As reported by a previous MicroCapital story, Oikocredit is a Dutch cooperative investment fund comprised of church groups, social support groups, and individual investors. Established in 1975, it works in 58 countries worldwide, investing in mainly in cooperatives or small and medium-sized enterprises (SMEs) that are involved in agriculture, trade, services and manufacturing projects. According to MIX Market, the microfinance information clearinghouse, it had USD 455.8 million in total assets with 306 active investments, as of year-end 2006. Over 60 percent of Oikocredit’s loans are channeled through microfinance institution (MFI) intermediaries. Its investments have been largely successful, with loan loss of less than ten percent, throughout its 33 years of activity. Currently, the fund has USD 421.2 million available for investment.

Details of Oikocredits’ January investments are as follows:

Opportunity Bank, the leader in Montenegro’s microfinance sector and its only bank with 100 percent foreign capital, received a loan of USD 2.9 million. Established in April 2002 as Opportunity International’s first fully-licensed bank in the region, Opportunity Bank provides financial and advisory services for small and medium-sized enterprises (SMEs), agricultural producers and individual entrepreneurs. Aside from its majority shareholder Opportunity International, a nonprofit organization dedicated to microfinance, Opportunity Bank also has a number of minority private shareholders. According to its 2006 annual report, it had total assets of EUR 139 million (USD million), a loan portfolio of EUR 66.3 million (USD million), a shareholder’s equity of EUR 11.9 million (USD million), and total deposits of EUR 108.7 million (USD million), with a customer base of over 49,000. Opportunity Bank is headed by Chairman Keith Flintham and Chief Executive Officer (CEO) Mark Crawford.

Kompanion, a financial development institution in Kyrgyzstan, received a loan of USD 750,000. Established in 2004, Kompanion was formed from a merger of several micro-credit agencies. Its products include SME loans, women’s solidary group loans, and unsecured microloans. According to MIX Market, at the end of 2006, Kompanion reported total assets of USD 8.4 million, a gross loan portfolio of USD 7 million, debt-to-equity ratio of almost 1000%, return on assets (ROA) of 9.7 percent, and return on equity of 139.3 percent. It also reported a portfolio at risk (PAR) over 30 days of .35 percent with 21,801 active borrowers and 282 personnel. Kompanion is led by Chief Financial Officer Ulanbek Termechikov, and oes not currently report to a third-party performance evaluator.

Microloan Fund (MLF) Microinvest, a Tajikistan-based MFI established in 2002, received a loan of USD 300,000 from Oikocredit during its January round of investments. According to its 2006 year-end report with MIX Market, it had total assets of USD 2.6 million, gross loan portfolio of USD 2.2 million, a debt-to-equity ratio of 201.2 percent, ROA of 6.1 percent, and ROE of 14.2 percent. It also reported PAR over 30 days of .1 percent, with 5,854 active borrowers and 73 personnel. In February 2006, MLF Microinvest received a rating of BBB by Microfinanza Rating. The MFI is currently led by General Director Shoira Sadykova.

In Latin America, Prestanic, a non-governmental organization in Nicaragua, was the recipient of a USD 1 million investment from Oikocredit, who is its largest funder according to the MIX Market. Created in 1991 as an arm of CEPAD (Consejo de Iglesias Evangélicas Pro-Alianza Denominacional), it became independent in 1999 and now operates with 6 branches throughout Nicaragua. In December 2006, MIX Market reported that Prestanic had total assets of USD 13 million, a gross loan portfolio of USD 11 million, debt-to-equity ratio of 315.5 percent, ROA of 4.3 percent, and ROE of 13.3 percent. It also had PAR over 30 days of 2.8 percent, with 9,219 active borrowers and 103 personnel. In 2006, Prestanic received a rating of BBB+ by Microfinanza Rating. It is currently led by CEO Axel De Ville.

