2012 Sub-Saharan Africa Regional Snapshot

Microfinance Information Exchange

2012 Sub-Saharan Africa
Regional Snapshot
January 2013

The Premier Source for Microfinance
Data and Analysis

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Table of contents

MFIs distribution across SSA

Outreach

Performance drivers

Funding flows

A look at Regional Economic Communities (REC)

Conclusion

2



Outreach

Performance drivers

Funding flows


Conclusion

3

A look at microfinance in SSA

The following report is a deep-dive into the 259 Countries included in
institutions that reported to MIX in the 2011 financial Bank Coop. NBFI NGO
this report
year.
CEMAC Cameroon,
Central African
0 4 5 1
Republic, Chad,
Republic of Congo
EAC Burundi, Kenya,
Rwanda, Tanzania and 8 17 24 10
Uganda
SADC* Angola, Democratic
Republic of Congo
(DRC), Madagascar,
Malawi, Mozambique, 6 4 11 14
Namibia, South Africa,
Swaziland, Zambia and
Zimbabwe
WAMU Benin, Burkina Faso,
Ivory Coast, Mali, Niger, 0 54 8 19
Senegal and Togo
Other Ghana 0 0 12 6
Ethiopia 0 0 3 0
Nigeria 38 0 0 2
Number of reporting institutions Comoros, Guinea,
Shade indicates total number of institutions Liberia, Sierra Leone, 1 5 2 2
South Sudan
0 1-9 10-18 19-40

Total Number of institutions: 259 * Tanzania, member of both EAC and SADC, has been included in the EAC sample for the purpose of this report. 4

Regional concentration of charter types

Bank Cooperative NBFI NGO

Number of reporting institutions Number of reporting institutions Number of reporting institutions Number of reporting institutions

0 1-9 10-18 19-40 0 1-5 6-10 11-15 0 1-4 5-9 10-14 0 1-2 3-4 5-7

Total Number of institutions: 53 Total Number of institutions: 84 Total Number of institutions: 64 Total Number of institutions: 54

Please note the sliding scale by color across the charter types

While NBFIs and NGOs are spread relatively evenly in SSA, Banks and Cooperatives are respectively
absent in West Africa (except in Nigeria) and southern Africa.

5

Outreach


Outreach

Performance drivers

Funding flows


Conclusion

6

Growth trends

Growth of active borrowers Growth of depositors
60 40
Millions

Millions
35
50
30
40
25

30 20

15
20
10
10
5

0 0
2009 2010 2011 2009 2010 2011

SSA EAP ECA LAC MENA SA SSA EAP ECA LAC MENA SA

Access the graphs’ data

In 2011, in terms of both borrowers and depositors, numbers in SSA recovered slightly from previous
losses (10% and 9% growth respectively) due to sustained economic growth across the region despite the
global economic slowdown.
SSA remains the second largest regional market in terms of number of depositors. If this trends
continues, then SSA will be the leader in depositors as of 2012.

7

Depositors dominant in SSA

Borrowers vs. Depositors (2011 FYE)

SA

MENA

LAC

ECA

EAP

SSA

0 10 20 30 40 50 60 70
Millions

Number of active borrowers Number of depositors
Access the graph’s data

SSA is the only region globally with depositors far outnumbering borrowers at three to one.

8

SSA: Outreach by charter

A deeper look into SSA shows that depositors are dominant across all charter types except for NGOs which
are often not allowed to collect deposits.
Banks and Cooperatives are the clear drivers with depositors outnumbering borrowers 6:1 and
5:1, respectively.
Borrowers and depositors by charter type (2011 FYE)
8
Millions

7

6

5

4

3

2

1

0

Number of active borrowers Number of depositors

Access the graph’s data 9

Heterogeneity in loan balances across charters

Average loan balance per borrower (2011 FYE)
$1,400

$1,200

$1,000

$800

$600

$400

$200

$0

SSA


NGOs and NBFIs disburse the lowest average loan amounts indicating that they target more low-income
clients than Banks and Cooperatives do.

10

Linked with the depth of outreach

Despite the fact that 73% of Cooperatives reporting SP data consider women as part of their target
market, Cooperatives are the only charter with less than half of female borrowers. They are also the least rural-
focused with less than one-quarter of clients in rural areas.
Two drivers of this are the Ivory Coast and Senegal, who account for over one-third of all Cooperatives’ borrowers
in SSA. They are especially urban-oriented with only 18% and 14% rural clients, respectively.

