The CEO of the Ghana Microfinance Institutions Network (GHAMFIN), Dr David Andah, argued that mainstream banks are moving into RCBs’ market now that Ghanaian RCBs have created an enabling financial environment in rural areas and that RCBs cannot compete with the mainstream banks’ offerings. Dr Andah also called on the Ghanaian government to reconsider restrictions placed on RCBs, such as requiring new RCBs to raise at least GHS 150,000 (the equivalent of USD 105,000) in capital [1].

You may view the World Bank’s report at the following URL: http://siteresources.worldbank.org/INTARD/Resources/GhanaRCBs_web.pdf.

Ghana is one of eleven countries targeted by a recent USD 50 million investment by Barclays to improve access to microfinance [2].

By Lindsey Shaughnessy, Research Associate

About ARB Apex Bank: ARB Apex Bank Limited, founded in 2000, is a public, limited-liability company that operates twelve branches in Ghana. ARB Apex Bank, whose shareholders are rural and community banks (RCBs), supervises and funds RCBs and aims to provide RCBs with new technology, banking products and staff training. As of 2006, ARB Apex Bank reported total assets of GHS 51.4 million (the equivalent of USD 36 million).

About Bank of Ghana: The Bank of Ghana has regulatory and supervisory authority in Ghana over virtually every type of banking and financial institution, including rural and community banks, savings and loan companies and credit unions/cooperatives. The Bank of Ghana conducts annual on-site audits of these institutions. Nonprofit organizations in Ghana are not regulated by any government agency.

About Barclays: Barclays is a London-based financial services provider that operates in more than 50 countries. Barclays offers wealth management, investment banking, personal banking and corporate banking services. As of year-end 2009, Barclays reported total assets of GBP 1.38 trillion (USD 2.1 trillion).

About the Ghana Microfinance Institutions Network (GHAMFIN): The Ghana Microfinance Institutions Network (GHAMFIN) is an informal association of microfinance institutions (MFIs) in Ghana. GHAMFIN provides training, industry monitoring and microfinance product services to approximately 240 member institutions in all regions of Ghana.

About the World Bank: The World Bank Group consists of five closely associated institutions, all owned by member countries that carry ultimate decision-making power. Each institution plays a distinct role in the Group’s mission to fight poverty and improve living standards for people in the developing world. The World Bank Group encompasses the World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). The World Bank, established in 1944, has approximately 10,000 employees in 100 global offices, and is charged with reducing poverty in developing countries through leveraged loans.

Sources and Additional Resources:

[1] Microfinance Africa, “Fifteen Ghanaian rural banks marked for liquidation”, September 4, 2010. http://microfinanceafrica.net/news/fifteen-ghanian-rural-banks-marked-for-liquidation/

[2] MICROCAPITAL BRIEF: “Barclays Commits $50m to African Microfinance Groups Including Village Savings and Loans Associations”, August 27, 2010. http://www.microcapital.org/microcapital-brief-barclays-commits-50m-to-african-microfinance-groups-including-village-savings-and-loans-associations/

MicroCapital’s Microfinance Universe profile: ARB Apex Bank

MicroCapital’s Microfinance Universe profile: Bank of Ghana

MicroCapital’s Microfinance Universe profile: Barclays

MicroCapital’s Microfinance Universe profile: Ghana Microfinance Institutions Network (GHAMFIN)

MicroCapital’s Microfinance Universe profile: World Bank Group

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

Mr Cox warned that a sudden change in the exchange rate between the local currency and an MFI’s borrowing currency could put the institution’s balance sheet at risk. He also pointed out that MFIs would face higher capital adequacy requirements and a more restrictive regulatory environment as they expand to become deposit taking institutions. Mr Cox’s commentary coincides with a final paper published recently by the Bank for International Settlements, an intergovernmental organization of central banks based in Basel, Switzerland, on core principles applicable to supervising MFIs, which could be found at: http://www.bis.org/publ/bcbs175.htm

About MFX Solutions LLC [2]:
MFX is founded in 2008 and offers non-deliverable swaps and forwards to Microfinance Investment Vehicles (MIVs) and to Microfinance Institutions (MFIs) which cannot deal directly with hedging organizations such as The Currency Exchange Fund (TCX). In a currency forward, two parties agree to exchange future payments in different currencies at an exchange rate that reflects expected future interest rates associated with the two currencies. A swap occurs when two parties exchange equal value loans in two different currencies with interest rates reflecting anticipated currency movement and institutional credit quality. In non-deliverable instruments, the principal or notional amount, of the hedge is not exchanged, which means parties only exchange the net difference between their positions. The organization has a USD 20 million guarantee from the Overseas Private Investment Corporation, an agency of the United States government acting to promote international economic development. To work with MFX, MFIs must also be rated by MicroRate, a MFI rating agency established in 1997.

