Munich Re Foundation is a private grant making foundation. Its focus areas include education and training, science and research, disaster prevention, environmental protection, and public healthcare. As of 2008, Munich Re had total assets of USD 342.8 billion, and an ROE of 15.3 percent. Munich Re serves a total of 5, 000 clients in 160 countries [2].

At the conference, Munich Re was joined by the International Labour Organization (ILO) Microinsurance Innovation Facility. The ILO presented a new study of microinsurance in Africa, which found that 14.7 million people living on less than USD 2 a day are covered by microinsurance in 32 African countries [1]. This represents approximately 2.6 percent of the African population. The study also found discrepancies between countries. For example, 2.7 percent of the Senegalese population are covered by microinsurance, while 18.5 percent are covered in South Africa. Presenters from the ILO added that while life insurance was becoming more prevalent in Africa, health insurance products only covered 1.9 million people. Thus while there has been an 80 percent increase for most African countries in people covered by microinsurance from 2005 to 2008, there are still several challenges facing HMI specifically [1].

Prisca Soares, secretary general of the African Insurance Organization (AIO) said at the conference that she saw two major challenges facing HMI. “The first is education, but not only for the population; the providers too need to have a deeper understanding of the target market. The second is innovation. We need to think outside of the box and look at the needs of each individual population group, know their culture and customs, and it’s only by doing this that we will be able to offer good-value microinsurance products” [1].

Dr. Shreeraj Deshpande, head of the health insurance department at India-based insurance company Bajaj Allianz, adds to these challenges the issues of finding a distribution model which works at low costs, and establishing a process that allows distributors to handle a large number of insurances with very low premiums. Bajaj Allianz has implemented microinsurance schemes which are run and controlled by local community organizations. A community collects the premiums and administers their use. Bajaj Allianz receives 33% of the premiums and deals with cases “at the higher end of the spectrum” [3].

A past MicroCapital story the successes of an organization dedicated to HMI, Grameen Kalyan. Through the Grameen Kalyan microinsurance scheme, HMI clients pay a yearly insurance premium (USD 1.73 a year for Grameen Bank members and USD 2.17 for non-Grameen Bank members) which covers up to six family members [4]. For more details about this scheme and Grameen Kalyan, please visit http://www.microcapital.org/microcapital-story-grameen-kalyan-offers-health-microinsurance-for-usd-173-per-year-and-partners-with-pfizer-inc-ge-healthcare-and-mayo-clinic-is-it-economically-viable/. A similar organization, Caregiver, is also covered by MicrCapital: http://www.microcapital.org/microcapital-story-scalable-and-sustainable-micro-health-insurance-just-around-the-corner/.

By: Diya Chopra, Research Associate

Bibliography:

[1] Munich Re Foundation

http://www.munichre-foundation.org/NR/rdonlyres/E151BD0B-EC78-4828-B819-1E111E971DE8/0/20091105PressReleaseMIC2009.pdf

[2] Munich Re Annual Report 2008

http://report.munichre.com/reports/munichre/annual/2008/gb/English/5010/consolidated-balance-sheet.html

[3] Bajaj Allianz

http://knowledge.allianz.com/en/globalissues/microfinance/microinsurance/micro_health_insurance_india.html

[4] http://www.microcapital.org/microcapital-story-grameen-kalyan-offers-health-microinsurance-for-usd-173-per-year-and-partners-with-pfizer-inc-ge-healthcare-and-mayo-clinic-is-it-economically-viable/

A recent MicroCapital story provides the background for the discussion at this forum. For more information, please visit: http://www.microcapital.org/microcapitalorg-story-remittance-duopoly-international-fund-for-agricultural-development-ifad-african-development-bank-afdb-and-inter-american-dialogue-iad-hold-global-forum-on-remittances-c/

At the closing session of the forum, several conclusions were reached. First, the participants recommended that more market actors, particularly microfinance institutions (MFIs), post offices, and credit unions be permitted to act as payout locations [1]. According to an IFAD report titled Sending Money Home to Africa, the number of payout points across the African continent is currently serving one-tenth of the population [2]. According to IFAD, a payout point is a physical location where an inbound foreign currency transfer is received and where remittance recipients collect their money [2]. For details on the IFAD report, please visit http://www.ifad.org/remittances/pub/money_africa.pdf.

