MicroLead was launched by UNCDF in 2009 in partnership with the Bill and Melinda Gates Foundation, a US-based philanthropic organization, in an effort to expand the global availability of microfinance services. Through a competitive bidding process, MicroLead provides funding to financial institutions who in turn are developing savings-based products and services for poor people in developing countries. As of September 2011, MicroLead has funded 13 projects worth USD 20.1 million.

By Rohan Trivedi, Research Associate

About the MasterCard Foundation:
Based in Canada, the MasterCard Foundation is a private foundation with the goal of enabling people living in poverty to improve their lives with increased access to microfinance and education. The foundation was established in 2006 by a gift of shares from global payment processor MasterCard Worldwide during the company’s initial public offering. As of 2010, the MasterCard Foundation reported approximately CAD 3 billion (the equivalent of USD 2.9 billion) in assets.

About the United Nations Capital Development Fund (UNCDF):
The United Nations Capital Development Fund (UNCDF) provides investment capital and technical advice to developing countries to promote microfinance and private sector development. UNCDF currently invests in thirty-eight of the least developed countries with a total programme portfolio amounting to approximately USD 200 million. Through its programs, UNCDF strives to contribute to the attainment of the Millennium Development Goals (MDGs), eight targets that were established by the United Nations to address the needs of developing countries.

About the Bill and Melinda Gates Foundation:
Based in the US, the Bill and Melinda Gates Foundation provides grants to organizations in approximately 100 countries with the aim of enhancing health care, reducing poverty and expanding access to education and information technology. The Bill and Melinda Gates Foundation’s Financial Services for the Poor initiative focuses on providing people with secure places to save money. To support this initiative, the foundation works with financial organizations to increase access to technology (point-of-sales devices, automated teller machines, etc.) and to forge partnerships among mobile phone companies, banks and microfinance institutions. It also supports the startup and growth of new banks in “difficult markets”. As of June 30, 2011, the Bill and Melinda Gates Foundation reported an asset trust endowment of USD 36.3 billion. In 2010, the Foundation awarded USD 2.6 billion in grants.

Please visit our partners!

There are also many educational institutions which help the financially challenged obtain the dream of a university or college education. Read more about Averett University financial aid and how affordable a professional degree can be.

Sources and Additional Resources:

[1] MasterCard Foundation Press Release: “The MasterCard Foundation and the UN Capital Development Fund (UNCDF) Launch Expansion of the Successful MicroLead Programme Promoting Financial Inclusion in Africa”, http://www.themastercardfoundation.org/news_releases/2011-09-19_1.htm

MicroCapital.org story, May 6, 2011: “MICROCAPITAL BRIEF: Opportunity International to Receive Grant of $2.5m from United Nations Capital Development Fund’s (UNCDF’s) MicroLead Program to Begin Microfinance Services In Democratic Republic of Congo”, http://www.microcapital.org/microcapital-brief-opportunity-international-to-receive-grant-of-2-5m-from-united-nations-capital-development-funds-uncdfs-microlead-program-to-begin-microfinance-services-in-democratic-republic-of-co/

MicroCapital.org story, December 15, 2010: “MICROCAPITAL BRIEF: MasterCard Foundation, UN Capital Development Fund (UNCDF) Launch YouthStart to Expand Financial Services for Youth in Sub-Saharan Africa”, http://www.microcapital.org/microcapital-brief-mastercard-foundation-un-capital-development-fund-uncdf-launch-youthstart-to-expand-financial-services-for-youth-in-sub-saharan-africa/

MicroCapital Universe Profile: MasterCard Foundation, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MasterCard+Foundation

MicroCapital Universe Profile: United Nations Capital Development Fund (UNCDF), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=United+Nations+Capital+Development+Fund+%28UNCDF%29

MicroCapital Universe Profile: Bill and Melinda Gates Foundation, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bill+and+Melinda+Gates+Foundation

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse/

A paper from the New America Foundation cites difficulties experienced by the USD 21.7 billion Global Fund to Fight AIDS, Tuberculosis, and Malaria as evidence of the need for change. The fund was forced to retract or suspend a significant sum after the discovery of money misspent and missing. Jon Liden, the fund’s spokesman, painted what may be seen as a bleak picture of foreign aid delivery when he reportedly said “we would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing institution”. The metrics used to determine the effectiveness of aid can contribute to the problems as they typically measure not the amount of aid that actually reaches the poor, but the aggregate amount spent.

Electronic delivery is forecast to cut the cost of administration and reduce corruption, with the costs of moving to electronic payments able to offset after one year. Although the potential implementation of such a system may present significant challenges, it potentially would expand the poor’s access to finance by increasing the usage of mobile technology.

