MicroCapital » Radhika Chandrasekhar

MICROFINANCE PAPER WRAP-UP: Microfinance as a Poverty Reduction Tool – A Critical Assessment by Anis Chowdhury

Radhika Chandrasekhar — Wed, 13 Jan 2010 05:01:16 +0000

Written by Anis Chowdhury, Professor of Economics at the University of Western Sydney, Australia and Senior Economic Affairs Officer at United Nations Department of Economic and Social Affairs (UN-DESA); DESA Working Paper No. 89; December 2009; 13 pages, available at www.un.org/esa/desa/papers/2009/wp89_2009.pdf

This working paper debates the effectiveness of microfinance as a tool for poverty reduction. The author begins by describing how there exist conflicting opinions and very few credible studies that have analyzed to what degree microfinance loans reduce poverty. Impact analysis in a limited number of previous studies has shown that microcredit loans do not decrease poverty. Instead, results show that, “a vast majority of [borrowing households] with starting incomes below the poverty line actually ended up with less incremental income after getting micro-loans, as compared to a control group which did not get such loans.” However, Chowdhury points out that credit is not the sole factor at play when determining microfinance’s success in boosting household income. There are, in fact, a plethora of complementary factors that are essential for microcredit loans to be more effective. On the supply side, these micro-loans are more beneficial when microfinance institutions (MFIs) also offer services for management, entrepreneurial, and basic education training. On the demand side, which still remains largely unrealized in the sector, small businesses require “a vibrant, well-functioning domestic market that encompasses enough people with enough money to buy what these enterprises have to sell.” Thus, microfinance loans, by themselves, cannot simply make poor households successful. Rather, they are most effective when combined with innovative complementary factors.

Chowdhury also discusses the heavy criticisms against the interest rates charged by MFIs. Critics of microfinance argue that these institutions charge far too high of an interest rate, which often ranges from 30 to 100 percent on an annualized basis. MFIs or non-governmental organizations (NGOs) that are able to charge lower interest rates are only able to do so due to subsidization. MFIs justify higher rates based on their arguments that high interest rates help attract investors, and that MFI interest rates are still far better than alternative options, such as borrowing money from local moneylenders at even higher interest rates. Other criticisms in the industry include arguments that MFIs are still exclusionary, since they fail to provide services to the poorest of the poor.

Despite such skepticism towards the effectiveness of microfinance programs, the author contends that microfinance has proven to be successful in encouraging consumption-smoothing behavior, and in providing a risk-coping safety net for those most susceptible to vulnerability shocks. It has also helped distribute financial power away from local loan sharks, empower especially female borrowers, and boost clients’ self-esteem.

Chowdhury concludes by claiming that impact analyses show that borrowers who hold advantages, such as business skills, entrepreneurship abilities, and education, are the borrowers that are most likely to succeed in rising above the poverty line. Thus, he argues that microcredit loans ought to be geared toward small businesses in the informal sector, rather than toward those who lack assets and entrepreneurship abilities. Finally, for such schemes to make a significant impact in poverty reduction, the author recommends that public policies ought to focus more on broad growth programs that intend to increase overall productivity and levels of employment. He calls to attention the importance of government involvement in designing and operating financial schemes, and believes that only through the combined efforts of the financial sector and government can poverty reduction be realized.

MICROCAPITAL BRIEF: International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), and CRG Capital (CRG) Launch Central and Eastern Europe (CEE) Special Situations Fund

Radhika Chandrasekhar — Tue, 12 Jan 2010 20:07:27 +0000

The International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), and CRG Capital, a financial service firm, launched the Central and Eastern Europe (CEE) Special Situations Fund. A recent press release from the EBRD claims that the CEE Special Situations Fund, as part of the IFC’s Debt and Asset Recovery Program, is the first fund to focus on the “acquisition, turnaround, and resolution of corporate distressed assets [of underperforming businesses] in Central and Eastern Europe.” While the EBRD, IFC, and CRG Capital have provided an initial €36 million, the fund aims to raise €200 million. Lars Thunell, Executive Vice President and CEO of IFC believes that the fund will help “restore long term viability of the regional financial system,” and will make financial services more affordable and available for small and medium private businesses.

