MicroCapital » Risks

MICROFINANCE PUBLICATION ROUND-UP: Role Reversal Revisited, Microinsurance Profitability Business Case, Trends in Cross-Border Funding

Kristha Abores — Tue, 07 Feb 2012 05:03:38 +0000

“Role Reversal Revisited,” by Damian von Stauffenberg and Daniel Rozas, published by MicroRate, 2011, 22 pages, available at http://microrate.com/wp-content/uploads/2012/01/Role-Reversal-Revisited-…

This paper reviews the roles of development finance institutions (DFIs) and private lenders in funding microfinance institutions (MFIs). While DFIs are expected to pave the way for private funders to support MFIs as the industry matures, “Role Reversal,” a 2007 report published by MicroRate indicates that this is not the case. The 2007 paper observed that DFI lending was heavily concentrated towards the most creditworthy MFIs, leaving investment in smaller or riskier MFIs to private microfinance funds. This new report re-examines the situation and finds that MFIs with easy access to private funding still make up a significant portion of DFI lending.

“A Business Case for Microinsurance: An Analysis of the Profitability Of Microinsurance for Five Insurance Companies,” Janice Angove and Nashelo Tande, published by the Microinsurance Innovation Facility, July 2011, 55 pages, available athttp://www.ilo.org/public/english/employment/mifacility/download/mp11bus…

This paper analyses the profitability of microinsurance through case studies of five insurers that operate in low-income markets in Kenya, South Africa, India, Guatemala and the Philippines. The authors utilize a framework based on three main drivers of profitability: generating sufficient income by reaching scale, managing claims costs and managing acquisition and administration costs. The findings indicate that products with simple life benefits can be profitable. Working with partners can also be beneficial for insurers, both in managing distribution and administration costs as well as in providing customers value beyond the cover provided by the insurance policies.

“Trends in Cross-Border Funding,” by Barbara Gähwiler and Alice Nègre, published by CGAP (Consultative Group to Assist the Poor), December 2011, 4 pages, available athttp://www.cgap.org/gm/document-1.9.55998/Brief_Cross-BorderFunding.pdf

This paper describes global trends in microfinance funding between 2007 and 2010 based on data from the annual CGAP Funder Survey of cross-border funders. The findings show that the amount of new commitments increased from USD 2.9 billion in 2009 to USD 3.6 billion in 2010. The study also shows the increased use of microfinance investment vehicles (MIVs) and other intermediaries in channelling investments. While debt remains the primary instrument used by funders, equity investments have increased, with the share of equity funding in total commitments at 13 percent in 2010, up from 9 percent in 2008.

By Kristha Abores, Reseach Associate

Sources and Additional Resources:

[1] “Role Reversal Revisited,” http://microrate.com/wp-content/uploads/2012/01/Role-Reversal-Revisited-…

[2] “A Business Case For Microinsurance: An Analysis Of The Profitability Of Microinsurance For Five Insurance Companies,”http://www.ilo.org/public/english/employment/mifacility/download/mp11bus…

[3] “Trends in Cross-Border Funding,” http://www.cgap.org/gm/document-1.9.55998/Brief_Cross-BorderFunding.pdf

“Cross-border Funding (2011),” http://www.cgap.org/p/site/c/template.rc/1.11.45737/1.26.17576/

“CGAP Cross?border Funder Survey 2011,” http://www.cgap.org/gm/document-1.9.55343/Funder_Survey_2011_Results_Table_Rev.pdf

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

MICROCAPITAL BRIEF: “Paris Appeal for Responsible Microfinance” by Convergences 2015 Reaches 600 Signatories

Ariana Malushi — Mon, 06 Feb 2012 05:03:27 +0000

Convergences 2015, a nonprofit based in France that focuses on poverty elimination, is promoting the “Paris Appeal for Responsible Microfinance” in an effort to slow the commercialization of microfinance, arguing that it is inconsistent with development and inclusive finance. Initially presented at the 4th annual Convergences 2015 Forum in May 2011, the appeal has attracted 600 organizations and individuals as of January 2012 to agree to abide by a code of conduct that includes adapting products and services to the needs of poor people, encouraging “moderate” interest rates and maintaining “the highest standards” of information transparency and client protection. Members of the public may view the list of signatories or endorse the appeal at http://www.appeldeparis.org/.

