MicroCapital » Scott Everett

TECHNOLOGY FOCUS: Mobile Finance – Indigenous, Ingenious or Both?

Scott Everett — Wed, 10 Dec 2008 16:59:18 +0000

Originally reported in PCWorld by Ken Banks.

In Ghana, it’s popularly known as susu. In Cameroon, tontines or chilembe. And in South Africa, stokfel. Today, you’d most likely call it plain-old microfinance, the nearest term we have for it. Age-old indigenous credit schemes have run perfectly well without much outside intervention for generations. Although, in our excitement to implement new technologies and solutions, we sometimes fail to recognize them. Innovations such as mobile banking — great as they may be — are hailed as revolutionary without much consideration for what may have come before or who the original innovators may have been.

The image of traditional African societies as predominantly “simple hunter-gatherer” is more myth than truth. The belief that Africa had little by way of economic institutions and processes before the arrival of the Europeans is another. As Niti Bhan pointed out during her fascinating “Life is Hard” presentation at the Better World By Design Conference earlier this month, many rural communities today are familiar with concepts such as loans, barter, swap, trade, credit and interest rates, yet the majority remain excluded from the mainstream modern banking system and have never heard of things like ATMs, banks, mortgages or credit cards. It’s not that people don’t understand banking concepts; it’s just that, for them, things go by a different name. In Kenya, as few as one in 10 people may have a bank account, but that doesn’t stop many of them from using a number of trading instruments or running successful businesses. Technology can certainly help strengthen traditional trading practices, and we know this because when technology is made available, the users are often the first to figure out how to best make it work for them. Mobile technology is today showcasing African grassroots innovation at its finest.

Africans are not the passive recipients of technology many people seem to think they are. Indeed, some of the more exciting and innovative mobile services around today have emerged as a result of ingenious indigenous use of the technology. Services such as “Call Me” — where customers on many African networks can send a fixed number of free messages per day when they’re out of credit requesting someone to call them — came about as a result of people “flashing” or “beeping” their friends (in other words, calling their phones and hanging up to indicate that they wanted to talk). A lot of interesting research on this phenomenon has been carried out by Jonathan Donner, an anthropologist working at Microsoft Research. Today’s more formal and official “Call Me”-style services have come about as a direct result of this entrepreneurial behavior.

The concept of mobile payments did, too.

Researchers have for some time been observing the behavior of users in developing countries, seeking to identify the next big thing. As Jo Best puts it in her “Mobile & Wireless” column, many of these ideas spring from “the fertile mind of some user who wanted to do something with a mobile that their operator hadn’t provided yet.”

Tapping into these fertile minds is a fascinating business, something that Jan Chipchase at Nokia is famous for. Some of Jan’s earlier observations identified emerging mobile payment-style services long before the mobile operators, or even the ICT4D community, had even thought of them. The mantra “build it and they will come” seems alive and well in the African mobile context.

Whilst many traditional development approaches generally introduce alien ideologies and concepts into developing countries — sometimes for the better, often for the worst — today’s emerging mobile services are very much based on a model of indigenous innovation. Take M-PESA, the much-touted Kenyan mobile money transfer service developed by Vodafone and the U.K. Department for International Development, as an example. Increasing numbers of African users were already carrying out their own form of money transfers through their mobiles long before any official service came into being. (SENTE, from Uganda, is one of the better known indigenous “systems.”) What M-PESA has done is formalize and scale this kind of activity and bring it fully to market. Its impact has been spectacular, with around 3 million registered users since launch in March 2007 and about 8 billion Kenyan shillings (US$106.8 million) changing hands every month. But what services such as these, rolling out in increasing numbers of African countries, have done to earlier “indigenous” systems — mobile-based, such as SENTE, or more traditional microfinance solutions, such as susu, tontines or chilembe — is not so clear; although the latter were most likely well on the decline long before mobile phones came on the scene.

Many indigenous economic systems still exist today where they haven’t been wholly replaced by modern financial structures or technologies. In “Africa Unchained,” George Ayittey states his belief that future African economic prosperity lies in traditional systems and practices:

“Women traders can still be found at most markets in Africa. They still trade their wares for profit. And in virtually all traditional markets today, bargaining over prices is still the norm — an ancient tradition. Traditional African chiefs do not fix prices. And it is this indigenous economic system, characterised by free village markets, free trade and free enterprise that Africa must turn to for its economic rejuvenation.”

