In a recent case of poor governance, the IDB has informed Benin in early January of its decision to withdraw from a Mudarabah financing agreement worth XOF16.5 billion (US$30.81 million) aimed at supporting a microfinance program. MARC ROUSSOT writes.
“It appears that pages of the document that was approved and signed by Benin’s authorities have been substituted. Agents of the Autonomous Sinking Fund of Benin introduced new provisions pertaining to the payment of intercalary* and default interest on top of administrative charges,” according to a statement.
With the introduction of these provisions to the detriment of the microfinance program, agents of the Autonomous Sinking Fund of Benin would have been qualified for bonuses based on recovery operations. Having discovered the changes in the agreement, the IDB took the decision to cancel the financing.
Following a cabinet meeting, ministries have been tasked to file a new application to the IDB, suspend civil servants who were involved in the fraud and take all necessary disciplinary and judiciary measures against them. According to several of Benin’s media outlets, Dieudonne Bleossi Dahoun, the general director of the Autonomous Sinking Fund of Benin appointed in October last year, has already been dismissed and several other executives suspended.
Signed in April 2016, the financing would have been channeled to the US$50 million Integrated Program for Microfinance Support in Benin II, which intends to increase the standard of living of rural communities through economic empowerment of the population.
Besides the IDB, the Islamic Solidarity Fund for Development, the poverty-alleviation arm of the IDB, was expected to provide US$20 million. It is unclear if this part of the financing has been canceled as well.
During the first phase of the program aimed at reducing poverty for 200,000 people per year between 2010 and 2014, 181 projects amounting to more than US$20 million were financed.
*Intercalary interest is the interest that is calculated and charged during the period from the time that a loan is granted until the start of loan repayment.
This article first appeared in IFN Volume 15 Issue 07 on the 14th of February 2018