Rural finance institutions in Sub-Saharan Africa: Their outreach and sustainability

This paper reviews the performance of six rural finance institutions (RFIs) in Sub-Saharan Africa. Two performance criteria are used to evaluate these RFIs - the level of outreach and the degree of self-sustainability achieved. Each of the RFIs exhibits some weaknesses according to the identified performance criteria and crucial information on their performance is often missing. However, outreach of all six RFIs has been significant. Generally, the selected RFIs in Cameroon, Togo, Rwanda, Benin, Malawi and Burkina Faso have extended financial services to rural clients that are usually excluded from formal financing - smallholder farmers, woman and the poor. No single model for successful rural financial intermediation emerged from the study. Rather, these RFIs have employed a variety of operating modes to improve savings mobilization, provide credit, and increase their flexibility In service delivery. Our assessment of sustainability reveals more varied performance. Loan collection rates are quite different across the institutions and there has been a build-up of arrears in Cameroon, Togo and Rwanda. Since full information is not available, it is not possible to discern the relative contributions of larger interest rate spreads versus more effective management of administrative costs towards achieving improved self-sustainability in these RFIs. The subsidy dependence index could be computed for only one of the RFIs (Banques populaires in Rwanda), since the other five RFIs had seriously inadequate financial reporting systems. This is an aspect of institution-building in the region which may provide a high pay-off to state and-or donor support. While public intervention is often needed during the establishment phase of these RFIs, it should be focussed on institution-building and not lead to subsidized interest rates on loans.