Mali Financial Intermediation between MFIs and Banks Development Policy Paper

This paper presents the details of the study on intermediation between banks and microfinance institutions (MFIs) in Mali. The study had the following objectives:

• To analyze constraints on the intermediation between MFIs and banks: The constraints were statutory and judiciary, institutional level of performance;
• To draw lessons from the experience of the National Bank of Agricultural Development (BNDA): BNDA is able to refinance MFIs due to its capacity to mobilize external resources with soft conditions. The other banks have not been able to achieve the same;
• To propose recommendations on strategies to be adopted for intermediation:
  • Statutory and judiciary - modify legal texts regulating MFIs based on founded technical arguments to improve financial and institutional sustainability of MFIs;
  • Institutional - support on information management, monitoring and control techniques, equipment support, development of ethic code, setting up of inter-MFI guarantee fund, training;
  • Communication - introduce good PR system, regular flow of information between banks and MFIs and organize exchange meets.

The author concludes by stating that the banks could consider financing MFIs at rates lower than commercial rates, but this is possible only if all loans to MFIs are secured either by the funds of the MFIs themselves or by guarantee funds from donors. The author recommends helping banks to mobilize lines of credit at soft conditions to refinance MFIs or to constitute a guarantee fund to serve as partial guarantee deposit for the financing of MFIs.