bank.
According to Mr. Kolli S. Tamba, 11, head of CBL’s Microfinance Unit and senior Advisor-Multilateral Relations and Special Projects, the LEAF project will be implemented by the government of Liberia’s Investment Committee headed by the Central Bank of Liberia.
He named the CBL, the ministries of Finance, Planning &Economic Affairs, Gender &Development, United Nations Development Program (UNDP), and United Nations Capital Development Fund (UNCDF) as member institutions of the Investment Committee.
According to Mr. Tamba, the Committee is responsible to receive business plans from interested institutions (not individuals) applying for loans, vet said plans, and do background investigation of the associations or unions before approving the proposals.
“When we approve a proposal, we will not make 100% disbursement. What we will do is make the first disbursement and see how the applicant is going to manage it before disbursing the second and third,” noted Mr. Tamba.
The CBL Microfinance boss indicated that the LEAF scheme is targeting mainly three informal sector institutions for women namely: microfinance, credit unions, and village savings as well as loans associations based mainly in non-banked rural communities in the country.
“Disbursement of loans,” he said will be made to individuals by the institutions that will be approved.”
The clarification by Mr. Tamba lay to rest speculation in media circle suggesting that the LEAF program would be implemented by Afriland First Bank Liberia.
It may be recalled that on Wednesday, January 11, 2012, the CBL initiated this scheme in the country at a concessional interest rate of 3% for a period of three (3) years.
Tamba pointed out that the CBL did not put cap on the interest rate that would be charged by rural women’s savings and credit unions because of the risks and the high cost associated with implementing such program, for the most part, projects in rural communities.
“To run microfinance is more challenging than normal banking because of the high cost of monitoring and risks due to the fact that the associations and credit unions in the rural areas deal with large number of people,” he said.
Tamba observed that putting cap on interest rate would have restricted the program to Monrovia instead of the targeted rural areas.
He told our business reporter in an exclusive interview in Monrovia yesterday that no commercial bank including Liberia’s lone microfinance bank, Accessbank, is qualify to borrow from the L$200 million scheme.
Tamba however, indicated that banks may stand in as collaterals for benefiting loans institutions and groups that decide to apply.
“Village savings loans associations and unions will stand a better chance if a financial institution (commercial bank) offers collateral in its behalf.”
Mr. Tamba also clarified that there are only two programs that CBL has delegated to Afriland First Bank to implement.
They include the Mutuelle Financiere des Femmes Africaines (MUFFA), and the Means and Competence (MC2).
These two projects are not part of the L$200 million facility launched by the CBL.
Mr. Tamba disclosed that about US$50,000 is needed for the launch of the MUFFA initiative.
According to him, initial financing of the pending MUFFA and MC2 programs will be done by CBL and Afriland Bank.
The MUFFA is microfinance institution aimed at providing financial services and products adapted to low income women or to women of the informal sector in urban areas.
The principal missions of the MUFFA are: to combat poverty by improving the living condition of women; to combat unemployment of women; to develop women activities; and to support the women in business initiatives.
The need for promoting MUFFA arises from observations that there is numerical superiority of women in the majority of the populations of countries in Sub-Saharan Africa, the important role of women in the family unit, and the women are the pillar in the family and principal provider of basic needs.
The second component of this program is the MC2, micro banks created and managed by members of the community with respect to their social-cultural values and with technical assistance of an existing bank.
According to Mr. Tamba, Afriland First Bank will play the role of providing technical assistance/support such as clearing, and training to rural community women and men to create their own micro banks and manage those banks on their own.
“Women will have shares in those banks and they will manage it by themselves,” noted Mr. Tamba.
According to him, Afriland First Bank has demonstrated experience in providing these kinds of services taking clues from the Bank’s group performance in Cameroon and other countries.
“The bank that will implement the MUFFA and MC2 projects in Liberia will be the Afriland Bank. The MC2 has a mission to provide rural populations with a tool that favors the development of the individual and the entire non-bank rural community,” he said.