It’s likely that many people would argue strongly against Ayittey on this, believing that progress across the African continent is based on embracing change and the new world economic and technological order. It’s an active and fascinating debate. Whichever side of the fence you’re on, all of this does raise one important question: Should technology solutions aimed at the developing world, and mobile solutions in particular, seek to build on and enhance indigenous, traditional activities — economic or otherwise — or, where necessary, is it okay just to replace and lose them?

That isn’t the only question, either. How does the introduction of emerging mobile services shift the balance of power in traditional African societies? Will women, for example, remain as economically active participants in the new mobile-powered world, or will men take more control? Do mobiles narrow or widen gender inequalities? Is technology exacerbating the gap between the haves and have-nots, or is it truly proving as transformational as we all believe or hope?

Very few businesses would willingly throw out all of their processes and procedures in order to implement a new IT system, however good it may be. The more astute ICT solutions providers know this and, wherever possible, aim to allow seamless integration of any new technology into their clients’ workplaces and working practices. Doesn’t it make sense that we should take the same approach with indigenous societies and seek to build on existing procedures and traditions, and not just assume that a new, modern solution is better and replace everything that went before?

It’s a fine balancing act and one people are still trying to figure out. The irony could be that while growing numbers of social scientists are turning to technology to help preserve and document disappearing cultures, the same technologies may be contributing to their ultimate decline.

Ken Banks, founder of kiwanja.net, devotes himself to the application of mobile technology for positive social and environmental change in the developing world and has spent the past 15 years working on projects in Africa. Recently, his research resulted in the development of FrontlineSMS, a field communication system designed to empower grassroots nonprofit organizations. Ken graduated from Sussex University with honors in social anthropology with development studies and currently divides his time between Cambridge, U.K., and Stanford University in California on a MacArthur Foundation-funded fellowship. Ken was awarded a Reuters Digital Vision Fellowship in 2006 and named a Pop!Tech Social Innovation Fellow in 2008. Further details of Ken’s wider work are available on his Web site.

MICROCAPITAL STORY: MicroCred Receives Capital Increase from Developing World Markets and AXA Belgium

Scott Everett — Mon, 01 Dec 2008 08:43:43 +0000

MicroCred, an investment company that creates companies and banks specialized in microfinance, approved a capital increase which includes investments from a new shareholder, Developing World Markets (DWM) and a founding shareholder, AXA Belgium. DWM will take a 22% stake in the company, while AXA Belgium will increase its shareholding to 25%. MicroCred’s total equity capital stood at USD 23.2 million at the end of November 2008.

The funding that MicroCred recieves comes from private donors, private indviduals, development agencies, and institutional investors through equity and loans close to or at market conditions and in turn supports and creates microfinance institutions (MFIs). These MFIs mostly consist of Greenfield microfinance companies but depending on countries and contexts, MicroCred also invests in former NGOs that have been transformed or already existing companies. MFIs that belong to the MicroCred Group are either commercial companies or banks. MicroCred has thus far created MFIs in the following countries:

Mexico: MicroCred Mexico was created in February of 2006 and operates 6 branches with over 6,400 borrowers and an active loan portfolio of USD 2.8 million.

China: MicroCred Nanchong was created in February of 2006 and operates 1 branch with over 719 borrowers and an active loan portfolio of USD 1.6 million.

Madagascar: MicroCred Madagascar was created in December of 2006 and operates 5 branches with over 7,700 borrowers and an active loan portfolio of USD 6.7 million.

Sénégal: MicroCred Sénégal was created in September of 2007 and operates 1 branch with over 1,609 borrowers and an active loan portfolio of USD 1.4 million.

The founder of MicroCred, PlaNet Finance, is very diversified within the microfinance community with five other organizations. PlaNIS offers advisory services in debt management and private equity and also advises and structures financial vehicles in microfinance, PlaNet Finance Advisory Services is a technical assistance and consulting provider, Planet Rating is a microfinance rating agency, PlaNet Guarantee is a microinsurance specialist, and FinanCités is a venture capital company for microentrepreneurs in French deprived urban areas.

MicroCred and it’s investors will benefit from PlaNIS’s new local currency risk mitigation fund, MICROFIX. The fund will be working with Microfinance institutions and international investors to understand, quantify and reduce currency risk by providing currency hedging services as well as risk management solutions. MICROFIX was created in partnership between PlaNIS and Coporate Connect and is backed by technical assistance from BNP Paribas , FMO and The Currency Exchange Fund (TCX) (the local currency capital markets development fund). It is designed to assume segregated currency exposures from transactions originated by its participants, which enables them to directly transact in local currencies in emerging and sub-emerging markets. By Investing in MICROFIX, Microfinance organizations will get access to Local Currency hedging with a leverage averaging of a maximum of 10 times on the equity invested. Corporate Connect and PlaNIS target capitalization with USD $ 70 million, providing a risk mitigation capacity of $ 350 mln. PlaNIS will be the Manager of the Fund. Corporate Connect will act as service provider to the Fund Manager during the term of the Fund.