By Trevor Kwong, Research Assistant

Sources and Additional Resources:
[1] Microfinance Focus: Microfinance Needs to be Funded By Local Currency Loans – MFX:

http://www.microfinancefocus.com/news/2010/08/30/microfinance-needs-to-be-funded-by-local-currency-loan-–-mfx/

[2] MicroCapital Universe: MFX Solutions LLC:

http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MFX+Solutions+LLC+(MFX)

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

The decision was made during the committee’s last meeting in Yaounde, Cameroon. This represents a 400 percent increase from the original requirement of USD 4 million. Idriss Ahmed Idriss, the president of the committee stated that the new requirement would “strengthen the banks and microfinance institutions in Central Africa by raising their required capital reserves.”

[1] About the Economic Community of Central African States:
The Economic Community of Central African States (ECCAS) is an economic community of the African Union which aims to promote collective autonomy, better standards of living and economic. There are 11 member states, including Angola, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, Republic of Congo, Rwanda and Sao Tome and Principle.

By Trevor Kwong, Research Assistant

Sources and Additional Resources:
[2] Source Article: Cameroon’s Banks, Microfinance Institutions Required to Increase Capital Reserves:
http://www.voanews.com/english/news/africa/west/Cameroons-Banks-Microfinance-Institutions-Required-to-Increase-Capital-Reserves-101563613.html

[3] MicroCapital Universe: The Economic Community of Central African States:
http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Economic+Community+of+Central+African+States

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

The authors focus on the credit risk of securitization, which is the risk of a default on microfinance securities by their microlender originators. The authors propose structural solutions which include backing the microfinance securities with credit default swaps to protect investors and the use of super-securitization, which involves creating collateralized debt obligations from the assets of multiple microfinance institutions (MFIs) to diversify the exposure beyond dependence on just one MFI. In addition, the authors propose a number of systemic changes to protect investors which include the creation of a credit bureau to maintain a record of borrowers’ repayment histories to better estimate their credit worthiness and the creation of a MFI liquidation facility that can take a failing MFI into receivership and sell its assets to increase the likelihood of repayment to investors. Such a facility might function similarly to the Federal Deposit Insurance Corporation in the United States.

By Trevor Kwong, Research Assistant

Additional Resources and Sources:
[1] Source Article: Microfinance Focus: Hidden Risks of Securitization -Part II: Establishing a Sounder Basis for Microfinance
http://www.microfinancefocus.com/news/2010/08/19/hidden-risks-of-securitization-part-ii-establishing-a-sounder-basis-for-microfinance/

[2] Wikipedia: Securitization:
http://en.wikipedia.org/wiki/Securitization

[3] Microcapital: MICROCAPITAL BRIEF: Vineet Sukumar of the Institute for Financial Management and Research (IFMR) Capital Defends Microfinance Securitization
http://www.microcapital.org/microcapital-brief-vineet-sukumar-of-the-institute-for-financial-management-and-research-ifmr-capital-defends-microfinance-securitization/

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

By Julia Korn, Research Associate

About Smile Microcredit Bank:

Established in December 2008, the Smile Microcredit Bank (SMB) is a South Korean state-led program that provides unsecured loans to low-income households through partnerships with the private sector. As of April 2010, SMB’s 38 total branches had lent KRW 7 billion (USD 5.9 million) to 953 borrowers.

About Financial Services Commission:

The Financial Services Commission (FSC), established in January 2008, was created for the purpose of centralizing the regulation of Korea’s financial markets. FSC’s responsibilities include promoting a sound credit system and fair business practices. FSC serves as a consolidated policy-making body for all matters pertaining to supervision of the financial industry.

