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Turbulence for Microfinance in Benin: The PADME Crisis

CGAP

In March 2008, the Council of Ministers of the Government of Benin decided to intervene in the management and operations of PADME. PADME is the second largest MFI in Benin with almost 30,000 active borrowers and an outstanding loan portfolio of US$31 million. The Council of Ministers cited concerns with the financial and operational management of PADME and requested suspension of the Executive Board and resignation of the Director René Azokli (meeting minutes in French). This action is normally reserved by the Ministry of Finance to place a financial institution under receivership (administration provisoire).

In response, PADME’s board and management issued a lawsuit to prevent the Government’s actions, and PADME's staff went on strike. In late March, the Ministry of Microfinance installed Didier Djoi as interim Director and required staff to return to work. René Azokli, the former Director of PADME, issued a response to the Government’s charges. Azokli also spoke on national television to clarify the issues (View video, Read transcript in French).

ACCION, which has provided technical assistance to PADME since 2001, noted their “great concern and disappointment” and added that they are working to “fully understand the situation and to offer appropriate assistance for a timely and effective resolution.” Other partners of PADME including Women’s World Banking, Freedom from Hunger and Triodos also issued statements of support for PADME.

The PADME situation raises issues of MFI management and supervision as well as political risk. Do governments have adequate tools and procedures to manage such crises, and are they used appropriately? What is the appropriate role of the Government, Central Bank, donors and investors in an MFI failure (or perceived failure)? How can MFIs and banks manage political risk? Over the next weeks, many will observe the situation unfold in hopes that PADME’s clients will not lose their access to financial services.

Originally started through a microfinance project of the Government of Benin and the World Bank in 1993, PADME became a private Association in 1997. Throughout its lifetime, PADME has received funding from USAID, World Bank, ADF, Oikocredit, and BOAD, amongst others, and technical assistance from ACCION, Women’s World Banking, Freedom from Hunger and other leading international organizations. PADME has been preparing to transition from a private association to a share-capital non-bank financial institution, with potential investors including IFC, Stichting Triodos Doen, Ecobank and ACCION Investments.