About the EBRD:

The European Bank for Reconstruction and Development (EBRD) is, according to its website, “the first international financial institution of the post Cold War period.” Headquartered in London, the bank began operations in 1991 upon the agreement of 40 countries and is now “owned by 61 countries and two intergovernmental institutions.” It aims to “finance operations that are both commercially viable and assist development” in 29 countries in Central Europe and Central Asia. It does this by providing loans, debt securities, equity investments, guarantees, and technical assistance to micro and small businesses as well as commercial banks and non-bank microfinance institutions (MFIs).

About IFC:

The International Finance Corporation, a member of the World Bank Group, contains 182 member countries, and uses loan and debt securities, equity investments and guarantees as instruments of poverty alleviation. Specifically, its functions involve supporting the private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and services. In 2009, the IFC made new investments in developing countries that reached a total of USD 14.5 billion.

About CRG Capital?CRG Capital is a private equity firm that focuses on asset management for underperforming companies in Central and Eastern Europe. CRG Capital invests in direct control equity investments, non-performing debt instruments, stranded or end-of-life regional private equity funds, and other “distressed or special situation” companies. The firm, established in 1992, was initially known as “The Recovery Group.”

Bibliography:

[1] EBRD Press Release. http://www.ebrd.com/new/pressrel/2009/091202b.htm

[2] EBRD. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+(EBRD)

[3] IFC. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+(IFC)

[4] CRG Capital. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CRG+Capital

Original Source Article: Press Release from the EBRD

January 11, 2010

IFC, EBRD, and CRG Capital launch first restructuring fund for central, eastern Europe to support region’s recovery

IFC, a member of the World Bank Group; the European Bank for Reconstruction and Development; and CRG Capital, a leading restructuring fund manager have launched the first fund dedicated to investing in distressed assets in Central and Eastern Europe.

The CEE Special Situations Fund will invest in underperforming companies to support recovery in the region. It is being established by CRG Capital. The fund aims to raise €200 million, with EBRD, IFC, and CRG Capital initially committing a total of €36 million. It will focus on the acquisition, turnaround, and resolution of corporate distressed assets in Central and Eastern Europe.

The fund forms part of the Debt and Asset Recovery Program launched by IFC during the 2009 World Bank Group’s Annual Meetings in October.

Parham Pouladdej, Managing Director of CRG Capital, said, “We are very pleased with the fund’s first closing and the cornerstone investors’ confidence, support, and commitment. This successful closing reflects our track record, the strength of our team and investment strategy, as well as our unique positioning. While challenging, the current environment provides substantial opportunities to capitalize on throughout the region.”

Varel Freeman, EBRD First Vice President, said, “The EBRD’s participation in the fund will support the development of private equity investments in companies that have been adversely affected by the economic crisis. The fund will support an established management group that will bring new skills to support the recovery of viable, but struggling, companies.”

Lars Thunell, IFC Executive Vice President and CEO, said, “We are pleased to work with EBRD and CRG Capital on this important initiative for Central and Eastern Europe. By addressing the problem of bad debts, we are helping restore the long-term viability of the regional financial system so that individuals and small and medium businesses can gain better access to affordable finance.”

The Debt and Asset Recovery Program is a key element of IFC’s strategy to support the Europe and Central Asia region.

MICROCAPITAL BRIEF: Poll by Azerbaijan Microfinance Association (AMFA) Indicates Dissatisfaction with Consumer Loan Provision

Radhika Chandrasekhar — Tue, 12 Jan 2010 05:03:56 +0000

According to a recent article from ABC.AZ, a business information website in Azerbaijan, a poll administered by the Azerbaijan Microfinance Association (AMFA) showed that 28 percent of participants are dissatisfied with the “quality of services upon getting consumer loans.” The purpose of the poll was to analyze domestic income and expenditure patterns and assess the population’s understanding of financial services and personal finance. The majority of respondents that were unhappy with the quality of their financial services were from smaller cities (43.5 percent) and rural areas (14.8 percent), rather than from main cities like Baku, the capital of Azerbaijan. Many of those that found it difficult to make bank deposits or take out business loans live in poorer regions of the country. About 1,207 people from 9 economic regions of the country participated in the poll.

