Source: NY Times
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The State Bank of Pakistan (SBP) has issued a new circular that it will provide a 25 percent first loss guarantee for loans under its Micro Credit Guarantee Facility (MCGF) to further encourage commercial banks to provide wholesale funds to microfinance institutions (MFIs).  The Facility was introduced last December but was met with an unenthusiastic response by banks despite the SBP’s 40 percent principal guarantee on loans.  According to the press release in the Daily Times of Pakistan, only one loan has been granted so far under the MCGF.  Banks and development finance institutions (DFIs) now will have the option of choosing either the 40 percent principal guarantee (pari passu), or the 25 percent first loss guarantee.  The first loss guarantee will cover gaps in repayment of a loan’s principal, up to 25 percent of the principal value of the loan, whereas the 40 percent principal guarantee will cover 40 percent of the actual loss incurred.  In essence the first loss guarantee covers a bank’s smaller losses upfront completely, while the 40 percent principal guarantee would require the bank to share in the losses but covers a larger percentage of loss. Continue Reading »

At a meeting recently held at the Bangladesh Bank, the Microcredit Regulatory Agency (MRA) of Bangladesh announced that microfinance institutions (MFIs) will have to limit the interest rates they charge clients to a flat 15 percent or an effective rate of 30 percent.  An MRA official said that the move is an interim measure, and that the MRA will announce a final interest rate policy for MFIs after “conducting an in-depth study”.   In addition to the limits on interest rates the MRA announced that MFIs cannot collect deposits totaling more than 80 percent of their total outstanding loan portfolio, in order to prevent financial fraud.  Additionally, according to a senior MRA official, MFIs will be empowered to purchase any fixed asset on the basis of the executive committee’s approval instead of the board of director’s consent.  The MRA also asked that NGOs offering microfinance separate their microfinance activities from other business activities otherwise all of their business activities will fall under the monitoring and supervision of the MRA. Continue Reading »

Written by Robert Cull, Asli Demirgüç-Kunt, and Jonathan Morduch, and based on data from the Microfinance Information Exchange (MIX Market), released May 2008 as Policy Research Working Paper Number 4630 by the World Bank Development Research Group, 40 pages, available at: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2008/05/27/000158349_20080527095250/Rendered/PDF/wps4630.pdf Continue Reading »

Source: Business Day 
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Nguon Sovan and George Mcleod, writers for Cambodian newspaper The Phnom Penh Post, reported in March 2009 that although the microfinance institutions (MFIs) have so far avoided the worst of the current economic recession, they are expecting slower growth rates and higher interest rates as the global credit crunch hits foreign lenders who have been a key source of funding in the past. This is a new perspective on the Cambodian microfinance market, as in February 2009, The Phnom Penh Post published a far more optimistic article stating that although the growth of the microfinance sector this year would be at a slower pace than previous years, the industry is still stable and expected to grow at double-digit rates. For more on The Phnom Penh Post’s February 2009 article, please read this MicroCapital article. Continue Reading »

Pakistani Microfinance Institutions (MFIs) found themselves in heavy criticism at a workshop on the state of microfinance held in Islamabad.  The workshop was organized by the Planning Commission of the Government of Pakistan to revisit the policies in place for MFIs and determine recommendations for the future of the industry.   Continue Reading »

Acceder.com is a non-profit internet-based microfinance charity with the mission, “to accomplish (their) dream of equal opportunity” by providing interest-free loans in Jewish communities. It is run by the New York based ACCEDER Foundation. Loans currently only benefit borrowers in Argentina. Users can scroll through a list of potential borrower’s profiles and decide whom they would like support with a minimum contribution of USD 25. The money is then funneled through Acceder.com to Acceder loan officers in Argentina who are in charge of screening clients, distributing loans and collecting repayments. Although the website does not provide information on standard loan sizes, posted loan sizes range from USD 1700 to USD 2700. The loans finance purposes such as small businesses, trips to Israel, housing improvement, and debt consolidation. Continue Reading »