TCX explains that borrowers in emerging markets must often choose between two equally risky and unattractive alternatives for long-term funding. Either they fund long-term assets with short-term liabilities in local currency, or they search for long-term, hard currency debt from international investors. Both options create a financial mismatch that often results in unforeseen costs and overcapitalization, and borrowers are frequently forced to bear undesired risks that affect their projects adversely. These less than ideal options are the reason for TCX and MICROFIX coming into existence, and organizations like MicroCred that provide the means for investors to invest at the MFI level without risking their exposure.

Developing World Markets is a fund manager and investment bank created in 1994 with the goal to use the capital markets for sustainable development and to support microfinance institutions. DWM has disbursed over USD350 million into banks and non-bank financial institutions specialized in microfinance representing more than 20 countries from Asia, Africa and Europe.

MicroCred’s founders also include partner investors International Finance Corporation, Société Générale and Axa Belgium; Later joined by the French Development Agency (AFD) and the European Investment Bank in 2007.

Scott Everett, Research Assistant

Addiional Resources:

TheMIXMarket: Home, MICROFIX.
RISKMARKETS: Home, TCX.

MICROCAPITAL STORY: Acumen Fund Invests 2.8 Million into Development and Microfinance Programs in Pakistan

Scott Everett — Tue, 25 Nov 2008 07:00:50 +0000

Acumen Fund, a venture capital fund that invests in sustainable development operations, announced four new investments in Pakistan. The investments amount to over USD 2.8 million. Acumen Fund began investing in Pakistan in 2002 with a focus on the housing sector, providing slum-dwellers with affordable legal housing and infrastructure alternatives, as well as financial services that allowed low-income clients to improve their homes and supplement their incomes. Acumen Fund has since expanded its focus to address the broader set of critical issues keeping the majority of the population of 160 million people in poverty.

$1.4 million is being provided to The First Microinsurance Agency (FMiA), a company designed to provide health and life insurance to the poor, in a joint venture investment with Aga Khan Agency for Microfinance (AKAM). FMiA is the first systematic micro-insurance initiative in Pakistan, and its overall objective is to reduce the vulnerability of poor families to financially catastrophic events through microinsurance. By helping families maintain a minimum standard of living, microinsurance can provide an opportunity to bounce back and take charge of their economic and social positioning in society. FMiA’s microinsurance products are distributed through micro-finance institutions, NGOs and social organizations, as well as corporations and local government agencies.

A $750,000 equity investment and $750,000 debt investment will go to Kashf Holdings Private Limited (KHL), a holding company providing financial services to low income households through its established companies. Kashf Holdings is a part of the larger Kashf Foundation which seeks to create a conglomerate of companies that each focus on offering specialized services to the overall microfinance market in Pakistan

Micro Drip will receive a $200,000 debt investment and $300,000 equity investment. Micro Drip markets and distributes affordable drip irrigation products in the Tharparkar desert and other arid regions of Southern Pakistan. Micro Drip seeks to make thousands of rain-fed farmers less dependent on rain as a source of irrigation and allow them to farm all year round, often boosting their income three to four fold in one year. 80% of the farmers in these areas where Micro Drip operates live on less than $1 per day, making them some of the most economically insecure regions in Pakistan.

Sehat First (‘Health First’), a network internet driven health centers that provide affordable healthcare and medications to low-income communities will receive a $200,000 equity investment. There are only 74 physicians per 100,000 people in Pakistan, with healthcare facilities concentrated in urban areas. Rural areas often lack qualified doctors and vital medications. Sehat First provides health consultancy services to low-income patients using an online application that remotely links doctors and specialists with their patients via the Internet. Sehat First physical health centers also provide medicines and offer general store items for sale.

Acumen Fund Pakistan Director Aun Rahman stated, “The lessons that we will learn and the insights that we will gain from our new investments in FMiA, Kashf Holding Co, Micro Drip, and Sehat First will help us to build viable and scalable models for the delivery of health services and innovative irrigation solutions to rural populations.”

Acumen was recently featured in BusinessWeek for their collaboration with the Salesforce.com Foundation and Skoll Foundation to create a Portfolio Data Management System (PDMS) which will be released in January 2009. The database seeks to offer a standardized set of data to be used across the broad range of social enterprise organizations, from non-profit to for-profit, to track performance. “When you have no metrics, it is difficult to measure impact, and decisions get made based on anecdotes, not real data,” says Jacqueline Novogratz, founder and CEO of Acumen Fund.

