Financial Sector Reform PDF Print E-mail

Meeting of Working GroupIn February 2008, the Ministry of Trade and Industry, the Ministry of Finance and Economic Development and the Bank of Sierra Leone, worked with the Sierra Leone Business Forum to organize a successful Financial Sector Seminar on the theme “Evolving the Financial Sector: Delivering Faster Growth.”

A key outcome of the seminar was the formation of a “Financial Sector Working Group” to facilitate efforts at reform of the financial sector. The Working Group comprised of members drawn from key institutions in the public and private sector. These included the insurance industry, the Central Bank, the Ministry of Finance and Economic Development, Professional Bodies, Commercial Banks, non-banking sector, the Institute of Public Administration and Management, representatives of small and large businesses, and business Associations. The Sierra Leone Business Forum serves as the Secretariat.

A reformed financial sector that will serve the needs of a growing private sector in Sierra Leone is required because access to finance for small businesses, the poor and agricultural activities is still very limited. Physical barriers are compounded by weak institutional, legal and administrative frameworks. A robust and efficient financial sector is therefore a necessary solution for effective private sector development.

In Sierra Leone, however, the financial system has been struggling to effectively serve the needs of the private. Small and medium enterprises dominate the private sector in terms of numbers. They however continue to grapple with many constraints including lack of adequate access to finance, lack of assets for collateral, lack of reliable accounts for business transactions, and huge dependence on informal sources of financing.

Other physical barriers to financial sector development include weak roads, water supply, and electricity infrastructure; institutional, administrative, and legal obstacles; shortage of skilled professionals; insufficient technology resources, lack of public knowledge and education on products and procedures of a modern financial system; the inability of the Central Bank to effectively conduct monetary policy; and an underdeveloped non-bank financial sector and financial intermediation. The capital market was still evolving, although the establishment of the Interim Stock Exchange facility was an added push, the report said.

In its bid to ensure access to finance, the Working Group and the Bank of Sierra Leone developed the Financial Sector Development Plan (2009) which aims to ensure that the financial sector delivers faster growth through the private sector. Funding for implementing the Plan is being sought from the World Bank by the Bank of Sierra Leone.

Critical challenges that remain to be addressed include capacity building in the financial institutions, financial deepening to improve access to financial products and services, capital adequacy of the Central Bank, its financial autonomy and independence, legislative reforms, including commercial courts and alternative disputes resolution mechanisms, developing financial infrastructure and technology to improve on payment systems, credit and financial reporting, and establishment of an effective Capital/Securities market.


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