FONDECO (Fondo de Desarrollo Comunal), a non-bank MFI established in 1995 in Bolivia, received a loan of USD 1,000,000. FONDECO operates with nineteen branches throughout Bolivia, including a mobile one. Its products include individual and group microloans. According to MIX Market, the microfinance information clearinghouse, as of December 2006, FONDECO had total assets of USD 6.5 million, a gross loan portfolio of USD 5.1 million, debt-to equity ratio of 292.7 percent, ROA of 1.8 percent and ROE of 7 percent. Its PAR over 30 days was 11.4 percent with 6,894 active borrowers and 30 personnel. FONDECO is led by General Director Maria Eugenia Moscoso Moreno. There is no information available on FONDECO’s third-party performance evaluation.

Finally, MiCrédito, a Nicaraguan microbank founded by Mennonite Economic Development Associates (MEDA) in 2004 to target the underserved rural micro-lending market, received an Oikocredit investment of USD 500,000. It currently runs operations with 30 personnel serving 2,500 clients out of four offices throughout Nicaragua. Products include standard credits intended for micro and small commercial businesses, rural credits for farmers and rural businesses, temporary credits for existing clients with good credit standings, and salaried staff credits, offered in agreement with select companies. According to MEDA’s 2006 annual report, it had a total loan portfolio of USD 1.1 million. MiCrédito is led by Chairman Fred Wall and General Manager and CEO Octavo Cortés. It does not currently report to the MIX Market, nor to a third-party performance evaluator.

By Mary Fu

Additional Resources:

Consultative Group to Assist the Poor (CGAP): List of Recent Transactions – January 2008

Oikocredit: About Us

MicroCapital article, February 4, 2008: “Oikocredit of the Netherlands Invests $12.2m in Latin American Microfinance Institutions”

MIX Market: Profile for Oikocredit

Opportunity Bank: 2006 Annual Report

MIX Market: Profile for Kompanions

MIX Market: Profile for MLF Microinvest

MIX Market: Profile for Prestanic

MIX Market: Profile for FONDECO

MiCrédito: About

As MicroCapital reported in an October “Who’s Who in Microfinance” article, MicroCredit Enterprises was founded in 2005 to target sustainable economic development among families living in extreme poverty (USD 1 per day or less). Its loan portfolio grosses USD 9.3 million and includes seventeen MFIs in twelve countries worldwide. Because the majority of MicroCredit Enterprises’ senior management team serves on a pro bono basis, the organization is able to operate with an annual budget of only 3 percent, or USD 300,000 of its loan portfolio. MicroCredit Enterprises is led by CEO Jonathan C. Lewis and CFO Michael H. Katcher.

CHC Limited, formerly known as Cambodian Health Committee Credit Program, was established in March 1994 in response to public health problems, in particular tuberculosis, among the rural poor in Svay Rieng province, Cambodia. At year-end 2006, it reported total assets of USD 1.2 million. In addition, MIX Market reports that as of the end of 2007, CHC Limited had 6,294 active clients, including over 4,000 savers. Its gross loan portfolio is just under USD 1.8 million with a portfolio-at-risk (PAR) over 60 days of 0.7 percent. In 2006, Micro-Credit Ratings International Limited (M-CRIL) gave CHC Limited a rating of beta plus (ß+). CHC Limited’s major shareholders include CARD Bank, CMI Holding International, as well as individual shareholders. It is currently led by a five-member Board of Directors.

By Mary Fu

Additional Resources:

CGAP: “List of Recent Transactions” – January 2008

MicroCapital article, October 11, 2007: “WHO’S WHO IN MICROFINANCE: MicroCredit Enterprises”

MicroCredit Enterprises: About

CHC Limited Microfinance Institution: About

Calvert Foundation was launched in 1995 in cooperation with the Ford, MacArthur and Mott Foundations to mobilize individual and institutional capital for investment in nonprofit organizations (NGOs). The Foundation primarily targets institutions in the United States and various developing countries that have at least three years of experience and USD 2 million in assets. Its flagship investment product is the Community Investment Notes, which allows investors to invest in a diversified portfolio of NGOs and social enterprises at fixed interest rates of the investor’s choice. MIX reports that as of December 2006, Calvert Foundation had total assets of over USD 106 million, with USD 27.2 million allocated to 50 active investments. In November 2007, MicroCapital reported that Calvert Foundation was the first provider of securities for eBay’s microfinance web-brokerage service MicroPlace.

