Burkina Faso moves to strengthen microfinance sector with new Governance bill
In a decisive move to bolster financial inclusion, Burkina Faso’s Council of Ministers approved a draft law on October 30, 2024, aimed at fortifying governance across the microfinance sector. This legislation seeks to address critical gaps within a sector that has become essential in providing credit and savings services to populations excluded from traditional banking.
Addressing structural vulnerabilities in microfinance
Microfinance institutions have emerged as a lifeline for individuals and small businesses unable to access conventional financial services, particularly within the West African Economic and Monetary Union.
However, the sector’s rapid expansion has highlighted structural challenges, especially among credit unions and savings cooperatives, which constitute over 70% of the industry.
Inadequate governance, limited oversight, and resource constraints have raised concerns about the stability and sustainability of these institutions, potentially jeopardizing both clients and the industry at large.
The newly proposed law introduces stringent governance reforms, clarifying the roles and responsibilities of supervisory authorities to ensure better resource management and closer operational monitoring.
This step is crucial to improving transparency, preventing misuse, and securing the savings entrusted to these institutions by vulnerable communities.
Enhancing financial stability and expanding services
In addition to governance improvements, the law requires microfinance institutions to maintain a minimum level of social capital, enhancing their financial resilience and capacity to absorb potential economic shocks.
By mandating this financial base, the government aims to create a more stable microfinance ecosystem.
Furthermore, the bill allows these institutions to expand their range of services, adapting to the evolving needs of local populations and small businesses.
This legislative change opens doors for more customized financial products, empowering microfinance institutions to respond to the unique demands of their clients.
A Step towards financial inclusion and economic development
This legislative reform is positioned to strengthen Burkina Faso’s microfinance sector, aligning it with international standards and enhancing its role in promoting financial inclusion.
As the sector becomes more transparent and resilient, Burkina Faso’s citizens stand to gain secure and sustainable financial solutions, ultimately contributing to the country’s socio-economic advancement.
Maurice K. ZONGO
