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Assessing micro-finance institutions in Cross River State
This blog is an update on the previous entry on the Financial Inclusion for Nigerian Youth, dated February 9, 2015.
MEDA is partnering with Cuso International to improve financial inclusion for youth in Nigeria. The project titled Youth Leadership, Entrepreneurship, Access and Development (YouLead) works with young women and men in Cross River State, Nigeria.
While Cuso International is the lead agency, responsible for overall implementation of project activities, MEDA is responsible for programming towards better financial inclusion for youth via capacity building of financial service providers in Cross River State to respond to the financial needs of young adults and the provision of technical support to enable the development of gender-responsive financial services and products for young women and men1.
MEDA's support began via a Rapid Appraisal and Mapping Activity of the financial sector in Cross River State, which resulted in the pre-selection of prospective financial inclusion partners for YouLead. Following this pre-selection, a detailed institutional capacity assessment was undertaken of the pre-selected financial service partners.
Why was the assessment needed?
In order to identify areas of need, plan project activities and provide recommendations for areas of improvement of the selected financial services partners. The specific objectives were to:
Understand the financial sector in Cross River State, with particular focus on youth;
Develop and make recommendations for youth oriented products and services ; and
Identify capacity building opportunities for the partner microfinance institutions.
How was it done?
The assessment was conducted via a series of interviews with staff members of five (5) microfinance banks and one (1) microfinance sector support agency as well as thorough reviews of portfolios, policies and procedures for each institution; while taking into consideration their approach to gender responsive and environmentally responsible financial services and products for young women and men. This was undertaken in order to assess supply gaps in order to later develop market-driven products and services.
What did we find?
Based on the findings, the selected partners lacked adequate technical expertise and capacity to properly support youth entrepreneurs. These include:
Poor portfolio quality and monitoring;
Limited staff development opportunities;
Limited MIS systems in place enabling inefficient and ineffective data management;
Lack of access to capital for operations and product development;
Inadequate governance structure;
Poor lending methodology translating into performance;
Product offerings which are not demand driven or gender sensitive;
Lack of environmentally-focussed financial products and services; and,
Lack of non-financial services or products for youth, including limited understanding of how non-financial services can improve uptake of financial products and services by youth.
How will MEDA help?
MEDA Canada as a recognized industry leader in the provision of youth-inclusive financial and non-financial services with expertise in microfinance, entrepreneurship and employability services for youth. With direction and support from Cuso International, MEDA will:
Develop and implement capacity development plans for financial service partners to improve their ability to develop youth-friendly financial and non-financial products and services;
Prepare the financial partner institutions to offer youth-appropriate, gender-sensitive and environmentally responsible products to address the demand-supply gap identified, and build market-driven processes for product development;
Support financial partner institutions in creating responsible and innovative marketing plans for outreach to youth;
Assess existing financial education curricula and adapt them for young women and men in Cross River State;
Provide training and technical assistance to strengthen financial service partners.
What are the next steps and recommendations?
MEDA recommended that the microfinance sector support agency focuses on developing its capacity to properly support the microfinance banks that will be offering services to youth. This should be inclusive of providing capacity building support to the microfinance banks and advocating policy changes to the regulatory bodies to make servicing youth and women more attractive.
Recommendations to the microfinance banks include increasing their capacity to serve the growing youth market by putting more resources into developing, modifying and marketing more youth and gender oriented services and products. As well, adding more non-financial services, such as business development counselling and advisory services, to their offerings. These additions should provide more education and awareness that will result in better business decisions and financially responsible clients.
By following these recommendations and microfinance best practices, YouLead financial inclusion partners will be better positioned to provide the unbanked population suitable access to savings and credit facilities to improve their economic livelihoods and enterprises.
Now that we have completed an assessment of the financial partners, we have a picture of the supply-side. We are currently undertaking an assessment of youth financial needs in order to get a picture of the demand-side of the equation.
We have only just completed Year 1 of the project and there is much work to be done in Year 2. Stay tuned for more updates on our journey with financial inclusion for youth in Cross River State!