Inclusive finance reaching financially excluded persons in Mali
There has been a noticeable increase in adapted financial products offered to low-income people, small entrepreneurs, farmers and others
In Mali, the average net per capita income is US$1,349 for women and US$3,071 for men (UNDP 2016), and 49.3% of the population lives on less than US$1.90 per day. It is therefore not surprising that most people are marginalized from formal economic activities and do not have access to the financial services offered by traditional banks.
These indicators show how difficult it is for most Malians to participate in economic life and to improve their living conditions. With barely sufficient incomes, how can farmers access credit to fund infrastructure projects, rehabilitate land and improve agricultural productivity? Can the skills and services of financial professionals be counted on to plan the launch of a microbusiness and finance its activities? The solution to these questions in Mali is financial inclusion.
From microcredit to inclusive finance
The microcredit approach attempts to meet people’s financial needs through small loans with favourable terms, used to fund revenue-generating activities. It is basically a system of small-scale bank loans.
Inclusive finance is based on a much broader economic ecosystem and offers a whole range of financial services, including savings, insurance and credit. Its primary goals are to combat the financial exclusion of low-income people and to make financial planning and management part of people’s routine. Through a line of financial and non-financial products and services (savings, credit, insurance, money transfers, training, financial advice, technical expertise and others), inclusive finance aims to help members (clients) manage their economic and financial assets, regardless of value.
In Mali, it is not the banks but the cooperative/associative model that leads the way in adopting inclusive finance approaches. Financial cooperatives make an essential contribution to social development and improving communities’ living conditions. The cooperative model focusses on collective ownership, local management and rootedness in the community. This management model brings institutions even closer to the community and focuses on looking for ways to reduce individual and collective poverty.
The inclusive finance model is particularly appropriate in a country like Mali, where economic development and poverty reduction are critical goals. In Mali, Canada has been involved in inclusive finance because it offers these benefits: access to financial services that are adapted to the population’s needs and socioeconomic realities, community ownership and management of financial service institutions, and development of a link between financial services and their impact on the community.
“A co-operative is a privately owned business that operates on sound business principles and competes in local and global markets. The principles on which co-operatives operate and their management structure distinguish them from non-co-operative business and account for their distinct contributions to social and economic development. A co-operative is designed to meet its member/owners’ aspirations and economic and/or social needs.”
“The essence of the co-operative approach is disarmingly simple: maximize the capacity of local groups and communities to control their own destiny through business enterprises they own and operate in a democratic manner. This approach, when encouraged and enabled to flourish, can be remarkably successful, simultaneously creating economic wealth while sustaining cultural vitality, fostering democratic practices, and reducing poverty.”
– Taken from DID, CCA and SOCODEVI: Creating Wealth, Reducing Poverty, and Building a Better World: Canadian Co-operatives in International Development
Canada has been involved in developing inclusive finance in Mali for over 40 years, through Développement international Desjardins (DID). Over the decades, the services offered have expanded. Microcredit developed gradually, adopting the culture of inclusive finance. Partners combined efforts to consolidate their support for the financial inclusion of lower-income groups.
In 1989, Canada helped launch a project to develop savings and credit cooperatives in the Ségou region, which in 1993 became the Nyèsigiso network of savings and credit unions (Nyèsigiso means “the house of foresight”). This network is now Mali’s second-largest.
The Nyèsigiso network was created in 1993 with support from DID, which acted as the executing agency, with a budget of Can$17.6 million. It is a decentralized financial system bringing together mutual institutions (whose members pay a fee to ensure mutual assistance) or savings and credit unions, from the Kayes, Koulikoro, Ségou, Sikasso, Timbuktu and Bamako District regions. The first credit unions were created in 1990 and the Credit Union Federation (Union des caisses; UC) was formed and accredited in 1997. The UC provides technical and financial support to affiliated credit unions, which deliver services to the members. Canada has provided support for the Nyèsigiso network since the very beginning to improve people’s access to financial intermediation services and in so doing, foster growth and improve living conditions.
The Canadian Microfinance Support Program (Programme d’appui au secteur de la microfinance; PASMIF) in Mali covered the period of 2018 to 2013 (Can$14.6 million). It supported Mali’s national microfinance strategy, the goal of which is to increase access to diverse and innovative financial services to a large majority of poor or low-income communities. PASMIF was implemented via a shared financing mechanism involving the Malian government, the Danish International Development Agency (DANIDA) and Canada.