By Jacqueline Foelster, Research Associate

Sources and resources:

[1] New America Foundation, February 25, 2011, “Money to the People”, http://www.newamerica.net/node/45551

MicroCapital.org Article, January 18, 2011, “Bill and Melinda Gates Foundation Provides $10m for Haiti Mobile Money Initiative (HMMI) in Collaboration with US Agency for International Development (AID)”, http://www.microcapital.org/microcapital-brief-bill-and-melinda-gates-foundation-provides-10m-for-haiti-mobile-money-initiative-hmmi-in-collaboration-with-us-agency-for-international-development-aid/

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse/tiki-index.php

By Diana Baide, Research Assistant

[1] Poverty & Public Policy. “Microfinance, Commercialization and Ethics” by Reinhard Schmidt, Johann Wolfgang Goethe-Universitat Frankfurt am Main

http://www.psocommons.org/ppp/vol2/iss1/art6/

International influence on microfinance institutions (MFIs) comes in many forms: An MFI could borrow money from international capital markets, have an international director, be founded by an international organization (international initiator) or be a member of an international microfinance network such as Women’s World Banking, FINCA or Opportunity International. Yet, what is the impact of each of the above influences on the social and financial performance of MFIs?

Using financial data on MFIs from 2001 to 2008 obtained from rating reports by microfinance rating agencies such as MicroRate, Microfinanza, Planet Rating, Crisil and M-CRIL, the authors conducted regression analysis to tease out the effects of various international influences. They found that international influence is correlated with enhanced social returns, but has an inconclusive correlation with financial sustainability, contrary to the widely held view that international influence unequivocally boosts MFIs’ financial performance over time. Specifically, the paper studied the four following hypotheses:

Hypothesis 1) MFIs with an international initiator achieve better financial and social performance

The authors found that MFIs with an international initiator on average have higher levels of social outreach to women and lower levels of rural outreach. It was argued that most international initiators have an ‘exit strategy’ from MFIs and thus would tend to stay away from efforts to bolster rural outreach, which are often considered to be costly. After adjusting for unspecified subsidies, the paper found no statistically significant correlation between being founded by international actors and the financial performance of MFIs. A statistically significant negative relationship between having an international director and operational self-sufficiency was identified however. The authors posit that costs related to having an international directors such as salaries, might represent a significant cost burden for MFIs.

Hypothesis 2) MFIs that have undertaken international commercial or subsidized debt have better financial and social performance

The authors found that MFIs that undertake international debt have higher levels of rural outreach, while MFIs that undertake more subsidized debt in general have greater outreach to women. The authors argue that this is because most international lenders are concerned with the double bottom line (social and financial returns) and thus specifically want MFIs to target female clients.

Hypothesis 3) MFIs that have an international board member have better financial and social performance

The study found a negative correlation between international directorship and financial performance, but a positive relationship with social performance. This, the authors argue, is because international board directors might bring along a ‘culture of higher costs’ along with a focus on social outreach.

Hypothesis 4) MFIs affiliated with an international network have better financial and social performance

The study found that being affiliated with an international network improves social performance with regard to both women and rural outreach but not financial performance. The authors argue that joining an international network facilitates a transfer of knowledge and best practices.

By Trevor Kwong, Research Assistant

About Equitas Microfinance India Private Limited: Equitas is a microfinance institution (MFI) that was created in December 2007 and is located in Chennai, India. The company provides microcredit to low-income households in India. The objective of the company is to make credit available at a reasonable cost and in a transparent manner to the underbanked population of India, as well as achieve sufficient returns on investment in order to attract capital. As of March 2010, Equitas reports to the Microfinance Information Exchange (MIX) assets of USD 165 million, a gross loan portfolio of USD 134 million, 888,600 active borrowers, return on assets of 4.5 percent and return on equity of 12.38 percent.

About IFMR Capital: IFMR Capital, previously known as IFMR Trust Guarantee Company, is a non-banking finance company based in Chennai, India. It aims to provide access to capital for institutions in sectors such as rural and urban financial services, municipalities, rural small and medium-enterprises, rural infrastructure and agriculture.

By Diana Baide, Research Assistant

[1] My Digital Financial Chronical: “Equitas securitises Rs 100 crore loan” by Sanjay Vijay Kumar, 4 October 2010

http://www.mydigitalfc.com/equity/equitas-securitises-rs-100-crore-loan-237

MicroCapital’s Microfinance Universe profile: Equitas Microfinance India Private Limited

http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Equitas+Micro+Finance+India+Private+Limited

MicroCapital’s Microfinance Universe profile: IFMR Capital

http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=IFMR+Capital

Browse the MicroCapital Universe and add your entry to the wiki at:

http://www.microcapital.org/microfinanceuniverse/

About CGAP (Consultative Group to Assist the Poor): Housed at the World Bank Group, CGAP (Consultative Group to Assist the Poor) is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by over thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors.

