It is generally agreed that the private sector is the major driver of growth in free market economies.  Amid high unemployment, high poverty, and limited access to both physical and financial capital, Liberian entrepreneurs and informal business owners, with the assistance of our commercial banks will be the key to creating jobs and wealth in Liberia, which will then lead to the creation of a vibrant independent business class. 

The informal sector constitutes the largest productive sector in Liberia. Unfortunately, its potential contribution to the nation development and economy has not been fully realized for a number of reasons, including the following: 

ü      The lack of consumer confidence in the banking system

ü      The lack of marketing and innovation from banks in expanding their customer base beyond Monrovia and the formal sector

ü      Predominance of informal activities.

ü      A small formal private sector that is dominated by small proprietors who are more likely the beneficiaries of the available financial resources from commercial banks.

ü      Due to a lack of formal financial knowledge, many businesses maintain neither good records of their business activities, or even have bank accounts.

ü      Indigenous Liberians have the mindset that banking is for educated people and those who live Monrovia 

As a result of the above mentioned obstacles, many entrepreneurs and small businesses (especially those operating outside the formal sector) lack proper access to financial capital. Small businesses which are largely not diversified in their activities do not have the financial or physical asset to use as collateral, and are unable to actively participate in the banking system or even secure loans from commercial banks that would enable them to start, or expand their businesses. 

At present, the Liberian government is the single largest employer in the country, where the private sector has been largely dormant since the start of the Uncivil war in 1989.

The Informal Sector accounts for about 78% of the country’s labor force.  According to data from the Central Bank, the Banking Sector within the financial system is comprised of five (5) major commercial banks namely: EcoBank; Global Bank; International Bank; First International Bank and The Liberian Bank for Development & Investment (LBDI). Nearly all of these banks and their branches are located in Monrovia, with the exception of LBDI. 

To my knowledge LBDI seems to be the only commercial bank that is going above and beyond in creating opportunities for women, rural Liberian customers and businesses, and entrepreneurs.  The Bank recently established a loan scheme that is meant to empower Liberian women in business. Known as the “Women Empowerment Program”, this program will provide loans to Liberian market women to enable them expand and improve their businesses. The bank also has a program known as the “smart capture”, which is intended to attract customers who may not have the time to fill out forms to open new accounts at the bank, or individuals that are disadvantaged and cannot read and write at all.  LBDI should be applauded for its innovative banking and its efforts in creating economic opportunities for Liberians; but more still needs to be done, and banks need to do more in creating more opportunities that can bring more people out of the informal sector. 

Banks in Liberia currently offer a wide range of financial products, including savings and checking Accounts, short term personal loans, business loans, market research, Time Deposit, Certificate of Deposits (CDs), Bonds & Guarantees, Letters of Credit (LOCs), mortgages, etc., but very few small business owners, entrepreneurs and everyday consumers are aware of these products and services due to the lack of marketing and education from commercial banks. Banks need to step up the drive for new customers and build consumer confidence in the banking system by increasing marketing and educating the population on the benefits of banking, partnering up with successful business men and women to offer financial management classes and record keeping classes for business owners and entrepreneurs, and establish more branches to cover all regions in the country. 

Dismantling the status quo in banking and lending will not happen if our banking institutions are not innovative in how they market to Liberians, collect data on businesses, and establish credit profile for their banking customers.  Small and medium enterprises (SMEs) and the informal sector have cash flows that banks can tap into, but due to a lack of data on businesses operating in the country, no one really knows the number of SMEs currently operating in the country.  It is without a doubt that the informal sector constitutes the bulk of businesses in Liberia, and banks should be very instrumental in bringing these businesses into the main stream of society because, they are just as a productive and can contribute to the economy as much as formal businesses. 

Providing financial services to the informal sector and entrepreneurs in Liberia may not be viewed by commercial banks as commercially viable but, it is an important aspect of poverty alleviation in Liberia and creating economic opportunities.  The banks need to dismantle the status quo for lending practices in Liberia. Our informal/private sector in Liberia is characterized by self-employment, and the promotion of self-employment is a basic but major component of current and future economic development in Liberia.