MICROCAPITAL STORY: IFC Explores Investment Opportunities in Southern Sudan

The International Finance Corporation (IFC) has announced in a press release that it will explore emerging microfinance investment opportunities in Southern Sudan. Jean Philippe Prosper, the IFC Director for Southern and Eastern Africa recently visited Southern Sudan and reported that, “More stable conditions on the ground and an improved business environment have created the right conditions for IFC and other investors to consider new investments in Southern Sudan”. An investment climate team from IFC and FIAS, a multidonor investment climate advisory service of the World Bank Group, has been providing assistance to Southern Sudan since 2006.

While the specifics of where the IFC has contemplated investing have not been released, Southern Sudan has only a few key microfinance institutions (MFIs) that have emerged over the last decade. In December 2007 it was announced that Bank of Southern Sudan (BoSS) would launch the Microfinance Development Facility with funding from the World Bank administered Multi-Donor Trust Fund (MDTF) within the framework of the Private Sector Development Project. The Sudan Microfinance Institution (SUMI), the only MFI in Southern Sudan reporting to The Mix Market, was launched in 2003 with a grant from the United States Agency for International Development (USAID) and to date has opened five branches with over 8,000 clients. Its total assets for the 2007 financial year were reported at USD 1.5 million and its debt/equity ratio was reported at 10.63 percent. Additionally, Five Talents, a Christian microfinance development initiative, is providing funding to a pilot microfinance programme in Wau Diocese, which began in September 2005 and currently has 270 members.

Microfinance was recognized as a priority sector for Sudan in the mid-1990s. The demand for microfinance services is substantial, however the industry currently only covers 1-3 percent of the potential market. Ninety percent of the population in Southern Sudan is estimated to be living on an income of less than USD 1 per day. Islamic values have traditionally played an important role in the operation of Sudanese microfinance, more details of which can be explained in this MicroCapital Paper Wrap-Up. However under a 2005 peace deal to end the civil war in Sudan, only conventional banking would be allowed in the south, a deal which resulted in Islamic banks closing down rather than converting, taking USD 45 million between them.

The International Finance Corporation (IFC) is an intergovernmental organization launched in 1956. It is a member of the World Bank Group and its main objective is the promotion of private enterprise. The IFC finances private sector investment, mobilizes capital in the international financial markets, and provides advisory services to businesses and governments. The IFC reported liquid assets, net of derivatives and securities lending activities of USD 14.6 billion in 2008.

By Lori Curtis, Research Assistant

Additional Sources:

MicroCapital Story: “Bank of Southern Sudan Launches Facility to Encourage Microfinance with Support from International Donors led by the World Bank“

MicroCapital Story: “Five Talents Joins a Consortium of Fellow Christian NGOs to Support Microfinance Program in Sudan“

Mix Market Profile: “Sudan Microfinance Institution“

Paris Microfinance Network: “Microfinance in Sudan“

Reuters: “South Sudan orders Islamic banks to leave“

World Bank: “Project Information Document: Concept Stage“