Microfinance Assessment Consultancy to Darfur, Sudan
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MICROFINANCE ASSESSMENT CONSULTANCY TO DARFUR, SUDAN FEBRUARY ‐ MARCH 2010 FINAL REPORT COMMISSIONED BY THE FEINSTEIN INTERNATIONAL CENTER OF TUFTS UNIVERSITY, IOM AND UNDP SUDAN PREPARED BY: ABDELMAJID KHOJALI AND LENE M.P. HANSEN SUBMITTED: 01 JUNE 2010 Table of Contents 1. EXECUTIVE SUMMARY.........................................................................................................................4 2. BACKGROUND AND INTRODUCTION...............................................................................................8 3. APPROACH AND METHODOLOGY ....................................................................................................9 4. THE SETTING FOR ACCESS TO FINANCE IN DARFUR ..............................................................11 4.1 THE FINANCIAL SYSTEM IN SUDAN....................................................................................................11 4.2 MICROFINANCE IN SUDAN..................................................................................................................14 4.2.1 The Policy, Legal and Regulatory Framework for Microfinance.................................................14 4.2.2 The Support infrastructure for Microfinance ...............................................................................17 4.2.3 Microfinance in Conflict Environments........................................................................................20 4.3 THE CONFLICT CONTEXT OF DARFUR ................................................................................................26 4.3.1 The Early History of Darfur ........................................................................................................26 4.3.2 Key Causes of the Current Conflict .........................................................................................26 4.3.3 Key Impacts of the Conflict..........................................................................................................29 4.4. THE MARKET ENVIRONMENT IN DARFUR ..........................................................................................30 4.4.1 Powering the Markets...................................................................................................................34 5. THE DEMAND MARKET IN DARFUR...............................................................................................36 5.1 MARKET CHARACTERISTICS – WHO ARE THE CUSTOMERS? ..............................................................37 5.2 AN ATTEMPT AT MARKET QUANTIFICATION – HOW BIG IS THE MARKET? ........................................40 5.3 DEMAND SPECIFICATIONS - WHAT DO CUSTOMERS WANT?...............................................................41 6. THE SUPPLY OF MICROFINANCE IN DARFUR .................................................................................44 6.1 THE STRUCTURE OF THE SUPPLY MARKET IN DARFUR...............................................................................44 6.2 THE BANKS – RELUCTANT MICROFINANCE PROVIDERS .............................................................................45 6.3 NON-BANK FORMAL AND SEMI-FORMAL SERVICE PROVIDERS..........................................................51 6.3.1 Foreign Exchange (FOREX) Bureaus – serving UN .........................................................................51 6.3.2 Insurance Companies – Beginning to downscale .........................................................................52 6.3.3. The Public Corporation for Post and Telegraph..........................................................................54 6.3.4 Non-Governmental Organisations - Promising Facilitators ........................................................54 6.4 INFORMAL MICROFINANCE SERVICES PROVIDERS – FILLING THE GAP...............................................58 6.4.1 Credit Provision ...........................................................................................................................58 6.4.2 Cash Transfers and Remittances ..................................................................................................61 7. MAIN MICROFINANCE CONSTRAINTS IN DARFUR ...................................................................63 7.1 EXTERNAL CONSTRAINTS: DEVELOPMENT RESOURCES & CAPACITY................................................64 7.1.1 Public Infrastructure and Services ...............................................................................................64 7.1.2 Capacity for Development ............................................................................................................66 7.1.3 Fragile Ecology ............................................................................................................................67 7.2 RETAIL LEVEL CONSTRAINTS: CAPACITY TO MANAGE RESOURCES ..................................................69 7.2.1 Lots of Cash – Limited Capacity...................................................................................................69 7.2.2 No Financial Intermediaries.........................................................................................................70 7.2.3 Micro-Business Market Development...........................................................................................71 8. OPPORTUNITIES FOR THE FUTURE - RECOMMENDATIONS .......................................................72 8.1. IMPROVEMENT OF EXISTING SERVICES ..............................................................................................72 8.1.1 Branch-based Micro Banking.......................................................................................................73 8.1.2 Replicating Partnerships ..............................................................................................................75 8.1.3. Outsourcing – Establishing a Specialised MFI ............................................................................76 8.2. MODERNISING DELIVERY SYSTEMS ...................................................................................................76 8.2.1 Agents with (E)POS terminals ......................................................................................................77 8.2.2 Agents with Mobile systems..........................................................................................................78 8.2.3 Adding Insurance..........................................................................................................................79 8.2.4 E-Info – Non- Cash Market Development ....................................................................................80 8.3 FINANCIAL SERVICES IN SUPPORT OF NATURAL RESOURCE MANAGEMENT ......................................81 8.3.1. Corporate Social Responsibility - Setting examples that pay off..................................................82 8.3.2 Financing Change – Providing the Incentive ...............................................................................83 2 Annexes 1. Darfur - A Brief Historic Background 2. Terminology and Definitions – Islamic and conventional finance 3. Indicative Market Quantification – the calculations 4. Provisional Map of Outreach by Financial Service Providers 5. Environmental Appraisal format and Micro-carbon Credits 6. Example of Fund to support Alternative Energy use 7. Draft Project Document – UNDP format (To come) 8. Scope of Work for the Assignment 9. Work schedule and List of Persons Met Acronyms and Abbreviations ABS Agricultural Bank of Sudan MF Microfinance AML Anti-Money Laundering MFI Microfinance Institution ARB Animal Resources Bank MFP Microfinance Provider ASCA Accumulating Savings and Credit Assoc MFU Microfinance Unit (of CBOS) ATM Automated Teller Machine MIS Management Information System BDS Business Development Services MoFNE Min. of Finance & National Economy BOP Bottom of the (economic) Pyramid MoSW Ministry of Social Welfare CAR Capital Adequacy Ratio MS(M)E Micro- and Small (& Medium) Enterprise CBO Community-based Organisation NCP National Congress Party CBOS Central Bank of Sudan NHI National Health Insurance CIT Cash in Transit PA Practical Action (INGO) CPA Comprehensive Peace Agreement PaR Portfolio at Risk ratio CIS Credit Information System RI Relief International CSO Civil Society Organisation ROSCA Rotating Savings & Credit Association DPA Darfur Peace Agreement SACCO Savings & Credit Cooperative EC/EU European Commission/Union SCA Savings and Credit Association EPOS Electronic Point of Sale SDF Social Development Foundation FAO Food and Agriculture Organisation SDG The ‘second Pound’ currency of Sudan FDI Foreign Direct Investment since July 2007. One ‘second’ pound = GDP Gross Domestic Product 1000 ‘first pounds’ (SDP) and = 100 GoNU Government of National Unity Dinars (SDD) GoSS Government of Southern Sudan SMDF Sudan Microfinance Development GNI Gross National Income Facility HAC Humanitarian Aid Commission SME Small and Medium sized Enterprise(s) HH Household SO(C)B State-Owned (Commercial) Bank HRD Human Resource Development SSDB Savings and Social Development Bank ICT Information & Communication Technology TA Technical Assistance ICDB Islamic Cooperative Development Bank TOR Terms of Reference IDP Internally Displaced Person UN United Nations IFAD International Fund for Agricultural Dev’t UNAMID United Nations and African Union IGA Income Generating Activity Mission in Darfur ILO International Labour Organisation UNCDF UN Capital Development Fund I/NGO International/Non-Governmental Organisation UNDP UN Development