Mapping informal financial flows in the artisanal mining sector: The cases of Sierra Leone and Liberia

In recent years, the economic importance and formalisation of artisanal gold mining has taken centre stage in policy discussions on rural economic development in West Africa.  Research has shown that despite being associated with a host of environmental, health and safety and social concerns, the sector provides a livelihood for hundreds of thousands of poor people in the region, supplying valuable start-up capital for other economic activities.  But these gains have often come at a cost.  As artisanal gold mining is largely informal and unregulated, the territories in which it is found are largely under the control of local elite actors.  Many new entrants to the sector, therefore, are forced to forge exploitative relationships with these individuals, including buyers and middlemen, in the process becoming trapped in cycles of borrowing and indebtedness.  These informal setups deprive governments of substantial revenue, which could be captured if effective taxation schemes were in place.

Focusing on the cases of Sierra Leone and Liberia, this research seeks to inform evolving efforts to formalise artisanal gold mining in the Mano River Region by mapping informal financial flows in the communities where production is taking place.  In doing so, it will employ an innovative methodology involving the compilation of 'financial diaries' of those engaged in the sector, as well as others who depend on it for their livelihoods.  Specifically, it seeks to explore how wider changes in the financial circuits and social relations governing artisanal mining affect rural livelihoods, resource distribution and well-being at the household level. It also aims to understand and quantify the informal trans-border transactions that take place.

Complimentary in-depth interviews and focus group discussions will also be conducted with other key stakeholders. For a formalised system to have a meaningful impact on the lives of poor miners and their households, and generate the revenue needed to drive economic growth, a richer, more nuanced understanding of the socially-embedded nature of informal economic systems is first required. This project will therefore directly contribute to an important policy gap, by generating new knowledge about the loss of income in the economy that is channelled into informal flows and the loss of potential government revenue in taxes, both of which are important drivers of economic growth.