About the Azerbaijan Microfinance Association (AMFA):

The Azerbaijan Microfinance Association (AMFA) is an organization with over 31 member microfinance institutions (MFIs) across Azerbaijan. It started informally in the mid-1990s to help meet the economic requirements of internally displaced persons (IDPs) and began a formalized alliance of what would become the AMFA in 2001. It utilizes “knowledge management, policy advocacy, and technical services” to “advance the interests of the micro finance community” in Azerbaijan. Its three “Strategic Pillars” are “Innovative Products and Services,” “Continuing Education,” and Industry Expertise.” AMFA also offers services to improve financial management at medium-sized and larger institutions.

Bibliography:

[1] ABC.AZ 28.3% of Azerbaijani population dissatisfied over quality of services rendered upon receiving consumer loans. http://abc.az/eng/news_09_01_2010_41617.html

[2] AMFA. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Azerbaijan+Microfinance+Association+(AMFA)

MICROFINANCE EVENT: “Microfinance & Islamic Finance: The Nexus” Organized by USAID – Microenterprise Development Office in Washington DC, USA, January 13, 2010

Radhika Chandrasekhar — Tue, 12 Jan 2010 05:03:37 +0000

Event Name: Microfinance & Islamic Finance: The Nexus

Event Description: This event is part of the USAID Microfinance After Hours Seminar Series, held by the USAID Microenterprise Development Office. The seminar features Professor Ibrahim Warde from Tufts University, who will discuss the intersection between microfinance and Islamic finance.

Event Date/Time: Wednesday, January 13, 2010 at 4:00 – 5:30 pm

Event Location:

The QED Group, LLC

1250 Eye Street, NW, 11th Floor

Washington DC 20005

United States

Cost: Free

Event Website: http://www.microlinks.org/ev_en.php?ID=42112_201&ID2=DO_TOPIC

Registration:

RSVP if attending the seminar: afterhours@qedgroupllc.com

To participate remotely in the seminar through the internet, register here: https://www2.gotomeeting.com/register/700400714

To participate by phone, find more information here: http://www.microlinks.org/ev_en.php?ID=18592_201&ID2=DO_TOPIC

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

Event Organizer: USAID – Microenterprise Development Office

Description of Organizer:

The Microenterprise Development (MD) office manages the USAID’s Microenterprise Initiative, including USAID funding levels (greater than $200 million per year), client financial position, and financial status of institutions implementing programs. MD also provides field support to initiatives for microfinance, enterprise development, business services, value chain development, policy reform and impact assessment.

MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD) Extends $5m Long-term Loan to Kyrgyz Investment and Credit Bank (KICB) for On-Lending to Small and Medium Enterprises (SMEs)

Radhika Chandrasekhar — Tue, 12 Jan 2010 05:03:02 +0000

The European Bank for Reconstruction and Development recently provided Kyrgyz Investment and Credit Bank (KICB) with a USD 5 million long-term loan for on-lending to small and medium enterprises (SMEs) in the Kyrgyz Republic. According to a press release from the EBRD, KICB is considered one of the leading financiers of SMEs in the country. The loan intends help stimulate the development of SMEs in the Kyrgyz Republic by providing greater access to credit through medium to long-term loans.

About the EBRD:

About Kyrgyz Investment and Credit Bank (KICB):

The Kyrgyz Investment and Credit Bank (KICB) was established in 2000 by various institutions, including Aga Khan Fund for Economic Development (AKFED), the European Bank for Reconstruction and Development (EBRD), International Financial Corporation (IFC), Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG) and the Kyrgyz Government. The bank specializes in providing medium to long-term financing to private sector businesses.

Bibliography:

[1] EBRD Press Release. http://www.ebrd.com/new/pressrel/2009/091202b.htm

[2] EBRD. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+(EBRD)

[3] About KICB. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Kyrgyz+Investment+and+Credit+Bank+(KICB)

Original Source Article: Press Release from the EBRD

2 December 2009

New EBRD financing for small businesses in Kyrgyz Republic

$5 million credit line to Kyrgyz Investment and Credit Bank

The EBRD is increasing the availability of financing to private businesses in the Kyrgyz Republic with a new credit line for on-lending to micro, small and medium enterprises (MSMEs).