The Rockefeller Foundation, Cisco Systems Foundation, and individual philanthropists established the Acumen Fund in 2001 and as of June 30, 2008, Acumen had approved $34 million in investments in India, Pakistan, Kenya, Tanzania, Egypt and South Africa. Acumen Fund’s Pakistan portfolio totals $6.4 million in committed investments in enterprises focusing on drip irrigation, micro insurance, housing, health clinics, and other critical needs.

Scott Everett, Research Assistant

MICROCAPITAL STORY: Globe Telecom Establishes Partnership with and Receives 600k from Gates-funded CGAP for Mobile Banking Projects

Scott Everett — Mon, 24 Nov 2008 18:47:51 +0000

Globe Telecom, the second largest telecommunications company in the Philippines, has announced a partnership with the Consultative Group to Assist the Poor (CGAP) to utilize mobile banking technology in rural poverty stricken provinces. Specifically, Globe Telecom’s wholly owned mobile commerce business, G-XChange Inc. (GXI), intends to use its GCASH service to make it possible for poor people in the low-income rural provinces of Bohol, Surigao and Palawan to access basic financial services.

GCASH gives subscribers access to a cashless and cardless method of facilitating money remittance, donations, loan settlement, disbursement of salaries or commissions, and payment of bills, products and services. It requires only a mobile phone and a one-time registration, with a minimal charge per transaction.

The partnership will run through 2010 and for the first two years, GXI and CGAP will test a range of strategies aimed at understanding how mobile commerce initiatives can jump-start underprivileged economies in specific provinces in the country. The project seeks to address the needs of people who require cheaper, more convenient and more secure money-transfer and payment services. The project will develop rural e-payment systems in which poor people store and spend electronic money through GCash rather than cash.

“Alternatives to traditional banking services are growing quickly around the world. Cell phones and other technologies will change the way we use financial products everywhere. But few understand how the poor will use them, and what ultimately determines how these services flourish. Working with GXI in the Philippines makes it possible for us to figure that out in an unprecedented way,” said CGAP microfinance analyst Kabir Kumar.

Kumar said an extensive market survey will be conducted and published to understand why some customers are using the service more than others and their reasons for taking up the service. These include a research on existing merchant partners to better understand the incentives and needs they have for participating in the GCASH service and a survey of a representative sample of customers from each province to develop a baseline of financial use behavior.

The Philippines is a good place to gage the potential of these services and what impact they can have because of the sheer number of cell phone users (57 million users last year or about two out of three Filipinos holding cell phones). Mobile banking solutions like GCASH have received a lot of press attention in the last several years due to the rate at which these services are growing. Smart Money for example, a similar provider of mobile banking services in the Philippines, has now over 7 million subscribers while Globe’s GCash has 1.5 million customers. Even outside of the Philippines these services have displayed tremendous grown. In Kenya, Vodafone’s M-Pesa project signed up over 175,000 customers in its first three months, and averaged more than 2,500 new users a day.

CGAP is housed at the World Bank and is a consortium of 33 public and private development agencies working together to expand access to financial services for the poor in developing countries. CGAP was created in 1995 to help create permanent financial services for the poor on a large scale.

Scott Everett, Research Assistant

Additional Resources:

ManilllaTimes: Home, “Cell phones: A huge high-profit market”, November 9, 2008

BusinessMirror: Home, “Globe in tie-up for mobile finance project for poor”, November 24, 2008

NextBillion.Net: Home, “M-Pesa Shows Strong Demand for M-Banking”, July 9, 2007

MICROCAPITAL STORY: John Deere Foundation Grants $1.2 Million to Opportunity International to Fight Hunger in Africa

Scott Everett — Wed, 19 Nov 2008 06:42:49 +0000

Opportunity International, one of the world’s largest microfinance organizations, received a $1.2 million grant from the John Deere Foundation to provide increased access to financing for the hunger-afflicted in Africa. OI forecasts that the grant will have a $10.6 million economic impact over the next three years. The grant will be used to benefit farmers, food processors and retailers and their ability to provide affordable food to the rural poor in Malawi and Mozambique.

Malawi faced a severe food crisis in 2004, when an estimated five million people (40 percent of the population) suffered from a prolonged famine. To this day, millions of people in Malawi are struggling to cope with hunger and chronic poverty. Mozambique’s economy has been undermined by the aftermath of civil war and numerous natural disasters in recent years. Currently, 70 percent of the population lives below the poverty line and less than 20 percent have completed primary school. Approximately 80 percent of the population lives in rural areas. The rural poor constitute both the greatest unmet need and the largest underserved market for microfinance services in both Malawi and Mozambique.