A paper titled On Reducing Remittance Costs, released by the World Bank in May 2005, reached a similar conclusion, pointing towards the necessity of such institutions to be able to receive and transfer foreign currency locally [3]. According to the forum participants, this would increase outreach to rural areas where individuals must travel long distances to cash their money.

Another recommendation made at the forum was the promotion and support of increased competition in a market currently dominated by two money transfer groups, Western Union and Money Gram [4]. Please see the aforementioned MicroCapital story for details on the issue of competition and remittances in Africa. The participants added that any exclusivity agreements discouraging competition should be discontinued. According to IFAD, Western Union and Money Gram have protected the returns of their initial investment by requiring that agents sign exclusivity agreements. IFAD explains that “these agreements effectively ‘lock’ more than half of all available payout locations. Entities wishing to partner with these companies have to sign exclusivity agreements. This prevents other competitors from expanding their network” [2].

Another conclusion drawn at the forum was the importance of employing technology to improve access to financial services in rural areas. One such technology is the use of mobile phones [1]. According to IFAD, 93 percent of remittance-receiving MFI clients own a mobile phone and mobile phone owners are likely to receive more remittances in rural locations than those who do not own a mobile phone [2]. Another technology would be a software platform allowing financial institutions to pay in foreign currency.

The International Fund for Agricultural Development (IFAD) was established as an international financial institution in 1977 under the United Nations. IFAD’s goal is to empower rural women and men in developing countries to achieve higher incomes and improved food security [5]. According to IFAD’s most recent annual report, as of December 31, 2008 the organization had total assets of USD 7.2 million, and a total investment portfolio of USD 2.8 million [6].

MicroCapital has previously covered stories on remittances, which have been referenced in the bibliography section below [7] – [10].

By: Diya Chopra, Research Assistant

Bibliography:

[1] Afrol News

http://www.afrol.com/articles/34544

[2] IFAD

http://www.ifad.org/remittances/pub/money_africa.pdf

[3] World Bank

http://siteresources.worldbank.org/INTPROSPECTS/Resources/Onreducingremittancecosts-revisedMay12.pdf

[4] MicroCapital

http://www.microcapital.org/microcapitalorg-story-remittance-duopoly-international-fund-for-agricultural-development-ifad-african-development-bank-afdb-and-inter-american-dialogue-iad-hold-global-forum-on-remittances-c/

[5] IFAD

http://www.ifad.org/governance/index.htm

[6] IFAD Annual Report 2008

http://www.ifad.org/pub/ar/2008/e/12_e.pdf

[7] MICROFINANCE EVENT: 2009 International Forum on Remittances, Organized by the International Fund for Agriculture Development, October 22-23rd 2009

[8] MICROCAPITAL PAPER WRAP-UP: Migrant Remittances: A Development Challenge, Published by the African Development Bank Group

[9] MICROCAPITAL.ORG STORY: International Finance Corporation (IFC) Purchases Bonds Worth 11.5 Billion Colombian Pesos (USD 6.2 Million) to be Loaned by Remittance Distributor ‘Giros y Finanzas’

[10] MICROCAPITAL PAPER WRAP-UP: Financial Infrastructure: Building Access Through Transparent and Stable Financial Systems by the World Bank

The Times of India, an Indian daily news source owned by The Times Group, indicates predictions, by unidentified financial analysts, that approximately USD 200 million will be invested by venture capital/private equity funds in the Indian microfinance sector in 2009 [2]. For MicroCapital coverage of this story, please visit http://www.microcapital.org/microcapital-story-indian-venture-capital-private-equity-funds-turn-to-investing-in-microfinance-institutions-in-india/

According to Indian Microfinance, a virtual news source for microfinance in India, since 2008, USD 210 million has been invested in microfinance in India through 20 deals, of which Hyderabad (India)-based SKS Microfinance accounted for 53 percent [3]. SKS, India’s largest microfinance institution (MFI), received USD 75 million from PE investors in November 2008 [4]. According to the 2008 microfinance industry report by Intellecap, a social investment advisory firm, the current Indian MFI market is valued at approximately USD 1.5 billion [3].

