Surfing the tattered pages of this blog, one is able to read about MFIs operating in saturated markets.
Sierra Leone as a whole is decidedly not such a market, but I sometimes suspect that certain segments have reached a point where you get a rapidly decreasing measure of development for your microfinance Leone. A quick survey of the Kiva portfolio of ARD and LAPO, SL reveals that a majority of clients operate businesses in the retail sector and many of these deal in the same products – Maggi cubes, plastic ware, soap, palmoil, smoked fish ect. Now there is absolutely nothing wrong with selling say fish, – fishermen benefit from having their catch made available to a larger population, smoked fish is, besides being delicious, a healthy and safe source of protein for many Sierra Leoneians, also all the usual benefits of micro entrepreneurship apply.
The thing is though, the streets of Freetown are in no way lacking fishmongers, and my impression is that none of them are doing particularly brisk business. Clients are able to pay back their loans so presumably that means it is possible to make a profit but I wonder whether the country as a whole would not gain more if microfinance funding was supporting other sectors. Agriculture springs to mind, although fantastically fertile Sierra Leone is unable to grow enough food to feed it’s population, adding to an already hefty trade deficit. It seems odd to ship in eggs from China and India, Thai or Pakistani rice and (not so) frozen meat from the EU and Brazil but that’s what you will typically get in Freetown.
Both of the Freetown based MFIs I had the privilege of working with have elected to place branches in Freetown and the larger provincial towns of Bo, Makeni and Kenema and thereby serving a predominantly urban client base. There are a number of reasons for this choice, the important ones as far as I can tell are logistics – beyond the main roads transportation becomes exceedingly difficult and time consuming. Unavailability of necessary skill sets – One would need to recruit loan officers who combine knowledge of local dialects, customs and economy with financial and legal skills. It is worth noting that none of these issues are deemed unsurmountable by the MFIs, in fact they see advantages to operating in the country side such as lower risk of default in rural group loans as compared with other client categories. Both plan to eventually cover rural areas.
Nilaus served as a Kiva Fellow in Sierra Leone with ARD, LAPO and SMT. Although advocating rural microfinance he would be much saddened if his blog entry caused anyone to avoid lending to Freetown fishmongers, who provide a key ingredient of Cassava leaf stew.