Percent of female and rural borrowers (2011 FYE)
90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Percent of female borrowers Percent of rural borrowers

Inversely, NGOs serve the highest percentage of women, and NBFIs have the greatest percentage of rural clients.
11

Performance drivers


Outreach

Performance drivers

Funding flows


Conclusion

12

Return-on-Assets (ROA) by charter

ROA trend
6%

5%

4%

3%

2%

1%

0%
2009 2010 2011
-1%

-2%

Bank Cooperative NBFI NGO SSA


Across SSA, Banks are the drivers of profitability, but NGOs achieved the strongest ROA growth thanks to
a 6 percentage point increase in their financial revenue/assets ratio between 2010 and 2011. During
this period, other charters experienced changes of -4 to 0 percentage points.
13

Operating costs by charter

Despite having the highest personnel expense/GNI ratio, Banks maintained the lowest personnel expense ratio
due to a large asset base. Meanwhile, NGOs, with the second highest personnel expense/GNI ratio, have the
highest personnel expense ratio due to a much lower asset base.

Breakdown of operating expenses by legal status (2011 FYE)
30%

25%

20%

15%

10%

5%

0%
Bank Cooperative NBFI NGO SSA

Average of Personnel expense/ assets Average of Depreciation and amortisation expense/assets
Average of Administrative expense/ assets

Additionally, Banks maintained the lowest operating expense ratio partially because of their high average loan
balance. Conversely, NGOs have the lowest average loan balance but the highest operating expenses.
14

A look at scale

Operating expenses/assets by scale (2011 FYE) Another factor that determines costs is the size of
institutions:
Small Large institutions (GLP > USD 8 million), regardless of
their legal status, kept operating costs as low as 11%.
Medium

Large

0% 5% 10% 15% 20% 25% 30%
Breakdown of GLP size by legal status (2011 FYE)
Operating expenses/assets
100%
90%
80%
Amongst Large institutions, NGOs 70%
are the least numerous. 60%
Among Small institutions, the 50%
majority of the Banks are located 40%
in Nigeria. 30%
20%
As for Small Cooperatives, over 10%
three quarters of them are from 0%
WAMU. Large Medium Small

The data set includes 122 small institutions, 68 medium institutions and 64 large institutions.
15

Funding structure by region

Deposits represent a major share of the funding structure of SSA MFIs, second after EAP.

Funding structure and financial expense by region (2011 FYE)
100% 10%

90% 9%
Total Funding

Total Assets
80% 8%

70% 7%

60% 6%

50% 5%

40% 4%

30% 3%

20% 2%

10% 1%

0% 0%
SSA EAP ECA LAC MENA SA

Equity Deposits Borrowings Financial expense/ assets

Although SSA has a greater number of depositors than EAP, the average deposit balance per
depositor is nine times lower than in EAP.
16

Different determinants for financial expenses

NGOs and NBFIs are the most reliant on
external debt
Funding structure and financial expense by charter
type (2011 FYE)
NGOs are not always
100% 10% NBFIs have a
allowed to collect
similar structure
90% 9% deposits, they also
to NGOs with a
Total Funding

maintained the highest

Total Assets
80% 8% slightly higher
share of equity due to
focus on deposits.
70% 7% donated equity (25% of
their equity base).
60% 6%

50% 5%
Banks and Cooperatives maintained low
40% 4%
amounts of external debt
30% 3%

20% 2%
Banks have high
With deposits
10% 1% financial expenses since
accounting for over
they bear the highest
0% 0% 70% of their funding
volume of borrowings in
Bank Cooperative NBFI NGO structure, Cooperati
absolute terms as well
ves have the lowest
Equity Deposits Borrowings Financial expense/ assets as the highest cost of
financial expenses.
borrowings in 2011.

17

Funding flows


Outreach

Performance drivers

Funding flows


Conclusion

18

Funding commitment across SSA in 2011

The 10 countries with the highest ROA significantly overlap with the countries that have the highest
amounts of committed cross-border funding.

Top 10 ROA countries ROA Funding by Amount of cross-border funding (USD)
(with data available for more than 3 (weighted recipient
MFIs) average) country
(Million USD)
Ethiopia 8.17% 161
DRC 7.69% 57
Nigeria 7.41% 71
South Africa 5.61% 6
Kenya 4.75% 143
Uganda 4.51% 160
Tanzania 2.99% 182
Ghana 2.09% 128
Senegal 1.90% 91
Cameroon 1.53% 30 Tanzania, Ethiopia, Uganda, Kenya and
Ghana alone account for 30% of
commitments.
Access the table’s data
Graph from the 2012 CGAP Survey on Cross-border Funding for Microfinance 19

Focus on cross-border commitment

Cross-border commitments in SSA are increasing: while grants and debts dominate, equity is on the rise.

Top 10 recipients,
Trends by instrument breakdowns by instrument (As of Dec. 2011)
$3,000 $1,200
Millions

$2,500 $1,000

Millions
$2,000 $800

$1,500 $600

$1,000 $400

$500 $200

$0 $0
Dec09 Dec10 Dec11 Debt Grant Guarantee Equity Other

Debt Grant Guarantee Equity Unspecified Top10 All SSA

The top 10 recipient countries as compared to SSA are attracting significant shares of debt and
guarantees (over 60%), but equity is mostly going to other countries.

