MicroCapital » Trends/Challenges

MICROFINANCE PAPER WRAP-UP: Global Microscope on the Microfinance Business Environment 2011

Emilia Akonom — Thu, 09 Feb 2012 19:22:21 +0000

By the Economist Intelligence Unit, funded by The Multilateral Investment Fund, Corporación Andina de Fomento and the International Finance Corporation, October 2011, 72 pages, available at: http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=36453519.

This paper examines the microfinance business environments in 55 countries, comparing them across three categories: supporting institutional framework, political stability, and regulatory framework and practices. It is the fifth annual paper in the series, covering the 12-month period through June 2011. The research comprises data collected in 21 countries of Latin America and the Caribbean, 11 countries of Sub-Saharan Africa, seven of Eastern Europe and Central Asia, seven of East Asia, five of South Asia and four of the Middle East and North Africa.

The authors argue that while microfinance has become more mature and sustainable, the global financial downturn lead to a downgrade in the quality of some loan portfolios resulting in the need for improvement, especially within risk management. The report benchmarks the regulatory framework and operating environment in each evaluated country. The factors included in the scoring are: regulation and supervision of microcredit portfolios, legal recognition for microfinance institutions (MFIs), regulatory and supervisory capacity for microcredit and other microfinance services, deposit policies, accounting transparency, client protection, credit bureaus and political stability.

The two countries of East and South Asia that are rated as having the most favorable conditions for microfinance operations are Pakistan and Philippines. Both receive strong scores for regulatory frameworks and are in the top ten positions in the overall ranking. Cambodia, ranked 13th, also has an advantageous environment for MFIs. There is an expectation of positive change in Thailand where the Ministry of Finance has appointed new body to deal with microfinance matters and the central bank eased regulations. In China, although the number of MFIs has been growing, the sector is still in the early stages of development. India’s ranking dropped due to new regulatory limits on interest rates and lending margins. Countries such as Sri Lanka and Vietnam are still in the process of formulating regulatory mechanisms for microfinace.

Countries of Eastern Europe and Central Asia generally occupy middle positions in the ranking. The position of the Kyrgyz Republic dropped nine spots to settle at 21 as the regime change in 2010 annulled plans for modernization of relevant law. Armenia and Bosnia focused their efforts on consumer protection, and both countries score highly for financial reporting standards.

Peru and Bolivia perform best in the ranking not only in Latin America and the Caribbean region but also globally. The authors of the ranking find that in Peru the sector benefits from a well-defined legal framework and effective supervisory capacity. On the other hand, microfinance in Bolivia continues to prosper regardless of civil unrest. As the operations environment for microfinance has improved in Mexico and Panama, both countries jumped in the ranking to finish in a tie at tenth place. Brazil climbed up twelve spots as a result of strong financial inclusion and innovations in agent banking. Trinidad and Tobago, Venezuela, Haiti and Argentina are among those occupying the bottom ten spots worldwide.

The growth of microfinance has decreased in a number of Arab countries due to political unrest. Current affairs had a particularly bad influence on the operating environment in Yemen. Despite clear regulation and rapid growth in the sector in Yemen over the last several years its rank this year sank 17 positions – still the best in the Middle East and North Africa. While Egypt’s legislation does not allow the provision of microcredit by non-bank commercial companies, Morocco has been boosting its investment climate for microfinance. On the other hand, Lebanon only lightly regulates with regards to microfinance.

Kenya scores the highest in Sub-Saharan Africa and is fourth in the global ranking. Neighboring Uganda finishes ninth globally and, alongside Pakistan and Philippines, is the leader of the category for regulatory framework and practices. Rwanda ranks 15th based on government support of microfinance activities, especially in rural areas. In Nigeria, the central bank revised its microfinance policy in April 2011 but faces difficulties with enforcement. The central banks also have issues with supervising MFIs in Democratic Republic of Congo, Ghana and Senegal. In Madagascar, the market size has increased and there is a comprehensive legal framework and a promotion unit, but serious transparency issues remain.

