A three-day training on access to finance for small Liberian business under the Post Ebola loan project will today, Wednesday, March 20, 2019 commence in Monrovia.
This training, according to its organizers, is meant to enhance the ability of Micro, Small and Medium Enterprises (MSMEs) in accessing finance, keeping track of business record and opportunity to interact and share their stories.
The Ministry of Finance and Development Planning (MFDP) has been able to successfully manage the loan program.
Owing to the ugly past in administering of loans by the MFDP under the past government, Minister Tweah insisted that the ministry does not interfere directly with the disbursement of the funding.
Frederick Krah, Director of Debt Management at Finance and Small Medium Enterprises (SMEs) Post Ebola loan Project Coordinator, praised Minister Tweah for the mammoth support to the project since he assumed office.
Krah noted that it was during Minister Tweah’s administration that a number of achievements were made.
He added, “under Tweah’s leadership, the initial 2-year maturity was extended to 5 years to give flexibility to MSMEs and participating institutions.”
According to Krah, Minister Tweah also ensured that the project conducted a nationwide survey to directly gauge the impact of MSMEs lending to businesses in other parts of the country.
He named the independent selection of financial institutions, design of the contract, non-government interference and the monitoring framework as the reason for the success of the Post Ebola loan project.
“The MFDP being the main implementer of the project was never a part of the selection process of the PFIs. Instead, the Central Bank of Liberia conducted the evaluation and it was certified by the World Bank;
“The contract was designed to give financial institutions the flexibility to repay, while expanding their businesses. The loan maturity was increased to five years from an initial 2-year and interest was given to the PFIs at 2% so as to allow them on-lend to the MSMEs at affordable rate,” Krah continued.
He said, “the project employs a robust monitoring framework to ensure that objectives are met. Financial institutions are required to report disbursements on a monthly basis to ensure that environmental and safeguard policy are adhered to; three missions were conducted in selected parts of Montserrado, Margibi, Bong and Nimba counties.”
To uphold transparency and non-government interference, seven qualified financial institutions, including the Liberia Bank for Development and Investment, GN Bank, Afriland Bank, BRAC, DIACONIA, Business Link and LEDFC, were used as vehicles to direct on-lend to the MSMEs, and these institutions were vetted by the Central Bank of Liberia and certified by the World Bank.
It can be recalled that in early 2017, the Government of Liberia received a grant of US$4.8 million from the World Bank through the MSMEs Post-Ebola Reconstruction Project with the intent to provide finance to MSMEs on a sustainable term and to enhance the capacities of local private sector financial institutions to lend profitably.
Of the amount, US$ 4.0 million was used for direct credit to MSMEs, while the US$ 800, 000 was for technical assistance and innovations.
At end January 2019, actual disbursement by PFIs was US$ 2.96 million or 74 percent out of the US$ 4.0 million. However, proceeds from the microfinance institutions that were reinvested brought the total disbursement to 94 percent; adding that the Portfolio at Risk (PAR) above 30 days was averaged at 6.5 percent, while PAR above 90 days was averaged at 4.8 percent.
Beyond providing capital, the project has hired consultancies to develop the capacity of MSMEs on Accessing and Using Credit and Capacity Building for Banks and MFIs on Financing for MSMEs.
US$120,000 of unallocated fund for the project was reallocated to the highest performing PFIs, BRAC Microfinance Institution to boost their capital. The decision was discussed and agreed by the Steering Committee.
The General Auditing Commission (GAC) commissioned the first audit on the project, covered the period May 3, 2017 to end of June, 2018. A cleaned report (unqualified) was made on the project for the period.
However, the auditors recommended few minor improvements in the Project Operation Manual (POM) and Participation Agreement (PA) affecting the following areas: Non Compliance with interest payments by the participating institutions; over payments to borrowers contrary to PMO and or PA and submitting of vetting document from the recruitment process. The Project Management Team (PMT) has already addressed the areas of concerns by the auditors.