The EBRD is providing a $5 million long-term loan to Kyrgyz Investment and Credit Bank (KICB) to help the bank diversify its funding base and develop further its portfolio of MSME credits. The loan agreement was signed today in the Kyrgyz capital Bishkek.

Since the beginning of its operations in 2001, KICB has gradually developed into one of the leading providers of term finance to MSMEs in the Kyrgyz Republic, and is currently one of the top five banks in the country.

The EBRD loan will enable KICB to finance investments and working capital of Kyrgyz businesses with medium and long-term loans, thus addressing the lack of credits available to micro, small and medium-sized companies in the country.

“In the current challenging economic environment small businesses are particularly affected, facing limited access to the much needed financing. This transaction reinforces the EBRD’s commitment to support the development of the private businesses in the Kyrgyz Republic as well as to strengthen the financial sector in the country,” said Kenji Nakazawa, Head of the EBRD office in the Kyrgyz Republic.

“KICB continues to play a strong role in the field of private sector financing, and this credit line is another important milestone in the bank’s development, as it allows us to expand the provision of medium and long-term financing to the MSME sector” said Mr. Kwang Young Choi, Chief Executive Officer of KICB. He pointed out that “the bank has achieved proven results in building strong credit portfolio and KICB will further support sustainable private sector companies”.

KICB was established in 2000 by a group of institutional investors led by Aga Khan Fund for Economic Development (AKFED), EBRD, International Financial Corporation (IFC), Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG) and the Kyrgyz Government.

To date KICB has benefited from over $10 million in various financing facilities from the EBRD.

Since the beginning of its operations in the Kyrgyz Republic, the EBRD has committed over €185 million in more than 50 projects in the infrastructure, corporate, energy and financial sectors of the country’s economy, which attracted additional investments worth over €100 million.

MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD) Extends First Loan in Georgian Currency Worth $1m to Crystal Microfinance Organization

Radhika Chandrasekhar — Mon, 11 Jan 2010 18:54:13 +0000

The European Bank for Reconstruction and Development (EBRD) has extended its first loan in local Georgian currency, the Lari (GEL), worth about USD 1 million, to Crystal, a local microfinance institution (MFI). Along with the loan, the EBRD has also offered USD 100,000 in grant funds. Through these provisions, the EBRD intends to help Crystal meet rural Georgians’ “increasing demand for longer-term loans” in local currency units, and strengthen Crystal’s risk management and governing structure. The EBRD also claims that it is prioritizing lending in local currency units in its countries of operations to insulate them from future foreign exchange fluctuations.

About the EBRD:

About Crystal:

Crystal is a joint-stock company microfinance institution (MFI) that operates primarily in rural areas of western Georgia. Crystal was initially established as a micro-credit program that functioned as a part of a local non-governmental organization called “Charity Humanitarian Centre Abkhazeti” (CHC). In 2004, it was recognized as its own MFI called “Crystal Fund,” and by 2007, it was officially registered within the National bank of Georgia as a joint-stock company microfinance organization. According to the MIX Market, as of 2008, Crystal has a gross loan portfolio of USD 4.2 million, total assets of USD 4.7 million, return on assets of 8.41% and return on equity of 35.86%. For more information, visit the link provided below in the bibliography.

Bibliography:

[1] EBRD Press Release. http://www.ebrd.com/new/pressrel/2009/091221c.htm

[2] EBRD. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+(EBRD)

[3] Crystal. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Crystal:+Joint-Stock+Company+(JSC)+Micro+Finance+Organization

Original Source Article: Press Release from the EBRD

21 December 2009

EBRD provides first local currency loan in Georgia

$1 million to JSC Crystal MicroFinance Organisation

The EBRD is increasing the availability of financing to private businesses in Georgia by extending its first local currency loan in the country for on-lending to micro and small enterprises (MSEs). The Bank is extending a Georgian Lari (GEL) loan, equivalent to $1 million, to Crystal, a non-bank microfinance institution, to support the organisation in its drive to expand operations and further develop its portfolio of MSE credits, particularly in rural areas and the agricultural sector.

