Diagnostic to Action: Microfinance in Africa

This diagnostic report describes major achievements, challenges and growth trends in the microfinance sector in Africa. It aims to inform strategic decisions to scale up microfinance in the continent.

More and more people in low-income market segments in countries across Africa are now able to access an increasing range of financial products. The report states that:

• NGOs have transformed into regulated institutions in order to offer a broader range of services;
• Commercial banks and other formal financial institutions have increasingly moved down-market;
• Microfinance is being integrated into larger financial systems;
• Despite growth and promise, however, current market penetration to low-income households is less than 15 percent;
• Constraints to financial service provision in Africa include high cost environment, scarcity of skilled manpower and lack of funding.

The marketplace in Africa has the right conditions for rapid entry by new commercial players. Recommendations for microfinance development in Africa include:

• Put clients first;
• Groom leaders;
• Strengthen human resource management;
• Emphasize information and transparency;
• Encourage innovation and efficiency;
• Develop demand-driven savings;
• Campaign for increased access.