BOAKAI MURPHY DORLEY The Impact of Microfinance on Poverty Reduction in Montserrado County: A case study of Access Bank Liberia Limited, 2009-2012 O Impacto da Microfinança na Redução da Pobreza em Montserrado County: Um estudo de caso do Access Bank Liberia Limited, 2009-2012 Campinas 2014 i CAMPINAS 2014 iii iv v Candidate’s Declaration I hereby declare that this researches “The Impact of Microfinance on Montserrado County”, A Case Study of Access Bank Liberia Limited is my own work and all materials used have been indicated and acknowledged with complete references. This research has been done independently with the guidance and support of the researcher advisor. vii Acknowledgements Firstly, I am grateful to the Almighty God for His continuous blessings He showers upon me day by day. I would also like to extend my sincere gratitude to my supervisor Prof. Dr. Simone Deos for her useful comments, remarks and engagement throughout the dissertation process. Furthermore, I would like to thank the participants in my survey, who have willingly shared their precious time during the process of interviewing. Finally, I would like to thank all those who were involved directly or indirectly for the accomplishment of this research. ix Resumo Microfinanças constituem a prestação de uma vasta gama de serviços financeiros que incluem depósitos, empréstimos, poupanças, transferências de dinheiro e seguro para as famílias pobres e de baixa renda e seus microempreendimentos. No paradigma do desenvolvimento, as microfinanças têm se mostrado cada vez mais necessárias – estratégia utilizada para atender aos grupos negligenciados da sociedade, especialmente mulheres, pessoas de baixa renda, comunidades rurais e a população carente. O objetivo dessa pesquisa é contribuir para a compreensão do impacto das microfinanças no alívio da pobreza em Montserrado County, usando o Access Bank Liberia Limited para o estudo de caso. Essa pesquisa cobriu o período de 2009 a 2012. Os resultados indicaram que as microfinanças tiveram um impacto positivo no alívio da pobreza dos destituídos de Montserrado County, particularmente liberianos sem acesso às instituições financeiras formais. Os resultados revelaram que as microoperações financeiras do Access Bank Liberia tiveram um impacto positivo na criação de empregos, renda dos clientes e poupanças. Além disso, as evidências sugerem que o acesso à assistência financeira como o crédito para pessoas de baixa renda é capaz de estimular a geração de microempreendimentos que permitem a essa parcela da população sair da armadilha da pobreza. Portanto, microfinanças são uma das mais eficientes intervenções para melhorar as condições econômicas dos destituídos, além de ser um instrumento de proteção social, principalmente para mulheres. Palavras chaves: microfinança – pobreza – Libéria xi Abstract Microfinance is the delivery of a broad range of financial services which includes deposits, loans, payment services, savings, money transfer, and insurance to the poor and low- income households and their micro-enterprises. In the development paradigm, microfinance has evolved as a need –based strategy and program to cater to the neglected groups of society particularly women, poor, rural, deprived population. The objective of this research is to contribute to the understanding of the Microfinance impact on poverty alleviation in Montserrado County, using Access Bank Liberia Limited as a case study. This research covered the period 2009-2012. The researcher’s findings indicated that microfinance has a positive impact on poverty alleviation on the destitute poor of Montserrado County, particularly Liberian who lacks access to formal financial institutions. The findings revealed that Access Bank Liberia microfinance operations have a positive impact on job creation, clients’ income and savings. Moreover, the evidence suggests that if the poor or low income earners are provided access to financial assistance, such as credit, they are capable to start a micro-enterprise that will allow them to break out of the poverty trap. Therefore, microfinance has become one of the most effective interventions for economic empowerment tool for the destitute poor as well as social protection mainly for women. Key words: microfinance – poverty – Liberia xiii List of Tables Table 1: Liberia Economic Sector Contribution to Gross Domestic Products from, 2005-2010 ................................................................................................................................................... 12 Table 2: Comparison of GDP Growth Rate in the Sub-Region of Africa, 2013 ....................... 13 Table 3: Liberia Market Indicator- Absolute Number (Persons Aged 15 and Over) ................ 19 Table 4: Liberia Market Indicators, 2010 .................................................................................. 