By Ariana Malushi, Research Associate

Sources and Additional Resources

[1] Information submitted to MicroCapital by Convergences 2015, January 2012

MicroCapital.org Article, January 26, 2012, “MICROCAPITAL BRIEF: Microfinance CEO Working Group Issues Road Map for Microfinance Industry Promoting Smart Campaign, Microfinance Transparency, Social Performance Task Force,” http://www.microcapital.org/microcapital-brief-microfinance-ceo-working-…

MicroCapital.org Article, “MICROCAPITAL EVENT: Fourth Annual Convergences 2015 – Working Towards the Millennium Development Goals, Paris, France, May 3-5, 2011,” http://www.microcapital.org/microcapital-event-fourth-annual-convergences-2015-–-working-towards-the-millennium-development-goals-paris-france-may-3-5-2011/

MicroCapital.org Article, “MICROFINANCE EVENT: Convergences 2015, Conference to Design Road Map for Microfinance In Next Decade, May 25 to May 26, 2010, Paris, France,” http://www.microcapital.org/microfinance-event-convergences-2015-confere…

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

MICROCAPITAL BRIEF: Cambodian Government: Microfinance Interest Rates of Up to 50 Percent Threaten Loss of Land, “Social Instability”

Natalie Baer — Mon, 23 Jan 2012 14:07:47 +0000

Cambodian government officials reportedly are looking to negotiate down the interest rates on microfinance loans, arguing that current rates are unsustainable for the country’s rural farming population and that defaults are causing many farmers to become landless. [1] The Cambodia Rural Development Bank, an autonomous public enterprise established by the government to fund microfinance institutions (MFIs), is negotiating with the 10 institutions it supports to lower rates. [1] [3] Meanwhile, MFIs argue that rural customers understand interest rates and that if rates were too high, they would go to other lenders. However, operating costs for MFIs also remain high, since farmers consult individually for loans rather than borrowing in groups, and much of MFIs’ funding comes from overseas, which is more expensive than local funding. [1]

According to the Cambodia Microfinance Association, a trade association of 26 MFIs, the aggregate gross loan portfolio of its members has increased almost 20 percent since December 2008 to USD 510 million as of March 2010. [2] Loan size average USD 500. [1]

By Natalie Baer, Research Associate

About the Cambodian Microfinance Association: The Cambodian Microfinance Association (CMA) is an NGO that was formally established in 2004 by seven microfinance institutions (MFIs). As of May 26, 2011, CMA has 26 active members. Its main function is to strengthen communication among MFIs and other groups such as government authorities, donors, creditors and investors.

Source and Resources:

[1] “Debt fears for farmers Calls for lower microfinance rates”
http://www.phnompenhpost.com/index.php/2012011153889/Business/debt-fears-for-farmers-calls-for-lower-microfinance-rates.html

[2] Mix Market: Microfinance in Cambodia
http://www.mixmarket.org/mfi/country/Cambodia/report

[3] Cambodia Rural Development Bank http://www.rdb.com.kh/data/about%20RDB.htm

MicroCapital Universe Profile: Cambodian Microfinance Association http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Cambodian+Microfinance+Association+%28CMA%29#Description_140_word_limit_

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

MICROCAPITAL BRIEF: Preferring Sector-Wide Solution, Reserve Bank of India Refuses to Classify Restructured Loans as Performing Assets for Microfinance Institutions BASIX, Sharada’s Women’s Association for Weaker Section (SWAWS)

Nisha Koul — Tue, 17 Jan 2012 13:15:52 +0000

The Reserve Bank of India (RBI), India’s central banking authority, has refused to give a special exemption to commercial banks, that include HDFC Bank, Corporation Bank and Axis Bank, to restructure loans outstanding to microfinance providers BASIX Group and Sharada’s Women’s Association for Weaker Section (SWAWS) Credit Corporation India Private Limited under a classification other than as non-performing assets [1] [2]. RBI has reportedly expressed that such a “special dispensation is unlikely for one or two firms,” and it would prefer “MFIs and banks to come together…as such concessions can be for the entire sector and not individual firms.” Both BASIX and SWAWS did not participate in a corporate debt restructuring (CDR) offer from RBI that expired in June 2011 that allowed banks to restructure loans given to MFIs without classifying the assets as “bad loans.” Under the CDR, banks offered concessions such as extended repayment terms, lowered loan rates and a moratorium on the repayments on wholesale loans to microfinance institutions (MFIs).