The Support to Inclusive Rural Financing in Mali (AFIRMA) project, valued at Can$13 million, took place between 2014 and 2018. AFIRMA’s goal is to improve rural people’s access to financial services that meet their needs. The Canadian aid fits into the framework of the Programme de micro finance rurale, a rural microfinance program overseen by the International Fund for Agricultural Development (IFAD) for a period of eight years (2010 to 2018). The rural microfinance program has two main components: (1) support to facilitate access to financial services; and (2) support for the viability of decentralized financial systems in five administrative regions (Kayes, Koulikoro, Sikasso, Ségou and Mopti). The target is over 415,000 people living in low-income rural communities.
The Agriculture and Rural Financing in Mali (FARM) project has a budget of Can$18.4 million over five years (2014 to 2019). It is being carried out by DID and La Financière agricole du Québec’s international development division. The goal of the FARM project is to improve productivity in the agricultural industry in the Ségou, Sikasso, Koulikoro and Bamako regions by providing an overall structure for the financial services currently being offered to farmers. The project: (1) strengthens the institutions that finance farms; (2) optimizes joint action between players in identified value chains; (3) improves access to financial protection mechanisms for farmers and financial institutions, notably through a harvest insurance program and a guarantee fund; and (4) integrates women and youth into agricultural activity by fostering sustainable development and gender equality. The FARM project goes hand-in-hand with the expanded range of services offered through inclusive financing, services that go well beyond the loans system of a strict microcredit approach. The goal here is to provide support to stakeholders in the agricultural industry so they can improve their management practices and even their farming methods.
The importance of digitization
Over the course of Canada’s ongoing support, the Nyèsigiso network has professionalized its support by developing technology to connect member credit unions in a single accessible network. At the start of the 2000s, automating operations became a priority for the cooperative networks. Starting in 2002, DID deployed transactional software in three of the network’s credit unions. Between 2008 and 2015, large-scale work was done by DID, with assistance from the Bill & Melinda Gates Foundation and Canada, to interconnect member institutions of the Nyèsigiso and Kafo Jiginew networks. Innovations, such as an interinstitutional system and points of service, now allow members of these cooperative banks to access their money no matter where they are in the country, so long as there is a savings and credit union nearby.
Small Malian entrepreneurs have specific financing needs that are not met in the traditional banking system. They often exceed the capacity of basic cooperatives, which are hesitant to offer large loans, in order to limit their risks.
To redress this situation, DID, with financial support from Canada, began in 1996 to implement an Entrepreneurs’ Savings and Credit Union (Caisse d’épargne et de crédit des entrepreneurs; CAECE). It provides businesses with the funding they need to expand their activities, and it offers savings collection services to help manage cash and build wealth. The CAECE employees are encouraged to establish close ties with clients, which includes going on location to the borrower’s operations site.
Then, in 1996, Canada funded a project to support urban habitat financing. The project, implemented by DID, in partnership with the Canadian Mortgage and Housing Corporation (CMHC), led to the creation of a mortgage guarantee fund in Mali.
Involvement of other partners
Implementing and developing an alternative and inclusive financial system requires contributions and joint action between many partners, both local and foreign, including nongovernmental organizations, individual proponents and private-sector stakeholders. In addition to Canadian aid, Mali’s technical and financial partners have included the World Bank; the International Monetary Fund; the African Development Bank; countries including Germany, France, the US, Denmark and the Netherlands; numerous NGOs; and local banks.
Canada’s support in the area of inclusive finance has had several direct impacts. The following are some indications of the large-scale success of Canada’s financial backing, with DID’s support: the creation of the Nyèsigiso network of savings and credit unions; community participation in the cooperative management of financial institutions and local credit unions; and the use of the products and services being offered. Despite the security crisis that has affected Mali since 2012 and has led to significant losses on loans in the Nyèsigiso network, this network has demonstrated its resilience. The professionalization of its services, through the networking and digitization of member institutions, has greatly improved access to local financial services, even in rural areas.
Over time, the support provided to the Nyèsigiso network has evolved, and Canada has provided expertise in step with the credit unions’ development. This support has covered everything from helping the first credit unions emerge in 1989, to digitizing them and reconfiguring the network. All of this has transformed the landscape of inclusive finance in Mali.
There has been a noticeable increase in adapted financial products offered to low-income people, small entrepreneurs, farmers and others. For instance, products other than savings and loans had been largely unknown, including loan guarantees, harvest insurance and more. What also distinguishes the network implemented with Canada’s help are the many training programs being offered, not only to bank managers but also to individual women and men savers and entrepreneurs, on topics ranging from finance to sector-based know-how.
