At the annual dinner of the Governor of the Bank of Sierra Leone, Patrick Saidu Conteh has in his speech revealed that the outcome of a study commissioned by the Bank has shown that about 6.3 million people in Sierra Leone are financially excluded.
Speaking at the Bintumani Hotel, last Friday 2nd February, on the financial inclusion landscape in Sierra Leone, Governor Conteh added that the recent Geospatial Data Analysis and Financial Inclusion study jointly sponsored by the Bank of Sierra Leone and World Bank, indicated that only about one million Sierra Leoneans have an account at a financial institution.
He went on to say that of that number only about 500,000 Sierra Leoneans have received a loan from a formal financial institution. “For the most part, products and services that serve these core financial needs are not consistently available at affordable rates.”
Citizens with low or no incomes he says may have insufficient income or assets to meet the relatively high requirements of banks. Although the country can boast of a range of financial institutions, from banks to microfinance institutions and financial service associations, “access is limited and mainly concentrated in the big towns and cities” he said.
According to the study, further insights into the state of financial inclusion in Sierra Leone was provided, with particular reference to the geographical dimensions of access to financial services.
It shows that a total of 86 out of 191 Chiefdoms have no form of financial services access points. The North and North West Provinces rank bottom with a total of 51 Chiefdoms without any form of financial services operators.
The comparative data for Eastern Province is 14 Chiefdoms and Southern Province 21 Chiefdoms. In terms of the services provided, 75 per cent of the access points are mobile money operators, while MFIs comprise 7 per cent and commercial banks a mere 6 per cent, among others.
The Governor went further to talk about the Financial Inclusion Baseline Survey 2017, also co-sponsored by the World Bank, which also identified a range of barriers to financial inclusion in Sierra Leone.
The barriers included inappropriate products, low income of individuals, regulatory barriers, long distance to access points, lack of knowledge and understanding of financial services and high cost of products and services.
“In light of these barriers, it is concerning that the absence of credit and access to other financial services may drive consumers to alternative providers, which may come at a much higher cost and risk than traditional financial services” he said.
He then challenged the commercial banks to double their effort to take the lead in a bid to increase access to financial services.
He assured that the banking sector is stable, safe and sound. “We have observed significant improvements in key financial soundness indicators like capital adequacy, liquidity position, asset quality, corporate governance and earnings performance.”
With all these developments that he has highlighted, he went on to say that there are inherent structural factors that impede our efforts to deepen the financial system for achieving strong and inclusive growth.
Financial services in the rural areas he said remain limited, even with the growth in the number of community banks, financial services associations, and commercial banks’ branches.
“The bulk of financial institutions and services are concentrated in Freetown and districts headquarter towns, thereby restricting financial inclusion to mainly the urban population. This limits the size of savings mobilized to stimulate growth and develop the economy” he said.
Banking products and services he noted are still largely limited to accepting deposits, granting of loans and advances, and foreign exchange dealings. The main source of income for the entire banking industry he said is investment in Government Treasury Bills.
As a result of this, he said that there is this growing competition among financial institutions which has forced banks to move towards providing relatively sophisticated products including internet and mobile phone banking, point of sales and the use of Automated Teller Machines (ATMs).
The cost of financial intermediation continues to be high, whereas credit to the private sector is very low, around 5 per cent of GDP.
By Zainab Iyamide Joaque
Monday February 05, 2018.