BANKS FOR AFRICA’S POOR

Program Related Investments Help More Africans Get Financial Services

Sometimes making grants is not the best way to support our partner organizations. As an alternative or a complement to grants, Program Related Investments (PRIs), low-cost loans and equity investments provided at below-market rates to support a charitable purpose, can often do more to help our partners grow.

This year, we made two PRIs to stimulate the development of banks that serve the poor in Africa. If our partners show that they can pay us back, then commercial investors may be more willing to assume the risk of investing in financial-services institutions with low-income clients. In addition, because PRIs are partially intended to demonstrate our partners’ viability to commercial investors, they help encourage financial discipline.

There is good reason to believe that such investments will pay off. In Africa, some studies suggest that more than 90 percent of the population doesn’t have access to financial services. No other continent makes do with such a sparse banking infrastructure. And yet, if financial-services institutions could be encouraged to work with more families in African countries, they could use these families’ savings to offer additional services, such as loans that could generate profits while assisting their depositors to build wealth. In short, banks may very well be able to operate profitably in Africa while serving poor Africans.

We made combined grants and PRIs to two financial-services providers in Africa—ProCredit and Opportunity International—to help them build banks for the poor. (ProCredit received a $9 million grant and a $20 million loan. Opportunity International received a $5.5 million grant and a $10 million loan.) Both groups have years of experience providing financial services to low-income clients. They will use the grants to train staff, upgrade computer systems, and build capacity in other ways; they will use the loans to meet minimum capital requirements set by bank regulators and to provide more loans to poor clients.

In the next several years, we hope these investments will help millions more Africans get the banking services they need to better provide themselves and their families with the basic necessities of life.