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Wednesday, December 19, 2007
Bernd Balkenhol of the International Labour Office and Jonathan Morduch of New York University discuss “The bottom line for microfinance”:
“Muhammad Yunus had a small and beautiful idea, an idea that was celebrated globally by the Nobel Peace Prize in 2006. Yunus showed that poor households in his native Bangladesh could be reliable bank customers, and, with that, he promised a new way to open opportunities for the excluded and to attack entrenched poverty. Small loans, he argued, could nourish the tiny, capital-starved businesses of the poor and create lasting improvements in living conditions. But he had more than an idea: “microfinance” became the foundation of Grameen Bank, a financial institution that today serves over 7 million customers. Other pioneers in Latin America, Africa and elsewhere in Asia have made microfinance a global phenomenon. Continue Reading »
Thursday, December 13, 2007
Monday, October 15, 2007
MICROFINANCE DIALOGUE: THE NEXT DECADE
NOVEMBER 2, 2007 – MEDFORD, MASSACHUSETTS, USA
Quite a few top thinkers in the industry will be on hand at the Fletcher School to state their positions and engage in discussion with the audience. Topics are to include:
Microfinance and the Capital Markets – Who Benefits?
What is the impact of commercial financing on microfinance? Who benefits – customers, investors, the local economy or the public at large? What is an appropriate role for policy in mediating microfinance, if any?
Microfinance and Soft Money – What Is It’s Best Use?
Continue Reading »
Monday, June 4, 2007
The annual G8 summit, an international forum attended by the world’s leading economic powers, will include addresses from the CEO of Equity Bank, a Kenyan financial institution offering microfinance services to its clients.
Mr. Mwangi’s keynote address is entitled, Contributions of Micro-credits to Overcoming the Spell of Poverty Also in Africa. It will be followed by a roundtable discussion on eradicating poverty; a goal G8 countries are under pressure to achieve. His focus will be on increasing the accessibility of financial services to the low-income population, who are currently neglected from the sector.
Continue reading “MICROCAPITAL STORY: Equity Bank Chief Executive Officer Mwangi to Address Microfinance at G8 summit”
Wednesday, February 21, 2007
By Julie Abrams and Damian von Stauffenberg, sponsored by Calmeadow, 24 pages. This paper discusses the relationship between government-owned development institutions (called International Financial Institutions or IFIs in the paper), who concentrate their lending on the strongest microfinance institutions (MFIs), and the private lenders, who are left only smaller, riskier MFIs. The authors contend that the IFIs are crowding out the small private institutions from lending to the “best MFIs,” in contrast to their public claim of taking the risks the private sector is unwilling to take.
Continue reading “Paper Wrap Up: Role Reversal: Are Public Development Institutions Crowding Out Private Microfinance Institutions?”
Monday, February 19, 2007
The German government, according to the, Financial Times, will propose an African microcredit fund during the upcoming “G8” rich country club in June. Even though the article provides precious few facts and figures, it is still probably safe to assume this is bad news.
Government “foreign aid” has a very ugly past. Why are we to think it will be any different this time?
Microfinance is not magical. It can be undone like any other well intended plan by hamstring policies and screwy politics.
The Financial Times leads us to believe that this proposal is Berlin’s bold response to taunts that tight-fisted Germans do not give enough foreign aid. If this is true, then microfinance has earned the dubious honor of being a chip at the richest table.
Saturday, January 20, 2007
The Bolivian microfinance world is in turmoil because Prodem, the country’s #3 microbank, was sold to a Venezuelan government bank. The sale has provoked anxiety that micro-financial services will be used to generate political support for the Chavez administration, thus undermining the Bolivian microfinance market as micro-borrowers smell politics and stop paying their loans. Or, worse, that Mr. Chavez will undercut other Bolivian micro-banks by charging artificially low interest rates subsidized by Venezuela’s wealth in oil. Such a scenario would have broader impact on the microfinance industry as a whole because Bolivia is arguably the second most important market in the world after Bangladesh.
MicroCapital interviewed Prodem CEO and Founder, Edurado Bazoberry recently at the WWB-Goldman conference on capital markets. Many people in the microfinance world were shocked that Mr. Bazoberry, one of microfinance’s most innovative pioneers, would “sell out” given the potential damage to a fledging industry he did so much to build.
Mr. Bazoberry justified the move as a rational reaction to the threatening posture of the newly elected Morales administration of the Bolivian government. The Morales government wants its public banks to serve the Bolivian poor and is happy to use legislative levers to manipulate the market as political tensions in Bolivia continue to grow. Prodem’s bread and butter business is rural lending and according to Mr. Bazoberry his business had been overtly targeted by the government. He believes that within eight months his business will be killed, so he decided to sell.