XacBank was created in 2001 from a merger of the two largest non-bank financial institutions in Mongolia, Goviin Ekhlel LLC and X.A.C LLC. It is currently the second largest MFI and the leading provider of development finance in the country. Operating with a network of 67 branches, XacBank offers a full range of financial products and services, including savings and loans, to target various market segments in both urban and rural regions. In November 2007, Moody’s gave XacBank a rating of Ba2 with a stable outlook. XacBank is currently led by Chairman and CEO Mr. Ganbold Chuluun and President Mr. Bold Magvan.

According to MIX, XacBank reported a gross loan portfolio of USD 50.3 million and total assets of USD 76.3 million, as of year-end 2006. It also had a debt-to-equity ratio of 718.1 percent, return on assets (ROA) of 2.5 percent and return on equity (ROE) of 17.8 percent. Its major shareholders include: Triodos (15.06%), ShoreCap International (12.22%), Microvest (14.69%), and Mercy Corps (18.44%).

By Mary Fu

Additional Resources:

Consultative Group to Assist the Poor (CGAP): List of Recent Transactions – January 2008

Calvert Foundation: About Us

MIX Market: Profile for Calvert Foundation

MicroCapital article, November 19, 2007: “MicroCapital Talks to Shari Berenbach, Executive Director of the Calvert Foundation About the Foundation’s Relationship with MicroPlace and How It Became the First Issuer to Sell Investments on the Site”

MIX Market: Profile for XacBank

XacBank: Home

Moody’s Investors Service: Credit Opinion: XacBank LLC

Dr. Khan was born in Agra, located in the state of Uttar Pradesh, India in 1914. When he was 21, he left to study literature in Cambridge. After graduation, he returned to India where he began his career in the prestigious Indian Civil Service (ICS). Over the course of his six-year service, he served mostly in East Bengal. In 1945, disillusioned by the Bengal Famine of 1943, he resigned from ICS to work as a locksmith near Aligarh, Uttar Pradesh, India, and later as a teacher at Delhi’s Jamia Millia Islamia (National Islamic University).

In the early 1950s, Dr. Khan returned to East Bengal, which was renamed East Pakistan after the partition of British India in 1947, and which would later became the independent country of Bangladesh. There he worked as the principal of Comilla Victoria College until 1958, when he left to work as a visiting professor at Michigan State University. Upon his return to Comilla in 1959, he became director of the newly formed Pakistan Academy for Rural Development (later renamed the Bangladesh Academy for Rural Development (BARD) in 1971), where he developed the Comilla Model.

The Comilla Model is rural development approach that evolved from a number of pilot projects beginning with the original establishment of the BARD in 1959. One of the objectives of these pilot projects was to devise a development model that could be replicated throughout the country. In sum, the Comilla Model was based upon the principle of cooperatives and people’s participatory role at the grassroots level. Thus, a main feature of model was the two-tiered agricultural cooperative, consisting of voluntary farmer groups, at both the village and central levels. Through these cooperatives, farmers were able to generate capital via deposits, obtain microcredit and basic training, as well as develop a shared knowledge base. Other components of the model included a Rural Works Program (RWP), which helped build infrastructure and generate employment in the process, the Thana Training and Development Centre (TTDC), which unified national-level officials and resources in the rural development effort, and the Thana Irrigation Programme, which facilitated the development of agricultural methods. By employing careful research, exploring agricultural credit, and providing supplies and training, Dr. Khan is widely thought to have pioneered the microcredit movement through the techniques associated with the Comilla Model.