Information on Nyèsigiso (2011)
- Active borrowers: 25,695, including 46% women
- Total savers: 177,733
- Gross portfolio: US$20.7 million
- Credit unions and points of service: 60
- Geographic coverage: Kayes, Koulikoro, Ségou, Timbuktu and Bamako District regions
– International Labour Organization
The actions taken by Canada, partner countries and Mali culminated in the adoption of a microfinance policy (Politique nationale de micro finance), inciting Mali’s microfinance institutions to comply with the regulatory framework developed by the West African Economic and Monetary Union. Beyond access to financial services, Canada’s support in the area of inclusive finance has enabled significant social change, notably by fostering a cooperative culture in a spirit of economic mutual aid.
Given that credit union members also own shares in the institutions, they are invited to contribute directly to managing them. They make decisions about services and the approach to take with beneficiaries and clients. If the members are women and youth, then it is women and youth who will take charge of their financial institution and decide what strategic directions will guide its actions with the community. Thus, Canadian partners have transmitted more than know-how, they have passed on a culture of engagement and development.
The impact on communities may be hard to measure. However, to see the many benefits of inclusive finance, we need only count the number of women, men and youths who have gotten access to a financial service, even on a small scale, and seen their quality of life improve as a result. And, to gauge the multiplier effect of financial support that is tailored to members’ specific needs, we need only look at the many micro-entrepreneurs, men and women alike, who have found in their local credit union an investment partner and a source of training and coaching.
Reducing child labour by improving agricultural work conditions and productivity | Information taken from the ILO
Nyèsigiso has tackled the issue of child labour through awareness-raising and training for its members. While awareness-raising activities honed in on child labour, training combined this theme with others, like productivity, working conditions and financial management. These themes were included to encourage attendance, by offering members tools to gain additional benefit from their work. The program began with training internally on work improvement methods in a rural development context, on child labour and on financial management, using guides and material produced by the International Labour Organization (ILO). Then, these trainers offered training to Nyèsigiso members who employ (or subcontract to) children and who receive a farm credit.
– International Labour Organization
Lastly, inclusive finance in Mali has impacted living and working conditions by improving the profitability of member businesses. For instance, it has been shown that the Nyèsigiso network, the main beneficiary, has had a significant impact on child labour. In Mali, from 2001 to 2010, 36% of children aged 4 to 15 worked. An analysis conducted by the ILO showed that Nyèsigiso members improved their businesses’ productivity and working conditions and reduced their use of child labour. Indeed, a reduction in the number of child workers has been observed, thanks to a reduction in the number of working hours, an increase in school enrolment, a decrease in absenteeism among clients’ children and an increased awareness about child labour.
The sustainability of the outcomes observed in inclusive finance remains uncertain. Intended to equip the country with an environment conducive to private-sector investment and development, including its legislative, fiscal and institutional context, Mali’s reforms have been slow to take shape. Nevertheless, the partners’ levels of motivation and ownership are generally high, since the results of these actions benefit them directly by improving their living conditions and increasing their income.
One of the risk factors that impacts on the sustainability of inclusive finance actions is the Malian government’s fiscal policy of imposing a maximum interest rate on credits. This has been counterproductive to the performance of decentralized financial systems.
The fragility of credit-fund monitoring, control and management systems (be it for microfinance or rural credit), the absorption capacity, the expertise pool and the financial resources available to member companies or organizations are all rapidly reaching their limits. This affects their chances of achieving administrative and financial autonomy.
The 2012 coup d’état and the ensuing security crisis have had a significant impact on inclusive finance in general, and on the Nyèsigiso network more specifically. The network has been weakened by a wave of bankruptcies in the decentralized financial systems in the northern part of Mali. Businesses are operating in an economically difficult situation, and this has an effect on financial institutions.
Canada is a pioneer in gender equality, and all of its programming in Mali pays close attention to this aspect. However, after several decades of interventions in inclusive finance, gains in male-female equality are still modest, and the situation of women in Mali remains worrisome. Disparities in microfinance reflect the existing gender imbalance in Malian society. Despite aid that has targeted vulnerable population segments and reached out to women, the dividends they have received from inclusive finance actions are minuscule.
In 2016, only 51% of women had access to microfinance services, as compared to 64% of men (Central Bank of West African States; BCEAO). There are a number of factors explaining this discrepancy:
- Rural women are greatly involved in their family’s grain production and only have rudimentary tools. They are neither paid nor valued.
- In addition to working on grain production for their family, women must do their own farming activities (some grain, but mainly vegetables) on parcels of land that are allocated or loaned to them. These plots of land are often located far away and the soil is not very fertile. The required investments are rarely made in the land because women fear that the owners will take it back, and owners fear the women will appropriate it if they make improvements.
- Women have very limited access to credit, especially in agriculture. The major obstacle is their inability to offer collateral. Rare are the women who manage to obtain seasonal or equipment credit, be it in cash or in kind.
