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Financial Inclusion and Agency Banking in Sudan

Project Development Objective (PDO)

The aim of this project is to support the Government and the Central Bank of Sudan promote financial inclusion by developing a comprehensive financial inclusion strategy and action plan with clear goals, targets, timeframe, and M&E tool & support the development of Agency Banking Regulations.

Background

Financial inclusion in Sudan is a formidable challenge. According to Findex (2014), only 15 percent of adults (15+) had a bank account, 8 percent saved in a formal financial institution, and 4 percent borrowed money from a formal financial institution. Over the years, the government has introduced various initiatives to support financial inclusion. Direct interventions included the establishment of a microfinance unit within the Central Bank of Sudan (CBOS) in 2007, mobilization of CBOS and donor support (credit lines and technical assistance) to the microfinance sector, and introduction of regulations in 2009 requiring commercial banks to allocate at least 12 percent of total financing to microfinance. The government also established a credit registry in 2011 which is credited for the increase in lending (particularly in the microfinance sector) and reduction in NPLs. Efforts to strengthen collateral frameworks are also underway with the establishment of a collateral registry for both immovable and movable collateral. Finally, the government has taken initial steps to introduce digital payment systems and is planning to allow financial institutions to use agents for the delivery of financial services, particularly in rural areas.

Nonetheless, the government’s financial inclusion agenda has been constrained by two main factors. Firstly, interventions have been narrow and fragmented, with no clear targets and mechanisms to track progress. This is largely due to a lack of a comprehensive and coherent strategy that sets clear goals and priorities, assigns responsibilities and coordination mechanisms, and establishes a robust monitoring and evaluation system. The awareness among policy makers of financial inclusion is also still limited and needs to be broaden. Secondly, interventions have not been informed by comprehensive diagnostics including demand side surveys which, in addition to measuring the level of financial inclusion, could describe the landscape of access (by identifying the type of products and services used by financially included and excluded individuals) and the drivers and barriers to the usage of financial products and services

Activities / Output

The technical assistance project will include the following activities:  

1.  Developing a comprehensive financial inclusion strategy (including completions of relevancy
     diagnostics) and establishment of a governance framework 

2.  Disseminating the strategy

3.  Developing the agency banking regulations / guidelines

Expected Outcomes

The main expected outcomes of the project include the following:

1.  The development of National Financial Inclusion Strategy (NFIS) which will help to mobilize
     commitments from stakeholders to implement financial inclusion interventions in a coordinated
     and efficient manner

2.  An effective regulatory framework and supervisory practice for agent banking

3.  More consistent and effective enforcement of risk-based supervision