Data from the 2012 CGAP Survey on Cross-border Funding for Microfinance 20

Commitment designation

Trends by Funding Purpose
$3,000
Millions

$2,500

$2,000

$1,500

$1,000

$500

$0
Dec07 Dec09 Dec11

Capacity Building Refinancing Unspecified

Over one-third of the funding commitments to SSA are for “capacity building” purposes, whereas
globally “capacity building” only amounts to 16% of commitments.
As a young microfinance market, SSA still has a significant need for capacity building.

Data from the 2012 CGAP Survey on Cross-border Funding for Microfinance 21

Local funding
Amount lent by funder region (2011 FYE)

Over one-third of the funding for SSA is provided by
funders within the region, which charge higher
interest rates than foreign funders do.

SSA Others

Types of local lender by legal status (2011 FYE) Maturity and rate by local lenders (2011 FYE)
120 12%

Months
$1,000
Millions

100 10%
$800 80 8%
$600 60 6%
$400 40 4%
20 2%
$200
0 0%
$0 DFI Financial Fund Government Other
Bank Cooperative NBFI NGO Institution

DFI Financial Institution Fund Government Other Average term (months) Average interest rate

NBFIs receive the majority of local funding in SSA, predominantly coming from financial institutions, which carry
the highest interest rate (11%) of all local lenders.
Over the period 2008-2011, over 80% of NBFIs’ local funding went to Ethiopia and Kenya (38% and 45%
respectively).
Data from the 2012 MIX Funding Structure Database – Funding structure database covers 59 institutions of SSA, hence the discrepancy from earlier described borrowings. 22

Foreign funding

Among all charter types, banks are the ones attracting the largest amount of foreign funding (40%).

Types of foreign lender by legal status (2011 FYE) Maturity and rate by foreign lender (2011 FYE)
$700 100 10%
Millions

Months
90 9%
$600
80 8%
$500 70 7%
60 6%
$400
50 5%
$300 40 4%
30 3%
$200
20 2%
$100 10 1%
0 0%
$0
DFI Financial Fund Government Other
Institution
DFI Financial Institution Fund Government Other
Average term (months) Average interest rate

Among foreign funders, Funds and DFIs are the most active in SSA, accounting for 54% and 28% of all
foreign funding respectively. They also carry the highest interest rates.
However, foreign lenders overall provide cheaper funding than local lenders at an average rate of 9%
per annum vs.10% for local lenders.

Data from the 2012 MIX Funding Structure Database – Funding structure database covers 59 institutions of SSA, hence the discrepancy from earlier described borrowings. 23



Outreach

Performance drivers

Funding flows


Conclusion

24

Zoom at regional economic community level

MFIs distribution in WAMU (Dec. 2011)* MFIs distribution in EAC (Dec. 2011)*

Cooperative Bank NBFI NGO Cooperative Bank NBFI NGO

*The charter type distribution is based on the count of MFIs reporting to MIX in 2011, by charter type
Access the charts’ data

Cooperatives, fostered by the PARMEC
law, dominate the sector in WAMU. For-profit institutions (NBFIs and Banks) are
shaping the landscape in the East African
Expectations for landscape diversification Community (EAC), accounting for over half of
grew with the new microfinance law and all reporting institutions.
NBFIs are starting to emerge.

25

Current status of new microfinance law adoption
in WAMU
PARMEC law New law

Adopted in 1993 by the Council of Ministers of The new law (the Regulatory law of
WAMU, the PARMEC law established the Decentralized Financial System) was adopted
conditions governing the exercise of mutual in 2007 by the Council of Ministers and
or cooperative savings and credit institutions replaces the PARMEC law. Primarily, it
in the community. implements a single licensing scheme for all
In 1996, a framework agreement was adopted charter types.
to guide registration for non-mutualist MFIs At the national level, each WAMU member
excluded from the law. country is obligated to pass the law.
Mali
Law n°10-
Niger
013 Burkina Faso
Law n°023- Law n°
adopted in
2009/AN 2010-04
2010
adopted in adopted in
2009 2010
Senegal
Law n°
2008-47
adopted in Benin
2008 Law n°
2012-14
Bissau Guinea
Law adopted in
n°9/2008 2012
adopted in
2008 Togo
Ivory Coast Law n°
Law 2011-009
n°2011-367 adopted in
adopted in 2011
2011 26

Returns by REC

Returns on assets (2011 FYE)
10%
WAMU achieved the lowest financial revenue
5% possible due to the low level of interest
0% rates MFIs can charge (a price cap, aka the
TEG, is set at 27% for all MFIs).
-5%