Established in 1998, Crystal operates in Western Georgia, where it has a strong presence, including in some rural areas where no other lender operates. Through this transaction the EBRD is helping Crystal meet the increasing demand for longer-term loans in GEL, facilitating MSE’s access to financing at a time when local currency lending in Georgia remains limited.

The EBRD is setting a specific priority of promoting local currency borrowing in its countries of operations in a drive to reduce excessive dependency on foreign currency debt. The EBRD loan is accompanied by $100,000 in grant funds, which will be used to strengthen Crystal’s corporate governance and risk management.

Since the beginning of its operations in Georgia, the EBRD has committed over 663 million to approximately 120 projects in the financial, corporate, infrastructure and energy sectors.

MICROCAPITAL BRIEF: Batey Relief Alliance (BRA) Starts Microcredit Schemes for “Women’s Empowerment Program” in Haiti and Dominican Republic

Radhika Chandrasekhar — Mon, 11 Jan 2010 07:54:39 +0000

The Batey Relief Alliance (BRA), a humanitarian aid organization, plans to launch agricultural and human capital development programs in rural regions of Haiti and the Dominican Republic. In 2009, the United States Department of Agriculture (USDA) and the US Agency for International Development (USAID) provided USD 2.5 million to BRA for agricultural development projects and microfinance schemes in rural communities in the two countries. The USAID-funded Women’s Empowerment Program enables BRA to partner with local organizations, including Fonkoze, a Haitian microfinance institution (MFI) that intends to empower impoverished female entrepreneurs; Partners In Health, a Haitian health development organization; and Esperanza International, a development organization in Mexico that also provides microfinance services. BRA’s goal is to create 30 women’s organizations, set up training services for up to 600 women, and provide microfinance loans for about 300 female business owners. These initiatives will especially target the southeast region of Haiti, known as the District of Belle Anse.

About the Batey Relief Alliance:

Batey Relief Alliance, established in 1997, is registered as a humanitarian aid organization that launches development projects in the Dominican Republic and Haiti. The projects, which are usually health-oriented, are implemented by the BRA staff through partnerships with local government agencies and organizations.

About FONKOZE:

Fonkoze, established in 1994, is one of the largest microfinance institutions in Haiti. It offers various financial services, including micro-credit lending in groups, small and medium-sized business loans, savings products, currency exchange services, remittances services, health and education services, social impact monitoring, and life and credit microinsurance.

About Partners in Health:

Partners in Health, founded in 1987, is an organization that aims to provide health care options to the poor in Haiti. Its services include patient care, program administration, drug procurement, technical assistance, and fundraising. The structure of this organization is such that it collaborates with the Program in Infectious Disease and Social Change at the Harvard Medical School, the Division of Global Health Equity at Brigham and Women’s Hospital, and the Francois-Xavier Bagnoud Center for Health and Human Rights at the Harvard School of Public Health.

About Esperanza International:

Esperanza is a non-profit organization, established in 1985, that aims to “bridge existing needs [of the poor] with available resources” in Mexico. Its various projects include house building or providing primary health care, microcredit or social service programs.

Bibliography:

[1] Dominican Today. ”Batey Relief Alliance Launches New Programs in Haiti, Dominican Republic.” http://www.dominicantoday.com/dr/poverty/2010/1/7/34407/print

[2] Batey Relief Alliance. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Batey+Relief+Alliance+(BRA)

[3] FONKOZE. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Fonkoze

[4] Partners in Health (PIH). http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Partners+in+Health+(PIH)

[5] Esperanza International. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Esperanza+International

MICROCAPITAL BRIEF: Microfinance Branches Opened by Indian Bank and Canara Bank in Tamil Nadu, India, Allow Self-Help Groups to Gain Access to Credit

