“The majority of our people don’t have access to financial services. If we can change that, it will have a positive macro effect on the economy,” Central bank Governor Milton Weeks has said. According to him, Liberians are suffering and poor because they do not have access to financial services to create opportunities for themselves.
Suggesting that financial inclusivity could have a positive effect on inflation, which stands 8.4 and 8.5 percent in the Liberian economy, he believes “financial inclusivity can address inflation.”
In an interview with the Daily Observer last Thursday in Monrovia, Governor Weeks said “Many Liberians are not included in the financial structure of the country, and the Central Bank is doing all it can to manage the situation.”
Tech leads the way
He defined inclusion as “bringing the majority of our poor people who have no access to financial services to the financial services sector.”
According to Gov. Weeks, the CBL “can ensure that the market woman can have access to financial services. It’s not just having a bank account, but access to a loan, insurance and other services that the majority of our people can have access to where they did not before.
This can be done using mobile technology and will result in a better quality of life and result in an overall improvement of our economy.
He cited examples of existing financial inclusion platforms such as Mobile money through subsidiaries of Lonestar and Cellcom. He also named “agent banking”, where commercial banks no longer have to have branches in the far-flung areas, but can appoint agents to provide services on their behalf. Also, he said the CBL is finalizing implementation of a switch that can facilitate seamless transactions between commercial banks and save time.
More sustainable model
Governor Weeks said Liberia’s economy needs to be restructured, and move from the traditional model of depending on the extractive industries (rubber and iron ore) to a more sustainable model, with agriculture at the center. According to him, the prevailing economic situation in the country clearly indicates that there is a need for the country to restructure its economy to ensure stability, inclusion and improvement of other key indicators.
He regretted that successive Liberian administrations have been talking about the need to change the country’s dependence on the extractive sector for decades but little is done to realize it.
He said though Liberia’s economy is faring “a little better than Zimbabwe, we are concerned because of the pressures” of inflation, adding that it is “better that we are under 10 percent.
Governor Weeks said the increase in the U.S. Dollar exchange rate has impacted the country, increasing to the cost of goods and services.
“We have limited tools to manage the exchange rate but we are working toward stabilizing or at least we are trying to reduce how fast the rate changes.
The Governor made it clear that it is not within the CBL’s absolute power to control inflation. He referred to “external factors and external shocks” that influence inflation both positively and negatively, such as the global decline in petroleum prices, which he said has helped to ease the effects of inflation on the Liberian economy. “Same with rice, but then government spending also has in impact, so a lot of it is outside of our direct control,” he said.
“But what we are trying to do is work with our fiscal authorities, monitor and try to make adjustments as we go along and this is not something that we can just intervene and bring down,” he said.
Although past Liberian leaders engaged in economic empowerment in the form of credit guaranty schemes; however, “They failed miserably because people borrowed money and didn’t pay back because they said it was the government’s money so they could take it for free; and of course, they were not educated about it.
“Today, we have improved the structure through our financial literacy programs at the CBL where people have learned what is involved in taking a loan. This is how SMEs can become more empowered,” he noted.
Governor Weeks further said the CBL is working other with the Ministry of Agriculture to develop a funding structure that encourages investment in the agriculture sector.
“Looking at the low level of investment in the agriculture sector, Liberia is yet to come close to the Maputo Declaration—a continental framework that calls for ten percent of every national budget in Africa to go to agriculture.
He however noted that it depends on how the 10% allotment is calculated to meet the terms of the Maputo Declaration. For example, it is unclear whether farm-to-market roads, which are essential for agriculture to thrive, would be included as agricultural budgetary allotment under the Maputo Declaration.
“When we talk about prioritizing agriculture it doesn’t necessarily mean everyone will return to the soil, but we must encourage value addition that would also help create jobs. We are therefore working with partners to fund the establishment of processing plants across the country,” he said.
It may be recalled that Governor Weeks’ predecessor, Governor Mills Jones, led an initiative that provided access to loans to Liberian farmers in the leeward counties, leading to the establishment of Village Savings and Loans for the first time in the country’s history.