-10%
Expenses and Revenues (2011 FYE)
-15%
50%
-20%
40%
'09 '10 '11 '09 '10 '11 '09 '10 '11 '09 '10 '11 '09 '10 '11
30%
WAMU EAC CEMAC SADC SSA
20%
By 2011, EAC was the only REC to maintain a
10%
positive ROA.
0%
While SADC is on the rebound, WAMU and WAMU EAC CEMAC SADC SSA
CEMAC each had declining ROAs in 2011.
Total expense/ assets
Without Namibia, SADC’s ROA would be positive
Financial revenue/ assets
in 2009 and 2010, and -1% in 2011.
Average of Yield on gross portfolio (nominal)

Access the graphs’ data
27

Zoom on Ghana, Ethiopia and Nigeria
Total borrowers (2011 FYE)
Ghana, Ethiopia and Nigeria, not captured in the
Ethiopia
analysis by REC, together account for over a third of
Ghana 14%
SSA’s total borrowers. 5%

Remainder of
Nigeria
SSA
17%
All three countries achieved an increase in ROA in 2011 64%
after a decrease in 2010.

Return on assets (2011 FYE) Expenses and revenues (2011 FYE)
12% 60%
10% 50%
8% 40%
6% 30%
4% 20%
2% 10%

0% 0%
Ghana Ethiopia Nigeria

Total expense/ assets
Ghana Ethiopia Nigeria Financial revenue/ assets
Average of Yield on gross portfolio (nominal)
Due to the June 30 FYE in Ethiopia, annual figures have not yet been captured for that market. Please refer to MIX’s Ethiopia country page for a more comprehensive view on that
market as of March 31, 2011. 28

Is risk decreasing in SSA?

There has been a substantial decrease in PAR>30 over 2011 thanks to efforts in WAMU and EAC.
In EAC, Kenya and Burundi particularly shaped this trend: PAR 30 decreased in each country by 12
percentage points.

Risk trends in SSA (2011 FYE)
12%

10%

8%

6%

4%

2%

0%
2009 2010 2011

Portfolio at risk > 30 days Write-off ratio

29

Risk level by REC

Risk by REC (2011 FYE)
12%

10%
High risk in SADC is mainly driven by
8%
Malawi, Zambia and Mozambique.
EAC is the only regional economic
6% community maintaining a PAR>30
4%
below 5%.

2%

0%
WAMU EAC CEMAC SADC SSA
Risk in Ivory Coast
Portfolio at risk > 30 days Write-off ratio 35%
30%
25%
20%
Ivory Coast is a driver of high risk for WAMU.
15%
The share of the portfolio written off in 2011 10%
reflects the impact of the 2010 disputed 5%
elections and ensuing political crisis. 0%
Ivory Coast 2009 Ivory Coast 2010 Ivory Coast 2011

Portfolio at risk > 30 days Write-off ratio

Access the graph’s data 30

Conclusion


Outreach

Performance drivers

Funding flows


Conclusion

31

Conclusion

Each charter type is clearly shaping the landscape where it is most
prevalent.

SSA’s positive ROA trends are led by East Africa.

Foreign funding remains prevalent and represents the most attractive
funding conditions in SSA.

Despite localized high risk levels, overall risk is decreasing in SSA.

32

Data sources

Performance of
MIX Market
microfinance providers

Funding structure MIX Market Funding Structure Data

Cross-border funding CGAP Cross-Border Funding Survey

SSA Financial inclusion
MIX: Mapping Africa Financial Inclusion
map

WAMU status of
Banque Centrale des Etats de l’Afrique de l’Ouest
microfinance law adoption

33

Acronyms
Communauté Economique et Monétaire de l'Afrique Centrale: Cameroon, Republic of Congo, Equatorial Guinea, Gabon,
CEMAC
Central African Republic, Chad.
ECA Eastern Europe and Central Asia

EAC East African Community: Burundi, Kenya, Rwanda, Tanzania and Uganda.

EAP East Asia and the Pacific

DFI Development finance institution

LAC Latin America and the Caribbean

Large Gross Loan Portfolio > 8 million USD

Medium Gross Loan Portfolio between 2 and 8 million USD

MENA Middle East and North Africa

NA North America

PARMEC Projet d'Appui à la Réglementation des Mutuelles d'Epargne et de Crédit

REC Regional Economic Community

SA South Asia

Southern African Development Community: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi,
SADC
Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
Small Gross Loan Portfolio < 2 million USD

SSA Sub-Saharan Africa

WAMU West African Monetary Union: Benin, Burkina Faso, Bissau Guinea, Ivory Coast, Mali, Niger, Senegal and Togo.

WE Western Europe
34

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2012 Sub-Saharan Africa Regional Snapshot

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