Sources and Additional Resources:

[1] Jooang Ang Daily. “Borrowing Criteria Tighten: FSC Wants Default Risk Reduced for Microcredit Loans” by Jung Jae-Yoon on August 19, 2010.

MICROCAPITAL BRIEF: South Korean Government Launches Sunshine Microfinance Loan Program under Smile Microcredit Bank for Low-income Households by Conner Brannen on August 2, 2010: http://www.microcapital.org/microcapital-brief-south-korean-government-launches-sunshine-microfinance-loan-program-under-smile-microcredit-bank-for-low-income-households/

MICROCAPITAL BRIEF: Critics Accuse Smile Microcredit Foundation of Heavy-Handed Regulation, Stifling Access to Microfinance in Korea by Jay Kumar on December 30, 2009. http://www.microcapital.org/microcapital-brief-critics-accuse-smile-microcredit-foundation-of-heavy-handed-regulation-stifling-access-to-microfinance-in-korea/

MICROCAPITAL BRIEF: South Korea Unification Ministry, Smile Microcredit Bank to Provide Microfinance Loans to North Korean Refugees, July 14, 2010: http://www.microcapital.org/microcapital-brief-south-korea-unification-ministry-smile-microcredit-bank-to-provide-microfinance-loans-to-north-korean-refugees/

MICROCAPITAL BRIEF: South Korean Smile Microcredit Bank (SMB) Successfully Lobbies for Regulation Changes and Alters Loan Practices, May 21, 2010: http://www.microcapital.org/microcapital-brief-south-korean-smile-microcredit-bank-smb-successfully-lobbies-for-regulation-changes-and-alters-loan-practices/

MICROCAPITAL BRIEF: Conglomerates Enter the Microfinance Industry in South Korea Via the Government-Inspired Miso (Smile) Microcredit Foundation, January 6, 2010: http://www.microcapital.org/microcapital-brief-conglomerates-enter-the-microfinance-industry-in-south-korea-via-the-government-inspired-miso-smile-microcredit-foundation/

MicroCapital Universe: Smile Microcredit Bank: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Smile+Microcredit+Bank+%28SMB%29

MicroCapital Universe. Financial Services Commission (FSC). http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Financial+Services+Commission+%28FSC%29

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

AKMI commissioned CGAP (Consultative Group to Assist the Poor), a Washington-based policy and research center, and EDA Rural Systems Private Limited (EDA), a research and capacity building organization based in India, to research and write the report. The final report, entitled “Competition and the Role of External Agents: The 2009 delinquency crisis in southern Karnataka”, outlines a number of key factors contributing to the delinquency crisis, as well as provides actionable recommendations for stakeholders [1].

At the time of the crisis, some microfinance analysts argued that it was caused by clients borrowing excessively from multiple lenders and then finding themselves unable to pay off their loans. The resulting defaults forced some microfinance institutions (MFIs), especially those with poor client tracking systems, to reduce operations [2].

The report offers several other issues contributing to the crisis. In addition to multiple borrowing, the report cites high default and suicide rates in the Kolar District; a downturn in the silk industry in the town of Sidlaghatta; an anti-MFI edict by Muslim clerics in the town of Ramanagaram; Hindu-Muslim riots over a mosque in the city of Mysore; coercive collection practices; and gender inequality as contributing to the crisis. For example, while some male clients were supportive of their wives’ use of microloans, others accused female microcredit clients of “neglecting” family duties, their silk factory jobs and Islamic law [3], thus exacerbating tensions between clerics and MFIs.

To alleviate these pressures, CGAP and EDA made three recommendations for MFIs: to better share information; to increase the loan ceiling on individual loans in order to reduce the incentive for multiple borrowing; and to reschedule loans for borrowers facing significant setbacks [3].

You may download the full report at the following URL: http://indiamicrofinance.com/wp-content/uploads/2010/08/Karnataka-Microfinance-Report-August-2010.pdf.

By Lindsey Shaughnessy, Research Associate

About Association of Karnataka Microfinance Institutions (AKMI): The Association of Karnataka Microfinance Institutions (AKMI) was founded in 2006 with the goal of promoting community development finance in rural Karnataka and elsewhere in India through dialogue, capacity building and stakeholder engagement.