BASIX Group’s microfinance activities are carried out by two MFIs: Bhartiya Samruddhi Finance Limited (BSFL), a non-banking finance company, and Krishna Bhima Samruddhi Local Area Bank Limited (KBSLAB), a rural bank. According to the Microfinance Information Exchange (MIX), BSFL reported total assets of USD 352 million, a gross loan portfolio of USD 281 million and 1.5 million active borrowers as of December 2010. As of the same date, KBSLAB reported to MIX total assets of USD 31.3 million, a gross loan portfolio of USD 20 million, return on assets (ROA) of 1.33 percent, return on equity (ROE) of 12.1 percent and 67,000 active borrowers.

As of 2010, SWAWS reported to MIX total assets of USD 28.3 million, a gross loan portfolio of USD 21.9 million, ROA of 0.13 percent, ROE of 0.48 percent and 142,100 active borrowers.

By Nisha Koul, Research Associate

About BASIX Group: BASIX Group is an Indian institution whose members provide poor people various services including microfinance, health insurance and agricultural and business development services. The BASIX Group operates through a holding company known as Bhartiya Samruddhi Investments and Consulting Services Limited (BASICS). BASIX Group’s microfinance activities are carried out by two microfinance institutions (MFIs): Bhartiya Samruddhi Finance Limited (BSFL), a non-banking finance company and Krishna Bhima Samruddhi Local Area Bank Limited (KBSLAB), a rural bank. As of September 30, 2010, BASIX reported a gross loan portfolio of USD 402 million with approximately 3 million clients and operations in 16 Indian states.

About Sharada’s Women’s Association for Weaker Section (SWAWS) Credit Corporation India Private Limited: SWAWS, registered in 1999, aims to “improve the quality of life of clients through provision of responsive and efficient financial services as per international best practices and transparency, while maximizing stake holder’s value.” As of 2010, SWAWS reported to the US-based nonprofit Microfinance Information Exchange (MIX), total assets of USD 28.3 million, a gross loan portfolio of USD 21.9 million, return on assets (ROA) of 0.13 percent, return on equity (ROE) of 0.48 percent and 142,100 active borrowers.

Sources and Additional Resources:

[1] Live Mint, “Loan recast plans of Basix, Swaws hit a roadblock,” http://www.livemint.com/2012/01/04224208/Loan-recast-plansofBasix-Sw.html?atype=tp

[2] Live Mint, “Basix, Swaws seek RBI approval for debt recast by banks,” http://www.livemint.com/2011/12/15211958/Basix-Swaws-seek-RBI-approval.html?d=1

MicroCapital.org story, November 1, 2011, “MICROCAPITAL BRIEF: Indian Microfinance Institutions (MFIs) Spandana Sphoorty Financial, Share Microfin, Asmitha Microfin Call Off Merger After Restructuring Plans Approved,” http://www.microcapital.org/microcapital-brief-indian-microfinance-institutions-mfis-spandana-sphoorty-financial-share-microfin-asmitha-microfin-call-off-merger-after-restructuring-plans-approved/

MicroCapital.org story, September 5, 2011, “MICROCAPITAL BRIEF: Vijay Mahajan of Microfinance Firm BASIX Says Firm to Explore Foreign Investors if Domestic Banks Refuse to Lend,” http://www.microcapital.org/microcapital-brief-vijay-mahajan-of-microfinance-firm-basix-says-firm-to-explore-foreign-investors-if-domestic-banks-refuse-to-lend/