SKS Microfinance is a non-bank finance company (NBFC) providing financial services for the poor. SKS was founded in 1997 and is based in Andhra Pradesh, India. According to the Mix Market, the microfinance clearinghouse, SKS has a gross loan portfolio of USD 278, 710, 715, and 3, 520, 826 active borrowers. As of March 31, 2009, SKS had total assets of USD 596, 162, 206, a debt to equity ratio of 3.57, an ROA of 3.68%, and an ROE of 18.72% [5].

Following closely behind SKS is Hyderabad-based MFI, Spandana Sphoorty Financial Ltd, raising USD 6.4 million in PE investments [6]. According to the MIX Market, the microfinance information clearinghouse, Spandana was established in 1998 and has approximately 1.2 million active borrowers.  As of March 31, 2008 Spandana’s gross loan portfolio was USD 182.2 million and total assets were USD 208.9 million.  As of the same date, the institution’s debt-to-equity was 8.56, ROE was 53.62 percent and ROA was 4.34 percent [7].

According to Xavier Reille, leader of the Consultative Group to Assist the Poor’s (CGAP) Transparency Team, there is still much work to be done to encourage interest in equity investment in microfinance. Mr. Reille explains that “primary issuances are still limited by the small pool of investable MFIs and by the absence of an organized secondary market. A majority of transactions are in the form of private placements, and so far there have been only two pure microfinance IPOs (Compartamos in Mexico and Equity Bank in Kenya). With the current turmoil in the market, it’s unlikely we’ll see new ones any time soon” [6].

CGAP and J.P. Morgan have teamed up to analyze the challenge of valuing equity investments in microfinance. They have produced a set of benchmarks for the valuation of microfinance equity. For MicroCapital coverage of this analysis, please visit http://www.microcapital.org/microcapital-story-the-consultative-group-to-assist-the-poor-cgap-with-support-from-jp-morgan-chase-co-releases-empirically-based-study-of-valuation-models-used-in-microfinance-equity-invest/.

For more information regarding PE investments in microfinance, please see [7]- [10] of the bibliography.

By: Diya Chopra, Research Associate

Bibliography:

[1] Financial Express

http://www.financialexpress.com/news/Soaring-microfinance-lures-PE-investors/537843/

[2] Times of India

http://timesofindia.indiatimes.com/NEWS/Business/India-Business/VC/PEs-bet-on-micro-finance/articleshow/4844292.cms

[3] Indian Microfinance

http://www.indiamicrofinance.com/microfinance/private-equity-microfinance/high-valuations-deter-private-equity-investments-in-indian-microfinance-sector.html

[4] Indian Microfinance

http://www.indiamicrofinance.com/microfinance/private-equity-microfinance/pe-fund-inflow-to-indian-microfinance-sector-grows-242.html

[5] MIX Market

http://www.mixmarket.org/mfi/sks

[6] Indian Microfinance

http://www.indiamicrofinance.com/microfinance/private-equity-microfinance/valuing-equity-investments-in-microfinance.html

[7] MicroCapital

http://www.microcapital.org/microcapital-story-spandana-sphoorty-financial-ltd-issues-inr-800-million-usd-17-million-one-year-10-percent-bonds-in-deal-arranged-by-standard-chartered-bank/

[8] http://www.microcapital.org/meet-the-boss-discussions-on-successful-due-diligence-when-evaluating-microfinance-investment-vehicles-financial-viability-interview-with-christina-leijonhufvud/

[9] http://www.microcapital.org/microcapital-paper-wrap-up-microfinance-investment-vehicle-miv-performance-and-prospects-highlights-from-the-cgap-2009-miv-benchmark-survey-by-cgap/

[10] http://www.microcapital.org/microcapital-story-the-consultative-group-to-assist-the-poor-cgap-with-support-from-jp-morgan-chase-co-releases-empirically-based-study-of-valuation-models-used-in-microfinance-equity-invest/

SKS Microfinance, a non-banking finance company regulated by Reserve Bank of India, provides 50-week loans for income generation in developing societies. Founded in 1997 by Mr. Vikram Akula, SKS’ mission is to provide financial services for the poor. The MFI has provided upwards of USD 1.1 billion in financing, and has maintained a lending book of up to USD 425 million. SKS finances income-generating jobs in the following sectors: agriculture, trade, production, livestock, and new age business. According to the MIX Market, as of March 31, 2009 SKS reported total assets of USD 596.2 million, 3.5 million active borrowers, and a gross loan portfolio of USD 279 million. SKS also reported a debt-to-equity ratio of 3.6, an ROE of 18.7%, and an ROA of 3.7% [3].

