Engrossing graph encountered while researching the effect of Chinese investment in Africa (click on it for the full size version):

From the excellent World Bank report, Africa’s Silk Road.

We are now in Burkina Faso, the last stop on what has been a fascinating and somewhat challenging tour of West Africa. Here’s a beginner’s guide to one of the world’s poorest countries:

1. Located in the heart (and heat) of West Africa, between the Sahara desert and the forests of the south, Burkina Faso has one of the highest fertility rates in the world. The average Burkinabe woman has six children. As a consequence, the population has increased five-fold in the past half-century. At 15 million, however, it is still under-populated compared to Great Britain, which is of similar size but has four times more people. It’s still too crowded though for the 3.5 million Burkinabe who live and work in neighbouring Ivory Coast.

2. Known in colonial times as Upper Volta, Burkina Faso means ‘Land of the Honourable People.’ Burkinabes are known as among the most honest folk in Africa.

3. The country has arguably the world’s best place names. Its capital – one of the oldest cities on Earth – is Ouagadougou. Leafy Bobo-Dioulasso, from where I am writing this, is the second city. It also boasts the desert market town of Gorom-Gorom (so good they named it twice), Bouroum-Bouroum (ditto), Fada N’Gourma, Tin-Akof, Niangoloko and, er, Rambo.

4. Burkina has few natural resources. The French only colonised it because it was a bridge between their coastal territories of Benin and Ivory Coast and their desert holdings in modern-day Mali and Niger. It even stopped being a country for 15 years from 1932, when it was carved up between its more important neighbours. The French made good use of Upper Volta’s human resources, however, forcing hundreds of thousands to build railways, farm cocoa and fight in the First World War trenches.

5. The country is dominated by the Mossi ethnic group. A tribe of brilliant horsemen (which may account for the profusion of betting shops in Bobo), the Mossi repelled slave raiders and other rivals and remained intact for 400 years until their kingdom fell to the French. Captain Paul Voulet, who led the French expedition, was a real-life Kurtz figure, who stuck victims’ heads on poles, roasted children over fires, and strung up soldiers who displeased him at a height where their feet could be reached by hyenas’ hungry jaws. When his superiors tried to rein him in, he told his troops he was no longer French but a “black chief,” who would found his own empire. After he was killed, the French, embarrassed that their civilising mission in their colonies had gone awry, attributed Voulet’s activities to the maddening heat of Africa.

6. Burkina Faso is one of Africa’s least urbanised societies. Despite plagues of locusts, catastrophic droughts, desertification, and the fatal effects of US cotton subsidies (Burkina produces cotton at one-quarter the cost of American cotton, but subsidies mean US producers can undercut Burkinabe farmers), over three-quarters still live in the countryside. The French colonial administrator R Delavignette wrote in 1946 that, ‘We came from an industrialised Europe where factories are joyless affairs, and found people who worked to music. Communal labour had its drums and tom-toms, its orchestras to cheer the workers on.’ Drummers still accompany farmers at planting and harvesting times today.

7. Burkina hosts Africa’s most important film festival, the biennial Fespaco (the next one is in 2011). Cinema attendances are falling, however, because of the proliferation of pirated DVDs.

8. Burkina was home to the ill-fated revolutionary Thomas Sankara, who as president alienated the French by calling them neo-colonialists, told the country’s creditors he wouldn’t pay them back (‘you played the game, you lost,’ he explained), slated African leaders for their corruption, and practised what he preached by ditching the ministerial Mercedes for a Renault 4, taking out a $2,000 mortgage to buy a house, and cycling around Ouagadougou on a rusty old bicycle (is David Cameron a secret fan?). Cheques he wrote often bounced. Sankara was killed in 1987 by soldiers close to his friend Blaise Compaore, who many suspect ordered the assassination. Frequently described as Africa’s Che Guevara, Sankara, who unlike most African revolutionaries died before he could sully his reputation, remains a hero to young idealists from all over the continent.