MicroCapital.org story, April 26, 2011, “MICROCAPITAL BRIEF: Cresa Microfinance, Sharada’s Women’s Association for Weaker Section (SWAWS) Microfinance of India Face Possible Bankruptcy,” http://www.microcapital.org/microcapital-brief-cresa-microfinance-sharada%E2%80%99s-women%E2%80%99s-association-for-weaker-section-swaws-microfinance-of-india-face-possible-bankruptcy/

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

MicroCapital Universe Profile: SWAWS, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Sharada%E2%80%99s+Women%E2%80%99s+Association+for+Weaker+Section+%28SWAWS%29+Credit+Corporation+India+Private+Limited

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

MICROFINANCE PAPER WRAP-UP: “Bank Agents: Risk Management, Mitigation, and Supervision;” by Kate Lauer, Denise Dias, Michael Tarazi; Published by CGAP (Consultative Group to Assist the Poor)

Kristha Abores — Tue, 17 Jan 2012 03:33:57 +0000

By Kate Lauer, Denise Dias and Michael Tarazi; published by CGAP (Consultative Group to Assist the Poor); December 2011; 24 pages; available at: http://www.cgap.org/p/site/c/template.rc/1.9.55781/

The authors of this paper analyse the use of bank agents in an effort to guide supervisory entities in developing a regulatory approach suitable to their respective countries. The authors observe that in most countries, bank agents, which are defined as “any third party acting on behalf of a bank,” handle a very small percentage of the total assets in banking systems, minimizing the systemic risk they present. However, the authors stress that it is still important that bank supervision offices enforce the responsible use of agents.

Tasks performed by agents include the following: transmitting information, such as receiving loan applications or providing customers with account balances; processing information, such as conducting “know your customer” procedures or assessing loan applications; handling cash, including deposits or withdrawals; and electronic fund transfers, such as bill payments or disbursing government benefits. Banks may use agent network managers (ANMs) to manage agents. In such arrangements, banks may outsource the agent management functions to a specialized third-party operator, arrange for a large retailer to use its outlets as agents of the bank or enter into an agency agreement with a third party, which in turn subcontracts to multiple agents.

The authors point out that the extent to which a bank uses agents, the specific tasks assigned to agents and the bank’s management of this channel all affect the level and kind of risk to which a bank will be exposed. These risks include operational risks, such as agent fraud, data entry errors, poor cash management and abusive service; technological risks, such as utility disruption or software failure; legal and compliance risks, such as customers suing the bank as a result of an agent’s actions or agents demanding the same benefits as bank staff; credit risk, such as the bank not receiving money owed by the agent; and the resultant reputational risk. In order to mitigate these risks, banks may utilise policies covering areas such as agent selection and hiring, training, cash management and monitoring. Other risk management strategies include periodic reviews of agent networks, contingency planning, insurance coverage and risk-sharing with ANMs.

The authors studied the regulatory environments of seven countries, some of which require approval for banks to use agents in general, individual agent registration, regular information reporting and onsite inspections.

The authors also discuss corrective measures that supervisors can take in cases of bank or agent noncompliance. These include instructing the bank to develop a plan to address weaknesses, requiring additional capital, asking the bank to remedy agent misconduct, requiring the bank to terminate the agency agreement, imposing fines or even prohibiting the bank from the further use of agents.

The authors assert that while it is “too early to determine how specifically the different supervisory approaches impact bank use of agents,” there is some indication that cumbersome licensing requirements may dissuade banks from pursuing the model. The authors stress that supervisory entities should measure risks in comparison to the costs of supervision and bank compliance. In general they argue that given the relatively limited scope of bank use of agents, there is low systemic risk, so supervision should not be overly complex or burdensome.