For MicroCapital coverage on the microfinance sector in Punjab, please visit:

http://www.microcapital.org/microcapital-story-grameen-foundation-and-women%E2%80%99s-world-banking-express-concern-over-the-potential-crisis-in-punjab-pakistan%E2%80%99s-microfinance-sector/.

By: Diya Chopra, Research Assistant

Bibliography:

[1] Punjab News Line

http://www.punjabnewsline.com/content/view/20225/38/

[2] DNA India

http://www.dnaindia.com/money/report_sks-microfinance-seeks-to-expand-in-north-india_1157581

[3] MIX Market

http://www.mixmarket.org/mfi/sks/data

The initiative is designed to improve the poor’s access to insurance markets by assisting insurance supervisors and strengthening their expertise in the area of emerging and underserved markets. The release said that IAIS and those involved in the project plan to “contribute towards an improved policy, regulatory and supervisory environment consistent with international insurance standards, encourage investment in the insurance sector, and develop sustainable microinsurance operations in emerging markets” [1].

Further details regarding the initiative have not been released. According the ILO website, a document on regulation and supervision of microinsurance in emerging countries is currently being drafted [2].

Armando Vergilio dos Santos Junior, chair of the IAIS Subgroup on Microinsurance said “The challenge before us today is to elaborate standards that allow low-cost delivery of insurance services without exposing customers to unnecessary risks and costs” [1]. For MicroCapital coverage on some of the challenges facing the microisurance industry, please visit http://www.microcapital.org/microcapitalorg-story-wharton-business-school-online-portal-acknowledges-the-need-for-innovation-in-the-microinsurance-sector-and-highlights-the-existing-barriers-to-a-wider-acceptance-of-microinsur/. For discussion of the potential for microinsurance in emerging markets, please see http://www.microcapital.org/microcapitalorg-story-the-scope-for-microinsurance-and-the-importance-of-best-practices-observations-by-accion-international-zurich-financial-services-and-risk-management-solutions-inc/.

The International Association of Insurance Supervisors (IAIS) was established in 1994. Based in Switzerland, IAIS represents insurance regulators and supervisors in nearly 140 countries [3]. For a comprehensive list of IAIS members, please visit: http://www.iaisweb.org/index.cfm?pageID=31. IAIS issues global insurance principles and standards, provides training and support on issues related to insurance supervision, and organizes meetings and seminars for insurance supervisors [3]. In January 2008 it launched the IAIS DISCOVER Project which was created to deliver online tutorials to insurance supervisors around the world. As of December 31, 2007, total assets for IAIS were USD 5, 901, 294, according the company’s annual report available on its website [4]. IAIS’ funding comes from investments in a Swiss Government bond, as well as certain members and third parties, such as the Bank for International Settlements, the Financial Services Agency (Japan), and others in the form of grants [4].

The Consultative Group to Assist the Poor (CGAP) is an independent policy and research center dedicated to advancing financial access for the world’s poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. At the end of 2008, CGAP’s total assets exceeded USD 40 million [5].

The World Bank is a source of financial and technical assistance to developing countries around the world for purposes including education, health, public administration, infrastructure, and more [6]. For more information, please visit http://web.worldbank.org/

The International Labour Organization (ILO) was founded in 1919. ILO is the global body responsible for drawing up and overseeing international labour standards. Working with its member states, ILO seeks to ensure that labour standards are respected in practice as well as principle. An annual report for the organization is not available on its website [7].

FinMark Trust is the founding sponsor of the Access to Insurance Initiative. FinMark was established in March 2002 with funding from the UK’s Department for International Development (DFID). FinMark is an independent trust whose mission is to “make financial markets work for the poor.” FinMark attempts to do this by promoting and supporting policy and institutional development in un- and under-banked parts of Africa. Financial information is not available in the company’s annual report [8].

The German Federal Ministry of Economic Cooperation and Development (BMZ) is a ministry of the Federal Republic of Germany. The BMZ was founded in 1961 for the purpose of providing financial aid and help to developing countries. The BMZ’s budget for 2009 is USD 8.6 billion [9].

Related stories and paper wrap-ups on the Microcapital.Org portal on the advantages and disadvantages of microinsurance have been referenced in the Bibliography section below [10] – [18].  