And while he had many suitors, as Prodem is one of the top micro-banks in the world, no buyers offered a price over book value, given the situation. Except, of course, the Venezuelan government. Although Mr. Bazoberry will not disclose the price of Prodem, we believe it to be about 3.5 times book value, which is a plum price even under ideal circumstances.
So, he took the money, much of which goes to Prodem employees who have been compensated with stock for many years. Although Mr. Bazoberry remains quite defensive about his decision, he is now a rich man and as ambitious as ever. He says his next plan is to use the proceeds to create a regional bank, which may open as soon as next year. Many of Prodem’s employees have decided to invest in this new venture with their proceeds from the sale. It appears the Venezuelan government did not bother–or just did not care–to secure a non-compete agreement.
Monday, October 9, 2006
M.M.M. Aheeyar, research associate at Hector Kobbekaduwa Agrarian Research and Training Institute, Colombo, Sri Lanka, recently concluded research on the impact of cash grants on the microfinance market in areas of Sri Lanka affected by the tsunamis of 2004. Mr. Aheeyar writes, “There were reports of uncoordinated and poorly targeted cash grants. Some areas attracted a large number of NGOs and aid agencies, resulting in more cash and in-kind assistance than was required. According to the MFIs, this had a negative impact on repayment cultures and on the honesty of beneficiaries. There is insufficient evidence to prove that excessive cash grants affected the repayment of culture of beneficiaries. In any case, the problem lies not with the concept of cash assistance, but with a lack of coordination and improper targeting in its delivery” (15).
Continue reading “Researcher Examines the Effects of Cash Grants on Microfinance in Tsunami-Affected Sri Lanka”
Tuesday, September 12, 2006
In a parliamentary meeting recently, Microfinance State Minister Salim Saleh voiced concern over donations to microfinance institutions. According to him, donors have been giving heavily to Uganda’s microfinance sector. But rather than increasing access to capital for the poor, “the donors have invested at the policy level as well as seminars and workshops”. He concluded by stating that donors should spark economic growth in the country, but not control it.
Continue reading “Uganda’s Microfinance State Minister Says “No” to Donations”
Thursday, August 31, 2006
The Gates Foundation has made an unrestricted grant to the Grameen Foundation as a show of support for the latter’s strategic plan. On June 1, 2006, MicroCapital reported on the Gates Foundation $1.46 million donation to nonprofit microfinance network Unitus. Earlier in March, it also reported on Bill Gates’ focus on microfinance investing. And in January, ACCION International received a $5.8 million grant from the Gates Foundation to develop partnerships with microfinance institutions in West Africa and India. The Gates Foundation gave $8.7 million in microfinance grants in 2005 (see MicroCapital Blog’s December 14, 2005 and December 1, 2005 articles). The recipients of these grants were Opportunity International, FINCA International, and California-based Freedom From Hunger.
Continue reading “The Grameen Foundation Receives $1.5 Million Grant from the Gates Foundation for Strategic Plan”
Wednesday, August 9, 2006
A relatively new organization, Kiva.org, has been receiving a lot of press lately for its distinctive approach to microcredit (including The Wall Street Journal, BusinessWeek, BBC News, NPR and The Village Voice). Kiva offers the general public the unique opportunity to back a micro-business by underwriting a loan via Kiva’s website. Pictures and payment updates posted by Kiva’s partner micro-banks in countries around the world make the process compelling and fun.
Continue reading “Kiva.org Gets the Press It Deserves for Microcredit Investment”
Wednesday, July 26, 2006
Apparently, microfinance in South Korea has failed. The Korea Times, a South Korean daily newspaper, attributes this failure to “lack of private donations and government support.” The South Korean government established the Social Solidarity Bank (SSB), the nation’s first non-governmental microfinance institution, in 2002. Since its inception, SSB attracted corporate donations of 3 billion won (USD $3.15 million), in large part from conglomerate Samsung Group and Kookmin Bank. However, The Korea Times believes this was “a miniscule amount of money and not enough to allow the bank to operate as a financial institution.”
Continue reading “The Korea Times of South Korea Says Microcredit Is a Failure “due to lack of private donations and government support””
Saturday, June 24, 2006
The National Bank of Rwanda (BNR) shut down local 8 MFIs last Friday. The closures of Intambwe SA, Ongera Microfinance SA, Gwiza Microfinance SA, CMF Urugero SA, Urumuri Microfinance SA, Coopec Intera, Coopec Iwacu and Coopec Ubumwe Iwacu represent the beginning of an anticipated MFI crackdown by BNR.