Sources and Additional Resources:

CGAP (Consultative Group to Assist the Poor), December 2011, “Bank Agents: Risk Management, Mitigation, and Supervision,” available at http://www.cgap.org/p/site/c/template.rc/1.9.55781/

MicroCapital.org article, May 3, 2011, “MICROCAPITAL BRIEF: CGAP (Consultative Group to Assist the Poor) Technology Blog Reviews Lessons Learned from Branchless Banking in Brazil,” http://www.microcapital.org/microcapital-brief-cgap-consultative-group-to-assist-the-poor-technology-blog-reviews-lessons-learned-from-branchless-banking-in-brazil/

MicroCapital’s Microfinance Universe profile, CGAP, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP

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

MICROCAPITAL BRIEF: 48 Tanzanian Microfinance Institutions Adopt Code of Conduct Covering Transparency, Client Protection

Kristha Abores — Tue, 10 Jan 2012 13:53:34 +0000

The Tanzania Association of Microfinance Institutions (TAMFI) has announced that 48 of its member microfinance institutions (MFIs) have adopted a code of conduct. Winnie Terry, TAMFI Executive Secretary, was quoted as having said, “With this code of conduct, TAMFI members are expected to take a leading role to deliver high quality and responsible financial services to the community. The code is intended to make Microfinance Institutions become more responsive to the clients they serve.”

MFIs adopting this code of conduct are required to disclose interest rate and other service costs to customers through loan contracts, advertisements, brochures and notice boards. Lenders are required to provide clear and understandable loan contracts prepared in Swahili, as well as verbal explanations, especially to those who cannot read. Institutions are also required to explain the consequences of late loan payments and non-repayment. TAMFI is encouraging customers to raise concerns about MFIs that fail to follow these guidelines by contacting a hotline it has set up for this purpose: +255 0764 668 331.

Some of the MFIs subscribing to the code of conduct are Tujijenge Tanzania Limited, African Microfinance, Promotion of Rural Initiative and Development Enterprises Limited (PRIDE), Dar-es-Salaam Community Bank, Akiba Commercial Bank, Small Enterprise Development Agency (SEDA), Youth Self Employment Foundation (YOSEFO), Presidential Trust Fund (PTF), Small Entrepreneurs Loan Facility (SELF), K-Finance and Facilitation for Integrated Development and Relief Services (FAIDERS).

The text of the code of conduct is not available.

By Kristha Abores, Research Associate

About Tanzania Association of Microfinance Institutions (TAMFI):

The Tanzania Association of Microfinance Institutions (TAMFI) aims to support the capacity development of microfinance institutions in Tanzania through lobbying, advocacy, training and the gathering and dissemination of information. As of January 2012, it has approximately 48 member institutions. The Coalition of Tanzanian Microfinance Practitioners and Service Providers Limited merged with TAMFI in July 2010.

Sources and Additional Resources:

[1] “Microfinance institutions adopt code of conduct,” http://dailynews.co.tz/index.php/biz/806-microfinance-institutions-adopt…

MicroCapital.org article, April 11, 2011, “MICROCAPITAL BRIEF: Indian Microfinance Network Sa-Dhan Introduces Code of Ethics,” http://www.microcapital.org/microcapital-brief-indian-microfinance-network-sa-dhan-introduces-code-of-ethics/

MicroCapital.org article, September 13, 2010, “MICROCAPITAL BRIEF: Iraqi Microfinance Institutions (MFIs) Agree to Code of Ethics at Inaugural Iraqi Microfinance Industry Network Meeting,” http://www.microcapital.org/microcapital-brief-iraqi-microfinance-institutions-mfis-agree-to-code-of-ethics-at-inaugural-iraqi-microfinance-industry-network-meeting-2/

MicroCapital Universe Profile: Tanzania Association of Microfinance Institutions (TAMFI), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+Tanzania+Association+of+Microfinance+Institutions+%28TAMFI%29

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

MicroCapital Universe Profile: Akiba Commercial Bank (ACB), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Akiba+Commercial+Bank

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

MICROFINANCE PUBLICATION ROUND-UP: Microfinance Product Diversification, Over-indebtedness in Kosovo, Social Inclusion

Kristha Abores — Mon, 09 Jan 2012 06:57:27 +0000

“Making Microfinance Work: Managing Product Diversification” by Cheryl Frankiewicz, Craig Churchill; published by the International Labour Organization (ILO); December 2011; 612 pages; available for a fee at http://www.ilo.org/global/publications/ilo-bookstore/order-online/books/…

Designed for middle and senior managers at microfinance institutions (MFIs), this book reviews various product options, explores how to combine product menus to serve specific market segments and discusses strategies on managing partnerships and overcoming the challenges of managing a diverse product portfolio. The book suggests specific actions to manage diversification including adapting institutional culture, redistributing responsibilities, empowering staff, communicating with clients, reengineering systems and managing change in general [1].