About CGAP (Consultative Group to Assist the Poor): Housed at the World Bank Group, CGAP is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by approximately 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 EDA Rural Systems Private Limited (EDA): EDA, established in 1983, is a development sector consultancy, research and capacity building organization. EDA focuses on providing microfinance and livelihood services to the poorest areas of South and Southeast Asia, Central Asia and the Pacific. EDA-Rural does not report to the Microfinance Information Exchange (MIX).

[1] India Microfinance Business News, “AKMI releases report on independent study of Microfinance in Karnataka”, August 13, 2010. http://indiamicrofinance.com/akmi-report-kolar-microfinance.html

[2] MICROCAPITAL BRIEF: “Over-Indebtedness And Borrower Deliquency In The Indian State of Karnataka – A Blogger’s Observations”, June 25, 2009. http://www.microcapital.org/microcapital-story-over-indebtedness-and-borrower-delinquency-in-the-indian-state-of-karnataka-%E2%80%93-a-blogger%E2%80%99s-observations/

[3] AKMI, Competition and the Role of External Agents: the 2009 delinquency crisis in southern Karnataka, April 2010. http://indiamicrofinance.com/wp-content/uploads/2010/08/Karnataka-Microfinance-Report-August-2010.pdf

MicroCapital’s Microfinance Universe profile: Association of Karnataka Microfinance Institutions (AKMI)

MicroCapital’s Microfinance Universe profile: CGAP (Consultative Group to Assist the Poor)

MicroCapital’s Microfinance Universe profile: EDA Rural Systems Private Limited (EDA)

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

By Julia Korn, Research Associate

Sources and Additional Resources:

[1] Big Think. “Microfinance: For Community or for Gain?” by John Cookson on July 30, 2010. http://bigthink.com/ideas/21613

MicroCapital. “MICROCAPITAL BRIEF: SKS Microfinance Launches India’s First Initial Public Offering (IPO) by a Microfinance Institution” by Jennifer Shevock on July 29, 2010. http://www.microcapital.org/microcapital-brief-sks-microfinance-launches-india%E2%80%99s-first-initial-public-offering-ipo-by-a-microfinance-institution/

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

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. Specifically, they looked at the barriers that women encounter when they start a business. They also considered access to financial services and the microfinance industry. The methods the authors used to conduct research are:

1) Literature review: The authors looked for pre-existing research on Latin American female entrepreneurs.

2) Census data review: The authors compiled information from national statistics institutions in order to create a gender equity profile for each country that focuses specifically on women’s participation in the workforce, women’s business ownership and women’s access to finance.

3) Interviews: The authors conducted interviews with individual women entrepreneurs, financial institutions, NGOs and training institutes.

4) Case studies: The authors gathered detailed data on individuals by following them closely and collecting data on their business activities.

According to the authors, barriers which prevent female businesses from growing include feeling too much responsibility to stay at home to manage the household, lack of access to financial services, risk aversion manifested as reluctance to borrow money, social conventions that prevent women from deviating from a norm and a lack of education and training. The authors write that the reluctance to borrow is especially prevalent among women in lower income segments.

The authors find that women tend to reinvest their income into their households at a higher rate than men, suggesting that policy interventions to improve the growth potential and profitability of women’s businesses would not only contribute to the economic growth of their communities through their businesses but also result in increased household investment in children and education.

The authors also found that there are differences in how men and women use financial products because of women’s propensity to avoid risk. The authors claim that women sometimes fail to take advantage of opportunities that might allow them to expand their businesses, like moving their business out of their home or hiring full-time employees. Therefore, business expansion loans with lower interest and longer terms should be offered to women because such loans could enable them to graduate their microenterprises to small enterprises, a step that the authors argue has historically been more difficult for women than for men.

Additionally, according to the authors, institutions should offer contractual savings products for education and encourage men to use these products to reduce the burden of this responsibility on women. The authors also propose the introduction of insurance products that can help women manage their risks, and they suggest that efforts should be made to help women train in business administration. Lastly, the authors argue that stakeholders should promote educational opportunities which target “social conventions and gender-based perceptions of family responsibilities to encourage a more equitable division of responsibilities.”

