From Project to Institution: AFD and Crédit Rural de Guinée Invest in Rural Finance for the Long Term

Topic :

This Donor Good Practices note sets out a case study that examines how Agence française de développement (AFD) made a long-term commitment to provide financial services to very poor, rural customers in the Republic of Guinée through a network of rural community banks.

The project required AFD and project manager IRAM (Institut de recherches et d’applications de méthodes de développement) to engage in developing a rural social fabric to support locally managed rural banks. As AFD discovered, it would have to make a tradeoff that it might not make again—it sought to establish pro-poor outreach and depth before sustainability. Achieving financial viability would consequently require a 20-year commitment, perseverance, and significant financial and institutional investment.

As of March 2004, Crédit rural de Guinée, CRG, offered savings and loan products to over 130,000 members across the country through individual rural banks. While not yet sustainable, it has a high-quality portfolio and is projected to break even in 2007, when the consolidated net income of its community banks will cover costs without subsidies for the first time.

In addition to providing a valuable service to clients, CRG today is one of Guinée’s top 20 employers and, as the largest financial institution with countrywide coverage, it is a significant force in local development.

In its discussion regarding AFD’s rural finance strategy, this short paper points to a number of areas of particular emphasis – significant investment over the long term, creation of human resource capacity, ensuring local governance, developing a supervisory model, and moving from project to institution.

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