By: Diya Chopra, Research Associate

Bibliography:

[1] IAIS http://www.iaisweb.org/__temp/22_October_2009__Launch_of_new_global_programme_to_improve_access_to_insurance.pdf

[2] ILO

http://www.ilo.org/gimi/concertation/ShowNews.do?nid=4415

[3] IAIS

http://www.iaisweb.org

[4] IAIS

http://www.iaisweb.org/__temp/2007-2008_Annual_report.pdf

[5] CGAP

http://www.cgap.org/p/site/c/aboutus/

[6] World Bank

http://siteresources.worldbank.org/EXTAR2009/Resources/6223977-1252950831873/AR09_Complete.pdf

[7] ILO

http://www.ilo.org/global/About_the_ILO/lang–en/index.htm

[8] FinMark Trust

http://www.finmark.org.za/index.aspx

[9] BMZ

http://www.bmz.de/en/ministry/budget/index.html

[10] MICROFINANCE PAPER WRAP-UP: Emerging Markets in Microinsurance, by Arthur D. Little

[11] MICROCAPITAL STORY: Microinsurance Innovation Facility Opens Second Round of Research Grants

[12] MICROCAPITAL STORY: Tensions In The Microinsurance Sector – Observations From Munich Re’s Experience In Indonesia

[13] MICROCAPITAL STORY: Opportunity International’s MicroEnsure of the United Kingdom to Launch Microinsurance Program for Climate Change and Crop Failure in India

[14] MICROCAPITAL STORY: Microfinance Investors Back The Leapfrog Financial Inclusion Fund To Raise USD 44 Million For Microinsurance

[15] MICROCAPITAL STORY: Zurich Bolivia and Microfinance Bank BancoSol To Offer Life Insurance To Bolivian Emigrants

[16] PAPER WRAP-UP: “Health Microinsurance: A Comparative Study of Three Examples in Bangladesh” by Mosieh U Ahmed, Syed Khairul Islam, Md. Abul Quashem, and Nabil Ahmed (Part IV of IV)

[17] MICROCAPITAL STORY: Scalable and Sustainable Micro Health Insurance Just Around the Corner?

[18] MICROCAPITAL STORY: Asian Development Bank (ADB) and Japan Fund for Poverty Reduction (JFPR) Approve $2m Grant to Help Grow Microinsurance Service in Bangladesh

Event Date: October 29- October 31, 2009

Event Location: Hilton Hotel, Nairobi, Kenya

See Our Comprehensive Event Calendar Here: http://microfinanceassociation.ning.com/events

Who Should Attend?

The conference is only open to the members of the MicroFinance network [MFN].

Summary of Event:

Leaders of microfinance institutions (MFIs) from over 20 countries will gather to share ideas, experiences, and innovative solutions to the challenges faced by the institutions in search of continuous growth and progress. Dr. James Mwangi, CEO and Managing Director of Equity Bank, said “This conference comes at time when microfinance institutions have taken a central role in poverty reduction, aimed at improving the living conditions of the majority rural poor, especially in emerging markets in Africa and Asia” [1].

Event Theme and Topics:

A major topic of the conference will be how the global financial crisis has affected MFIs across continents. Another theme is “keeping leadership in a changing environment.” Individuals will also be looking at models which are most effective in poverty alleviation, and discussing strategies and forecasts for the coming year (2010) [1].

Background on Organizer:

The MicroFinance Network (MFN) is a global association of institutions committed to improving the quality of life of the poor through the provision of credit, savings instruments and other financial services. The members of the Network believe in the establishment of sustainable and profitable institutions that operate on commercial principles and serve large volumes of clients who are not currently served by traditional financial institutions. As of December 31, 2008 the MFN had 36 members [2].

Background on Host:

The Equity Bank of Kenya was founded in 1984. It accounts for 52 percent of bank accounts in Kenya with over 4.1 million accounts [3]. According the MIX Market, the bank has a gross loan portfolio of over USD 535.8 million [4]. As of December 31, 2008, the bank has a return on assets of 5.91 percent, a return on equity of 22.16 percent, and a debt to equity ratio of 2.92 [4]. According to the most recent financial data from the bank, profits of 2.7 billion Kenyan shillings, the equivalent of over USD 35.8 million, were reaped in the first half of 2009 [5].