9. Blaise Compaore is still the Presdient of Burkina Faso today. Something of an eminence grise, as well as being linked to Sankara’s death he was also implicated in civil wars in Liberia and Sierra Leone, and is a longstanding supporter of the vicious Liberian warlord Charles Taylor (currently on trial in The Hague for war crimes). On the other hand, Compaore has also helped broker peace, for now, in Guinea. In the 2005 election, judged ‘free and fair’ by the 1500 (count ‘em) international observers who were flown in to watch, he gained 80% of the vote.

10. Burkina’s main cities saw violent street protests in 2008, as food and fuel prices climbed beyond the reach of most urbanites. As Compaore has loosened his dictatorial grip on the country, protests of all kinds have increased. One year, the authorities in Ouagadougou tried to force motorcycle riders to wear helmets. Vigorous rioting forced them to back down.

“You wouldn’t understand this country if you stayed here for five years. I don’t understand it,” says Nestor Cummings-John, the head of the Sierra Leone Women’s Movement (“faute de mieux,” he replies when I ask why the group is run by a man).

I take his point. After six weeks in Guinea-Bissau (plus a lot of background research), I felt I had a fairly good grasp of how the society worked, why things are as they are, and what the prospects are going forward. But after six weeks in Sierra Leone, my mind is full of confusion, as chaotic as Freetown’s deranged street markets. I can only hope that a few weeks of quiet reflection somewhere sane like Burkina Faso will help me sort through the jumble of impressions, fears, questions and competing explanations that are clattering around my head.

One of the questions I’m grappling with is whether Sierra Leone is knitting itself together after Siaka Stevens’ ruinous dictatorship and the even more damaging civil war, or if in fact the country is in danger of slipping back into conflict.

Tony Blair, who visited Freetown last year, believes Sierra Leone is “thriving.” The Truth and Reconciliation Commission, on the other hand, which was set up to investigate the causes of the war, argues that the same levels of poverty, corruption and youth alienation pertain today as prevailed twenty years ago, before the war started. As Paul Collier showed in The Bottom Billion, moreover, most countries that go through one civil war endure another within a decade or two.

Blair’s view is buttressed by the fact that the country has been at peace for nine years, that it held uneventful elections in 2007 which were widely judged to be fair, and that dangerous neighbours like the Liberian thug Charles Taylor are off the scene. Exiles are returning, drawn by peace and the still-tantalising prospect of mineral riches. And many Sierra Leoneans have told me their compatriots have learned their lesson from the war and are extremely reluctant to go down that road again.

Not everyone is so sanguine, however. While the wealthy are generally quite optimistic about the future, the poor remain disgruntled, railing against the corruption of the rich and the ineffectiveness of government. “The poor don’t love their country,” says Joseph, a young Freetonian working with Amnesty International. Edward, an old man in a Freetown slum, says the poor have no reason to be patriotic. Most young people I’ve met have asked me to help them acquire visas for Britain. (more…)

More disgraceful drivel from Con Coughlin, who is still employed by the Telegraph as its “executive foreign editor” (yep, there’s a story behind that job title).

Coughlin – last noted on Global Dashboard cheerleading for torture – hopes that the Queen gave South African president, Jacob Zuma, “a lesson in etiquette.”

About the only good thing that can be said about South African President Jacob Zuma’s State visit to Britain is that he might learn some lessons about how to conduct himself in public.

Just why the Labour government thought it a good idea to extend an invitation to the legendary philanderer, who loves nothing more than to prance around a stage in tribal dress waving a machine-gun, is something of a mystery…

Having been exposed to the brilliant pageantry that Britain puts on for visiting heads of state, and the quiet dignity with which the Queen conducts herself on such occasions, one sincerely hopes that the experience will give Mr Zuma pause for thought. Mr Zuma is, after all, the head of state of a country with a rich and proud history, something that should be reflected in the dignity of his office.

As if that wasn’t bad enough, Coughlin goes on to accuse Zuma of a lack of gratitude to the UK. And what should be thank us for? Nothing more than the end of white majority rule in South Africa.

