ROUNDTABLE DICUSSION ON REGULATORY AND SUPERVISORY FRAMEWORK IN
ISLAMIC MICROFINANCE,
IDB, SUDAN UNIVERSITY OF SCIENCE AND TECHNOLOGY,
KHARTOUM, 18-19 MARCH 2014
Sudan – Enabling Policies,
Supervisory and Regulatory Framework
For Microfinance Sector.
Prof. Badr El Din A. Ibrahim,
President,
Microfinance Unit,
Central Bank of Sudan
Contents
 Introduction
 Pillars of the enabling policies, supervisory & regulatory
framework
 Microfinance Policies % Infrastructure
 Microfinance Institutional Framework
 Microfinance Strategies
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Financial inclusion and poverty alleviation
Sudan MF Regulatory Framework- What is new?
What is missing?
Actions required.
Introduction
 The Sudanese Islamic, central bank-led microfinance
regulation and supervision practice, based on gap & needfilling, managed to produce a (1) full-fledged and (2)
nationally integrated Islamic microfinance regulatory
model. This model is described by the World Bank's
Consultative Group to Assist the Poor (CGAP) as :
"A laboratory for Islamic microfinance delivery where
developments could shed light on effective Islamic
microfinance practices".
CGAP, 2013, "Trends in Sharia-Compliant Financial Inclusion", Consultative Group to Help the Poor,
CGAP, The World Bank, Focus Note, No. 84, March
 Moreover, the IMF in its 2013 Article of
Consultation stated that:
“The microfinance sector is small but growing rapidly, thanks to
the authorities’ active promotion. The results of this push have
been impressive to date. The number of MF borrowers went
from 49,000 at end-2007 to 494,000 by 2012. In terms of
active clients, Sudan and Bangladesh are easily the global
leaders in Islamic finance microfinance, with Sudan likely to
take top spot given current growth rates”
(Sudan: 2013 Article IV Consultation Staff Report; IMF Country Report 13/317; September 5, 2013)
Pillars of the enabling policies, supervisory & regulatory
framework
a. Microfinance Policies & Infrastructure:
 In 1994/95: incorporation of “Craftsmen, Professionals & Small
Producers, Including the Productive Families” as a priority sector for
financing, with some preferential treatments
 MF was recognized as a priority sector, with a minimum allocation of
12% of the banking portfolio.
 a Regulatory and Supervisory Framework to establish microfinance
institutions was issued in 2011.
 Identification of 15 types of guarantees suitable for this sector.
 Identification of Islamic lending modes of microfinance.
 Announcement of the Comprehensive Insurance Documents to act as
insurance & a guarantee
 Establishment of the Wholesale Guarantee Agency (Kafalat) to
guarantee wholesale finance from CBOS, donors and Commercial
banks to the 23 licensed non-deposit taking MFIs.
 Provision of technical assistance to MFIs (in 2011b, a program
with the Islamic Development Bank (IDB) to allocate $59.5 million
joint fund for technical support, IT & wholesale finance to MFIs. A
$ 20 million capital Sudanese Microfinance Development Facility
(SMDF) to support MFIs via disseminations of best practices,
technical assistance, training & wholesale financing.
 Reorganization of the government MF specialized banks (Saving &
Social Development Bank & Agricultural bank) for more effective
microfinance service delivery.
b. Microfinance Institutional Framework
Microfinance Unit at the CBO to overlook the financial sector.
The Supreme Council of Microfinance (SCMF) headed by the
First Vice-President and include all relevant state ministers
Microfinance Project Development Centre (PDC) to encourage
microfinance projects and to perform projects' feasibility studies
in accordance with the comparative advantages. Microfinance
units at the CBOS’ branches & commercial banks headquarters
Project Planning Units (PPU) in 8 state ministries (function:
feasibility studies of projects, provide technical information and
perform annual plans to execute the ministry-related
microfinance projects, and organize clients into groupings)
c. Microfinance Strategies
 The CBOS strategy to promote the sector was made
through the Vision for the Development & Expansion of
MF Sector in Sudan -2007-2011. The vision includes:
Conducive Legal & Policy Environment, Develop & Sustain
MFIs & Establishing & Supportive Infrastructure
 The new Comprehensive National Microfinance Strategy
(CNMS) cover up to 2017. This microfinance strategy
will replace the CBoS strategy, and includes all
microfinance stakeholders.