After Bangladesh’s independence in 1971, Dr. Khan served as a research fellow, visiting professor, and advisor at several universities in Bangladesh, Pakistan, and the United States. In 1980, he returned to Pakistan to continue grassroots development work through the Orangi Pilot Project (OPP), which emphasized self-help as the solution to obtaining capital and improving sanitation, health, education, and employment within low-income settlements northwest of Karachi. During the span of twelve years, from 1981 to 1993, OPP assisted residents in family planning, improved building construction, organized immunizations, and helped install low-cost sewers that served 72,000 homes and 600,000 people at one-tenth the cost of conventional sewage systems. According to the magazine Architecture in Development, the key to the success of the program was the adoption of the lane as the basic unit of social organization. Under this system, twenty to thirty houses were built on either side of a road and formed a cooperative that was headed by two elected managers who served as the links between the residents and the OPP. Today, three institutions remain in Orangi to continue Dr. Khan’s work: OPP-Research and Training Institute (RTI), Karachi Health and Social Development Association (KHASDA) and the Orangi Charitable Trust (OCT). All three aim to support local initiatives by following Dr. Khan’s principle of employing local resources and building on the central self-reliance component of poverty alleviation. For more information on these institutions, please click here.

Dr. Khan passed away in October 1999 at age 85, and is survived by his wife, son and four daughters. Throughout the course of his development career, he received many prominent awards, including various civil awards (Nishan-i-Imtiaz, Sitara-i-Pakistan, Hilal-i-Imtiaz and Magsaysay Award) and an honorary doctorate by Michigan State University. Dr. Khan’s written works include Orangi Pilot Project: Reminiscences and Reflections, published by Oxford University Press, and a three-volume work compiled and published by BARD, entitled The Works of Akhtar Hameed Khan.

By Mary Fu

Additional Resources:

Banglapedia: Khan, Akhtar Hameed

Banglapedia: Comilla Model

Attock News: “Dr. Akhtar Hameed Khan – The Pioneer of Microcredit”

Daily Times: “Cam Dairy: The Common Man’s Friend”

Architecture in Development: “Profile: Dr. Akhtar Hameed Khan”

OPP-OCT: Home

Mr. Nelson Kuria, managing director of CIC, said that the decision arose from the nature of CIC’s “…cooperative insurance with a social consideration, different from commercial insurance companies”. This decision is also seen as a major effort in boosting public confidence and promoting the importance of an insurance policy as protection against unforeseen circumstances.

Thus far, most of the claims that have already been filed are from small businesses that were looted or burned during the political violence that have affected parts of the Rift Valley, Nyanza, Western Coast and Nairobi provinces . A major challenge for CIC will be to distinguish insured clients who are truly affected by the unrest from those merely seeking profit. CIC is actively dispatching staff to the affected areas to assess claims.

CIC is a private insurance company, originally established in 1978 as Co-operative Insurance Services Limited (CIS). In Kenya, it is the market leader in Group Life business and its only microinsurance financier. Its products include: death and permanent disability, personal accident, in-patient medical expenses, funeral expenses, livestock insurance, fire and burglary. As of December 2007, CIC has insured over 163,000 individual members with a portfolio of KES 17.8 billion (USD 252.1 million). CIC does not currently report to MIX Market, the microfinance information clearinghouse, nor to a third-party performance evaluator.

By Mary Fu

Additional Resources:

Bloomberg: Currency Calculator

Business Daily: “CIC to honor poll related claims”

Co-operative Insurance Company (CIC): About Us

Participating for-profit social enterprises are leaders in the sectors of microfinance, investment advisory, education, energy, and health. They are: Ujjivan, a non-bank financial institution that serves poor Indian women by optimizing microfinance with modern retail banking technologies; Intellecap, a strategic advisory firm that mobilizes investments for socially-motivated businesses; iDiscoveri, an experiential education organization focused on self-discovery and meaningful learning in economically emerging societies; Solar Electric Light Company (SELCO India), a company that provides reliable, affordable, and environmentally sustainable energy services to rural homes and businesses; and Vaatsalya, a company that seeks to expand rural and semi-urban healthcare by building and managing hospitals where they are needed most.

