MFI Report

Sierra Leone is in the process of reconstruction. With the 11-year-old civil war concluded, Sierra Leoneans have returned to their homes and started anew. There they have found peace, but few resources to rebuild their lives. Sierra Leone’s infrastructure, both economic and social, was largely destroyed during the civil war and is only now being restored. This destruction was especially deep in the finance sector, where the system of rural and postal banks collapsed. As a result, returnees arriving with few assets of their own and host populations who are already impoverished lack the capital necessary to restart agricultural or business activities. In this situation, providing access to financial services has become essential to help Sierra Leoneans increase their income and to facilitate the economic recovery process.

American Refugee Committee has responded to this need with its microfinance program – Finance Salone. Beginning in 2001, ARC provided loans to returning and host populations to restart their businesses and lives. Clients used the loans to purchase basic equipment or supplies to begin or expand small scale trading, production, and service businesses, such as carpentry, market gardens, or tabletop retail enterprises. Over the first year and one half operations, the program served over 3,000 clients through three local partners, developed systems for managing its portfolio and built local staff capacity to effectively disburse and monitor loans. In the fall of 2002, with field operations in place, ARC and the microfinance staff turned towards making the program sustainable. To focus energies and increase the chance of success, operations were consolidated under the banner of Finance Salone . ARC planned to manage the portfolio during the consolidation period, then “spin-off” the program and register it as a local microfinance institution. In the two years since this decision, under ARC management, Finance Salone has dramatically improved its capacity and performance, increasing the numbers of clients served from 2,500 to 8,600 clients while decreasing portfolio at risk (1 day) from 3.24% to less than .1%. Alongside its success as a microfinance provider, ARC has taken the lead in moving the microfinance industry forward, helping to found the Sierra Leone Microfinance Forum and participating in the development of the Government of Sierra Leone Microfinance Policy.

Finance Salone is ready to move forward. In January 2005, ARC transferred the Finance Salone business operations to a limited liability, for-profit, finance company under Sierra Leone law. During the first year of operations, Finance Salone expanded in both the capital and rural centers, providing demand-driven services to microentrepreneurs through group and individual lending products. Now that Finance Salone has reached profitability, ARC is seeking international and domestic investors to diversify ownership. Strengthened by a committed base of owners, Finance Salone will then begin accessing commercial funds to profitably reach over 45,000 active clients by 2009 with a loan portfolio projected at more than US $6.9 million. At this point, Finance Salone will be prepared for transformation into a deposit taking institution. By taking an early corporate route, ARC has not only aligned its structure to match its mission of providing profitable financial services to entrepreneurs; it is paving the way for the microfinance industry in Sierra Leone to enter the financial mainstream.
Cacher