There are over 200 MFIs in Rwanda, many of which emerged after the Rwandan Genocide in 1994. Since 2004 especially, the nation has seen the rapid growth of unregistered and unregulated MFIs. A depositors base three times that held by the commercial banks has been built. A statement from the Rwanda Microfinance Forum, a consortium of local MFI’s striving to set industry standards, lays the blame on the lack of a microfinance sector policy.
BNR’s Governor Francios Kanimba said that many MFIs opened without proper authorization or adequate capital: “We have a situation where for some institutions, 85% of the capital was contributed by people coming in [the customers].” Mr. Kanimba said the decision to close the 8 MFIs was a result of their mismanagement of funds and losses from poor credit management practices.
It should come as no surprise that the MFIs blame the government and that the government blames the MFIs. No one would ever point a finger at the irresponsible international donors who have spawned the glut of 200 tiny MFIs in Rwanda, and over 10,000 tiny MFIs around the world.
Continue reading “The Microcredit Investment Legacy of Plundering Poor People’s Savings: National Bank of Rwanda Shuts Down 8 Local Microfinance Institutions (MFIs)”
Wednesday, April 5, 2006
Those on the microfinance sell side were cautiously optimistic today with the announcement of a campaign to lessen donor paperwork. In a new paper, James Daily of the Grameen Foundation in Washington DC, urges data standards to rationalize micro-lenders’ reporting obligations to donors and investors.
To date, the microfinance buy side has had little incentive to build standards of any sort, so Mr. Daily’s call may well go unheeded. Business Industries have incentives to cooperate to build standards to increase efficiency and profits, whereas microfinance investors on the whole still eat from public budgets and private philanthropy.
What happens when "funders" experience counter-incentives to cooperate? A lot of pet projects. No one knows for sure, but there exist about 10,000 micro-lenders all over the world, probably 70-90% of which cultivate a donor just to keep the lights on. The rabbit hole is deep: donor agencies even today continue to advocate subsidizing yet more micro-bank start-ups.
When will we see standards for the data microbanks report to investors? Not until the buy side overcomes counter-incentives to consolidate. Hopefully, Mr. Daily’s paper will inspire just that.
Wednesday, March 29, 2006
"Apart from health, education and HIV/AIDS, we want to expand our funding activities to include the micro-finance sector especially in developing countries," said. Melinda Gates during a recent trip to
Kenya. The Gates Foundation has selected
Kenya as the launch pad of a multi-million dollar microfinance initiative.
During this trip, the Gates’ had a microfinance round-table meeting exploring views from representatives of Equity Bank, Kenya Women Finance Trust, Opportunity Bank of Malawi, Centenary Bank of Uganda, Jamii Bora Trust and K-Rep at the K-Rep Bank office in
Nairobi. Mrs. Gates touted the importance of microfinance by stating, “The foundation believes microfinance is one of the critical cogs in poverty alleviation in the entire developing world.”
Over the past twelve months, the Gates foundation has provided a series of grants to microfinance organizations such as Accion, Freedom From Hunger (FFH), Opportunity International, and Aga Khan Development Network (AKDN) åö totaling around $20M.
Additional Resources
1) The Standard, “Bill Gates set to fund microfinance institutions,” March 8, 2006
2) The Microfinance Gateway: “Bill & Melinda Gates Foundation to Fund MFIs in Kenya,” March 9, 2006
3) Microcapital Blog: With a $2.2m Grant to Microfinance Network Opportunity International, Gates Foundation Dips Toe in Microcredit Investing—Is It Welcome?, December 1, 2005
4) Microcapital Blog: Gates Foundation Dips Deeper in Microfinance, Neglecting Another Investment Opportunity with a $6 Million Microcredit Grant to Microfinance Network Freedom From Hunger, December 14, 005
5) Microcapital Blog: Has ACCIÌãN Opened the Gates’ To Microfinance Investing?, January 30, 2006
6) Accion
7) Freedom From Hunger
8) Opportunity International
9) Aga Khan Development Network (AKDN)
Tuesday, January 31, 2006
ACCIÌãN International announced today that it has received a US$5.8 million grant from the Bill & Melinda Gates Foundation. The grant will be used primarily to develop new partnerships with microfinance institutions and commercial banks in West Africa and India.
Continue reading “Has ACCIÌãN Opened the Gates’ To Microfinance Investing?”
Wednesday, December 14, 2005
Thursday, December 1, 2005
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