Yes – according to Coughlin - ”It was Britain’s opposition to South Africa’s apartheid regime that eventually allowed his ANC freedom movement to seize power.”

Update: A good time to recall Coughlin’s track record helping MI6 plant stories in the press, and his work fuelling the rumour that Saddam was behind 9/11.

When I arrived in Sierra Leone six weeks ago and encountered its friendly people, spectacular beaches, lively nightlife and mysterious traditions, I wondered why the country has so few tourists (in our six weeks we have met a total of three, with three or four other possible but unconfirmed sightings).

It didn’t take long to find out. A nation that should be eager to attract tourists seems to be making systematic efforts to keep them out. If you were trying to make it as difficult as possible for foreigners to visit your country, I could recommend the following measures, which all work brilliantly for Sierra Leone:

- Charge an exorbitant sum for visas (£50 for a month, compared to, say, £10 for three months in Turkey, a much more tourist-friendly destination)

- Make obtaining the visa more complicated than for any of your neighbours by forcing applicants to produce a letter of invitation from a Sierra Leone national

- Encourage customs officials in the airport to be as surly as possible, and fail to punish them for extracting bribes from new arrivals for performing the simplest of procedures

- Build your airport thirty miles away from the capital city, on the opposite side of a giant river mouth, forcing visitors to cross either by helicopter, which regularly crashes, or ferry, which often breaks down or sinks. Make sure, too, that the ferry departure times do not coincide with incoming flights, so that your visitors will have to wait for hours in the burning sun (you will of course already have ensured there is no shade at the dock)

- Allow dozens of hustlers to converge on new arrivals as they exit the airport, giving preference to pickpockets and con merchants

- Refuse to harness the torrential rain in the rainy season to provide water and electricity to visitors at any time of year. This will ensure they cannot take respite from the heat with the help of fans, cold drinks, air-conditioning or showers. It will also mean restaurants and food stores will be unable to refrigerate food, thereby increasing the risk that your visitor will fall sick

- In the event that he does fall sick, make sure you spend none of the billiions of pounds of aid you receive on building effective hospitals or recruiting competent doctors to treat him

- Make your public transport system as slow and uncomfortable as possible, by failing to maintain vehicles so that they break down often, waiting until they are full before departing hours behind schedule, and packing two people into seats designed for one

- Enhance the effect of the above by allowing roads paid for by foreign donors to deteriorate and then failing to fill in the hundreds of resultant potholes

- Should a tourist somehow manage to shrug off these obstacles and apply for a visa extension (you have no psychiatric hospitals to house him, of course), redouble your efforts to force him out. To do this, hire the least friendly, most corrupt people to work in your immigration department. Extort money from your visitor for a visa extension that is officially free, then smile smugly at his distress

- As a final punishment for having the cheek to visit your country despite all your efforts to stop him, charge the departing, browbeaten tourist a £50 airport tax

NB: For foreign investors, multiply your efforts tenfold.

Xavier Sala-i-Martin and Maxim Pinkovskiy today published a working paper today that drops the following bombshell (here’s a free version):

Our main conclusion is that Africa is reducing poverty, and doing it much faster than we thought. The growth from the period 1995-2006, far from benefiting only the elites, has been sufficiently widely spread that both total African inequality and African within-country inequality actually declined over this period. In particular, the speed at which Africa has reduced poverty since 1995 puts it on track to achieve the Millennium Development Goal of halving poverty relative to 1990 by 2015 on time or, at worst, a couple of years late. If Congo-Zaire converges to Africa once it is stabilized, the MDG will be achieved by 2012, three years before the target date. These results are qualitatively robust to changes in our methodology, including using different data sources and assumptions for what happens to inequality when inequality data is not available.

Not much reaction yet – but I’m intrigued to see what other economists are going to make of their work…

Update: Xavier Sala-i-Martin has a wonderfully crazy Columbia University website – he likes FC Barcelona, Salvador Dali and Beavis and Butthead.