About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI), launched in 1998, that delivers microfinance products through a group-lending model to impoverished women in India. It is a for-profit non-banking finance company, which converted to a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. As of March 31, 2010, SKS Microfinance Private Limited reports to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, total assets of USD 897 million, a gross loan portfolio of USD 653 million, a return on assets of 4.96 percent, a return on equity of 21.56 percent and 5.79 million active borrowers.

By Diana Baide, Research Assistant

[1] CGAP. “SKS IPO: A Critical Transition for Microfinance” 30 September 2010

http://www.cgap.org/p/site/c/template.rc/1.26.14254/

MicroCapital’s Microfinance Universe profile: CGAP

http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+(Consultative+Group+to+Assist+the+Poor)

MicroCapital’s Microfinance Universe profile: SKS Microfinance

http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance

Browse the MicroCapital Universe and add your entry to the wiki at:

http://www.microcapital.org/microfinanceuniverse/tiki-index.php

Mr Khosla urges MFIs to steer away from philanthropy and more towards capital markets to access commercial funding that can make them stronger. Such funding, he writes, increases credibility among commercial banks and helps build equity. Despite concluding that the for-profit model is a vital component to increasing scale, he writes that commercial investors interested in for-profit MFIs might pressure them to increase interest rates and raise fees, leaving the burden on the borrower. He calls for social investors to take a lead role to counteract interests that might hinder the ultimate goal of helping the poor [1].

By Diana Baide, Research Assistant

[1] The Times of India. “Lending A Helping Hand” by Vinod Khosla, 18 September 2010

http://timesofindia.indiatimes.com/home/opinion/edit-page/Lending-A-Helping-Hand/articleshow/6574180.cms

Last year, the government of Ebonyi state disbursed two tranches totaling NGN 112 million (the equivalent of USD 740,500) to 1,978 individuals and 46 groups. To date, the state has “recovered 45 per cent of the first tranche of the soft loan it disbursed last two years, pointing out that the recovery of the second tranche of the loan would be due in November this year” [1].

By Lindsey Shaughnessy, Research Associate

Sources and Additional Resources:

[1] Nigerian Compass, “Ebonyi tackles poverty with N200m micro-credit loan”, September 13, 2010. http://www.compassnewspaper.com/NG/index.php?option=com_content&view=article&id=67637:ebonyi-tackles-poverty-with-n200m-micro-credit-loan-&catid=42:commune&Itemid=796

Browse the MicroCapital Universe and add your entry to the wiki at http://www.microcapital.org/microfinanceuniverse.

Original press release available online.

WASHINGTON, November 2 – Yeardley Smith, the voice of Lisa Simpson on the award-winning animated television series, The Simpsons, has joined the ranks of microfinance’s most generous and visionary supporters with a combined donation of $1.14 million to Grameen Foundation and Fonkoze, a Haitian microfinance institution.

The donation of $900,000 to Grameen Foundation will support a new initiative geared toward expanding micro-loans and other sustainable opportunities for people living at the very bottom of the economic ladder. The donation of $240,000 to Fonkoze is one of the largest individual gifts the organization has ever received and will help strengthen its institutional support for its front line staff.

Smith was first introduced to microfinance after seeing 2006 Nobel Laureate Muhammad Yunus on Oprah. Inspired to become actively involved, she traveled to Haiti, accompanied by Grameen Foundation president Alex Counts, to visit with women in remote villages to learn how microfinance and complementary health and literacy services improve the quality of life for them and their families.

“I’m greatly inspired by people who demonstrate initiative and perseverance. I saw with my own eyes how eager these women are to be self-sustaining and that the smallest bit of success can rebuild a person from the inside out,” said Smith.

Microfinance has already provided opportunities to more than 150 million people, but there is still more to be done to reach and benefit the very poorest—those living on less than $1 a day—with microfinance services and related non-financial services, such as health care and adult education.

Through its new initiative to improve the practice of microfinance that focuses on those who need it most, Grameen Foundation will identify and replicate solutions that will enable the most marginalized people to access critical resources and build reliable businesses. Smith is providing the seed financing to launch this program.

“I was inspired by Yeardley’s willingness to learn more about microfinance by travelling to Haiti to hear firsthand from microfinance clients,” said Alex Counts, president of Grameen Foundation. “We look forward to working with her in the years ahead, and hope her generosity will prompt others to support us in helping the poorest people improve their lives and escape poverty through microfinance.”