 The major expected outcome: increase contribution of MF sector to
GDP from 1 to 3%, increase number of clients from 494000 to 1.5
mill. by 2017, Increase in the % of poor microfinance clients (18
years +) from 8.2% to 24.6%, & women clients from 30% to 50%
Financial inclusion and poverty alleviation
 Khartoum state share 13% of the total MF clients, ranked
after Gadarif state (18%), North Darfur state (14%), &
North Kordofan state (13%), all are remote areas
 There is no consistent pattern of the relationship between
the clients and the volume of finance at all states.
Khartoum State came first with the share of 33%, Gezira
state second (9%), then River Nile, Gadarif, and Sinnar
(7%). A sizable finance is in Khartoum, the Capital, while
the sizable numbers of clients were in other states.
 The degree of banks concentration: the average share of
Khartoum state is 38.9% of the total branches during
the period 1979-1987, reduced to 32.8% during the
period 1997-2001, up to 41% in 2012.
 Other regions: The central region around 20%, eastern
region around 12%, northern region around 10%
recently, while western regions (Kordofan and Darfur)
share less than 10% over the same period (regional
inequality in the distribution of branches in towns and
urban areas)
 MFIs: Out of 23 MFIs currently working, Khartoum
state share only 5 MFIs
 With the exception of Khartoum and northern region,
which are characterized by a relatively high average
individual consumption of goods and services, other
regions (Central, Eastern, Kordofan and Darfur, where
the degree of banks' concentration collectively low) have
less than the national average level of consumption.
 Darfur and Kordofan states, which have the lowest
degree of banks' concentration in 2012 (below 10%),
their average individual consumption of goods and
services are the lowest
The Sudanese Regulatory Framework: What is new?
 The first full-fledge CBOS-supported Islamic MF experience
(licensing, following up, wholesale lending, capital sharing,
HR up-grading, projects sponsorship).
 It is one of the first African countries that establish national
MF Strategy including all stakeholders.
 The first African & Arab experience that determined a
percentage of banking MF portfolio
 The first experience with national institutional support
(SCMF, MFUs, MF Planning Units etc.)
 The first experience to include micro Takaful.
 introduce the wholesale via a governmental agency (Kafalat)
and to exploit the restricted Mudarabah as a formula for
microfinance wholesale lending
What is missing?
 The Sudanese microfinance regulatory framework
managed to set what is basically required to have many
microfinance indicators move rapidly.
 The number of clients (Banks and MFIs) increased
from 244000 in 2011 to 494000 in 2012 and to
700000 in 2013.
 The banking MF portfolio increased from 1% in 2007
to 5% in 2013.
 MFIs increased from 3 in 2007 to 23 in 2013.
 The MFIs’ NPL down from 6% in 2012 to 1.9% in 2013
Nevertheless misconceptions and gaps still exist
 MF is mainly viewed as intervention to reduce poverty
& not integrated to the macroeconomic objectives.
 MF is viewed only as credit-based lending, with little
use of micro-insurance, micro-saving, money transfer
 Most clients believe that credit before growth (finance
is pre-requisite to the existence of the project itself).
 Some believe that MF profit margins ( Murabaha
margin) should be centrally-controlled.
 MF is viewed microfinance as a charity lending, not a
lucrative business (margins should be subsidized).
 MF providers believe that microfinance activities do not
lead to institutional sustainability
 Most MF activities meet local-demand-oriented, not
export oriented
Actions Required
Ensure a social development-oriented microfinance sector
via regional equality of distribution of branches, heavy
use of partnership-based modes. move toward the
international performance measurement of banks/MFIs
financial, administrative & social outcomes/ coordinate
the strong national microfinance efforts,/guarantee clientprotection policy & mechanism/ ensure evidence-based
MF polices/ diversify projects/ make heavy use of modern
technology / ensure a full use of Islamic MF potential/
move towards export-orientated MF products / establish
investment maps, & exhibitions / ensure real public
awareness programs to remove misconceptions/ and
provide financial literacy programs