The resource rich country of Liberia, under the leader of the first ever democratically elected female leader of an African nation President Ellen Johnson Sifleaf, is fighting its way toward growth and development. According to Trading Economies, Liberia’s Gross Domestic Product (GPD) increased by 8.80% in 2012, showing massive growth potential in this resource rich country. The recent growth and development has been the result of efforts by Sirleaf’s government to eradicate corruption and nepotism and to bring forth a culture of independency and hard work. This year Liberia has attended its first G8 meeting. The President enjoys international goodwill. She has been able to attract Foreign Direct Investment (FDI) with a value of more than $20 billion. Multinational oil companies like Chevron, African Petroleum and ExxonMobil are involved in drilling and exploration activities here. More and more banks, credit institutions, and large organizations like World Bank and European Union are providing microfinance opportunities to small and medium enterprises (SMEs). The financial sector of the country is slowly and steadily trying to strengthen itself. Liberia still has a long way to go but it is fighting hard.
World Bank’s (WB) Chief Economist for Africa, Shanta Davaranja, and the International Monetary Fund (IMF) head of the visiting team to Liberia, Mrs. Catherine McAuliffe, are reported to have referred to Liberia’s economy as amongst the fastest growing economies (at 7% or higher) in the world. “Liberia’s economic growth is on an upward trajectory and economic prospects over the medium term remain favourable respectively.”1
“GDP without Development”
Most economists agree that GDP is the proper indicator of an economy’s health; however, this often does not apply to Liberia. Liberia has often shown great economic growth in the previous decades; still the effect is somewhat non-existent in some places. In 1997 Liberia’s economy was the fastest growing at 106.28%, yet most places were still fighting extreme poverty. The problem is “GDP without Development”. This scenario has been true for the country since all times. This year the unemployment rate has fallen from 3.70% in 2012 to 1.70% in 2013 and GDP growth rate is also high but the pace of social development is slow. There is much needed to be done in areas of education, infrastructure, communication, energy etc.
Some sectors like the mining and rubber industry are expanding. The upside of this “GDP without Development” scenario is that there is great potential in a resource rich country that can be exploited. Already some multinational companies like those in the power and water sector have found a large population to tend to. Despite developmental problems there has been increase in the presence of multi nationals, and the Foreign Domestic income being brought into the country. This shows that multinationals realize that Liberia has the capacity and capability to become a hub of major economic activity and a great market for their products.
3 tier model
Government institutions and organizations have found the answer to this “GDP without development” problem in this 3 tier model:
– Identifying the need areas
– Providing vocational training
– Providing micro finance opportunities
Identifying a need area
Identifying a need area is one of the most crucial steps for economic and business development in any country. For Liberia this comprises a large part of the economy, as well as most aspects of human development and infrastructure etc. One example is the manufacturing sector. Since the beginning Liberia’s economy has mainly been a product of its agriculture industry. 70% of its working population is involved in the agriculture sector. Now Liberia is slowly opening up to the manufacturing sector. For a much needed move toward manufacturing sector, to come to a competing ground with the rest of the world, government, institutions, and organizations are working with the people through awareness and training. Similarly, as much is needed to be done in terms of infrastructure, the local people can be trained to provide services in the respective sector in exchange of an income. This would increase employment and motivate development.
Organizations like World Bank and EU have time and again funded projects in areas having development needs. One such example is a project was community Empowerment Project (CEP) which was implemented by Liberia Agency for Community Empowerment (LACE). This mega project comprised of 15 sub projects funded by World Bank and the EU in which a total of US$679,092.58 have been located at LOFa County for the construction of bridges, schools, box culverts, and water wells fitted with hand pumps.
Providing Vocational training
Multinationals do not just bring in FDI and employment opportunities but also their expertise and technology. Through education and professional training, many of the people belonging to rural agricultural sector have been able to learn skills that they can apply in the manufacturing sector. This is of great significance in a country which has just begun to embrace the change.
A large segment of the unemployed is the youth and women. One important reason for a fall in unemployment rate is vocational training of this group. Many initiatives like the 2008 ‘The Adolescent Girls Initiative’ (AGI) for 1500 girls between ages 16 and 24 by World Bank and Nike foundation was carried out, under which professional training and life skills training was given. The targets of the effort were girls and women because they can form a strong foundation for their family’s development. More so it has been reported that women reinvest 90% of their income in their families, thus creating a ripple effect.