The goal of the joint project is to create a sustainable framework in Africa to increase food production, food availability at local markets, and family income for food. Through the initiative, informal sector enterprises, ranging from fresh produce stalls at a local market to processing cooperatives to small farmers growing maize, will have access to microfinance services. OI’s banks in the participant countries will enter rural areas through multiple channels, which include satellite offices, mobile bank units, kiosks, and electronic banking technologies including ATMs and mobile phones.

OI’s research shows that the biggest barrier for the poor in remote areas is the time and money required to travel to a bank’s main branch office to do business. OI will use small low-cost satellite branches and mobile service centers to provide access in rural areas to financial services that can impact the profitability of clients’ microbusinesses, reduce transportation costs, provide convenient banking and increase the safety of savings deposits. The mobile service centers are armored vehicles that offer nearly all of the capabilities of a bank branch.

The grant will allow OI to open four new branch offices and finance 6,800 agricultural businesses. Entrepreneurs receiving the loans will create 3,500 additional jobs. Altogether, 62,000 family members will benefit from enhanced food security with the increased income derived from these enterprises.

Opportunity International was created in 1974 and began as an entrepreneurial microfinance initiative in Asia and Latin America. In 2000 OI expanded its lending capabilities by forming its own formal financial institutions. OI serves over 1 million people globally. They report to the MIX Market as Market Facilitators and their 2007 assets totaled USD 736 million.

John Deere Foundation is the philanthropic organization established by Deere & Company in 1948 to help improve communities and society through charitable grants for education, human services, community betterment and world hunger.

Both OI and John Deere are based in Illinois.

To read MicroCapital’s story on OI’s new OptINnow program click here.

MicroCapital also published stories on new funding to OI in 2008 here, and in 2007 here and here.

Scott Everett, Research Assistant

MICROCAPITAL STORY: Partnership for Lebanon Announces New Microfinance and Development Initiatives With Over 1 Million in Funding From Cisco, Relief International, Intel and Microsoft

Scott Everett — Tue, 18 Nov 2008 07:00:15 +0000

The Partnership for Lebanon (PFL), an organization focused on creating sustainable social and economic growth in the region, recently hosted an event highlighting the creation of several new initiatives by some partner organizations. The event brought together Lebanese business sector leaders, economic organizations, various governmental entities, press and partners. Cisco Systems and Intel Corporation were a few of the organizations on hand to present the new programs.

Cisco Systems and Relief International announced the Cisco Rural Enterprise Development for Information in Technology (CREDIT) program to promote Information Communications Technology (ICT) and reduce the digital divide between urban and rural areas. With Cisco Systems’s support, Relief International is providing a loan of USD $1Million to Lebanon’s two most prominent microfinance institutions, Al Majmoua and Ameen, to offer access to capital for the ICT sector. Their goal is to create businesses that contribute to community and economic development in Lebanon’s rural and underserved areas. By the end of the three-year program, Cisco may convert this loan into a grant.

Cisco also announced a collaboration with Hariri Foundation-a Lebanese education organization-which will support the Lebanese government’s focus on building a reliable ICT infrastructure by connecting 50 schools via a National Education Network (NEN) to the Ministry of Education. The NEN will allow for wireless connectivity and a high speed network which will help schools share limited resources and to promote the development of online teaching materials.

Another announcement was that Intel Corporation Middle East will be donating a second telemedicine system. The telemedicine system will be located at Saint Georges Hospital in Ashrafieh and linked to a governmental hospital in Kobeiat in the North. The Telemedicine systems provide the hospitals with real-time video consultation between physicians who are kilometers apart, and the ability to share data and to diagnose patients from afar.

Lila Ibrahim, General Manager, Emerging Markets Group, Intel Corporation Middle East Corporation, said: “we are providing better healthcare so lives are saved, modernizing education tools for students to have more opportunities in the global economy, and developing the technology infrastructure for entrepreneurs to grow business within and outside the country.”

The Partnership for Lebanon was established by U.S. business leaders in September 2006 to assist with reconstruction efforts in Lebanon and to help the Lebanese people find the path to long-term stability and economic growth. The PFL’s leadership includes Steve Ballmer, CEO, Microsoft Corporation, Craig Barrett, Chairman, Intel Corporation, John Chambers, Chairman and CEO, Cisco Systems, Yousif Ghafari, Chairman, GHAFARI, and Dr. Ray Irani, Chairman, President and CEO, Occidental Petroleum
Corporation. The PFL focuses on five areas critical to creating sustainable social and economic growth in the region including: information communication technology (ICT) infrastructure; job creation/private sector revival; connected communities; workforce training; and crisis relief and response.