Radhika Chandrasekhar — Mon, 11 Jan 2010 05:03:35 +0000

According to a recent article by The Hindu newspaper, self-help groups (SHGs) in Tamil Nadu, India, have achieved greater access to credit due to openings of microfinance branches of private commercial banks, such as Indian Bank and Canara Bank, in rural areas. SHGs usually consist of groups of women, who pool together sums of money to save and take out loans from banks. According to the article, currently, Indian Bank has established 12 microfinance branches and Canara Bank has opened 2 branches in the state of Tamil Nadu. Until these branches were opened, SHGs had accounts in commercial banks in the cities, which provide “limited priority to the poor.” The microfinance branches are operated by staff members who are trained to understand and cater financial services especially towards the needs of SHGs. They also provide services such as management training, production chain establishment, and marketing strategies for businesses. Bank officials claim that these microfinance branches make financial services more readily available and specialized to SHGs’ needs.

Bibliography:

[1] The Hindu. “Microfinance branches ease credit flow to SHGs.” http://beta.thehindu.com/news/cities/Madurai/article75139.ece

Original Source Article: The Hindu

“Microfinance branches ease credit flow to SHGs”

January 4, 2010

The opening of microfinance branches has accelerated the flow of credit to self-help groups in the State.

These branches are manned by staff that are specifically trained to cater to the needs of SHGs and are aware of their requirements.

At present, such microfinance banks have been established in Tamil Nadu only by Indian Bank and Canara Bank, each having 12 and 2 branches respectively, according to a banking official who monitors flow of credit. Both banks have microfinance branches in Madurai.

A Reserve Bank of India officer told The Hindu that microfinance branches benefit both SHGs and the banks. While the SHGs get priority treatment at these branches, the workload of regular branches decrease as all SHG accounts in the city are transferred to the microfinance branches, the RBI official added.

Many SHG members told RBI Regional Director K.R. Anandha during a meeting organised at Chekkanoorani in Madurai district recently that more of their loan applications were getting sanctioned since the establishment of microfinance branches. Addressing the meeting, Mr. Anandha said that TamilNadu had one of the most active SHG movements in the country.

According to a Canara Bank official, their microfinance branch here was the first such branch established by the bank in Tamil Nadu with the next one opened at Coimbatore last week.

The official said that since when the branch was opened in April, it has formed 560 SHGs and provided credit linkage to 375 SHGs to the tune of Rs. 3.60 crore. Apart from uplifting women and physically handicapped, the branch also focuses on expediting credit flow. “We were on track to reach the targets set by the circle office in term of quantum loans and credit disbursal. There is also a good reception from SHGs,” the official said.

M. Kathiresan, Deputy General Manager and Circle Head, Indian Bank, said that its Micro Sate Branch, opened in March, had formed 929 SHGs and extended loan to the tune of Rs. 8.52 crore.

“This branch also provides expert inputs and training to SHGs by conducting meetings and bringing in resource persons. We also allow them to conduct meetings in this branch,” he said. The branch also provides free publicity to SHGs by allowing them to display their products. The branch had beensuccessful and has attracted a tremendous response from SHGs, he said.

“The branch has a high repayment rate of nearly 98.5 per cent. Indian bank has 27 microfinance branches in India,” he said.

MICROCAPITAL BRIEF: Ugandan Government Eliminates $2m Fisheries Credit Fund Due to Lack of Funding from Banks and Microfinance Institutions

Radhika Chandrasekhar — Mon, 11 Jan 2010 05:03:21 +0000

The government of Uganda recently cancelled the Fisheries Development Project (FDP) fund, worth an equivalent of USD 2 million, when local banks and microfinance institutions (MFIs) refused to help finance the project. The FDP, a joint project of the Ugandan government and the African Development Bank (AfDB), was intended to provide local fishermen with loans to invest in modern fishing gear and increase annual incomes. However, banks and MFIs decided against funding the project, due to what they perceived as high risk associated with the provision of long-term loans. It is estimated that it would have taken six months for the fishermen to simply start repaying their loans, and the loan itself was considered too costly in the long term and too risky of an investment for local banks and MFIs. Thus, the government, who could not afford to fund the project on its own, dismissed the project.

About the African Development Bank [2]:

Established in 1964, the African Development Bank (AfDB) is a development bank that provides loans and grants to governments and private companies in Africa. AfDB commits approximately USD 3 billion annually to African countries. Owned and funded by member governments, the bank has a public-interest mandate to reduce poverty and promote sustainable development. The AfDB is controlled by a Board of Executive Directors, made up of representatives of its member countries. The current president is Donald Kaberuka.