“Indebtedness of Microcredit Clients in Kosovo” by Justyna Pytkowska, Sylvia Spannuth; published by Finance in Motion and the Microfinance Centre (MFC); December 2011; 10 pages; available at http://www.microfinancegateway.org/gm/document-1.9.55745/EFSE%20DF_OI-St…

This paper outlines the results of a study commissioned by the technical assistance arm of the European Fund for Southeast Europe (EFSE), which is known as the EFSE Development Facility, to gain an understanding of the level of indebtedness and underlying borrowing patterns of microcredit clients in Kosovo, shed light to the factors that affect over-indebtedness and provide recommendations on how to address the issue. Two indicators were used to measure over-indebtedness: a “net indebtedness index” and clients’ perceptions of debt burden. The study recommends transparency about credit operations, financial education and other responsible lending practices [2].

“Alternative Banking and Social Inclusion” by Kurt von Mettenheim, Olivier Butzbach; published by the Institute for Money, Techonology and Financial Inclusion; December 2011; available at http://blog.imtfi.uci.edu/2011/12/alternative-banking-and-social_05.html

In a blog post on the website of the Institute for Money, Techonology and Financial Inclusion (IMTFI), Kurt von Mettenheim and Olivier Butzbach discuss how public savings banks can provide new channels for social policies, focusing on the findings of IMTFI research on the modernization of public savings banks and central banking in Brazil. The authors discuss idea that finance “increases inequality in a setting of high inequality and high financial returns,” using data from Sao Paolo as an example. The authors also suggest that “private bank-based strategies are not enough to counter underdevelopment and exclusion”, and they further explore alternatives through a case study of Caixa Economica Federal, a public savings bank in Brazil [3].

By Kristha Abores, Research Associate

Sources and Additional Resources:

[1] “Making Microfinance Work: Managing Product Diversification,” http://www.ilo.org/global/publications/ilo-bookstore/order-online/books/…

[2] “Indebtedness of Microcredit Clients in Kosovo,” http://www.microfinancegateway.org/p/site/m/template.rc/1.9.55745/

[3] “Alternative Banking and Social Inclusion,” http://blog.imtfi.uci.edu/2011/12/alternative-banking-and-social_05.html

MicroCapital Universe Profile: International Labour Organization (ILO), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Int…

MicroCapital Universe Profile: European Fund for Southeast Europe (EFSE), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Eur…

MicroCapital Universe Profile: Finance in Motion, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Fin…

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

MICROCAPITAL BRIEF: Indian Microfinance Institutions Shift from Lending Mostly to Women Towards Relatively Gender-Balanced Portfolio, Reports Elena Bridgers in Stanford Social Innovation Review

Nisha Koul — Wed, 28 Dec 2011 09:30:08 +0000

Elena Bridgers, a social researcher based in France, recently authored an article on the website of the US-based Stanford Social Innovation Review exploring the shift of microfinance institutions (MFIs) in India from a primarily “female client base” to a more “gender-balanced portfolio” [1]. Ms Bridgers explains that following the “microfinance crisis” that began in 2010 in the Indian state of Andhra Pradesh, MFIs are looking to shift from the group-lending model, which focused on women’s groups, to lending to individuals. This shift, Ms Bridgers notes, is “intimately linked” to an increased preference for male clients. According to Ms Bridgers, most MFIs lend to women not because they are more “secure and socially responsible investments” but because they are “docile.” She quotes a field manager of BASIX, a MFI in India, as saying that, “Women don’t stand up to you the way that men do. They are always at home, and they are easier to form into groups.” She further states that these women are not totally in control of the loans they access and are caught between the loan officers who hold them accountable for repayment of the loans and the husbands who are actually in control of the money.