Location Information:

Hilton Nairobi Hotel
Nairobi Central
Nairobi, Kenya
+254 020 2790000

By: Diya Chopra, Research Associate

Bibliography:

[1] Kenya Broadcasting Corporation
http://www.kbc.co.ke/story.asp?ID=60647

[2] MicroFinance Network
http://www.mfnetwork.org/mfn-annual-conference.html

[3] Equity Bank
http://www.equitybank.co.ke/about.php?subcat=124

[4] MIX Market
http://mixmarket.org/mfi/equity-bank/data

[5] Equity Bank Financial Results: http://www.equitybank.co.ke/about.phpsubcat=5

The volunteers are coming from Accenture Development Partnerships (ADP), the non-profit consulting arm of Accenture; Citigroup, a global financial services company; and Dow Chemical (Dow), a chemical manufacturer [1].

Grameen Koota’s most recent available financial statements from the end of 2006, available on the MIX Market, the microfinance information clearinghouse, report a gross loan portfolio of USD 10.4 million, total assets of USD 12.5 million, an ROA of 5.7%, an ROE of 72.3%, and a debt to equity ratio of 9.6 [3]. As of March 31, 2009, Enda reported a gross loan portfolio of USD 34.5 million, total assets of USD 37.7 million, an ROA of 2.88 %, an ROE of 9.09 and a debt to equity ratio of 2.13 [4]. [1].

GTC, the technology arm of the Grameen Foundation, focuses on technologies that help MFIs work more efficiently. The Grameen Foundation is a global non-profit organization that provides financial and social management solutions for the microfinance industry. Founded in 1997 and based in Washington DC, U.S., the Grameen Foundation has a global partner network of 55 MFIs, according to the MIX Market. The company’s most recent financial statements from March 2008 report total assets of USD 25.0 million, total revenues of USD 21.9 million, and total expenses of USD 16.7 million [5].

A product team from GTC along with a group of volunteers from ADP, Citigroup and Dow traveled to Grameen Koota and Enda for three weeks to conduct interviews with staff and management. The interviews were intended to capture the various needs of the MFIs, from accounting to liquidity forecasting to HR management, and to provide a list of recommended solutions to improve operations. According to the Grameen Foundation’s press release, Grameen Koota and Enda are now evaluating the recommended systems and will soon be implementing a web-based ERP solution to improve integration with the Mifos platform [6]. Details about these solutions were not released.

For more information on Mifos and technology as it relates to the microfinance industry, please visit: http://www.microcapital.org/microcapitalorg-story-the-international-banking-systems-online-journal-comments-on-how-key-stakeholders-influence-purchasing-decisions-of-microfinance-institutions-in-relation-to-information-systems/.

Accenture Development Partnerships (ADP) is the non-profit arm of Accenture, a global consulting firm. ADP provides advice and project management support for non-profit organizations, non-governmental organizations (NGOs), foundations and donor agencies operating in the development sector. Accenture was founded in 1989 and is based in Dublin, Ireland. As of August 31, 2009 Accenture reported total assets of approximately USD 12.3 billion. Total assets for the non-profit arm are not available on the company’s website [7],

Citigroup is a global financial services company that was founded in 1812 and is based in New York, NY, U.S. As of June 30, 2009 Citigroup reported total assets of approximately USD 2.0 trillion, an ROA of -0.93% and an ROE of -12.74% [8].

The Dow Chemical Company engages in the manufacture and sale of chemicals, plastic materials, agricultural, and other specialized products and services worldwide. Dow was founded in 1897, and is based in Midland, Michigan, U.S. As of June 30, 2009, Dow reported total assets of USD 66.2 billion [9].

By: Diya Chopra, Research Associate

Bibliography:

[1] PR Web

http://www.prweb.com/releases/microfinance/software/prweb3044904.htm

[2] Tech FAQ

http://www.tech-faq.com/erp.shtml

[3] MIX Market

http://www.mixmarket.org/sites/default/files/medialibrary/20501.1030/GK_CPR_06.pdf