20 Table 5: Liberia Employed Population aged 15 and above by Sex and Location ..................... 21 Table 6: Census Distribution of Population by Age Group, 2008 ............................................ 22 Table 7: Liberia Demographic Indicators, 2008 ........................................................................ 23 Table 8: Liberia Population Distribution by Age, 2008 ............................................................ 23 Table 9: Poverty in Liberia ........................................................................................................ 26 Table 10: Liberia Poverty Reduction Strategy (PRS) Final Report, 2012 ................................ 28 Table 11: A Worldwide Inventory of Microfinance Institutions and its Growth Patterns ........ 45 Table 12: Microfinance Outreach Indicators by Region ........................................................... 49 Table 13: Africa Microfinance Analysis and Benchmarking Report, 2008 .............................. 51 Table 14: Commercial Banks, Loans by Economic Sectors (2010-Nov, 2012 in Millions US$) ................................................................................................................................................... 56 Table 15:CBL SME Credit Stimulus Placement at Various Commercial Banks, 2012 ............ 63 Table 16: Loan Extension and Availability Facility (LEAF) .................................................... 64 Table 17: Beneficiaries Institutions of LEAF Program ............................................................. 65 Table 18: Sample of Total Respondents Per Economic Sectors "Before 2009 and 2012 After" Obtaining a Loan ....................................................................................................................... 77 Table 19: Access Bank's Respondents' Income Status "Before and After" Obtaining a Loan in terms of Percentage Growth ...................................................................................................... 79 Table 20: Access Bank's Respondents' Income Status "Before and After" Obtaining a Loan in Terms of Percentage Growth ..................................................................................................... 80 Table 21: Access Bank's Respondents' Income Status "Before and After" Obtaining a Loan in Terms of Percentage Growth ..................................................................................................... 81 Table 22: Respondents Saving capacity "Before and After" Obtaining a Loan in Terms of Percentage Growth .................................................................................................................... 81 Table 23: Respondents Saving Capacity "Before and After" Obtaining a Loan ....................... 82 Table 24: Respondents Saving Capacity "Before and After" Obtaining a Loan ....................... 82 Table 25: Analysis of Male and Female Respondents Per Age Group ..................................... 83 xv List of Figures Figure 1: Sectorial Composition of Gross Domestic Product, 2005-2010 ................................ 12 Figure 2: Gross Domestic Product Growth Rate in the Sub-Region, 2013 ............................... 13 Figure 3: Percentage Unemployment by Age Group ................................................................ 21 Figure 4: Liberia Population Growth Trend From, 1962-2008 ................................................. 24 Figure 5: Liberia Poverty Head Count, 2007-2010 ................................................................... 27 Figure 6: Microfinance Growth Trends on Three Continents ................................................... 46 Figure 7: Balance Sheet of the Banking Sector (As at Nov. 2013, in Millions of US$) ........... 55 Figure 8: Kinds of Microfinance Institutions and the Clients based in LibariaFigure 3.2 Kinds of Microfinance Institutions and the Clients Based In Liberia .................................................. 59 Figure 9: CBL Percentage of Total Loan Per Economic Sector, 2012...................................... 63 Figure 10: Organizational Chart of microfinance Lending Group Methodologies ................... 69 Figure 11: Access bank Liberia Limited Shareholder Structures, 2012 .................................... 70 Figure 12: Access Bank Key Financial Indicators Growth Trends, 2009-2012 ........................ 72 Figure 13: Access Bank Liberia Credit Administration Procedures ......................................... 74 xvii Table of Contents Candidate’s Declaration ............................................................................................................ vii Acknowledgements ......................................................................................................................