By Jennifer Powers and Barbara Magnoni of EA Consultants, Published by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), April 2010, 100 pages, available at: http://idbdocs.iadb.org/wsdocs/getDocument.aspx?DOCNUM=35282406

The authors of this study focused on the differences between male and female entrepreneurs in six countries in Latin America: Guatemala, Nicaragua, Colombia, Bolivia, Mexico and Peru. Continue Reading »

MicroRate, a microfinance rating agency, has released its fifth annual survey evaluating trends in microfinance investment – “State of Microfinance Investment: The MicroRate 2010 Microfinance Investment Vehicle (MIV) Survey.” The 2010 MIV survey indicates that investor interest in microfinance funds and similar intermediaries remains strong despite the global recession. However, strong interest from investors is being offset by weaker demand for funding from microfinance institutions (MFIs). In 2009, MIVs grew by 22 percent, but assets actually deployed to MFIs only grew 11 percent. This leaves MIVs with rapidly increasing levels of liquidity. By the end of last year, competition forced rates below the minimum level that some MIVs deem necessary in order to be compensated fully for the risk involved. Continue Reading »

Blue Financial Services Limited, a South African microfinance institution (MFI) that lost its operating license in Rwanda recently, has announced that it may take legal action against Rwandan borrowers who do not pay back outstanding loans. Continue Reading »

At a signing ceremony in Jamaica covered by The Gleaner, a Jamaican news publication, the Inter-American Development Bank (IDB) extended a loan of USD 450,000 to the microfinance institution (MFI) Micro Credit Limited. According to the article, Gerard Johnson argued during the ceremony that the Jamaican government is ill-equipped to deal with the financial needs of micro-businesses and often misdirects loans designated for MFIs. “This undermines non-government organizations,” he states. “The problem is access to these loans. The role of government should be to get persons to the point where they qualify for access.” Continue Reading »

The National Bank of Rwanda (NBR), the central bank of Rwanda, recently reported that Blue Financial Services, a South African microfinance institution (MFI) with reported assets of ZAR 1.5 billion (equivalent to USD 200 million), has lost its operating license in Rwanda after operating in the country for three years, because of “fiscal fraud.” Continue Reading »

The Microfinance Information Exchange (MIX) has released a paper by researcher Adrian Gonzalez entitled “Is Microfinance Growing Too Fast?” Continue Reading »

As part of its ‘BeyondBrics’ publication on business markets in emerging countries, the Financial Times (FT), a business news organization based in London, England, has predicted increased default risks in microfinance institutions (MFIs). James Fontanella-Khan, an online editor for FT, states, “Microfinance is expanding fast in emerging countries. The number of financial institutions piling in to grab a slice of the market is expanding at an even faster rate.” Continue Reading »

Three directors of Impact Microfinance Bank Limited, a microfinance institution established in 2008 with headquarters in Lagos, have been arrested for fraud. The three men – 49 year-old Innocent Akpan, 45 year-old David Obieke and 45 year-old Joseph Nwabuwanne – were arrested after several depositors complained that they could not access their funds. The suspects allegedly mismanaged the depositors’ money and subsequently could not honor clients’ deposits. Continue Reading »

In a recent interview with Vanguard, a regional publication, Alhaji Umar Ibrahim, acting Managing Director of the Nigerian Deposit Insurance Corporation (NDIC), shed light on the ongoing efforts to revitalize the Nigerian microfinance sector. Mr Ibrahim revealed that NDIC examiners had recently finished a comprehensive review of distressed microfinance banks. He stated that many of these banks have not been paying government fees and that many are facing insolvency. Continue Reading »

By Christian Ahlin, Jocelyn Lin and Michael Maio, published by the Journal of Development Economics, April 27, 2010, 16 pages, available at: http://news.msu.edu/media/documents/2010/06/8d6d8126-97dd-4569-b65b-736f700fc844.pdf

Mr Ahlin, Ms Lin and Mr Maio study whether and how the success or failure of microfinance institutions (MFIs) depends on the country-level context, particularly macroeconomic and macro-institutional features. In order to explore these questions, the authors reviewed data on 373 MFIs from 74 countries. The authors rely on two groups of MFI performance variables: operational self-sufficiency (the ratio of revenues to costs) and loan portfolio growth. Operational self-sufficiency is broken down into three components: financial revenues and costs, losses due to default and operating costs, so that, in some cases, the authors are able to identify the channel through which a given macroeconomic variable is correlated with the financial sustainability of a MFI. MFI portfolio growth is decomposed into two components: growth in number of borrowers (extensive growth) and growth in average loan size (intensive growth). Continue Reading »

A trend in initial public offerings (IPOs) by microfinance institutions in India could potentially increase the risk of defaults by microborrowers. SKS Microfinance, an Indian microfinance institution, has recently filed to raise up to USD 250 million in an initial public offering (IPO), as initially reported by MicroCapital on March 9, 2010. This pending IPO is causing concern that an IPO trend in India could trigger a trend in microfinance institutions’ (MFIs’) funding sources, as reported by MicroCapital on June 16, 2010, which could raise the risk of loan defaults by pressuring MFIs to disburse riskier microloans. Continue Reading »

By David Apgar and Xavier Reille, published by CGAP (Consultative Group to Assist the Poor), April 2010, 12 pages, available at: http://www.cgap.org/p/site/c/template.rc/1.9.43712/

“Microfinance Foreign Exchange Facilities,” a paper recently published by CGAP (Consultative Group to Assist the Poor), reviews methods microfinance institutions (MFIs) and microfinance investment vehicles (MIVs) use to deal with foreign exchange risk. It considers the nascent microfinance hedging market by detailing the operations of The Currency Exchange Fund (TCX), Cygma Corp and MFX Solutions LLC (MFX). It concludes by examining the importance of local-currency markets and additional development of the microfinance hedging market. Continue Reading »

By P. Hazell, J. Anderson, N. Balzer, A Hastrup Clemmensen, U. Hess and F. Rispoli, published by the International Fund for Agricultural Development (IFAD) and the World Food Program (WFP), May 2010, 153 pages, available at: http://www.ifad.org/ruralfinance/pub/weather.pdf

This paper provides an introduction to agricultural risk and the use of weather index funds to mitigate that risk. Participants in a weather index fund would receive financial compensation if an index highly correlated with local crop yields follows an undisclosed pattern. This pattern is kept secret to reduce the risk of moral hazard. Continue Reading »

Pakistan?s Microfinance Credit Information Bureau (MF-CIB) has been launched as a joint venture by the Pakistan Microfinance Network, the UK Department for International Development (DFID), the Citi Foundation and the State Bank of Pakistan. Continue Reading »

The government of the Indian state of Andhra Pradesh recently announced it would file criminal cases against any microfinance institution (MFIs) found to have used coercion to recover loans. Continue Reading »

In a recent interview on the Microfinance Focus website, Dr John Hatch, founder of FINCA International, a global microfinance network serving 700,000 people, discusses the successes of microfinance and FINCA’s experiences in disaster and conflict zones. Continue Reading »

The nonprofit Microfinance Information Exchange (MIX) recently released the 2009 benchmarking report on the microfinance sector in Brazil, available in Spanish. Continue Reading »