Candidates will be selected from the following undergraduate engineering schools in throughout India: BITS Pilano, IIT Bombay, IIT Delhi, IIT Kanpur, IIT Kharagpur, IIT Madras, NITK Surathkal, NIT Trichy, NIT Warangal and NSIT. Ideal candidates should demonstrate an interest in entrepreneurship and development through enterprise. As leaders in their peer groups, they will raise awareness of sustainable opportunities created through social initiatives. Nitin Rao, founder of E4SI, hopes that fellows will go on to lead or found organizations to “accelerate development through enterprise”. For more information on how to apply, please visit the E4SI website. Complete applications are due by March 2, 2008.

E4SI is led by four team members, including Founder Nitin Rao and four advisors.

By Mary Fu

Additional Resources:

Newswire Today: “New Innovative Portal Program to Connect the Best Engineering Talent to the Most Credible Social Enterprises Launched”

Engineers for Social Impact (E4SI): Home

More than 5,250 micro and small enterprises (MSEs) in Peru and 4,850 MSEs in Ecuador will receive technical assistance and training to enable them to participate in the value chains of seven anchor businesses in each country. The project will be executed by the Peruvian and Ecuadorian offices of SNV Netherlands Development Organization, a Dutch international development organization that aims to reduce poverty and improve governance by providing advisory services to local organizations in developing countries.  

This project is one of the first launched by the MIF under IDB’s “Opportunities for the Majority” initiative, which supports business innovations and partnerships focused on improving income and quality of life among Latin America’s low-income communities. According to IDB team leader Daniel Shepherd, these initiatives help create inclusive economic opportunities by promoting market access for the “population at the bottom of the economic pyramid”. For information about this initiative, please click here.

The MIF is an autonomous fund administered by IDB, and is the leading source of technical assistance grants for micro and small enterprise (MSE) development in Latin America and the Caribbean. Since its creation in 1993, it has supported over 1,000 projects valued at over USD 2.2 billion through both grants and investments. The MIF has also contributed to the expansion and professionalization of microfinance in the region. Earlier this month, MicroCapital reported that the MIF granted USD 1.9 million to support microfinance development in the Caribbean.

The IDB is the oldest and largest regional bank in the world, established in 1959 to promote development in Latin America. According to its 2006 year-end financial report. it has total assets of USD 9.53 billion and a equity-to-loan-ratio of 40.8 percent. As recently reported by MicroCapital, the IDB sponsored Standard and Poor’s Ratings Service (S&P) in its pilot ratings program for microfinance institutions (MFIs) in Latin America and the Caribbean.

By Mary Fu

Additional Resources:

Inter-American Development Bank (IDB): “IDB Fund Supports Inclusive Business Development in Peru and Ecuador”

SNV Netherlands Development Organization: Home

Multilateral Investment Fund: About Us

MicroCapital Story, February 5, 2008: “IDB Grants $1.9m to Development of Microfinance in the Caribbean”

IDB: 2006 Annual Report

MicroCapital Story, February 7, 2008: “Standard and Poor’s to Launch Rating Program for Microfinance Institutions in Latin America”

The second microfinance focus note of the series, entitled “Product Design and Insurance Risk Management”, focuses on ensuring the viability and sustainability of the insurance product. In order to design a product that strikes a balance between broad inclusion, value, affordability, and sustainability, microinsurance providers must start with four basic steps: define the target group, assess insurable risks, determine key product features, and establish payment capabilities among the target population.

The paper compares types of insurance products: group and individual, mandatory and voluntary. Group insurance targets those who are members of existing groups, and tends to cheaper to administer. On the other hand, individual insurance may be better suited for a scattered market or products that cannot be offered through a group approach. Mandatory insurance with voluntary options for individual coverage level is highlighted as a successful combination that can provide the affordability and sustainability of mandatory insurance while presenting the flexibility in choice of voluntary insurance.