[4] MIX Market

http://www.mixmarket.org/mfi/enda/data

[5] MIX Market

http://www.mixmarket.org/sites/default/files/Annual_Report-_2007-2008.pdf

[6] The Grameen Foundation: Mifos

http://www.mifos.org/about/news-resources/releases/accounting

[7] Money Central

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=ACN

[8] Yahoo Finance

http://finance.yahoo.com/q/ks?s=C

[9] Yahoo Finance

http://finance.yahoo.com/q/bs?s=DOW&annual

According to Mr. Sanusi, the need for supervision of MFBs in Nigeria has increased substantially over the past three years. This is primarily due to non-performing loans (NPLs) and fraudulent practices, giving rise to the prevalent illiquidity crisis in Nigeria’s microfinance sector [1]. NPLs are loans that are in default or close to being in default [2]. To learn more about Nigeria’s NPLs, please visit: http://www.microcapital.org/microcapitalorg-story-nigerian-central-bank-warns-of-increase-in-non-performing-microfinance-loans-poor-corporate-governance-and-commits-to-impose-sanctions-on-errant-officials-at-microfinance-bank/.

Several MFBs across Nigeria have closed shop, either temporarily or permanently, as a result of the illiquidity crisis. At the top of this list is the Integrated Microfinance Bank [3]. For MicroCapital’s detailed coverage of this temporary closure, please visit: http://www.microcapital.org/microcapitalorg-story-nigerian-mfi-integrated-micro-finance-bank-plc-imfb-temporarily-closes-doors-due-to-lack-of-liquidity/.

The illiquidity crisis has raised concerns over the ability of the CBN and the Nigeria Deposit Insurance Corporation (NDIC) to effectively supervise the activities of the widespread MFBs of Nigeria. Former Director of the Special Insured Institutions Department of the NDIC, Joel Ahimie, said it is beyond the current capacity of the two institutions to carry out proper examinations of all MFBs. Mr. Ahimie said outsourcing the supervision would be wise, if qualified auditing firms were hired. Mr. Adenekan, Chairman of the Lagos State chapter of the Association of Microfinance Banks of Nigeria, is in agreeance with Mr. Ahimie, asserting that the decision to outsource is long overdue [4].

Mr. Sanusi has sent a team from CBN to Ghana and South Africa, where the supervision of MFBs has been outsourced to independent audit firms. Mr. Sanusi hops the team will come back with some insights about this approach, explaining that “the oversight capacity of the CBN in terms of human beings cannot cope with the supervision of these institutions” [1].

Some individuals, however, are strongly opposed to the idea of outsourcing MFBs’ examination. One such person is William Ogumba, Deputy Director of the Other Financial Institutions Department (OFID), explaining that examination is the responsibility of the CBN and rather than outsourcing it should create another department that would focus primarily on MFBs [4].

For further MicroCapital coverage of the illiquidity crisis in Nigeria, please visit: http://www.microcapital.org/microcapitalorg-story-nigerian-mfi-integrated-micro-finance-bank-plc-imfb-temporarily-closes-doors-due-to-lack-of-liquidity/.

By: Diya Chopra, Research Associate

Bibliography:

[1]  Vanguard

http://www.vanguardngr.com/2009/10/23/cbn-open-to-outsourcing-examination-of-mfbs/

[2] Investopedia

http://www.investopedia.com/terms/n/nonperformingloan.asp

[3] MicroCapital

http://www.microcapital.org/microcapitalorg-story-nigerian-mfi-integrated-micro-finance-bank-plc-imfb-temporarily-closes-doors-due-to-lack-of-liquidity/.

[4] Vanguard

http://www.vanguardngr.com/2009/10/05/no-bail-out-for-micro-finance-banks/

Hirohisa Yukawa, author of The Role of Microfinance NGOs in a Military Governed Country, explains that current Burmese microfinance programs are limited to three districts, the Delta Region (Irrawaddy), the Dry Zone (upper Burma) and Shan State, reaching about 5 percent of Burma’s population [2]. These programs operate under the United Nations Development Programme (UNDP) in collaboration with the United Nations Office for Project services (UNOPS) [3]. The new program in Myanmar, however, will operate under the Burmese military, according to the Narinjara news release.

The program will be financed by Burma’s Ministry of Cooperatives. Loans will average USD 30, says an official from the Maungdaw Township Council Office [1]. Loan guidelines require that borrowers form a group of five people. The official stated that over 40 such groups have registered with the office so far to partake in the microfinance program.

According to the loan guidelines, anyone defaulting on his/her loan for three consecutive days will be permanently dismissed from the program. One local businessman says that some people have applied for the loans with the hope of surviving the current poverty crisis; however, others “shun the program” as it relates directly to local authorities [1].
 
