Credit access in Benin is a complicated issue that activists, governmental organizations and foreign aid groups have been working to improve for several years.
Development Credit Authority
There are a few different ways that organizations have approached the issue. One method, incorporated by the U.S. Agency for International Affairs (USAID), involves improving Development Credit Authority (DCA). The program is designed to allow residents to apply their credit to projects for improving health and agriculture.
Through DCA, more than 500 guarantees have been made with USAID by financial institutions. These have resulted in up to $4.8 billion in private financing, creating opportunities for more than 245,000 entrepreneurs worldwide.
The Microcredit Program
Credit access in Benin is an issue that the local government attempted to solve as well. In 2007, the governmental set up the Microcredit Program, which allowed people to take out loans for individual success and enterprises. It was designed to improve credit access across the country.
Credit access can affect poverty rates as well, giving people a chance to start new. Loans majorly affect a person’s ability to be successful and achieve personal goals.
Credit Access in Benin for Women
The World Bank recognizes in an overview of Benin’s finances that poverty in the country has a history of being unequal between genders. Women are more vulnerable and have fewer economic opportunities despite a lower poverty rate. Female-led households in poverty are at 28 percent in the country, while male-headed homes are higher at 38 percent.
Economic opportunities such as the opportunity to participate in personal economic goals or business endeavors can be improved by credit, increasing the accessibility of economic opportunity for women.
Risks to Credit Institutions
Despite foreign aid efforts and the government working to improve credit access in Benin, the issue is still a complicated one and improvement is difficult due to the way that credit has been established in the country.
According to the International Monetary Fund (IMF), several risk factors are present regarding the way credit institutions have been established and overseen in Benin. Government involvement, government bonds and the shallow financial market are risks to the success of the banking system and credit access in Benin. According to IMF, “The recent government plan not to pay back short-term bank loans, but to issue long-term bonds instead would not only deepen banks’ exposure to sovereign risk but also aggravate liquidity risks due to a sharp change in the maturity structure of the affected banks’ portfolio.”
As the government works to improve the credit system and the management of government loans and bonds, credit access in Benin may change. USAID and other groups will continue to look for ways to improve credit access in Benin. The DCA program is only one way activists are working on improving the issue and financial analysis from organizations such as the World Bank and the IMF will be useful going forward for people looking to make a change.
– Gabriella Evans