What is BIFSMO doing:

Limited access to financial services by the poor, particularly in the rural areas, has been identified as one of the main obstacles for sustainable development and poverty reduction in Mozambique. UNDP recognizes that promoting the availability of financial services and products affordable to the poor, particularly in the rural areas, could make a significant contribution to sustainable development and the reduction of poverty in Mozambique.

In response, UNDP Mozambique developed the “Building Inclusive Financial Sector in Mozambique Project”, which is a joint programme with the United Nations Capital Development Fund (UNCDF). The project works together with the National Directorate for Promotion of Rural Development (Direcção Nacional de Promoção do Desenvolvimento Rural - DNPDR) and includes the following three components:

• Operationalization of a clear National Microfinance Strategy with a monitorable action plan;
• Building the capacity of different training providers to provide high-quality training in microfinance (management, credit analysis and product development);
• Producing innovative financial services to improve the accessibility of financial services to the poor, especially in the rural areas.

How is this being achieved?

The overall strategy of the project is to facilitate and invest in a participatory and nationally-owned process that will broaden, deepen, and improve access to diverse financial services through professional microfinance institutions. This is achieved by: 

• Providing support at the macro-level through DNPDR to adopt and implement a National Strategy for Financial Inclusion that enhances the sustainable access to financial services by the majority of the population; 
• Reinforcing the meso-level by strengthening the technical infrastructure supporting financial service providers. So far the project is facilitating access to training of trainers programmes in partnership with different specialized international training institutes to create a pool of local expertise in microfinance. Complementary to this training, the strategy is to reinforce the National Microfinance Association (AMOMIF) so that it can develop robust trainings or curricula for Mozambican financial services providers. 
• Providing support at the micro-level to services providers to provide a full range of financial services at a reasonable cost to households and small and medium enterprises. The objective is to support services providers develop innovative products and/or services that address the specific needs of rural clients and to better support local economic development. 
• The innovations supported at the micro-level include mobile banking, and the designing of products that specifically address the needs of agricultural producers like contract farming. The financial services include savings, short and long-term credit, insurance, financial products for youth, local money transfers, international remittances, and leasing and factoring.

BIFSMO also provides investment funds at the micro-level to service providers as a grant and/or loan, which depends on the result of a technical assessment. The fund is managed through an investment committee that supports innovative pilot initiatives. At the same time the project seeks to attract other existing donors in the sector to create synergies and complementary support to the microfinance sector through a joint investment committee.

Why:

UNDP and UNCDF work to promote greater access to financial services and products for individuals and small and medium enterprises, as these businesses make significant contributions to employment, economic activity, local development, and poverty reduction. The majority of this segment is often without access to financial services, making it difficult for these enterprises to grow and improve their services. Promoting greater access to finance services for agriculture and small and medium enterprises has therefore become a key economic objective for governments and central banks in many countries. 

The Mozambican economy is dominated by the informal sector which employs around 70 per cent of the active population. Around 90 per cent of persons employed work in the agricultural sector. It has been demonstrated that it is very difficult for those employed in the informal sector to access financial services from the commercial banks to improve their businesses and livelihoods. These figures indicate that the microfinance sector has an essential role to play in economic development and poverty reduction in the country.

MDGs supported:

MDG 1: Eradicate Absolute Poverty and Hunger
The project works towards the provision of increased incomes for local communities. 

MDG 3: Promote Gender Equality and Empower Women
BIFSMO promotes the empowerment of women by focusing on access to finance for women and youth. 

It also contributes to the Delivering as One pilot experience by supporting United Nation Development Assistance Framework (UNDAF) outcome 1.7 "Institutions responsible for the promotion of pro-poor and sustainable economic development strengthened”, and output 1.7.2 "Community access to business and financial services, disaggregated by districts, area and beneficiaries -in particular women and other marginalized groups- increased”. 

Who are involved:

• National Directorate for Promotion of Rural Development (Direcção Nacional de Promoção do Desenvolvimento Rural - DNPDR)
• Association for Mozambican Microfinance (Associação Moçambicana dos Operadores de Micro finanças - AMOMIF)
• Financial service providers (these four combined serve approximately 35,300 clients): 
  • Development Fund for Women (Fundo de Desenvolvimento da Mulher - FDM)
  • Hluvuku
  • Progresso
  • Banco Oportunidade de Moçambique (BOM)

Location(s):   National

Results:

• Capacity of DNPDR strengthened at macro-level in microfinance
• Coordination mechanism established at macro-level through the Reference Group of key donors on microfinance, and Steering Committee (Ministry of Finance, Central Bank, DNPDR, and AMOMIF)
• Curricula for microfinance developed and used at the Faculty of Economics, Eduardo Mondlane University
• Training of trainers on-going to strengthen AMOMIF
• Four financial services providers supported, with several innovative products introduced (mobile banking through BOM, group-lending products for women through FDM, and loans specific to farmers through Hluvuku). These service providers combined serve approximately 35,300 clients.  
• Capacity of these financial services providers strengthened in business development
• A successful national workshop on Microfinance in the country was orgamised in Matola.

Duration:

The project was initially designed for 3 years (2007-2009), but was recently extended until 2011 as part of the UNDAF and Country Programme extension.

Project code:  54860
Budget:  (2007 - 2011)
UNCDF:  USD 1.320.000 (RR)
UNDP:  USD 800.000 (RR)
One UN Fund on Youth Employment:  USD 865.000

Delivery 2010:

Next Steps:
The design of the 2nd Phase of BIFSMO (2012 - 2015) is currently underway. The projected budget for the 2nd Phase will be as follows:

UNCDF:   $2 million
UNDP:   $2 million
UNCDF/donors (thematic funds - under negotiation):   $1.3 million

Contacts:

Ms. Oumou Sidibe Vanhoorebeke
BIFSMO Chief Technical Advisor - UNCDF
E-mail: oumou.sidibe.vanhoorebeke@uncdf.org

Ms. Utako Saoshiro
Programme Analyst – UNDP
Tel: +258-21-481-450
E-mail: utako.saoshiro@undp.org  

Ms. Carolina Samogudo
Programme Associate – UNDP
E-mail: carolina.samogudo@undp.org

Related web articles:

A loan of 85 dollars can make a difference  - 25 November 2010

UNDP's vision on microfinance in Mozambique covered byt the daily Notícias, in its "Economia & Negocios" supplement  in November 2010

Related websites:

For more detail on the vision of inclusive finance see: www.uncdf.org  or the Blue Book  

United Nations Capital Development Fund (UNCDF)  

AMOMIF  (Associação Moçambicana dos Operadores de Micro finanças – Association for Mozambican Microfinance - AMOMIF)