The Central Bank of Liberia has begun 2013 by unveiling further plans to ensure enhanced wealth creation, which it believes as an undisputable basis for developing a higher standard of living for the people.
Consequently, the CBL maintains that most important role of government in any society is the welfare enhancement of its people.
This constitutes an embodiment of a broad spectrum of social and political actions that must be carefully planned to achieve the desired goal. Therefore, CBL through its policy implementation has made tremendous contributions to the wellbeing of the Liberian society. Over the past few years years, the CBL under the stewardship of Dr. J. Mills Jones has made financial services accessible to a broad spectrum of the Liberian people--one of its key policy objectives through a number of initiatives, among which are the Credit Stimulus Packages for Liberian-owned SMEs. Among these packages are, the US$5 million to Liberian owned businesses, the bridge loan of US$20 million to the Government of Liberia, the US$10 million for the development of housing market, US$ 7.5 million to the agriculture and fishery sector and L$200 million for the Microfinance Industry.
The US$10 million to help develop the housing market is important for the development of a middle class, which is the bedrock of a sound stability over the long term. The development of low-income housing should be given priority and the benefits should not be limited to Monrovia and its environs.
The provision of affordable and decent housing facilities to a large segment of the society will help to raise their standards of living. Over time, the construction of decent housing can be a key component of economic and social development and stimulus to the deepening of democratic institutions and ideas. Housing for all is essential to economic, social and civic development in developing countries' economics. It serves as a major source of employment worldwide; it is particularly effective in creating jobs in Africa, where building technology is still enormously labor-intensive. Low-cost housing construction in Liberia utilizes mainly unskilled labor and it can therefore provide large numbers of decent paying jobs for the poor who have limited education and employment opportunities.
In addition, housing construction generates jobs in many others locally based ancillary industries such as furniture, equipment and supplies. It is estimated that in developing countries the multiplier generated by housing construction is 1.0, meaning that for every dollar spent on housing construction; another dollar is spent in other sectors.
Housing construction is not only a key driver of economic growth, but also responds to growing demand for improved housing facilities and urban infrastructure that leads to creation of good health environment in urban areas. People living in slum areas and informal settlements are subject to much higher incidences of infectious and environmental diseases. Decent housing facilities improve the chances for success in prevention programs against these epidemics.
The provision of the housing stimulus package is a practical manifestation of the importance CBL attaches to the development of a vibrant real estate sub-sector in Liberia.
The US$7.5 million stimulus package provided by the CBL is intended to enhance access to credit for agents in agriculture, a sector we cannot afford to ignore if our nation will rise above the scourge of poverty. Effort to raise production and productivity in the agricultural sector is critical and has the potential to have a direct impact on the current account of our balance of payments through increased food production md import substitution. This will have a beneficial effect on the value of the Liberian dollar.
Financing agriculture is important because it remains one of the supporting pillars of the Liberian economy and is the driver of the country's long-term prosperity. It is a key to substantial reduction in food insecurity and improvement in nutrition, creation of youth employment opportunities as well as increased government revenue, provide foreign exchange earnings and provide import for manufacturing and processing on a sustainable basis.
In sum, the Central Bank recognizes that access to credit is cardinal to the government's strategy to create wealth, build a middle class and equalize opportunities for all Liberians, and is using its
reserves through the various initiatives to help make credit available to all segments of the Liberian society on more favorable terms, thereby strengthening the foundation for sustained, inclusive economic growth and development.
The Credit Stimulus Package launched by the CBL in 2011 has had the effect of sustaining more than 2,500 Liberian jobs. The Package has afforded Liberian entrepreneurs to borrow funds at more affordable interest rates. Women-owned businesses have benefitted and it is known that women have difficulty getting credit to do business. It is a good thing for Liberians to take ownership of the economy as it helps to increase our national income.
Another important area in which the CBL has been concerned about is the microfinance sector.
This sector, when proper intervention is made, has a huge potential to reduce poverty in a more direct way than most other measures. This is where one finds the petty traders, tailors. Carpenters, cross-border merchants, villagers engaged in subsistence trade, among others. The provision of financial assistance to microfinance institutions will help create the enabling environment fu grassroots participation in economic development.
The CBL is aware of the enormous contribution that these people at the lowest spectrum of the income ladder can make in creating economic activity when they have access to finance.
The CBL, during the year provided over L$200 million to Microfinance institutions (MFI), Credit Unions and Village Savings and Loan Associations (VSLAs) throughout the country through the Loan Extension and Availability Facility as a means to boost inclusion in the financial sector and further enhance output growth and employment of those with low income.
In support of microfinance, a Loan Extension and Availability Facility (LEAF), was made in the amount of L$200 million, with a loan size of L$33.8 million, disbursed to 290 men and 2,330 women. The facility also supported Twenty six (26) credit unions with a loan size of L$19.2 million. Thirty, one (31) Village Savings and Loans Associations (VSLAS) received a total of L$7.5 million and the funds were disbursed to 23 men and 645 women.
This is a development that has a positive impact on the poor. The growth of microfinance is being guided by a five-year National Strategy for financial inclusion (2009-2013) and a Microfinance Policy, Regulatory and Supervisory Framework both of which were developed in 2008 by the CBL. The CBL has also developed in 2010 prudential regulations for microfinance deposit-taking institutions (MDIs) to bring about further inclusion of the poor in to the financial sector by making it possible for low-income earners to have the opportunity to save as well as borrow. Of course, these achievements did not manifest obliviously, they came through the actions and policies envisioned by the Executive Governor of the CBL, Dr. J Mills Jones, which contributed to the achievements made since 2006.
Another important contribution of the CBL to the economy in recent years has been reform efforts put in place to improve the financial landscape. Under the guidance of Governor Jones at the CBL, a number of reforms have been put in place that have resulted into increases in the number of commercial banks and branches operating in the county. Though there are still some challenges in the banking sector, the continued reform measures for prudential banking services have led to these developments.
The number of banks that operated in the country in 2006 was 5 with 17 branches, concentrated mainly in Montserrado County. However, as at end- December 2012, the number of banks increased to 9 with a total of 78 branches operational in 10 of the 15 counties. This has led to the availability of credit to the private sector to increase from L$2,690.0 million in 2006 to L$l8.9 billion recorded in 2012. Under the stewardship of Dr. Jones at the CBL, the minimum capital requirement of banks has increased to US$lO.0 million in 2011, from 2.0 million in 2007. The recapitalization measure is intended to strengthen existing commercial banks in the country.
Looking at the larger picture, the CBL has done a good job to ensure macroeconomic stability. In particular, the Bank has used its reserves to provide foreign exchange to the private sector through is foreign exchange auction program.
In this regard, the CBL auctioned US$72.4 million during 2Ol2, and has made it possible for small businesses, including those in the Liberian Marketing Association, women in cross-border trade and others, to participate in the auction.
Finally, wealth creation is an integral component in poverty alleviation. Economic history reminds us that most nations that have lifted their people out of poverty, for example China, Korea, Singapore were those that industrialized their manufacturing processes. Any serious dent into poverty reduction will require policy measures that put wealth creation at the center sage.
The efforts by the CBL to empower Liberian businesses, improve agricultural productivity and increase access to finance by the unbanked population should be welcomed by all as necessary first steps which lead to wealth creation. Let us be reminded again, as the CBL has stated that at the end of the day, economic management is about bettering the lives of the people.