Crafting a Path to Financial Inclusion for Artisanal and Small-scale Miners in Liberia
At MutConsult, we believe in the power of knowledge and networks to drive transformative change. Our recent collaboration with the Liberian Government and the African Development Bank exemplifies this commitment, as we embarked on a journey to create a groundbreaking Financial Inclusion Framework and Implementation Roadmap.
The Vision
In Liberia, as in many parts of the world, artisanal and small-scale mining (ASM) is a vital sector that supports livelihoods and fuels local economies. Yet, despite its significance, ASM often operates in the shadows, with miners lacking access to formal financial services that could enhance their economic security.
Recognizing the potential for change, MutConsult, with its extensive knowledge and networks throughout the African continent, joined forces with the Liberian Government and the African Development Bank to pioneer an innovative Financial Inclusion Framework tailored to support ASM formalization in Liberia.
The Quest for Knowledge
The journey began with boots on the ground, quite literally. Our team embarked on a journey to Monrovia and various parts of Liberia, engaging with local miners, community leaders, financial institutions, and technology providers. Through in-depth interviews, we sought to understand the unique challenges and opportunities of the Liberian ASM sector.
These conversations not only illuminated the intricacies of ASM in Liberia but also reinforced the importance of financial inclusion. We discovered that many miners lacked access to basic financial services, making it difficult for them to save, invest, or even secure their hard-earned income.
The Power of Partnerships
Our commitment to achieving transformative results was underscored by our partnership with the African Development Bank. By leveraging their expertise in financial inclusion and their vast network, we were able to harness collective knowledge and insights from various corners of the continent.
This collaborative approach allowed us to craft a comprehensive Financial Inclusion Framework that doesn’t just address current challenges but also paves the way for a more inclusive and sustainable future for Liberia’s artisanal and small-scale miners.
Findings from the Report
A review of Liberia’s financial ecosystem reveals that it is comprehensive and comprised of nine commercial banks, one development finance company, two mobile money operators, three money remitters, 19 insurance companies, 17 microfinance institutions (MFIs), one deposit-taking MFI, 12 rural community finance institutions (RCFIs), 1270 village savings and loans associations (VSLAs), 134 credit unions, foreign exchange bureaus (FX bureaus) and several fintech companies. However, Liberia is a primarily cash-based economy and formal financial services such as commercial banks, insurance companies and MFIs are undersubscribed. This is attributed to the challenges of physical access and the informal nature of the economy which has so far restricted most Liberians from being able to access more formal services. Mobile money, however, has been central to expanding financial access and with its high geographic penetration it has reached users unable to access traditional banking channels. Informal financial services, such as VSLAs, Credit Unions and RCFIs have provided an economically accessible alternative to those rural and remote populations who would be typically excluded and unable to afford traditional savings and credit options. Fintech has already disrupted financial service systems around the world by providing access at a lower cost, but in Liberia its expansion has been hindered by high data prices, limited fixed line penetration and an inhibiting regulatory environment.
An assessment of the ASM sector in Liberia indicates that it makes up the largest segment of Liberia’s formally registered mining activities by number of licenses, yet approximately 95% of ASM miners in Liberia remain unregistered. This is because Liberia has yet to develop and implement an ASM enabling policy, which has resulted in a largely unregulated informal sector which remains financially underserved and largely excluded. This is due to a combination of factors driving the sector’s high-risk profile: lack of documentation, mobility and seasonality; poor government oversight and enforcement; limited financial literacy and capacity; the physical remoteness of ASM operations; high interest rates and unfavourable repayment terms; illicit, illegal or criminal activities; and the miners’ lack of collateral. Equally, Liberian financial institutions have also encountered several critical barriers in servicing the micro, small, and medium-sized enterprise (MSME) sector: high levels of poverty, illiquidity, informality, a cash-based economy, external shocks, infrastructural weaknesses and limited access points, and high default rates. Due to this large gap in financing, there are many opportunities for financial institutions to engage better with ASM, and financial institutions could create innovative tailor-made and flexible solutions for the sector.
Conclusions, Recommendations and Roadmap
This financial inclusion framework is a product of the review and analysis of Liberia’s financial ecosystems and the country’s ASM value chain. From this analysis it was established that the sector’s financial inclusion can be achieved through a process of formalisation and subsequent de-risking. The first part of the financial inclusion framework contains a blueprint for providing a ‘golden triangle’ of sectoral support that could prove to be the basis for sustainable livelihoods and local economic development. The golden triangle provides an integrated approach to support ASM formalisation including:
1. Enabling a regulatory and institutional framework; 2. Developing extension services; 3. Providing finance.
The blueprint is structured around the three pillars of Liberian non-Bank financial institutions (NBFIs), specifically:
• Access to financial services, incorporating the expansion and diversification of access points, professionalisation of the NBFI sector and improved access to credit;• Promoting digital financial services, including improving usage, the legal and regulatory framework governing it, building its institutional capacity and oversight framework, and leveraging large volume flows to increase digital payments and financial inclusion; and
• Improving consumer protection and financial capabilities.
Full text available at the bottom of this page and the AfDB website.
A Brighter Future
The Financial Inclusion Framework and Implementation Roadmap we’ve developed is more than just a document; it’s a testament to the potential of transformative change. It outlines actionable steps that will make formal financial services accessible to ASM miners, improving their economic prospects and fostering sustainable development.
As we look to the future, we remain serious in our commitment, yet hopeful about the possibilities we can unlock. The Financial Inclusion Framework represents not just our vision but a shared vision for Liberia’s artisanal and small-scale miners – one that we believe can become a reality.