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Strong FSP boards prepare for and respond to external shocks as a rule, not an exception.

30784872334_b499dfc281_mThe following is part of a blog series spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s Africa Board Fellowship program.

> Posted by Paul DiLeo, Founder and Managing Director of Grassroots Capital Management and Governance Expert for the Africa Board Fellows Program

Far from being “extraordinary and rare,” challenging environments are a “normal” part of business for financial service providers (FSPs) targeting low-income populations. We tend to think that external environment challenges are extraordinary events that cannot be predicted or are too varied and diverse to prepare for—and therefore are best confronted as they arise. What do currency devaluations, deteriorating security, political interference or regulatory upheavals have in common? Can we can plan for them all and prepare effective responses in advance? Do responses need to be tailored to each circumstance?

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30784872334_b499dfc281_mThe following is part of a blog series spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s Africa Board Fellowship program.

ABF Fellows discussion at table

ABF Fellows group discussion. November 2016.

> Posted by Danielle Piskadlo, Director, CFI

Few countries have escaped socio-political unrest, conflict or periods of crisis. As the consequences of such events can be severe for both financial service providers and their customers, it behooves every board and CEO to consider how they might prepare themselves to respond when the political environment around them deteriorates.

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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 Center Staff

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This week the United Nations Food and Agriculture Organization (FAO) and MasterCard forged a new partnership to develop inclusive financial systems to support small-scale farmers and lower-income families. The team’s first effort focuses on the Kakuma refugee camp in north-western Kenya, a settlement home to roughly 170,000 refugees who have fled wars and violence in neighboring countries.

The partnership seeks to harness the duo’s respective strengths: FAO in fighting hunger and malnutrition among the most vulnerable and hardest-to-reach, and MasterCard in expanding financial inclusion through digital services. Their initiatives will center on, among other elements, providing credit and cash to households in economically-marginalized communities for the purchase of basic needs and farming inputs.

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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 Allison Ehrich Bernstein, Executive Communications Specialist, Accion

Quick: Pretend you’re a telecommunications operator in Africa. Which country would you choose for the launch of a new mobile money network?

Since the runaway success of Kenya’s M-Pesa system, banks and mobile service companies have been looking for the next big opportunity to bring cell phone-based financial services to a whole new client base. While we haven’t yet seen anything on the scale of M-Pesa, numerous companies (e.g. Easypasia in Pakistan, bKash in Bangladesh) have been chipping away at its number-one position.

So, what’s your pick?

You might say a fairly stable country that already has a reasonably strong banking sector, like Ghana. Or a high-population nation like Nigeria, or perhaps a place like Zimbabwe, where the financial system could use a jolt. And those wouldn’t be bad ideas.

Established African mobile-service providers Zain Group and MTN are taking a very different approach, however: they’re setting up mobile money networks in the world’s newest country, South Sudan.

Even if it weren’t a nation less than three years old, South Sudan might not strike the average observer as the next “it” spot for mobile money. Banking penetration in-country is negligible; there’s currently neither the central infrastructure nor leadership for it. And mobile penetration was somewhere around 13-15 percent in 2012, according to an International Finance Corporation study and other sources.

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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.