In terms of payment options, the paper highlights short-term insurance policies with renewable terms as the best compromise in which policyholders can have continued coverage and insurers can adjust pricing as needed. Because the low-income market tends to have unpredictable cash flows, payments deadlines should be timed to correspond with periods, such as harvest seasons, when households have some surplus income.

Product benefits should be kept as simple as possible, such that they can be easily explained in a few minutes. Clients should also have ready access to these benefits through an easy claims submissions process. Distribution of benefits, whether in cash or in kind, should depend on the type of insurance. On the other hand, long-term clients who have not claimed any benefits should also be offered extra benefits, such as savings features and premium refunds.

The paper recommends that insurers avoid elective participation, diverse target population, and numerous product choices, all of which increase adverse selection and necessitate more controls. However, some claims controls are crucial in maintaining the viability of microinsurance schemes. Effective ones, especially when used in combination, include: deductibles, which reduce administrative cost; coinsurance, in which the insured assumes partial liability; benefit ceilings, which curb insurer cost; and waiting periods, which help insurers better assess high-risk clients while providing immediate benefits.

By Mary Fu

In this first of twelve microinsurance focus notes, “Marketing: Promoting Insurance to the Poor”, CGAP provides tips on how to market insurance to the low-income population. Because this market segment is particularly disinclined to purchase insurance for several reasons, including lack of insurance education, limited resources, intangible benefits, short-term perspectives, and trust issues, social marketing techniques coupled with financial education are often necessary to successfully sell microinsurance.

Four main messages are used by microinsurance providers to promote their products. The first is protection, the core benefit of insurance; this message is often communicated through personal testimonies. The second is solidarity, which builds on informal self-help mechanisms are that familiar to this market segment; this message is important in explaining the risk-pooling aspect of insurance. Another is the “positive spin” message, which highlights the security provided by insurance, rather than the risks that clients would otherwise face. Finally, a fourth message is trust, which insurance providers achieve through branding or partnering with trusted organizations. Above all, the paper recommends that the best way to establish rapport is to pay claims.

In turning promotions into sales, raising awareness is the first step: awareness about insurance in general, as well as about specific insurance providers. However, the question of who is better suited to take on the role of providing the public good of financial education – individual insurers or the government/insurance association – still remains. The second step in converting promotions into sales is education on specific products, which must be tailored to different target audiences by taking into consideration various cultural nuances. The last step, activating clients, may involve techniques such as limited enrollment campaigns or prize drawings.

The paper concludes that after-sales service is crucial in backing all microinsurance marketing activities. This is best achieved by facilitating claims submissions and paying claims in a timely manner. Because marketing can make or break an insurance scheme, it must be approached holistically and strategically.

By Mary Fu

IFC is a division of the World Bank Group that provides a variety of financial products and advisory services to businesses and governments, with the aim of promoting private sector development in developing countries. In 2007, IFC contributed USD 8.2 billion and mobilized an additional USD 3.9 billion for 299 investments in 69 developing countries. IFC is led by CEO and Executive Vice President Lars Thunnel.

Letshego is a pan-African consumer finance group, established in Botswana in March 1998 as the country’s first micro-lending company. Its unsecured loans target formally employed civil servants and select private companies. Letshego’s wholly-owned subsidiaries include: Letshego Financial Services, Letshego Guard, Micro Provident Uganda, and Letshego Financial Services (Uganda). It is also a major shareholder of Micro Provident Swaziland and Micro Provident Tanzania. According to the group’s interim financial report, in July 2007 it had total assets of BWP 640 million (USD 101.5 million). In addition to IFC, its major shareholders are: Netherlands Development Finance Company (FMO), Sanlam, Investec, and Kingdom Zephyr. Letshego does not currently report to MIX Market, the microfinance information clearinghouse, nor to a third-party performance evaluator.

By Mary Fu

Additional Resources:

International Finance Corporation (IFC): “IFC Invests in Micro Provident Botswana to Expand Access to Financial Services in the Region”

Micro Provident Botswana, Ltd.: About Us

Micro Provident Botswana, Ltd.: Interim Financial Report