Scott Everett, Research Assistant

MICROCAPITAL STORY: USAID Note from The Field, Greening Microfinance to Turn Waste Into Wealth

Scott Everett — Mon, 17 Nov 2008 08:00:41 +0000

United States Agency for International Development (USAID) recently published a note about efforts in India to provide an integrated approach in addressing poverty alleviation, global health and energy. Shortage of cooking fuel is a key problem in India where approximately 260 million of the country’s total 1.2 billion population live below the poverty line. Some households burn cow dung cakes as an alternative fuel source, creating environmental hazards and causing harmful health consequences, including acute respiratory infections in children. According to a 2006 Shell Foundation Report, deaths linked to biomass smoke exposure compete with malaria as the leading cause of death in adults in developing nations every year.

Integrating clean energy initiatives with microfinance has the potential to positively impact the environment by creating localized renewable energy sources that can simultaneously improve health and reduce deforestation. GreenMicrofinance (GMf), an organization that ties renewable energy technologies – solar, wind, hydro, and biofuel – to microfinance, performs market study research with microfinance institutions (MFIs) to assess the demand for and supply of renewable energy systems, as well as the potential suppliers for partnership. GMf uses the results of these studies to work with MFIs to design a business model and loan product for renewable energy technologies.

One GMf implementation is with partner Wesco Credit in the south Indian state of Kerala and consists of a solution to regional disease control and waste management. Wesco understood the connection between waste and health so they developed integrated waste management systems to help prevent sickness outbreaks. Wesco’s solution was to construct biogas plants, which generate both clean energy and income for families (primarily by reducing household energy costs). Thus far, they have constructed 350 biogas plants that cost approximately $325 and service a family of five to six. These units are financed by self help groups (ShGs) supported by Wesco Credit with loan terms of two years.

Program participants place biodegradable waste, usually manure, along with wastewater into the biogas cement chamber and seal it. The waste decomposes anaerobically inside the chamber, producing a mixture of methane-carbon dioxide biogas that is pumped directly to the kitchen’s gas-run stove. The process also generates solid compost called sludge slurry, which serves as a potent fertilizer that Wesco clients use to promote organic farming. “All these programs are interlinked from the grassroots level to industry and the marketplace” said Father Moonjely, Executive Director.

With the assistance of GMf, Wesco Credit intends to install about 1,200 residential biogas units, 1,000 family-size units and 200 units to be used in rural farms. It also plans to install 50 institutional biogas plants to be used at hospitals, parish halls, and apartment complexes.

Evangelical Social Action Forum (ESAF), an Indian MFI has installed five biogas plants attached to institutions, restaurants, and hospitals. Paul Thomas, Director of ESAF, states, “Renewable energy provisions could provide access to income-earning avenues and would ultimately complement the efforts to reduce the poverty. A full range of appropriate energy options should be considered while providing energy services to the poor.”

ESAF was founded in 1992 and is based in the Kerala Province of India. As of March, 2007, ESAF had a Gross Loan Portfolio of USD 12.9 million, a Return on Equity of 58.6 percent, and a Debt to Equity Ratio of 3,653.8 percent. It currently holds the MIX Market’s 5 diamond rating for disclosure and transparency.

Wesco currently operates in 172 villages and oversees some 2,000 local self-help groups (ShGs) comprising more than 35,000 economically impoverished women in the region.

A discussion of environmentally sustainable microfinance initiatives will be facilitated by the GMf Team through USAID’s Speaker’s Corner program from November 18-20. The program is entitled Microfinance and Climate Change: Can MFIs Promote Environmental Sustainability? For more information or to sign up, visit http://www.microlinks.org/sc/greenmicrofinance.

The note was authored by Elizabeth Israel, Thomas Israel, and Betsy Teutsch of GMf. To read the full publication click here.

Scott Everett, Research Assistant

MICROCAPITAL STORY: Indian Microfinance Org Cashpor Adopts ClassifEye Secure Mobile Transactions Solution

Scott Everett — Fri, 14 Nov 2008 16:59:57 +0000

ClassifEye, a developer of secure fingerprint authentication technology, announced that Cashpor India, an Indian microfinance institution (MFI), has adopted ClassifEye’s camera-phone-based transactions and authentication solution. Casphor hopes to broaden its customer base and allow their agent-serviced customers to improve their financial reach. Cashpor India is piloting the service in parts of Uttar Pradesh and Bihar.