Bibliography:

[1] AllAfrica.com. “Uganda: Govt Scraps U.S. $2 Million Fisheries Credit Fund.” http://allafrica.com/stories/201001070090.html

[2] AfDB. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=African+Development+Bank++(AfDB)

Original Source Article: AllAfrica.com

“Uganda: Govt Scraps U.S. $2 Million Fisheries Credit Fund”

January 6, 2010

Kampala — THE Government has scrapped a $2m (about sh4b) fisheries credit fund after local banks and micro-finance institutions refused to finance it.

Under the African Development Bank (AfDB)-funded Fisheries Development Project (FDP), fishermen were to be given loans to buy modern fishing gear to ensure good harvesting practices and reduce post-harvest losses.

The project, under the fisheries ministry, was also aimed at increasing income of fishermen, according to last year’s status report on the fisheries development programme formulated in the 1990s.

In November 2002, the Government signed a contract with the AfDB to roll-out the project, five-months after approval of the loan.

Work on the project that had five components, including infrastructure development, quality assurance, aquaculture research and development and project management started in May 2003.

According to Edward Nsimbe Bulega, the national FDP coordinator, sh4b was re-allocated to construct landing sites and fish markets.

“Micro-finance institutions were reluctant to finance long-term loans, saying the risks were high,” he says.

If the project had taken off, fish farmers would have taken six months to start repaying the loans.

But banks considered this to be too long. Accordingly, the Government scrapped the fund as it could not fund it alone, the report indicated.

However, over 1,000 fish farmers, processors, boat builders were trained in management skills aimed at turning the sector commercial using part of the money that had been disbursed before the problems came up.

Thirty landing sites, 20 fish markets and an extension of the fisheries laboratory at Entebbe were build, and eight ice plants were secured. Monitoring and surveillance were also strengthened through the procurement and deployment of eight patrol boats and 31 motorcycles.

The training, Bulega said, was aimed at improving the quality of fish products and aquaculture production through reinforcing research and development.

Uganda fish exports have been declining over past few years. It earned $20m less from fish exports in 2008 compared to 2007. Fish exports to international markets fetched $155m compared to $117 fetched in 2007. In 2005, Uganda earned $45m from fish exports to international markets.

Compared to 2005 which was Uganda’s best year of fish exports, there was a loss of $30 million.

MICROFINANCE EVENT: “Water It Down!: What Does Clean Water Have to Do With Microfinance and Ridding the World of Poverty?” organized by Silicon Valley Microfinance Network (SVMN) in San Francisco, California, US; January 12, 2010

Radhika Chandrasekhar — Mon, 11 Jan 2010 05:03:17 +0000

Event Name: Water it Down!: What does clean water have to do with microfinance and ridding the world of poverty?

Event Description: The guest speakers, Gary White and April Rinne, from WaterCredit, a newly launched initiative by Water.org, intends to address the relationship between water sanitation and microfinance in poverty alleviation. WaterCredit program provides microcredit loans to the poor so that they may eventually tackle their own water needs.

Event Date/Time: Tuesday, January 12, 2010 from 6:00 pm to 8:30 pm

Event Location:

The Orrick Building

405 Howard St

San Francisco, CA 94105 US

Event Website: http://svmn.net/

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

Cost: Regular Attendee: $20; Student or Non-Profit: $10. (Online service charges not included in these figures).

Key Speakers include: Gary White, Executive Director and Co-Founder, Water.org and April Rinne, Director of WaterCredit at Water.org.

Event Organizer: Silicon Valley Microfinance Network (SVMN)

Description of Organizer:

The Silicon Valley Microfinance Network is a grassroots organization in the San Francisco Bay Area that aims to encourage those in the Bay Area (and beyond) to get involved in global microfinance initiatives. The organization puts on a monthly speaker series, holds networking events, and helps those looking for jobs in the microfinance field.

Bibliography:

[1] Silicon Valley Microfinance Network. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Silicon+Valley+Microfinance+Network