Banking and economy in Sierra Leone

Before the war, subsistence agriculture engaged about two-thirds of the working population and just before the end of war in 2002 there was substantial labor movement to the other productive parts of the country, especially the diamond mining centres.Output in cash crop production (coffee, cocoa groundnut, palm kernels) particularly in the country’s east has recently increased. The mining of diamond and rutile provides the major source of hard currency. The official registered output of diamond expanded by 44 percent over the 2002 period, totaling 352,000 carats and all from alluvial sources.
Kimberlite diamond mining started during the first quarter of 2004. Recorded manufacturing output fell in most categories in 2003 except cement production. The dollar value of registered merchandise exports jumped by 90% 2003 to US$90, almost all on the strength of diamond exports, which reached about US$78 million compared to US42 million in 2002. The history of post independence Sierra Leone has been marred by extremely poor governance, economic mismanagement and war.
After growing 4% annually in the 1960s the economy deteriorated sharply in the next two decades as a result of rampant corruption, massive state inequality, concentration of state spending on the non-poor, dismantling of local government, and a heavily taxed agriculture. Rural population per capita peaked in 1970. Between 1971 and 1989, GDP per capita dropped 37%. By 1990 80% of the population lived below the poverty line, and Sierra Leone had one of the most inequality in income distributions in the world.
The Banking sector has contributed a lot to the economy, providing the much needed foreign exchange for business activities. For example, the Bank of Sierra Leone, over the years has been establishing community banks throughout the country. The development of small and medium scale enterprise (SMEs) is crucial to creating jobs, especially in the rural areas where poverty is pervasive.
The SME strategy seeks to empower enterprises by increasing access to micro finance or small scale credit facilities with favourable lending terms, especially for the youth and women. SMEs form a dominant part of the GDP of a nation. They employ a large part of the population. SMEs also provide flexibility to the economic structure of a country and they respond to market needs faster than larger enterprises. They are widely recognized as essential to economic growth and poverty alleviation.
SMEs form the basis for graduation from the informal sector. The product and services offered by the Banking system in Sierra Leone are overdraft facilities, short- and medium-term lending, letters of credit, bonds and guarantees, bills for collection, import finance and cash collection.
Eligibility criteria for accessing funds from commercial banks range from history of business, trading performance, proper accounting, security consideration, monitoring and control, business development and remuneration. Acceptance of loan requests varies from bank to bank depending on the set criteria at the time.
Eligibility criteria for accessing funds from community banks are determined by the applicant’s honesty, integrity and reputation which must be well known in the community.
Most beneficiaries have been customers of the community bank in their region for at least six months and most maintain a savings account or current account.
Professional competence must be demonstrated through good record keeping on previous or actual successful management of the business. History of debt repayment must be without blemish and the applicants must have viable project proposals.
Rural community banks established by the Bank of Sierra Leone and other rural non-banking financial intermediaries are set to provide effective vehicles for the implementation of growth. Low income households, especially in the rural areas, will benefit from resources provided by micro-financing institutions to expand and diversify economic activities and to improve management of their resources.
The National Cooperative Development Bank, a leading institution in the provision of micro finance to cooperatives around the country, is considered crucial.
Commercial banks within the country over the years have been engaged in boosting the economy through social activities by supporting viable business entities. Most people now do bank their moneys as that helps them and the economy to grow. The economy of a country will never achieve appreciable growth levels without the participation of a viable banking sector. Banking facilitates growth through its activities with business entities and through individual input.
Sierra Leone’s post conflict economic performance has been robust, owing to recovery in the mining sector, with a real GDP growth of 4.3% in 2002. Sierra Leone’s recovery continued into 2004 when real GDP grew by an estimated 7.4%.
World Bank group activities in Sierra Leone have focused on helping the country’s transitional post conflict situation to that of sustained growth, making the best possible use of International Development Association (IDA) resources as leverage.
More support and harmonized development partnership are deemed crucial to the success of the economy. The IDA remains actively engaged with Sierra Leone, strengthening the foundation on which growth is being generated and the benefits derived equitably distributed to the country’s impoverished population. Sierra Leone’s economy will grow further, ceteris paribus… all things being equal.