Liberia’s President Ellen Johnson-Sirleaf said “We are proud of being the first country to adopt the Adolescent Girls Initiative, and we want others to join us in expanding this effort to improve the economic future of girls and young women around the world.”2
Another program like the AGI is The Ashesi Junior Entrepreneurs Network (AJEN) Liberia 2013 summer camp which targeted youth between the ages of 17 and 25. Under this program the participants were equipped with skills needed for private and social business enterprise. Such programs geared to reach the aim of “inclusive growth” are of high significance as they do not just affect one individual but one household.
In the recent years Liberia has been hit by Grameen Bank’s micro finance philosophy and by several multinational organizations, equipping the local Liberians with the much needed tools for development. The vision statement of ‘The Liberian Strategy for Financial Inclusion (2009-2013)’, a document that is the product of The Central Bank of Liberia (CBL) echoes truly the country’s hopes regarding its financial future.
“To build a sustainable microfinance industry, in order to
secure diversified and affordable financial services for all.”3
Microfinance is widely recognized and worldly appreciated as a predominant source of sustainable development. The Central Bank of Liberia is continually working with commercial banks, credit institutions, non-governmental organizations etc, to embrace and aid the fulfilment of The Liberian Strategy for Financial Inclusion and Government’s Poverty Reduction Strategy. The objective is “inclusive growth” where even the poorest of the poor benefit, for which CBL is making efforts, along with these institutions, to instil in the minds of the Liberians what Amartya Sen sees as “active agents of change, rather than passive recipients of dispensed benefits.”
Since 2005, 10 commercial Banks have opened up in Liberia which is an achievement for its financial system. By the end of 2008 Eco-bank on-lend funds to about seven thousand clients, while the Liberian Bank for Development and Investment (LBDI) provided 1.3 million US dollars to about 160 clients. In January 2009, after several years of sustained efforts by the Government and development partners, such as the International Finance Corporation (IFC), the European Investment Bank (EIB), and the African Development Bank (AfDB), ACCESS Bank Liberia – a commercial bank specializing in microfinance -started operations with a paid-in capital of US$6 million.According to World Council of Credit Unions (WOCCU) there were 154 operational credit unions, with a total of almost 26 thousand clients.7 Other MFIs include credit-onlyinstitutions, such as Building Resources across Communities (BRAC), Liberty Finance and Local Enterprise Assistance Program (LEAP), gave $4.5million in loans to 42,926 borrowers in 2012.4
There are problems of poor governance, weak links between banks and credit institutions, lack of knowledge present with MFIs regarding risk management of entrepreneurs especially those operating in the rural sector of the country, low literacy rate, poor infrastructure, and lack of awareness among people etc. CBL is working with other institutions to minimize and eliminate any of these problems. It aims to mobilize a microfinance culture by educating the common Liberian, training and retraining MFI personnel and strengthening the overall framework, and improving governance. Despite these challenges, microfinance has touched the lives of many. One such story is that of Thelma Kollie. In 2005, without any assistance, Thelma began selling some goods on a mere table. Undoubtedly the income coming from her business was very low. Thus upon hearing about micro loans being given by Balama Development Alliance, she approached them about her business. After receiving a loan of $100 she was able to buy a much larger number of goods to sell. Slowly profits began to rise and she was able to expand her business and her family’s farm. Today the family has hired ten other workers to work on their farm and is providing sustainable work for many others. Thelma’s family can afford proper food and education for the children, each of which has proved to be exceptional. Now her dream is to purchase a deep freeze and a rice mill.5
The land of the free is a land resounding with such stories of progress and development. Liberia is a resource rich country with large stocks of gold, diamond, timber, rubber, iron ore, and oil. It has the potential to set an example for other countries in Africa. The president has recognized energy, regional integration and tourism to have massive potential and massive advantages. As Sirleaf says her vision is to “get Liberia back on the path to middle income by the year 2030”6. This means an average yearly growth of 8.5% will be needed. This is a difficult target and is not one that can be achieved over night, but with proper assessment of problems, well-targeted development policies and their implementation it is not an impossible target for Liberia to achieve.