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> Posted by Danielle Piskadlo, Director, Investing in Inclusive Finance, Center for Financial Inclusion at Accion

The following is part of a blog series spotlighting views from participants in the Africa Board Fellowship (ABF).

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Two experiences with interest rate caps – in Kenya and Zambia – demonstrate the power of political forces to shape financial inclusion policies and may hold lessons for MSME lenders in other countries.

In a recent unpublished study, the Partnership for Responsible Financial Inclusion (formerly the Microfinance CEO Working Group) examined commonalities in the origins of interest rate caps in these two countries. In both cases, signs were clear that the general public was upset about the current state of loans and interest rates. Approaching elections increased the will among political leaders to make regulatory changes that would appeal to the public.

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Designing a mobile money product that meets client needs while bringing tangible benefits to the financial institution

> Posted by Habiba Balogun, Habiba Balogun Consulting

The following is part of a blog series spotlighting views from participants in the Africa Board Fellowship (ABF). For more from Habiba, an interview with her can be found here.

With over 160 million mobile phones in use in Nigeria out of a population of 180 million, high mobile penetration is a major factor in the country in achieving seamless payments.

In 2016, at Accion Microfinance Bank (AMfB) in Nigeria, where I serve as a board member, we introduced a mobile banking product called Brighta 143. The product is USSD (unstructured supplementary service data), so it runs on both basic and smart phones, and it has shown great potential to expand financial inclusion as well as bring benefits to our institution.

But of course, rolling out a successful mobile money product is hardly straightforward.

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> Posted by a Nairobi-Based Consultant

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Kenya and Nigeria are often heralded as two of the most dynamic economies in Africa. They could soon have something else in common: interest rate caps.

Banks in Kenya have urged President Uhuru Kenyatta to dismiss a new bill which caps loan interest rates and provides for sanctions (fines and prison) directly to the CEOs of banks that fail to do so. This is not the first time such a proposal has come forward; the last one having come at a time the incumbent president was Minister for Finance. Should the President sign off on the bill it will become law, and lending rates will be capped at 400 basis points above the Central Bank discount rate which now stands at 10.5 percent.

Understandably, the prospect of such limits has caused anxiety amongst lenders. Through the Kenya Bankers Association, Kenya’s bankers immediately lodged appeals to the government arguing that capping interest rates is counterproductive and against the free market economy premises Kenya enjoys. We are yet to see how the financial markets react.

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> Posted by Lizzy Bolze, CFI Analyst

Africa Board Fellows at the HBS-Accion Program on Strategic Leadership in Inclusive Finance. Pictured left to right: Felix Achibiri, Fortis Microfinance Bank, Nigeria; Titos Macie, Socremo, Mozambique; Elijah Chol, South Sudan Microfinance Development Facility; Charles Njuguna, Faulu Microfinance Bank, Kenya

It seems almost commonplace for financial institutions across sub-Saharan Africa to be confronted with currency devaluation, interest rate caps, political conflicts, increasing capital requirements, and disruptive technologies – not to mention the impact of wars, disease, climate change, and natural disasters. With all these complications and risks, I am left to wonder how can boards of financial institutions in Africa focus on anything other than constantly extinguishing crises?

In March, alumni of the Africa Board Fellowship (ABF) attended the HBS-Accion Program on Strategic Leadership in Inclusive Finance. During the weeklong executive education program, CFI staff had the opportunity to sit down with the four fellows pictured above to discuss some of the challenges they are facing.

A common challenge was the hardship caused by currency devaluations. MFIs often receive loans in U.S. dollars, and so as the value of local currency diminishes, squaring their balance sheets becomes increasingly tough. Elijah Chol of South Sudan reported that the Minister for Finance and Economic Planning announced a 500 percent devaluation of the South Sudanese Pound last December. At the South Sudan Microfinance Development Facility’s annual meeting a day later, the board was unable to take immediate action because the devaluation was so unexpected. Though prices in South Sudan’s market have since improved slightly, the impact of such extreme devaluation has posed great challenges across the microfinance sector.

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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

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In recent months several prominent banks in Kenya have collapsed, with Chase Bank (no relation to JPMorgan Chase) most recently placed under receivership by the Central Bank of Kenya (CBK) earlier this month. Additionally, this month it was announced that three majority government owned banks will be consolidated, and that voluntary mergers and acquisitions in the banking industry will be encouraged as a way to strengthen institutions. To better understand what this all means, I sat down with John Lwande, Director of the Africa Board Fellowship (ABF) program.  

DP: From your perspective, can you update us on what is happening?