Update II: These Economist articles from 2004 (one, two) offer useful background. The crux of the matter seems to be that Sala-i-Martin and Pinkovskiy use GDP to measure poverty (working out distribution of income from household surveys) – the World Bank’s figures are derived directly from the surveys themselves.

The New Yorker has a long profile of Paul Krugman that’s worth a look. The passage that has stuck with me is not really about Krugman but one of his friends…

Krugman began to realize that in the previous few decades economic knowledge that had not been translated into models had been effectively lost, because economists didn’t know what to do with it. His friend Craig Murphy, a political scientist at Wellesley, had a collection of antique maps of Africa, and he told Krugman that a similar thing had happened in cartography. Sixteenth-century maps of Africa were misleading in all kinds of ways, but they contained quite a bit of information about the continent’s interior—the River Niger, Timbuktu. Two centuries later, mapmaking had become much more accurate, but the interior of Africa had become a blank. As standards for what counted as a mappable fact rose, knowledge that didn’t meet those standards—secondhand travellers’ reports, guesses hazarded without compasses or sextants—was discarded and lost. Eventually, the higher standards paid off—by the nineteenth century the maps were filled in again—but for a while the sharpening of technique caused loss as well as gain.

This could act as a metaphor for all sorts of current debates, and academia’s contribution to them, but I leave you to fill in the blanks…

“It’s not diamonds that are the problem,” says Ali, a Lebanese diamond dealer in eastern Sierra Leone. “Diamonds are just stones. It’s people that are the problem.”

Sierra Leone has some of the highest quality diamonds in the world. Like a lottery winner who wastes his fortune and sinks into misery, however, the country has been unable to cope with its windfall. “Blood diamonds” have been blamed for causing its horrific civil war, which saw rebel militias, Liberian thugs, mercenaries, Sierra Leone’s army, and UN and Nigerian “peacekeepers” killing and maiming in a desperate struggle to gain control of the gem trade.

Since the war finished in 2002, Sierra Leone has languished among the world’s poorest countries, with nothing to show for its rich treasure trove of minerals. Economists see it as a classic example of the resource curse, which plagues many poor nations endowed with valuable natural commodities: mineral wealth allows governments to neglect the rest of the economy, enrich themselves, and ignore those outside their circles, forcing the excluded to resort to violence to obtain a share of the loot.

But the failure of resource-rich nations is not inevitable. Botswana has thrived on the back of its diamond mines. South Africa, brimming with gold and diamonds, is Africa’s largest economy. Australia, another diamond producer, doesn’t do too badly.

Earlier this week we spent the day at a diamond mine near Kenema. Johnny, a Sierra Leonean who has spent most of his life in England, has come back with his wife Suzy to dig for diamonds. Using borrowed money, they have leased an acre of land deep in the jungle and hired fifty men from surrounding villages to dig a forty-foot-deep pit and sift through the mud and gravel it throws up.

It is easy to see the allure. When we arrive, Johnny shows me yesterday’s haul of eight small stones. The first looks like an undistinguished lump of glass, but the second, flawless, looks like a diamond and, although rough (it will be cut in India or Antwerp), its different facets glitter as I turn it around in the sun. It is worth about £1,000. On the neighbouring plot last year, a Lebanese found a thirty-carat diamond worth £4 million. From one moment to the next, Johnny could get rich.

Or die trying. Another nearby plot was mined for two years by some Americans. They didn’t find a single gem. Prices fell by 80% in the recession, prompting many miners and dealers to switch to gold, which provides a steadier, less risky income. Ali’s business partner almost bankrupted him by giving him a fake cheque for £100,000-worth of diamonds. “We say the profit from diamonds reaches from your toes to your knees, but the losses reach up to your throat,” he says, making a strangling gesture. He is currently pursuing the man through Interpol.