Rami Cohen, CEO of ClassifEye, noted, “The economics of bringing trusted authentication methods to huge rural environments, such as India, have been a tremendous obstacle to profitably expanding MFI activities.”

ClassifEye’s solution is driven by imaging technology that uses camera phones. MFI customers can manage loans, make deposits and execute other operations via field agents who are equipped with internet-enabled cellular phones. The solution does not require any additional hardware such as fingerprint sensors, USB keys and code generators. The user simply downloads the ClassifEye software directly to their phone and takes a picture of his finger with the phone’s camera. The software then authenticates the user’s fingerprint and authorizes immediate access to the phone. The process takes less than a minute and eliminates the need to remember a password. According to Cashpor the service has been successfully tested by leading banks and MFIs.

According to a recent consumer survey by fingerprint sensor manufacturer AuthenTec, the majority of mobile phone users would like to have fingerprint authentication on their devices. Over 69 percent of the respondents in the survey said they will feel more secure about conducting mobile financial transactions through their mobile phone if it featured a fingerprint sensor. The survey was not limited to India, but does reveal some general user trends

ClassifEye attempts to address some of the potential constraints in their technology design by using algorithms and software that can analyze images of relatively poor quality, whether from bad lighting conditions or angles. ClassifEye also uses software that requires relatively low processing speeds.

Charlie Moore, Managing Director of Nobska Ventures, an Israeli investment firm, said, “We believe that ClassifEye can dramatically accelerate expansion of mobile commerce applications in the US and abroad. Our discussions with major carriers and equipment manufacturers confirm that many will strongly prefer ClassifEye’s technology”

Cashpor Financial and Technical Services (CFTS) was started in 1996 to give access to financial services in the form of small amounts of credit, to poor rural women. Cashpor India has 300,000 active loan clients with a portfolio of USD 150 million.

ClassifEye is an Israel-based company with local operations in India. Funding has been provided by Nobska Ventures, Israel’s Office of Chief Scientist, and Bio-Key International.

Scott Everett, Research Assistant

Additional Resources:

MICROCAPITAL STORY: “Rural Users Yet To Take a Call on Mobile Banking”, October 14, 2008

AUTHENTEC: Home, “Survey Shows Strong Interest in SMS Privacy, Demand for Convenient Fingerprint Security in Cell Phones”, October 27, 2008

TMCNET: Home, “Indian MFI Cashpor Improves Financial Reach with ClassifEye”, November 10, 2008

TEXTUALLY: Home, “ClassifEye technology guards camera phone identity”, November 7, 2008

MICROCAPITAL STORY: Asian Development Bank Loans 100 Million to Support Poor Philippine Farmers through Agribusiness, Infrastructure and Microfinance Projects

Scott Everett — Tue, 11 Nov 2008 07:01:03 +0000

The Asian Development Bank (ADB) issued a press release that they would be extending a total of $100 million in loans for a project intended to assist some of the estimated 150,000 poor farmers in southern Philippines – which includes six provinces in the autonomous region of Muslim Mindanao that have high levels of poverty. The funding consists of a loan of $70 million from ADB’s ordinary capital resources (OCR), and an additional $30 million from the OPEC Fund for International Development (OFID), which is administered by ADB. In addition to what ADB is funding, the Philippine government is contributing $52.4 million and local government units are contributing $56 million. All of the funding will go to the The Agrarian Reform Communities Project II (ACRP) which will allocate $135.2 million for rural infrastructure projects and $25.2 million for agriculture and enterprise development. The remaining funds will be used for capacity building, project implementation management, and contingencies.

ACRP aims to train farmers on how to participate in infrastructure programs as well as enhance the agribusiness activities that support the Comprehensive Agrarian Reform Program (CARP), which attempts to redistribute land among farmers and help them become market-oriented producers.

Risa Hontiveros, a representative in the Philippines House of Representatives attempting to pass the project implementation commented, “As long as there is one landless farmer who meets the requirements to be a beneficiary but does not own the land he tills, we are committed to ensuring that there will be funding for the acquisition of land from his landowner and its subsequent redistribution to him.”