Smith was deeply moved by Fonkoze’s dedicated employees and wanted to direct her substantial gift toward a program that would enhance their benefits, promote employee productivity and increase retention.

In welcoming the gift, Anne Hastings, Fonkoze’s executive director said, “We appreciate Yeardley’s insightful and meaningful gift to the people who work on the front lines every day, often in difficult terrain and conditions, to serve Fonkoze’s clients. The staff was very excited after we announced the gift because it was the first time someone has focused on them in such a unique and meaningful way.”

About Grameen Foundation

Grameen Foundation, a global nonprofit organization, helps the world’s poorest people access financial services and technology solutions by providing financing, technology support and management strategies to the local organizations that serve them. It also spearheads technology initiatives that create new microbusiness opportunities for the poor, provide telecommunications access for the world’s rural poor, and improve their access to health and agriculture information and other services. Founded in 1997, Grameen Foundation has offices in Washington, D.C., Seattle, Washington, Ghana and the Philippines. Dr. Muhammad Yunus, the founder of Grameen Bank and the 2006 Nobel Peace Prize Laureate, is a founding member of its board of directors, and now serves as director emeritus.

About Fonkoze

Fonkoze is Haiti’s alternative bank for the organized poor. It is a family of three institutions working together towards a single compelling mission: building the economic foundation for democracy in Haiti by providing the rural poor – mostly women – with the tools they need to lift themselves out of poverty.

The blog has generated significant commentary, given its provocative title. A number of commentators responded that institutional investors were aware of the problem of over-indebtedness and are in fact signatories to the Campaign for Consumer Protection initiatied by the Centre for Financial Inclusion and covered in previous Microcapital.Org stories [5], [6]. Others responded that social investors should ‘trade in financial returns for social returns’ and should not just participate in the sector for the ‘growth story’ alone. Another commentator noted that the title of the blog was misleading and suggested that it was naive to encourage investment in grassroots organizations alone. Often, private equity funds shy away from funding grassroots MFIs as these organizations are seldom commercially and operationally sustainable. In addition, these organizations tend to have governance issues that private equity investors are not comfortable with. Another commentator noted that the issues raised in the blog by Mr Salmon had been over-simplified and that some of the arguments raised were circular. In particular, a commentator raised the pertinent question of how the massive funding requirements in the global microfinance sector could be met by donor funds alone.

The blog also generated much comment on foreign currency hedging. One commentator noted that equity can be more expensive than loans due to the significant dividends that are measured in hard currency (sometimes against a devaluing local currency) which are disseminated to investors. The blog also encouraged some comments on how organizations such as Kiva dealt with the issue of foreign currency risk. The Kiva model has been covered in previous Microcapital.Org stories [7], [8].

Mr Salmon is a Reutors Blogger [9] who writes about issues relating to finance and banking, among other topics. He does not appear to be a specialist in the field of microfinance.

By Chinq Yee Chong, Research Assistant

Bibliography 

[1] Reuters Blog entitled ‘Don’t invest in microfinance’: http://blogs.reuters.com/felix-salmon/2009/08/13/dont-invest-in-microfinance/

[2] MICROCAPITAL.ORG STORY: Wall Street Journal Reports That While Microfinance Funds Have Previously Paid Off Some Investors Are Concerned About Future Prospects of Microfinance Industry In The Current Economic Downturn

[3] MICROCAPITAL STORY: Reducing Foreign Currency Risk In Microfinance Transactions – Observations by MFX Solutions At A Hanson Wade Conference On Microfinance Investments

[4] MICROCAPITAL STORY: MFX Solutions Inc. (MFX) in Washington D.C., USA Launches Hedging Operations Dedicated to Microfinance Institutions (MFIs)

[5] MICROCAPITAL STORY: Thirty-Five Organizations Sign Client Protection Principles to Ensure Fair Treatment and Financial Protection of Low-Income Microfinance Clients

[6] MICROCAPITAL STORY: Client Protection In Microfinance – Observations by ACCION and Prizma Mikro From A Hanson Wade Conference On Microfinance Investments

[7] MICROCAPITAL STORY: Tori Hogan’s Ninth Episode (Entitled “Micro-lending”) of the Ten-Part Film Series “Beyond Good Intentions” Takes a Critical Look at the Realities of Micro-Lending by Questioning the Impact of the Kiva Model

[8] MICROCAPITAL PAPER WRAP-UP: Microfinance Managers Consider Online Funding: Is it Finance, Marketing, or Something Else Entirely? by Deborah Burand

[9] Blogs of Mr Felix Salmon: http://blogs.reuters.com/felix-salmon/