(more…)

The leone, Sierra Leone’s currency, is not highly prized abroad. Nor is it especially strong compared to more established currencies: in 1978 when it broke from its sterling peg, the leone was worth 50p; buying 50p today would set you back 3,000 leones.
Sierra Leoneans with cash, therefore, along with importers of goods and those travelling overseas, are eager to get their hands on dollars, pounds or euros. Foreign diamond dealers, the legions of UN and NGO workers, local people who receive remittances from abroad, and the country’s dribble of masochistic travellers need leones in cash because there are no ATMs and nobody accepts credit cards.

If you don’t mind the 250-leone to the dollar spread, you can change money at foreign exchange bureaus or banks. But whereas the latter buy dollars for 3850 leones and sell them for 4100, the spread with Freetown’s Dollar Boys is a much more generous 4000-4050.

You can’t move more than a few yards in downtown Freetown without hearing the words, “Hello sir, change?” as a Dollar Boy accosts you, brandishing a large wad of leones or dollars. Dollar Boys are illegal, but their clients include government officials and ministers, big businesses and even banks in need of a liquidity top-up. The governor of the Central Bank sends someone onto the streets every day to find out how much his currency is worth. When I mention to Ahmed, a Dollar Boy of my acquaintance, that I’ve been to the Ministry of Foreign Affairs, he tells me he knows the building well as he provides a delivery service to ministry officials. “Even if they wanted to, the police couldn’t stop us,” he says. “We have too many customers.”

Ahmed makes around 20,000 leones (£3.30) a day – a decent sum by local standards. On his best day ever, someone (probably a diamond dealer but he doesn’t ask questions) changed $15,000 into leones – lacking that much cash himself, he had to bring in other Dollar Boys to make up the shortfall. He delivered the money in a huge box that he carried on his head through the streets of Freetown.
Although illegal, the Dollar Boys are well organised. Each one has his own patch, or “Base” – Ahmed loiters outside a bank – and each area has its own “committee,” with one central committee overseeing all the others.

The committees, which were set up on police advice after a Dollar Boy was murdered by Nigerians a few years ago, protect their members against violence and fraud (according to Ahmed, most of those who try to exchange counterfeit money are women). They also run an insurance pool, into which all members make regular payments so that if one is cheated for a large sum or suffers a family disaster, he has a cushion against bankruptcy.

The committees have two other important roles. The first is to protect the industry’s image, by investigating customer complaints, punishing bad behaviour and weeding out bad apples. The second is to vet new entrants to the market. As in the formal sector in Sierra Leone, you can only become a Dollar Boy if you have the right connections. Incumbents collude to keep out potential competitors (too many Dollar Boys, of course, would reduce each individual’s profits). Unwanted newbies – and Ahmed reports that competition to enter the fray is fierce – are told to keep away. If they refuse, the committees take them to the police and report them for acting illegally (yes, really). The police respect the committees – many of them use Dollar Boys’ services themselves – so they are usually sympathetic.

This morning, presumably because of a burst pipe, a trickle of water was bubbling up through a hole in the surface of a busy Freetown street. Next to the hole, a man in rags was on his hands and knees, lapping at the water like a dog.

Mobile phones are spreading through Sierra Leone like a cholera epidemic. Everyone either has one or aspires to one. Phone theft is common (my own lasted a week). People will sacrifice meals or school fees to buy credits (everyone is on pay-as-you-go, and stalls selling top-up scratch cards are ubiquitous, as are recharging shops, since few have electricity at home).

There is keen competition among the major mobile networks – Zain, Africell and Comium adverts adorn billboards, bars and houses, whose owners charge a monthly rent for you to daub your logo over their walls. They sponsor pop concerts, sports events and even Freetown’s venerable cotton tree, under which the first freed slaves congregated to plan their new lives.

As in Europe, the operators do not shirk from sharp practice. Calls to someone else on your network are cheap, but if you call a Zain phone from an Africell sim your costs soar. To combat this, Sierra Leoneans buy a sim card for each network and give out three numbers to contacts – a sim costs a dollar, and phones are sold unlocked. Some have handsets that can carry two cards at once, and you press a button to choose which to use for a particular call. Others have three phones with a different sim in each. The less affluent have to open up their phone to change the card each time they call another network (this of course means that you often have to dial three different numbers before you can get through to someone).

