Aga Khan Agency for Microfinance

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Microfinance in West Africa

AKAM has been expanding steadily in West Africa since the first of an integrated network of microfinance institutions was set up in 2006. Taking advantage of the common legal framework shared between eight West African nations, AKAM established MFIs in Mali and Burkina Faso using a common management team and framework with separate branch networks in each country. It was decided to extend this approach to include Côte d’Ivoire in late 2007 and to establish a joint financial vehicle through which investments in the three countries could be made. This coordinated approach has enabled AKAM to benefit from economies of scale, to operate more efficiently and to serve the natural economic and trade zone that overlaps all three countries.

The MFIs in each country offer credit for cereal commercialisation, the purchase of agricultural equipment, rice production, horticulture, animal fattening and alternatives to cotton growing. AKAM works largely in underserved rural areas where relatively little microfinance is offered, but is increasing its lending services in urban settings across the region. The increasingly diversified portfolio insulates the institutions from serious shocks caused by relatively frequent crop failures in the region due to floods, draught or cyclical locust swarms.

In Burkina Faso, the Première Agence de Microfinance (PAMF-BF) works closely with several AKFED sister companies. It provides credit for fertilizer and seed to the small-holder farmers who supply agro-processor Faso Coton with raw cotton and it provides loans to the employees of sugar producer SN Sosuco for school fees and off-season entrepreneurial activities. This cooperation is a key example of the synergies that are characteristic of AKDN operations in a number of countries. In areas where many jobs are seasonal, including Burkina Faso’s cotton-growing areas, a special focus of loan activity is the development of alternative sources of income to offset the lack of income between harvests. This may include loans for small trading shops, horticulture and home gardening and animal fattening. In rural areas, PAMF-BF uses group lending methodologies with group sizes of 20 to 40 persons in each. In 2007 the portfolio grew by over 330% to almost 14,000 clients with US$ 1.9 million in loans. With the start of deposit mobilisation, the number of savings clients increased from 800 to 2,700 by year end, though values remained low at just US$ 105,000, reflecting the low level of assets in the country.

The Première Agence de Microfi nance in Mali (PAMF-M) provides loans to both groups and individuals to address specific financial needs such as rural credit, financing of service activities and working capital for commercial activities, among others. PAMF-M also provides savings services as well as loans for housing improvement, education, and health. It is currently targeting both urban and rural populations in Mopti, Sévaré and Djenna and is coordinating its efforts with AKF’s rural support programmes in the area to enhance the impact on the agricultural productivity and quality of life of local residents. PAMF-M also supports small shopkeepers and artisans who live in and around the Great Mosque of Mopti, which was recently restored by AKTC. At the end of 2007, PAMF-M had 2,400 clients and a loan portfolio worth nearly US$ 900,000. Growth in the number of branches was in part a result of decentralised loan officers operating from new rural offices. In 2008 and 2009, PAMFM will begin to offer community loans for water and sanitation initiatives, solar panels and other small infrastructure projects.

In 2008, the Première Agence de Microfinance in Côte d’Ivoire (PAMF-CI) will start operations in the northern region which will focus on creating alternative income-generating activities, including ways to improve agricultural production, the purchase of livestock and the creation of small enterprises in urban and rural areas. As in Burkina, PAMF-CI will begin by serving the large number of smallscale farmers who are supplying Ivoire Coton, another AKFED company. Typical loans will range from US$ 300-500 dollars on six month terms. Provision of savings services and the development of microinsurance products and loans for housing, education and health are also top priorities for PAMF-CI as it enters the country. Conservative projections are for PAMF-CI to serve nearly 8,000 clients by the end of 2009.

AKAM’s key innovation as it moves forward in West Africa is the establishment of a regional financial vehicle that is designed to streamline the flow of investments and debt financing that will support the projected rapid growth of all three institutions. The financial vehicle is a purely pass-through holding company into which AKAM and its key partners will place their equity and debt. The holding company will then maintain a majority share of each individual institution, and debt funding can be transferred between the different institutions as needed to support portfolio growth. AKAM expects to be able to borrow in international, regional and local markets as there is liquidity available in some West African financial sectors.