Madagascar’s $10 billion GDP is largely driven by extractive industries, agro-industry, banks, transport, livestock and fisheries. 2014 was a decisive year, with a new president elected and a new government installed, ushering in expectations of political stability for the first time since the 2009 coup d’état. Growth in economic and social performance is expected to increase as governance and business climate reforms take effect, alongside buoyant extractive industries, agriculture and tourism.
Madagascar's microfinance sector was established in 1990. It began to experience rapid growth in the past decade, with more than 30 players that reach about a quarter of the population. It is a critical segment of the financial landscape and is seen as a vehicle to help eradicate extreme poverty, particularly as the banking sector only reaches an estimated 3 percent of the nation’s 23 million people. The vast majority of the population lives on about $1 a day, and is dependent on informal moneylenders who impose excessive rates of interest.
In 2005, AKF launched an integrated rural development project in the Sofia region, with the objective of doubling rice yields by training groups of farmers on alternative rice cultivation practices. To support these efforts, the Premiere Agence de Microfinance (PAMF) was established in 2006.
PAMF works closely with AKF to provide financial services in Sofia, operating in both the rural areas and small cities. It has expanded to 13 branches, including outside Sofia. Although the rural region still represents more than half PAMF’s total portfolio, PAMF has diversified in different geographic areas and economic sectors, such as the urban areas of the Analamanga region, and cities such as Majunga in Boeny, where it is focused on small traders and artisans as well as the rural sectors of these urbanized districts. In 2011, PAMF started offering SME loans. Despite the high operational costs, PAMF sees itself as a vehicle to reach the most vulnerable in society who live in isolated areas. As such, restrictions have been lifted on the minimum loan size and areas of operations have been widened to access more clients. As part of its commitment to the country, PAMF has worked with the Grameen Foundation to develop a Progress Out of Poverty (PPI) scorecard for Madagascar, widely used in microfinance to measure poverty outreach, and the first time it has been done for that country.
As well as loans to groups for rice and vegetable production and small equipment, and group savings accounts, PAMF offers loans for warehousing and inventory credit in its own granaries or in borrowers’ own or village granaries. A market survey has been carried out to assess the best strategy and products to offer to the burgeoning SME market. As part of PAMF’s digital financial services strategy, PAMF is working on technical solutions to offer mobile banking, which would be a new delivery channel for the institution.