AllAfrica.com reported that Salim Saleh, the current Ugandan State Minister for Microfinance announced that the Government of Uganda (GoU) has set aside 262 billion shillings (or USD 133.7 million) to be delivered as subsidized low-interest loans through the Microfinance Support Center (MSC), to Savings and Credit Cooperative Societies (SACCO), to individuals and small businesses. MSC is a government owned limited liability company set up to aid in management of rural microfinance. The announcement was made at the launch of the MSC’s five-year strategic plan. “This company has 40 billion shillings (USD 20.4 million) for the next five months and it can loan out 9 billion shillings (USD 4.6 million) each month,” said Mr. Saleh. This budget is up from January when MSC Director, Mr. Mutebi Kityo announced that the company was prepared to loan out USD 3.5 million by February 10. Financial information is not available regarding MSC’s previous activities. Continue Reading »

The Latin American Herald Tribune reported that thousands of farmers and small businessmen gathered on the night of Monday, January 12, to protest against high interest rates of microfinance institutions in the community of Tipitapa. They lit fire to a number of tires creating a blockade of traffic on the Pan American Highway just north of the Nicaraguan capital, Managua. The protest lasted until early morning on Tuesday, and culminated as the National Police used tear gas to clear away resistant protestors armed with guns, clubs, and stones. Two policemen and one civilian were injured, and 160 were arrested. Paramedics treated hundreds of others who were hurt by the tear gas. Continue Reading »

Source: Common Ground News

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The Grameen Trust of Bangladesh, a member of the Grameen Family that helps build new microfinance institutions (MFIs) around the world, plans to open a new MFI in Mexico. Fundacion Carlos Slim, the charitable organization of Mexican billionaire Carlos Slim, will provide an initial donation of USD 5m and guarantee another USD 40m in loans, which will create the total capital base for the new MFI. The new MFI will be modeled after the Grameen Bank. It will be a non-profit using the ‘social business‘ model, which implies that it will reinvest all profits back into the operation of the company. The new MFI, which will initially target 80,000 borrowers, will be named Grameen Carso after the Mr. Slim’s business conglomerate, Grupo Carso. The company will initially be managed by the Grameen Trust, but eventually they hope to turn the company over to Mexican operators. Continue Reading »

Source: Turkish Daily News.
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Recent increases in the cost of borrowing for many organizations around the world and new capital adequacy requirements are putting pressure on Indian Microfinance Institutions. According to The Times of India, both Equitas Micro Finance India (Equitas) and Madura Micro Finance ltd (Madura) are raising interest rates due to increases in the cost of borrowing. Also, SKS Microfinance (SKS) has begun looking for new sources of private equity funding, citing both the reserve requirements and increased interest rates. Continue Reading »

Written by Joshua Zacharias, Glucksman Institute for Research in Securities Markets at The Leonard N. Stern School of Business, New York University, Faculty Advisor: David Backus, April 16, 2008, available at: http://archive.nyu.edu/handle/2451/25936.

‘Economies of scale’ refers to increased efficiency (lower average costs per unit produced) experienced by firms as they increase the overall size (total units produced) of their operations. For financial institutions, this measurement measures cost savings realized from increasing the size of its loan portfolio in terms of both number of loans and overall value of loan portfolios. Continue Reading »

HSBC Turkey, the Turkish arm of the global bank HSBC, announced the allocation of USD 5 million toward microcredit loans until 2010 in Turkey. According to Piraye Antika, the CEO of HSBC Turkey, the microcredit loans will be evenly split between urban areas, rural areas and young university-graduate entrepreneurs. In disbursing the loans, HSBC will work with three non-government organizations: the Turkish Waste Prevention Foundation, the Community Volunteers, and the Female Labor Assessment Foundation. Continue Reading »

The Reserve Bank of India (RBI) recently tightened capital adequacy standards governing microfinance institutions (MFIs) in India, and several local MFIs worry the change may lead to the need to raise additional capital and increase interest rates.  Continue Reading »

A new United States non-profit organization, MicroFinance Transparency (MF Transparency), will publish the interest rates and other basic information about the lending practices of microfinance institutions (MFIs) worldwide. Supported by many throughout the world of microfinance, the founding of this new organization comes at a time of fierce debate over the role of commercial microfinance. Continue Reading »