A MicroCapital story explains that Myanmar’s unstable political situation has aggravated economic conditions not only in the region itself, but also in border areas such as Thailand. As such, the Japanese Government gave USD 84, 000 through its embassy in Thailand for a microcredit initiative on the Thailand-Burma border [4]. For more information on this initiative, please visit http://www.microcapital.org/microcapital-story-japan-gives-usd-84000-to-support-microcredit-on-the-thai-burmese-border-through-the-grassroots-human-security-projects-scheme/.

By: Diya Chopra, Research Associate
 
Bibliography:
 
[1] Narinjara News

http://www.narinjara.com/details.asp?id=2384

[2] International Society for Third-Sector Research: The role microfinance NGOs in a military governed country: A case study in Myanmar. Hirohisa Yukawa.

[3] Fiery Dragons: Banks, Moneylenders, and Microfinance in Burma. By Sean Turnell.

http://books.google.ca/books?id=nxb9fwtVUcwC&pg=PA320&lpg=PA320&dq=undp+%2B+unops+%2B+burma+microfinance&source=bl&ots=J83OY3-IAI&sig=teBL0kXYAcBK3ZaXqpR8obY6Jf4&hl=en&ei=xB7nSt3KH9PmlAfJrIGOCA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CAsQ6AEwAA#v=onepage&q=undp%20%2B%20unops%20%2B%20burma%20microfinance&f=false

[4] Embassy of Japan in Thailand

http://www.th.emb-japan.go.jp/en/jis/2009/0921.htm

Micol Pistelli, manager of Social Performance at the MIX Market, the microfinance information clearinghouse, and author of “Advances in Measuring Social Performance- Why Does it Matter?” explains why he believes social performance indicators are necessary for the microfinance industry. Ms. Pistelli asserts that social performance management and reporting allow for increased transparency which is important not only in attracting funds, but also in ensuring that clients’ needs are met [1].

Ms. Pistelli says transparency also allows clients, stakeholders and prospective investors to assess microfinance institutions (MFIs) in a fair and holistic fashion. He also explains that a universal set of indicators helps these individuals to compare MFIs with one another on a level playing field. This universal characteristic allows MFIs to assess themselves vis-à-vis their peers, including their own progress and shortcomings relative to the microfinance industry at large.

A previous MicroCapital story discusses the importance of having a cohesive set of indicators for the microfinance industry. For more information, please visit http://www.microcapital.org/paper-wrap-up-beyond-good-intentions-measuring-the-social-performance-of-microfinance-institutions-by-syed-hashemi/#more-1429.

With respect to the creation and implementation of such indicators, Ms. Pistelli draws attention to The Social Performance Task Force (SPTF). The SPTF is an international multi-stakeholder group established in March 2005 by the Consultative Group to Assist the Poor (CGAP), the Argidius Foundation, and the Ford Foundation. The purpose of the SPTF is to define social performance standards for the microfinance industry and address questions relating to social performance measurement and management. The SPTF consists of over 350 leaders from the microfinance field. It has developed 22 indicators designed to measure an MFI’s internal systems and activities, related outputs, and observed changes in the lives of clients.

A previously published MicroCapital story provides details regarding these indicators. For more information, please visit http://www.microcapital.org/microcapital-story-microfinance-information-exchange-mix-announces-release-of-the-social-performance-task-force%E2%80%99s-sptf-social-performance-indicators-survey/.

In February 2009, MIX sent a survey to all MFIs registered in the MIX Market to collect information on the 22 aforementioned indicators. Since then, over 100 MFIs have reported their social performance information. Half of these reports are now available on the MIX website.

Ms. Pistelli concludes by acknowledging that the integration of social performance into management is a gradual process, one which requires extensive planning and a management information system that can keep track of indicators. For further MicroCapital coverage of this topic, please visit http://www.microcapital.org/paper-wrap-up-beyond-good-intentions-measuring-the-social-performance-of-microfinance-institutions-by-syed-hashemi/#more-1429.

For MFIs interesting in reporting social data, please visit http://www.mixmarket.org/contribute-data.

By: Diya Chopra, Research Associate

Bibliography:

[1] “Advances in Measuring Social Performance: Why Does it Matter?” by Micol Pistelli. October 2009. MIX Market.