Ms Bridgers reports that in her two-month study of 90 women from unspecified regions in India, 18 percent had full control over their loans and 49 percent said they were partially in control of the money. 26 percent of the women said that they wanted “nothing to do with microfinance.” Ms Bridgers says that if women in this last category are to be empowered “a convergence of many more supportive efforts, mostly outside the scope of a typical MFI” will be needed. She concludes that MFIs should make the change to a gender-balanced portfolio, so their loans to women can be limited only to women that have a “reasonable chance” to maintain control of the money they borrow.

By Nisha Koul, Research Associate

About BASIX: BASIX Group is an Indian entity whose institutional members provide poor people various services including microfinance, health insurance and agricultural and business development services. The BASIX Group operates through a holding company, Bhartiya Samruddhi Investments and Consulting Services Limited (BASICS). BASIX Group’s microfinance activities are carried out by two microfinance institutions (MFIs): Bhartiya Samruddhi Finance Limited (BSFL), a non-banking finance company (NBFC), and Krishna Bhima Samruddhi Local Area Bank Limited (KBSLAB), a rural bank. As of 2010, BASIX reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 352.4 million, a gross loan portfolio of USD 281 million, approximately 1.5 million active borrowers and operations in 17 Indian states.

Sources and Additional Resources:

[1] Stanford Social Innovation Review, “Following India’s Microfinance Crisis, A Shift to Male Clients,” http://www.ssireview.org/blog/entry/following_indias_microfinance_crisis_a_shift_to_male_clients

MicroCapital.org story, May 10, 2011, “MICROFINANCE PAPER WRAP-UP: Microfinance in India – A Crisis at the Bottom of the Pyramid; Published by Legatum Ventures,” http://www.microcapital.org/microfinance-paper-wrap-up-microfinance-in-india-a-crisis-at-the-bottom-of-the-pyramid-published-by-legatum-ventures/

MicroCapital Universe Profile: BASIX, http://microcapital.org/microfinanceuniverse/tiki-index.php?page=BASIX+Group

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

MICROFINANCE EVENT: CGAP (Consultative Group to Assist the Poor) Hosts Virtual Conference “Understanding Multiple Borrowing and Avoiding Over-indebtedness Among Clients,” January 12 and 13, 2012

Kristha Abores — Tue, 27 Dec 2011 05:03:08 +0000

Event Name: Understanding Multiple Borrowing and Avoiding Over-indebtedness Among Clients

Event Date: January 12 – 13, 2012

Event Location: Online

See Our Comprehensive Event Calendar at: http://microfinanceassociation.ning.com/events

Cost: Free

Summary of Event:

This virtual conference will provide a platform to discuss thoughts and experiences around multiple borrowing and avoiding over-indebtedness. Moderators will be facilitating online discussions on various topics, including causes of multiple borrowing and over-indebtedness, mitigation strategies of lending institutions, how funding and training institutions are addressing these challenges and client protection in the context of multiple borrowing and over-indebtedness.

Background on Organizers:

CGAP (Consultative Group to Assist the Poor) is a US-based nonprofit policy and research center dedicated to providing financial access to poor people worldwide. CGAP is supported by approximately 30 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. CGAP reports taking in USD 20.9 million in total revenue for fiscal year 2010.

Institute for Financial Management and Research (IFMR) is an Indian nonprofit organization whose mission is to facilitate universal access to financial services in rural India. Established in 1970, IFMR focuses on the following areas: academic programs, research, executive training and consulting. Its affiliated research centers include: Centre for Micro Finance (CMF), Centre for Development Finance (CDF), Small Enterprise Finance Centre (SEFC), Centre for Insurance & Risk Management (CIRM), Center for Advanced Financial Studies (CAFS), Centre for Innovative Financial Design (CIFD) and Jameel Poverty Action Lab (J-PAL).

Established in Uganda with United Nations funding in 1998, MicroSave is a for-profit technical assistance, training and resource center that relocated its headquarters to Lucknow, India, in 2006 with support from India’s ICICI Bank. In 2008, MicroSave was transformed into a consulting company, which has since completed projects in Cameroon, Congo, Ethiopia, Ghana, Kenya, Malawi, Nigeria, South Africa, Tanzania, Uganda and Zambia.

