Micro¯¬¾nance in Mozambique Micro¯¬¾nance in Mozambique Achievements, Prospects & Challenges A report

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  • Microfinance in Mozambique Achievements, Prospects & Challenges

    A report of the Mozambique Microfinance Facility Prepared by Fion de Vletter • June 2006

  • Microfinance in Mozambique: Achievements, Prospects & Challenges page i

    MICROFINANCE IN MOZAMBIQUE Achievements, Prospects & Challenges

    TABLE OF CONTENTS Foreword viii Preface ix Acknowledgements x

    1.0 COMING OF AGE: A REVIEW OF THE PAST DECADE...........................................................1

    1.1 Introduction ....................................................................................................................1

    1.2 A Brief Historical Overview...........................................................................................3

    1.2.1 The Beginnings................................................................................................................3

    1.2.2 Dominance by International NGOs in Rural Areas ..........................................................4

    1.2.3 Shifting the Focus towards Urban Areas .........................................................................4

    1.2.4 Community Based Initiatives ...........................................................................................4

    1.2.5 Eclipse of the International NGOs ...................................................................................5

    1.2.6 Growth of National NGOs ................................................................................................5

    1.2.7 Legal Reforms..................................................................................................................6

    1.2.8 The Emergence of Savings as a Microfinance Product...................................................6

    1.3 Operator Achievements ................................................................................................7

    1.4 Stakeholder Interests and Impact ................................................................................7

    1.5 Recent Studies on the State of the Microfinance Sector...........................................9

    2.0 FINDINGS OF THE 2005 SURVEY OF MICROFINANCE OPERATORS ................................10

    2.1 Methodology.................................................................................................................10

    2.2 Previous Operator Surveys/Directories of the Sector .............................................10

    2.3 Results of the 2005 Survey and Comparisons with Earlier Surveys......................11

    2.3.1 Client Growth (Outreach)...............................................................................................13

    2.3.2 Portfolio Growth .............................................................................................................13

    2.3.3 Average Loan Size.........................................................................................................13

    2.3.4 Depth of Outreach..........................................................................................................14

    2.4 Number of Service Providers .....................................................................................15

    2.5 Institutional Transition ................................................................................................15

    2.5.1 Institutional Growth ........................................................................................................18

    2.5.2 Institutional Performance ...............................................................................................19

    2.5.3 Financial Products and Methodologies..........................................................................20

    2.5.4 The Cost of Credit..........................................................................................................22

  • Microfinance in Mozambique: Achievements, Prospects & Challenges page ii

    2.5.5 Gender Issues................................................................................................................24

    2.5.6 Distribution of Microfinance Operators and Outreach ...................................................24

    2.5.7 Rural-Urban Disparity ....................................................................................................27

    3.0 THE IMPACT OF MICROFINANCE ON URBAN AND RURAL CLIENTS: FINDINGS FROM TWO RECENT STUDIES ...........................................................................................................29

    3.1 Urban Clients: The Results of the Poverty Outreach and Impact Assessment in Mozambique .................................................................................................................29

    3.1.1 Objectives ......................................................................................................................30

    3.1.2 Methodology ..................................................................................................................30

    3.1.3 The Urban Socio-Economic Environment .....................................................................31

    3.1.4 Characteristics of the Assessed Clients ........................................................................34

    3.1.5 Client Borrowing Patterns ..............................................................................................36

    3.1.6 Depth of Outreach..........................................................................................................39

    3.1.7 Impact of Credit on Economic Activities ........................................................................40

    3.1.8 Impact of Credit on the Level of Household Welfare .....................................................43

    3.1.9 Influence of Crises .........................................................................................................44

    3.1.10 Reasons that More-than-Two-Year-Old Clients Drop Out.............................................44

    3.1.11 Use and Impact of Current Accounts.............................................................................44

    3.1.12 Client Satisfaction ..........................................................................................................46

    3.1.13 Summary and Implications ............................................................................................46

    3.2 Microcredit and Rural Livelihoods: The CCCP-CCOM Project ...............................47

    3.2.1 Background....................................................................................................................47

    3.2.2 An Overview of CCCP Impact on Member’s Livelihoods ..............................................48

    3.2.3 Conclusion .....................................................................................................................50

    4.0 THE POTENTIAL ROLE OF MICROFINANCE IN RURAL AREAS .........................................51

    4.1 The Changing Rural Economy ...................................................................................51

    4.2 Rural Non-Microfinance Finance Experiences in Mozambique ..............................52

    4.3 Developing Appropriate Microfinance Products for Rural Client Needs...............53

    4.4 Current Issues and Future Challenges......................................................................54

    4.4.1 A Changing Paradigm: Outsourcing Financial Services................................................55

    4.4.2 The Need for Complementary Non-financial Services ..................................................55

    5.0 CURRENT ISSUES AND FUTURE CHALLENGES..................................................................57

    5.1 A Review of Current Policy Objectives and Prior Recommendations ...................57

    5.2 Progress to Date ..........................................................................................................58

    5.3 Assessing the Case of Mozambique Based on the Statement of the Advisors Group ............................................................................................................................59

    5.4 Approaching Maturity: Lessons Learned and Adapting to New Paradigms .........60

    5.5 Recommendations for Meeting the Challenges of the Next Decade......................61

    5.5.1 Microfinance and Rural Poverty.....................................................................................61

  • Microfinance in Mozambique: Achievements, Prospects & Challenges page iii

    5.5.2 Capacity Building to Meet Projected Expansion in Rural Areas....................................61

    5.5.3 Developing Financial Products to Better Suit Client Needs ..........................................62

    5.5.4 Stakeholder Participation in the Evolution of Microfinance ...........................................62

    5.5.5 Continued Improvement of the Operating Environment ................................................63

    5.5.6 Confronting HIV/AIDS....................................................................................................64

    5.6 Concluding Remarks...................................................................................................64

    ANNEXES

    1. The Status of Microfinance Operators 2. Section B of Microfinance Operators Survey

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