The first implementation of the Agrarian Reform Communities Project began in 1998 and assisted 165 agrarian reform communities in 35 provinces. Mrs. Hontiveros said there are 4.5 million farmers whose lives are better off because of CARP

According to ADB, The project will target capacity building for organizations of agrarian reform, improve rural infrastructure and distribution networks, including farm-to-market roads, bridges, small-scale irrigation systems, post-harvest facilities, and widen the access of target communities to social infrastructure such as potable water supply systems and other community facilities. Technology will be leveraged to boost farming productivity. The project will partner with micro-finance institutions and nongovernmental organizations to develop new agricultural enterprises and markets. There will be an emphasis on building stronger, more representative farmer organizations with vulnerable groups, particularly women, involved in the consultation process for new development initiatives.

“The project will substantially expand the rural production base by assisting the poor to break out of subsistence farming, to diversify their livelihood activities, to raise production and distribution efficiencies, to improve their market position, and to provide employment opportunities for landless households,” said Manoshi Mitra, senior social development specialist at ADB’s Southeast Asia Department.

ADB’s OCR loan will have a 25-year repayment period, including a grace period of five years, and an interest rate based on the ADB London interbank offered rate-based lending facility. The OFID loan, on the other hand, will have a 20-year maturity, with a five-year grace period, a 1-percent service charge and a 3-percent interest rate.

Based in Manila, Philippines, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants and technical assistance. In 2007, it approved $10.1 billion in loans, $673 million of grant projects, and technical assistance amounting to $248 million.

Scott Everett, Research Assistant

Additional Resources:

NEWS.BALITA.PH: Home, “Solon calls for passage of CARP extension law”, November 10, 2008

MICROCAPITAL STORY: FINO Reaches Two-million Unbanked Populations in India and Releases Micro-Loan Management Software

Scott Everett — Tue, 11 Nov 2008 07:00:32 +0000

Financial Information Network and Operations Ltd. (FINO), a technology organization that produces biometric smartcards and micro-loan management software, has completed 2 million enrollments of customers in India. The number of enrollments increased from 1 million to 2 million in less than 4 months with an average of 20,000 customers being enrolled per day. FINO’s rapid growth is in part due to the extensive network of banks and other financial and government institutions utilizing their technology. That network includes Axis Bank, Bank of Baroda, Corporation Bank, DGB, ICICI Bank, ING Vysya, OBC, PNB, and UBI.

Currently, many Indian microfinance institutions use rudimentary technology systems that lack efficient reporting and credible transaction trails or alternatively incorporate manual field operations. The cost of these transactions can be in excess of 20%, which in turn pushes up borrowing costs for customers. The paperwork and human effort traditionally involved is inefficient when compared with the smartcards that allow users to process financial transaction securely and allow financial institutions to supervise transactions electronically.

Mark Stoleson, President of investment organization The Legatum Group which bought a $4.5 million stake in FINO in 2007, said “FINO’s smart card technology and back office support platform will enable the microfinance industry to scale rapidly… this inclusive approach will provide more accurate data and ultimately drive down the cost of capital for clients.”

An example of FINO’s technology being used in the field is a joint venture with Don Bosco Boys School and Union Bank. The venture provides children with a chip photo card they can use to deposit the savings from their daily wages in the bank. The card also serves as an ID to get a driver’s license or a ration card. Sanjay Kuberkar, Chief Operating Officer of FINO, said, “We expect through this scheme to work out a feasible solution that will empower street children by enabling them to open regular accounts with banks and save their earnings.”

FINO also recently announced its end-to-end micro-loan management solution Fino-Saral. The product is designed with a configurable business rules engine which enables the bank implementing the software to fine tune their existing products and launch new products quickly to meet changing needs of their customers. The software also addresses the common problem of many rural areas lacking network connectivity by allowing for all transactions to be booked immediately and logged in the back-end MIS system.

FINO was started in 2006 with the objective of building technologies to enable financial institutions to serve the underserved and the unbanked sector and also to service the technology requirements of entities engaged in servicing the bottom of pyramid customers. Along with the Legatum investment, FINO is funded from the international sector by Intel Capital and The International Finance Corporation, from the private sector by ICICI Bank Limited , ICICI Lombard General Insurance Company Limited, and The Institute for Financial Management and Research (IFMR), and from the public sector by Corporation Bank, Indian Bank, LIC, and Union Bank of India.

Scott Everett, Research Assistant

Additional Resources:

PRLOG: Home, “FINO reaches two-million unbanked populations in India”, November 4, 2008

MONEYCONTROL: Home, “FINO introduces state of art Micro loan management systems”, October 15, 2008

TIMES OF INDIA: Home, “Street children line up to take the best course”, November 2, 2008

B4MD: Home, “Case Study: IBM and Fino – boosting microfinance services in India”

MicroCapital article, May 31, 2007, “New Zealand-based Billionaire’s Legatum group buys $4.5 million Stake in Indian Microfinance Firm”