- It is estimated that fewer than one quarter of women are literate. Very few have managed to obtain support or training to develop their economic activities. Therefore, women have limited means to meet the requirements and challenges involved in economic transactions.
In 1993, when a program for women to access credit was implemented by DID, Canada clearly showed its intention to see an improvement in women’s economic status and living conditions in the Ségou and Bamako regions. The means taken by this program included increasing their involvement in banking and their access to credit, and strengthening their individual and group businesses.
To meet the needs of its female and rural clientele, the Nyèsigiso network set up training workshops on financial education, management and access to credit, all specifically targeting women. Today, largely thanks to Canadian aid, women have greater access to financial services.
Cooperative networks contribute directly to the financial inclusion of Malian women. The management of the Nyèsigiso network includes 22% women, showing its desire to see women play an increasingly active role in society. The continued presence of women in cooperative networks is a mark of progress.
Through its ongoing strategy to reduce economic and social disparities, Canada continues its efforts to have even more women participate in inclusive finance. In 2017, the FARM project incorporated a gender equality strategy to establish conditions for offering financial products that meet the needs of female agricultural entrepreneurs. The goal of this strategy, which was based on a comparative analysis of men and women, is to improve women’s access to resources, decision-making and knowledge.
The interest in inclusive finance is clear, and its relevance for the Malian context is acknowledged. There is a need to keep expanding the network, by improving and diversifying the products and services offered and by increasing the number of points of service, particularly in rural and isolated areas.
Many lessons have been learned thanks to Canada's interventions in inclusive finance in Mali. It is impossible to list them all; however, here are a few of interest:
First, recent years, particularly the time of crisis following the events of 2012, have shown the need to maintain a level of profitability that keeps local financial institutions secure. Thus, despite the inclusive network’s high level of social engagement, it is essential to seek a balance between its social mission and financial sustainability goals. Along the same lines, it is vital to determine a middle ground for interest rates, which are considered too high for clients but too low to ensure institutional viability.
The experience of Canadian aid to Mali’s decentralized financial system shows that a category of people exists even at the fringes of the nation’s poor population: the very poor. They also must be able to live with dignity in their environment. This population group remains excluded from banking, and even from the economy, which is nonetheless meant to be inclusive.
The challenge for inclusive financial institutions will continue to be to develop an approach that includes this marginalized population, based on their needs and while respecting their limited financial needs. And these institutions must do so while also maintaining their own financial health. Other types of programs may be needed to improve the situation of this group and to integrate them.
Lastly, it has been found that microfinance programs managed by the government generally create market distortions because they are subject to political influence rather than being led by commercial interests.
The cooperative approach, characterized by member-owners, involves democratic management, which tends to be more sheltered from individual influence and interests and instead be focused on the needs of the community and on poverty reduction.
Thus, Canadian partners in the area of inclusive finance have left behind much more than know-how: they have instilled a culture of community involvement and development.
- Central Bank of West African States, Cadre de politique et de stratégie régionale de l’inclusion financière dans l’UEMOA
- MPISP, Table of key microfinance indicators 2017
- SECEPI, impact studies from 2004
- CAECE, Final impact study report, 26-01-04
- Final impact study report on basic credit unions, 16-01-04
- Final impact study report on village credit unions, 26-01-04
- Methodology report, final impact study
- Summary results: Nyèsigiso evaluation
- Presentation: Microfinance in Mali: Situational overview
- Mali’s Ministry of the Economy and Finance (MEF), 2013 annual report on the evolution of microfinance in Mali
- MEF, 2014 annual report on the evolution of microfinance in Mali
- MEF, 2015 annual report on the evolution of microfinance in Mali
- FARM project, 2015 biannual report
- FARM project, 2015 biannual report
We would like to sincerely thank the following for their assistance in creating this impact story:
- The staff of Global Affairs Canada
- The staff of the Field Support Services Project (FSST)
- The staff of Développement international Desjardins (DID)
- Mr. Marcel Ouellette, consultant
- Mr. Alhassane Ibrahima Diall, Coordinator of the Decentralized Financial Systems Promotion and Support Centre (Centre de promotion et d'appui des systèmes financiers décentralisés)
- Mr. Adama Camara, President of Mali’s Professional Association of Decentralized Financial Systems (Association professionnelle des systèmes financiers décentralisés du Mali)
- Mr. Modibo Coulibaly, Director General of Nyesigiso, and his team
The Impact Stories series of Canadian aid in Mali was produced by the Field Support Services Project (FSSP) and in cooperation with the above-mentioned stakeholders.
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Note: The FSSP received funding from the Government of Canada.
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