The mobile exerts a dictatorial hold on social intercourse. Nothing is more important than an incoming call. Businesspeople interrupt meetings to take calls from friends, family and colleagues; the judge in a court case we observed last week kept halting proceedings whenever his phone rang; a beer with a Sierra Leonean friend is a series of stops and starts as he or she fields calls or replies to texts. (more…)

Had a surprisingly interesting tour of Freetown’s port yesterday. It’s the world’s third largest natural harbour.

Seventy years ago, the ship carrying my grandfather to the Far East during the war anchored briefly off Freetown. He remembered the oppressive heat and humidity, and the hawkers who rowed out to the ship in dugout canoes to sell their wares to British soldiers (plus ça change). The soldiers would lower buckets down to the canoes and haul up fresh fruit and snacks. For entertainment, some would drop coins into the sea, which intrepid young boys would dive down to retrieve from the seabed.

The port is a pretty modern affair these days. A couple of hours there gives you some insight into the workings of the country. A huge Norwegian vessel was unloading limestone to make cement (the post-war rebuilding of Freetown continues); another ship was being emptied of flour; dockers employed by the day were asleep in the shade of Maersk containers. Rice, bizarrely in such a hot and wet country, is the main import commodity, followed by wheat and iron rods for construction. Iron ore (processed elsewhere – Sierra Leone lacks the industrial capacity to process anything), timber, bauxite and rutile are the main exports (diamonds and gold are exported by other means). The World Food Programme has its own depot there, half-full of sacks of corn and flour.

We were shown round by a security guard, Alex, who has worked at the port for twenty years, including during the war when RUF rebels took it over and looted all the containers. His main duties include checking departing ships for drugs and stowaways. He says about half of the ships bound for Europe contain four or five stowaways. They row in in the dead of night, climb into the rudder hole, and sit tight – for weeks.

Sitting forlornly at the far end of the dock is a medium-sized Chinese fishing vessel. On it are a couple of Chinese men and a Sierra Leonean soldier. The boat was caught and impounded last autumn for fishing in Sierra Leone’s waters without a license (a common problem in West Africa). Seven Chinese fishermen have languished in a Freetown prison ever since – those who remain on board take them food every day but are not allowed to leave the country. To obtain his and the boat’s liberty, each prisoner must pay a $25,000 fine, but the shipping agent has failed to cough up. The vessel, guarded round the clock, is quietly rusting.

I’ve been in Freetown for a couple of weeks now and am starting to get my head around the place. Sierra Leone has only recently climbed off the foot of the UN Human Development Index, but signs of poverty, which people in the West – where its most abject form is mostly confined to society’s margins – can go long periods without glimpsing, are everywhere.

Among the most arresting are the crowds gazing at DVDs playing in shops; the emptiness of markets after festivals; the accused dressing up for court in clean T-shirt and flip flops; young African girls on the beach with old white men; the hordes of disabled people – not just amputees from the war but also victims of polio, leprosy and unhealed fractures; beggars of all ages on every street corner; the ubiquity of slums, which as well as having whole districts to themselves also fill in the gaps in more affluent areas;  billboards telling people to beware of counterfeit medicines; people collecting used plastic water bottles; the popularity of lottery outlets; car engines being switched off going downhill; children outside a bar at night using the electric light from inside to see their homework; stalls selling individual cigarrettes, pills and teabags; incessant and insistent requests for money or help with getting to the UK, even by people who work; the huge number of working children; and, of course, the proliferation of NGOs.

And finally an audible indicator of poverty, in the shape of a complaint made to me last weekend by an old man in a slum: “We should be shitting four or five times a week,” he said, “but people here only shit twice a week.”

Of course, traditional banks like Ecobank look down on microfinance as a small-fry, over-risky industry. In Freetown I met SB, who heads a not-for-profit microfinance institution (MFI).

