Liberia: Ministry of Finance Begins SMEs Training on Access to Finance
Monrovia – Three days training on access to finance for small Liberian business under the Post Ebola loan project will on Wednesday commence in Monrovia.
This training is meant to enhance the ability of MSMEs in accessing finance, keeping track of business record and opportunity to interact and share their stories.
The Ministry of Finance and Development planning under the leadership of Minister Samuel Tweah has been able to successfully manage this loan program.
Owing to the ugly past in the administering of loans by the Ministry of Finance and Development planning under the past government, Minister Tweah insisted that the Ministry does not interfere directly with the disbursement of the funding.
The Director of Debt Management MFDP and SMEs Post Ebola loan Project Coordinator Frederick Krah praised Minister Samuel D. Tweah for the mammoth support to the project since he assumed office.
Director Krah noted that it was during Minister Tweah’s administration that a number of achievements were made.
Krah said: “Under his (Tweah) leadership, he has ensured that the initial 2 year maturity was extended to 5 years to give flexibility to MSMEs and Participating Institutions.”
The project coordinator added that Minister Tweah also ensured the project conducted a nationwide survey to directly gauge the impact of MSMEs lending to businesses in other parts of the country,
Krah named the independent selection of Financial Institutions, design of the contract, non-government interference and the monitoring framework as the reason for the success of the Post Ebola loan project.
“The MFDP being the main implementer of the project was never a part of the selection process of the PFIs. Instead, the CBL conducted the evaluation and it was certified by the World Bank; “
“The contract was designed to give Financial Institutions the flexibility to repay while expanding their businesses. The loan maturity was increased to 5 years from an initial 2 years and interest was given to the PFIs at 2 percent so as to allow them on-lend to the MSMEs at affordable rate,” Krah continued.
The Project Coordinator added that the government has no direct interference or influence in the execution of the loan to beneficiaries.
Krah added: “The project employs a robust monitoring framework to ensure that objectives are met. Financial institutions are required to report disbursements on a monthly basis. To ensure that environmental and safeguard policy are adhered to, three missions were conducted in selected parts of Montserrado, Margibi, Bong, and Nimba Counties.”
To uphold transparency and non-government interference, seven (7) qualified financial institutions (LBDI, GN Bank, Afriland Bank, BRAC, DIACONIA, Business Link and LEDFC) were used as vehicles to directly on-lend to the MSMEs and these institutions were vetted by the Central Bank of Liberia (CBL) and certified by the World Bank.
It can be recalled, in early 2017, the Government of Liberia (GoL) received a grant of US$4.8 million from the World Bank through the MSMEs Post-Ebola Reconstruction Project.
The grant is intended to provide finance to MSMEs on a sustainable term and to enhance the capacities of local private sector financial institutions to lend profitably. US$ 4.0 million out of the total US$ 4.8 million was used for direct credit to MSMEs while the US$ 800k was for Technical Assistance and innovations.
Since the rolled out of this loan scheme, the project has been able to achieve a lot in relatively short period of time.
At end January 2019, actual disbursement by PFIs was US$ 2.96 million or 74 percent out of the US$ 4.0 million. However, proceeds from the microfinance institutions that were reinvested brought the total disbursement to 94 percent;
Adding that, the Portfolio at Risk (PAR) above 30 days was averaged at 6.5 percent while PAR above 90 days was averaged at 4.8 percent.
As at January 30, 2019, total new loans MSMEs exceeded target by 451.6 percent, from initial target of 500 new loans to 2,258 loans.
Beyond providing capital, the project has hired consultancies to develop the capacity of MSMEs on Accessing and Using Credit and Capacity Building for Banks and MFIs on Financing for MSMEs.
US$120,000 of unallocated fund for the project was reallocated to the highest performing PFIs, BRAC Microfinance Institution to boost their capital. The decision was discussed and agreed by the Steering Committee. The General Auditing Commission (GAC) commissioned the first audit on the project, covered the period May 3 2017 to end June 2018. A cleaned report (Unqualified) was made on the project for the period. However, the auditors recommended few minor improvements in the Project Operation Manual (POM) and Participation Agreement (PA) affecting the following areas: Non-compliance with interest payments by the participating institutions; overpayments to borrowers contrary to PMO and or PA and submitting of vetting document from the recruitment process. The Project Management Team (PMT) has already addressed the areas of concerns by the auditors.