By Julia Korn, Research Associate

In 2009, investment in Latin America and the Caribbean (37 percent of microfinance assets) surpassed that in Eastern Europe and Central Asia (35 percent), giving it a larger share of MIV investment than any other region. The share of investment in South Asia remained constant in 2009 at 9 percent. East Asia and the Pacific showed the highest growth (124 percent), but the region still only represented 7 percent of microfinance assets. Sub-Saharan African investment, with 6 percent of microfinance assets, also grew at an impressive rate of 45 percent during the year 2009.

By Conner Brannen, Research Assistant

About MicroRate:

MicroRate was founded in the US in 1997 with the intent to objectively evaluate microfinance institutions (MFIs), thereby increasing transparency. As a result, MicroRate hopes to drive additional funding into microfinance. MicroRate has evaluated approximately 500 MFIs worldwide and claims to perform its evaluations not through “rigid rating formulas,” but through “evaluation of critical risk.” As of 2010, the organization had offices in the United States, Peru and Morocco.

Sources and Additional Resources:

MicroRate: “State of Microfinance Investment: The MicroRate 2010 MIV Survey”: http://microrate.com/wp-content/uploads/2010/07/The-MicroRate-2010-MIV-Survey-Report.pdf

MicroCapital Universe Profile: MicroRate: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroRate

MICROCAPITAL BRIEF: LuxFLAG and MicroRate Announce LUMINIS Microfinance, Internet-Based Microfinance Investment Vehicle Information Service, May 18, 2010: http://www.microcapital.org/microcapital-brief-luxflag-and-microrate-announce-luminis-microfinance-internet-based-microfinance-investment-vehicle-information-service/

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

According to Blue Financial Services, the MFI had 800 borrowers in Rwanda with outstanding loans worth RWF 490 million (equivalent to USD 829,000). Blue Financial Services has reported assets of ZAR 1.5 billion (equivalent to USD 200 million).

By Julia Korn, Research Associate

About Blue Financial Services:

Blue Financial Services is a South African microfinance institution operating in 13 African countries. It serves the formally employed yet underbanked populations. Blue is listed on the JSE Limited AltX in South Africa and the Botswana Stock Exchange. Blue reported assets of ZAR 1.5 billion (USD 200 million) at February 28, 2010.

About The National Bank of Rwanda (NBR)

Founded in 1964, The National Bank of Rwanda (NBR) is Rwanda’s central bank with headquarters in Kigali. It operates Rwanda’s Securities Exchange. Its purpose is to define and implement monetary policy; organize, supervise and regulate the foreign exchange market; supervise and regulate the activities of financial institutions (notably banks, microfinance institutions, insurance companies, social security institutions, collective placement companies and pension funds institutions); supervise and regulate payment systems; and mint and manage money. In 2009 NBR reported total assets of RWF 726.8 billion (equivalent to USD 1.23 billion).

Sources and Additional Resources:

[1] Trading Markets. “Blue Financial Services Cautions Defaulters” on July 7, 2010. http://www.tradingmarkets.com/news/stock-alert/bfnlf_blue-financial-serv…

MicroCapital. “MICROCAPITAL BRIEF: National Bank of Rwanda (NBR) Revokes Blue Financial Services’ Operating License” by Julia Korn on July 13, 2010. http://www.microcapital.org/microcapital-brief-national-bank-of-rwanda-nbr-revokes-blue-financial-services%E2%80%99-operating-license/

MicroCapital. “MICROCAPITAL BRIEF: South African Microfinance Institution Blue Financial Services Reports Significant Year-End Loss and Recapitalization, Loses Operating License in Rwanda” by Jennifer Shevock on June 16, 2010. http://www.microcapital.org/microcapital-brief-south-african-microfinanc…

MicroCapital “MICROCAPITAL BRIEF: Mayibuye Group Reveals Turnaround Strategy for Blue Financial Services, a South African Microfinance Institution with Presence in 14 Countries” by Jennifer Shevock on July 1, 2010. http://www.microcapital.org/microcapital-brief-mayibuye-group-reveals-tu…

MicroCapital Universe. Blue Financial Services. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Blu…

MicroCapital Universe. The National Bank of Rwanda. http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The…

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