JL: It appears that following an extended audit tussle last month, Chase Bank, which had established itself as the jewel among small and medium-sized enterprise (SME) lenders in the market, and attracted funding from big name international investors, collapsed on the 7th of April. While Chase pushed the blame towards the accounting surrounding the bank’s Islamic banking assets, more serious implications point towards governance problems. To illustrate the severity of these governance issues, for instance, we are told that the bank made a staggeringly large amount of loans to its directors, an average of KES 1.35 billion per director (USD 13.5 million). This is not a routine staff and associate loan. Actually, Chase had a loan program for staff. Its average loan size was KES 1.9 million (USD 19,000). How could an SME bank, a financial inclusion flag bearer, allow its directors to lend tens of millions of dollars to themselves?! In a recent interview, three leading Kenya bank executives decried the lack of governance and fiduciary responsibility of bank directors in the country and called upon auditors to be firm in their opinions to mitigate the risk of bank failures and avoid panic.

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> Posted by Center Staff

Are you a senior leader at a financial institution serving lower-income clients in sub-Saharan Africa? The Africa Board Fellowship (ABF) program might be for you!

The six-month program was launched late last year to foster peer-to-peer learning and exchange on governance practices among board members and CEOs at African microfinance institutions. The fellowship begins and ends with multi-day in-person seminars; in between seminars, fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

The first cohort of ABF fellows convened in early June in Cape Town. Guided by the program’s seasoned faculty, advisors, and subject experts, fellows examined a wide range of topics, from board dynamics and managing sustainable growth to technology trends and risk management. A blog post on the inaugural seminar can be found here.

The above video shares highlight footage from the inaugural seminar, as well as remarks from ABF fellows and staff on the program.

For more information on the Africa Board Fellowship, including details on how to apply, click here.

> Posted by Kettianne Cadet, Program Coordinator, CFI

It’s been a few weeks now since our return from Cape Town and the kick-off seminar of the inaugural Africa Board Fellowship, a six-month program launched this year to foster peer-to-peer learning and exchange on governance practices among board members and CEOs at financial institutions serving low-income clients in sub-Saharan Africa. The fellowship begins and ends with multi-day in-person seminars and between seminars fellows are connected through a virtual collaboration space that includes discussion forums and dialogues.

In early June, CFI’s Investing in Inclusive Finance (IIF) team and the fellowship’s seasoned faculty, advisors, subject experts, and inaugural class of fellows all came together in South Africa for the in-person kick-off seminar. This first seminar was very well received by both fellows and staff and here are some of the reasons I believe it went well.

Participant Diversity: The first cohort of fellows connects 30 board members and CEOs from 13 institutions throughout 11 countries, all with diverse backgrounds and experience. Each participating institution is required to send their CEO along with one or two board members. Having this mix of participants throughout the seminar led to numerous engaged, candid, and rich discussions about roles, board dynamics, and responsibilities. Had we only brought together one fellow from each institution, these conversations would have been far more one dimensional.

Structured Accountability: Having both CEOs and board members present supports accountability within each institution – to participate in each session and to take action afterwards. If only one member from each institution attended, would they be able to transfer their takeaways to their organization or actually implement any of the lessons learned? Additionally, given that the fellows either came from a different geographical location, offered differing products, or perhaps targeted a different niche market, it seemed that everyone got enormous value from their exchanges with one another.

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> Posted by Alison Slack, Associate, CFI

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As CEO of the South Sudan Microfinance Development Facility, Elijah Chol is tasked with helping develop the financial inclusion sector in his fledgling country. Elijah is a member of the inaugural class of the Africa Board Fellowship (ABF) program, who begin their six-month fellowship in June in Cape Town, South Africa. We recently sat down with Elijah to learn more about his work in microfinance, and the governance challenges he faces.

South Sudan is a country striving to emerge from decades of crises on many fronts. “Post-conflict countries like ours have unique problems,” says Elijah. “One of the most pressing issues for us is that of education, especially in the villages and rural areas.” Because the education situation is so desperate, it is difficult to find board members with the skills necessary to effectively guide institutions.

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> Posted by Center Staff

In two weeks the first class of the Africa Board Fellowship (ABF) program will kick-off the fellowship in Cape Town, South Africa. The convening seminar marks the start of the inaugural fellowship, a six-month program aimed at strengthening the governance expertise of microfinance leaders in sub-Saharan Africa. The first class is composed of 31 board members and CEOs, coming from 13 institutions throughout 12 countries in Africa. Given the diversity of backgrounds and experience these fellows bring, in addition to our seasoned faculty, advisors, and subject expert staff, we are confident that the opportunities for peer learning and exchange will be plentiful in Cape Town, and throughout the fellowship. The profiles of our inaugural class of fellows are now available on the ABF website. Please join us in welcoming these fellows to the program!

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> Posted by Karin Malmberg, PIIF Manager, PRI

How do institutional investors in inclusive finance ensure that their investee institutions manage their social as well as financial performance? How do these investors contribute to the sustainable growth of the industry? And, perhaps most importantly how do they ensure that end clients are fairly treated and adequately protected?

The Report on Progress in Inclusive Finance 2014 by the Principles for Investors in Inclusive Finance (PIIF) Initiative addresses these questions, analyzing data submitted by inclusive finance investors on their responsible investment practices.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.