Event Website: http://virtualconference.cgap.org/

Submit Your Event: http://microfinanceassociation.ning.com/events

Sources and Additional Resources:

http://virtualconference.cgap.org/

MicroCapital.org article, September 6, 2010, “MICROCAPITAL EVENT: CGAP (Consultative Group to Assist the Poor) Hosts Virtual Conference on Microfinance and Mobile Banking, September 8 and 9,” http://www.microcapital.org/microcapital-event-cgap-consultative-group-to-assist-the-poor-hosts-virtual-conference-on-microfinance-and-mobile-banking-september-8-and-9/

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

MICROCAPITAL BRIEF: Smart Campaign Calls for Input on Microfinance Client Protection Certification Program

Kristha Abores — Wed, 21 Dec 2011 01:21:49 +0000

The Smart Campaign, an initiative to improve accountability regarding client protection in the microfinance industry, has called for public input on its Client Protection Certification Program, which has been under development since June 2010. The effort is intended to enable financial institutions to demonstrate their adherence to the Smart Campaign’s core Client Protection Principles (CPPs) as verified by third parties. The CPPs include appropriate product design and delivery, prevention of over-indebtedness, transparency, responsible pricing, fair treatment of clients, privacy of client data and mechanisms for complaint resolution. Certified financial institutions would be recognized publicly.

You may access the full Certification Program proposal at http://centerforfinancialinclusionblog.files.wordpress.com/2011/11/20111115_certification_proposal-for-public-comment_final1.pdf

Field testing will take place during the first quarter of 2012 and the pilot Certification Program is expected to launch in the first half of 2012. You can send your questions and/or comments via email at comments@smartcampaign.org. Feedback will be accepted through the end of December 2011.

The Smart Campaign is housed at the Center for Financial Inclusion in Washington, DC, and was founded with seed money from US-based nonprofit ACCION International. As of October 2011, approximately 1,900 microfinance institutions (MFIs), microfinance support organizations, investors, donors and individual industry professionals have endorsed the Smart Campaign.

By Kristha Abores, Research Associate

About Smart Campaign: The Smart Campaign, which was founded with seed money from US-based nonprofit ACCION International and is located at ACCION’s Center for Financial Inclusion in Washington, DC, is an “effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry.” It promotes seven core consumer protection principles including: appropriate product design and delivery, prevention of over-indebtedness, transparency, responsible pricing, fair and respectful treatment of clients, privacy of client data and mechanisms for complaint resolution. As of October 2011, approximately 1,900 microfinance institutions (MFIs), microfinance support organizations, investors, donors and individual industry professionals have endorsed the Smart Campaign.

Sources and Additional Resources:

[1] Center for Financial Inclusion: “The Smart Campaign Calls for Industry Input on Certification Program Proposal,” http://centerforfinancialinclusionblog.wordpress.com/2011/11/21/the-smart-campaign-calls-for-industry-input-on-certification-program-proposal/…

MicroCapital.org article, August 17, 2011, “MICROCAPITAL BRIEF: Smart Campaign Revises “Client Protection Principles” for Microfinance Institutions (MFIs),” http://www.microcapital.org/microcapital-brief-smart-campaign-revises-%E2%80%9Cclient-protection-principles%E2%80%9D-for-microfinance-institutions-mfis/

MicroCapital.org article, April 5, 2011, “MICROCAPITAL BRIEF: Smart Campaign Releases New Guidance Document, Proposed Revisions to ‘Client Protection Principles’,” http://www.microcapital.org/microcapital-brief-smart-campaign-releases-new-guidance-document-proposed-revisions-to-client-protection-principles/

MicroCapital.org article, February 22, 2011, “MICROCAPITAL BRIEF: ACCION International’s Smart Campaign to Launch Certification Program for Client Protection in Microfinance,” http://www.microcapital.org/microcapital-brief-accion-international%E2%80%99s-smart-campaign-to-launch-certification-program-for-client-protection-in-microfinance/

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

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