Set up in 2002 by a large American NGO but now self-sustaining, it has 20,000 members in four Sierra Leonean cities. It lends sums of between $120 and $2000 – in a country where most people live on a dollar a day, this means the loans are too large for the poorest people to access (SB says small loans are too costly to administrate).

Loans are for “income-generating activities” only. That is, not for weddings, funerals, medical bills or luxuries, for example, although SB is receptive to my argument that the first three of these can indirectly lead to improved income-generating capacity by relieving stress and strenghtening health (he also admits that some loans probably end up being spent on consumption rather than investment).

Most of the loans are repaid over 6-10 months, with repayments made weekly. They do not come cheap. The monthly interest rate is 3% – with inflation at around 11% this works out at an annual rate of 25%. And to this must be added the cost of travelling to the MFI’s office to make repayments (my medicine seller friend Musa said he gave up his membership because having to pay every week was too tough – his business is collapsing, and he asked me to fund him last week instead). Clients put up with these rates because they are poor, and cannot access cheaper loans because they lack collateral and credit ratings – SB’s MFI relies on word of mouth references, visits to inspect businesses, and guarantors.

Eighty per cent of clients are self-employed businesspeople, who borrow to buy palm oil for cooking businesses, refrigerators for storage, baskets and trays for hawking, and stock. The other twenty per cent are salaried but moonlighting. Eighty per cent of clients are women because, as SB says, men want to shoot for the big pot so they look down on small loans. Women are also much better payers.

The recession has hit the MFI’s clients hard. Remittances and investment from abroad have slumped, and the increased costs of food and fuel have hit customers. Many small enterprises, says SB, have gone to the wall. The normal default rate on loans is 3-4%, but in 2009 11% of money loaned was not repaid. As SB put it, “You might want to pay back a loan but if you have the choice of maintaining your credit rating or feeding your family, you don’t worry about not being able to borrow again in the future.”

If clients do default, the MFIs have limited options for chasing their losses. SB threatens to take bad debtors to the police but never carries it through because he knows it won’t help him recover the money. He worries that “clients talk to each other,” and come to see not-for-profit MFIs as a soft touch. Readers of Hernando de Soto will not be surprised to hear, moreover, that in many cases SB can’t even find his errant clients – some don’t have identity cards, and changes of address are frequent and go undetected by officialdom.

SB’s profits (which are all reinvested) have halved in the past year. Other MFIs have seen similar or worse slumps – in Morocco, once the poster child of African microfinance, the government has had to step in to help as several MFIs went bankrupt after defaults soared to 30%.

Because of the recession, many MFI clients have resorted to “multiple borrowing.” They join several institutions at once, borrow money from all of them, and often fail to repay. The problem is so serious that SB’s MFI has stopped taking new members until it figures out a way to stop the multiple borrowers. Such is people’s desperation, he says, that “if we opened up our membership now, we’d have 200 applicants queuing outside our office every day.”

Last week I met someone high up in the Sierra Leone branch of Ecobank. He proudly told me the history of his bank.

In the 1980s, because of widespread instability and the collapse of most African economies, Western banks like Barclays and Citibank pulled out of the continent. West Africa was left bankless.

Seeing this, West Africa’s chambers of commerce got together and decided that instead of allowing the Westerners’ withdrawal to cause further damage to African businesses, they would set up a bank of their own. The chambers of commerce didn’t have any money, however, so ECOWAS (the Economic Community of West African States) stumped up the initial capital. The chambers of commerce didn’t have banking skills either, so they talked to Citibank in New York and drew up a contract whereby Citi would set up the new bank, run it for its first four years, and train Africans to take it over after they left.

Lome, the capital of Togo, was chosen as Ecobank’s headquarters, as Togo was the only stable West African state at the time (it was ruled by a dictator). After four years, and having made good money out of the deal, Citibank handed the new entity over to Africans. Ecobank now has branches in thirty African countries, Paris and Dubai, and is planning to open up in London and New York. And it’s still run entirely by Africans.