IBSA Fund Annual Report- SIERRA LEONE
Digital Financial Services
Mostly contributing to:
Ministry of Finance and Economic Development; Bank of Sierra Leone; UNCDF Sierra Leone
The project aims to pilot digital financial-service products such as savings, mobile credit, insurance and financial literacy for women, youth and micro-, small and medium-sized enterprises. It will also contribute to policy development and technical support in the area of financial technology as well as strengthen the financial sector to support the financial inclusion of low-income populations. Three core interventions will be undertaken: establishment of an investment facility (catalytic funding), advocacy and capacity-building, and evidence-based learning and knowledge-sharing. This project will enable 100,000 people to have access to loans and savings, which can be used to access better health care, education and other services.
Results (Intended Outcomes/Outputs)
- Women, youth and micro-, small and medium-sized enterprises have improved access to digital financial services and products.
- Institutional capacity to formulate and implement a regulatory framework for digital financial services is strengthened.
- Lessons and best practices in implementing digital financial innovations are documented and disseminated.
- A financial technology (FinTech) challenge with the theme “Domestic resource mobilization” was launched; 5 FinTech models were selected to promote to bank management.
- A study for a consumer protection framework is being carried out. This will help the national bank to operationalize the consumer protection measures such as transparency and disclosure, complaint-handling and recourse, fair treatment, service delivery standards and data protection.
- Three online courses have been approved by the Bank of Sierra Leone management for the staff in three departments (Banking and Supervision, Financial Sector Development and Other Financial Institutions Supervision) to participate and become certified.
Link of the Project to National Priorities
Domestic resource mobilization is a key national priority of the new Government. This project investment in the FinTech Challenge was intended to align with the national development agenda, hence the support to the national revenue authority to collect revenues digitally.
Over 53% of the Sierra Leone gross domestic product is contributed by the informal sector. The investment in FinTech Challenge 2019–2020 aims to harness the growing digital economy to develop and test innovative solutions as a way to leapfrog access to finance and consequently build government and private-sector platforms to operationalize the benefits of the digital economy, which is also another key priority of the Government.
Strengthening South-South Cooperation
The learning exchange between the Bank of Sierra Leone and the Central Bank of Kenya was established, which helped to enhance the capacity of the staff of the Bank of Sierra Leone to learn more about global innovation in banking and the regulation of FinTech.
Challenges and Lessons Learned
- Technology-enabled financial services are becoming increasingly sophisticated as they rapidly evolve and scale. The rise of FinTech presents many regulatory challenges for Sierra Leone. The Bank of Sierra Leone, with limited expertise in technology, finds it difficult to understand FinTech and assess its implications for regulation, hence the need for technical assistance and grant support, which the IBSA funds have enabled. The Bank of Sierra Leone, like any other regulators in a developing economy, typically has limited resources, and technology-led innovation adds additional pressure. Without an appropriate regulatory environment, inclusive financial innovation may be stifled and financial exclusion exacerbated. This project is filling this vacuum.
- The Bank of Sierra Leone embarked on its FinTech journey just over two years ago with the launch of the National Strategy for Financial Inclusion 2017–2020 and has been learning and experimenting along the way. The Bank has introduced a number of innovations including the FinTech Challenges and the Regulatory Sandbox. The journey continues as the United Nations Capital Development Fund (UNCDF), with support from the IBSA Fund, continues to support finetuning policies and regulations to adapt to new developments and constantly help the Bank to learn from the industry and other regulators through exposure visits.
The sustainability of the project activities funded through the IBSA Fund has been a key priority. It is expected that, at the end of the funding grant, all the providers of financial services, given their revenue projections, will be sustainable and should be able to scale their innovations.