Microfinance Wholesale Market in Sudan

Microfinance Wholesale Market in Sudan

Professor Badr El Din A. Ibrahim,

President, Microfinance Unit, Central Bank of Sudan,

Sudan introduces the wholesale lending to MFIs via a governmental agency (Wholesale Guarantee Microfinance Agency, Kafalat) to siphon banks’ wholesale finance to MFIs with 75% risk-sharing at a cost of 0,5% of the total loan via restricted Mudarabah contract.

The wholesale programs in Sudan is dominated by the CBOS and shared by commercial banks, SMDC, and partnership with IDB. As of May 2014, out of SDG 328 millions funds allocated for microfinance by the MFIs, the share of self employed financial resources 14%, the CBOS share 53%, Islamic Development Bank/CBOS partnership18%, Sudanese Microfinance Development Company (SMDC) 10%, and commercial banks 5%.

The Sudanese outstanding experience in the microfinance wholesale field includes different microfinance portfolios shared by banks and the CBOS. Among these are Graduates' Project Financing Portfolio. This successful portfolio stated in 2012 and shared by the CBOS and other banks. It is a joint portfolio between the CBOS and other banks and it is administered by two leading banks (Commercial Farmers Bank and the Saving and Social Development Bank) with a capital of SDG 100 million (equivalent to approximately US$20 million). By the end of 2013, nearly 3000 graduates' projects in 15 states were financed using SDG 48 million, realizing SDG 3.8 million profits. AMAN Portfolio (a consortium of private sector banks & Zakat fund) is also one of the microfinance portfolios. Around US$ 40 million finance administered by Bank of Khartoum were allocated for MF projects. In addition, the CBOS microfinance experimental wholesale program started 2007 as Musharaka program with eight banks and two MFIs.

By 2012 US$ 168 were allocated in this program. One of the successful microfinance portfolio is the CBOS and Islamic Development Bank of Jeddah portfolio. This portfolio is intended to allocate US$ 19.5 on a wholesale lending-base via restricted Mudaraba to 7 MFIs. In this model program the current portfolio is US$11 million, PaR (30 days) is 2.49 and more than 25 thousands clients were covered so far with average loan size of only US$ 437. Another wholesale program is linking farmers in traditional agricultural rain-fed states to all markets (crop market, crop insurance market, extension services - seed selection, fertilizer usage, harvesting techniques etc.) via a wholesale lending portfolio.

This national microfinance project is meant to cover half a million farmers in the coming years. The program started with finance from AMAN portfolio in 2011. The State agricultural ministries provide extension services sponsored by the CBOS, Insurance Companies insure the product under the Comprehensive Insurance Document, the United Nations World Food Program (WFP) provides food for farmers, the government buys the product, the Strategic Reserve Corporation of the government acts as a final buyer and the WFP also buys the surplus product for its own program of schools and food for work. Working with the same stakeholders (in addition to Sudanese Microfinance Development Company, SMDC), the 2012 and 2013 versions were financed by the CBOS and Bank of Khartoum.

Despite these achievement in the microfinance wholesale lending, the market is still limited and more efforts are needed to expand this market. Among these is MFIs performance indicators to help donors (CBOS, Banks, and other stakeholders of this market) to select the appropriate MFIs for funding. Moreover, more market-oriented policies and more stakeholders such as telecommunication Companies and private sector companies are required to enter this market.

This government agency was meant to guarantee wholesale finance from commercial banks, CBOS, and other donors to the licensed non-deposit taking MFIs. The major objective is to drain off the remaining un-used funds of the 12% of the banks' microfinance portfolio from banks to non-deposit taking MFIs. Works is now underway for the Agency to start operation very soon.

CBOS/MFU Monthly Report, May 2014; Badr El Din A. Ibrahim, 2012, "Characteristics of microfinance wholesale lending in Sudan", CBOS, Internal Discussion Paper, Oct..

Tuesday, September 9, 2014