By Emilia Akonom, Research Associate

Sources and Additional Resources:

Global Microscope on the Microfinance Business Environment 2011 http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=36453519

MicroCapital Universe Profile: Multilateral Investment Fund (MIF) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Multilateral+Investment+Fund+%28MIF%29

MicroCapital Universe Profile: Corporación Andina de Fomento (CAF) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Corporaci%C3%B3n+Andina+de+Fomento+%28CAF%29

MicroCapital Universe Profile: International Finance Corporation (IFC)http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29

MicroCapital.org story, October 23, 2011, MICROCAPITAL BRIEF: Peru Tops 2011 Global Microscope Index on Microfinance Business Environment http://www.microcapital.org/microcapital-brief-peru-tops-2011-global-microscope-index-on-microfinance-business-environment/

MicroCapital.org story, May 10, 2011, MICROCAPITAL BRIEF: Banko Sentral ng Pilipinas (BSP) Convenes Microfinance Stakeholders Summit Celebrating “Microscope” Ranking from the Economist http://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-convenes-microfinance-stakeholders-summit-celebrating-microscope-ranking-from-the-economist/

MicroCapital.org story, October 15, 2010, MICROCAPITAL BRIEF: The Economist Intelligence Unit “Microscope” Study Discusses Challenges to The Rapidly Growing Microfinace Industry http://www.microcapital.org/microcapital-brief-the-economist-intelligence-unit-microscope-study-discusses-challenges-to-the-rapidly-growing-microfinance-industry/

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

MICROFINANCE PUBLICATION ROUND-UP: Poverty Scorecard for Afghanistan, Implementing Microfinance Information Systems, Improving Client Value from Microinsurance

Natalie Baer — Tue, 07 Feb 2012 17:54:28 +0000

“A Simple Poverty Scorecard for Afghanistan” by Mark Schreiner; published by Microfinance Risk Management LLC; January 2012; 117 pages; available at http://www.microfinance.com/#Afghanistan

Using data from Afghanistan’s “National Risk and Vulnerability Assessment 2007/8”, this scorecard estimates the probability that a household has expenditures below the poverty line using ten indicators that field agents can quickly collect and verify.

“Information Systems: A Practical Guide to Implementing Microfinance Information Systems” by Lauren Braniff and Xavier Faz; published by CGAP (Consultative Group to Assist the Poor); January 2012; 88 pages; available at http://www.cgap.org/gm/document-1.9.56237/TG_Information_Systems.pdf

This paper is technical guide that offers templates and tools to guide users through selecting and implementing management information systems.

“Improving Client Value From Microinsurance: Insights From India, Kenya, and the Philippines” by Michal Matul, Clemence Tatin-Jaleran and Eamon Kelly; published by International Labour Organization; September 2011; 49 pages; available at http://www.ilo.org/public/english/employment/mifacility/download/mpaper12_clientvalue.pdf?utm_source=EI29&utm_medium=Email&utm_campaign=EI

This paper analyses 15 microinsurance schemes using the International Labor Organization’s client value assessment tool, which is called PACE, based on its consideration of product, access, cost and experience. The PACE tool is intended to facilitate comparisons of the added value for clients among various insurance products and alternative means of protection such as informal risk-sharing practices.

By Natalie Baer, Research Associate

Sources and Additional Resources:

“A Simple Poverty Scorecard for Afghanistan” http://www.microfinance.com/#Afghanistan

“Information Systems: A Practical Guide to Implementing Microfinance Information Systems” http://www.cgap.org/gm/document-1.9.56237/TG_Information_Systems.pdf

“Improving Client Value From Microinsurance: Insights From India, Kenya, And The Philippines” http://www.ilo.org/public/english/employment/mifacility/download/mpaper12_clientvalue.pdf?utm_source=EI29&utm_medium=Email&utm_campaign=EI

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

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: Crowdfunding Platforms Including Peer-to-Peer Model Lead to Increased Reach, Reduced Transaction Costs in Microfinance

Nisha Koul — Thu, 02 Feb 2012 16:50:02 +0000

Crowdfunding platforms, intermediary services that act as an interface between “the public” and the “crowdfunded” project, can offer increased audience size, reduced transaction costs and decreased “legislative complexities,” reportedly says Daniela Castrataro, co-founder of UK-based social media consulting agency “twintangibles” [1]. Ms Castrataro expounds on two models of crowdfunding platforms used in microfinance: (a) a microlending model wherein money collected from a “crowd of people” is managed by local intermediaries; and (b) a peer-to-peer lending model in which financial transactions occur directly between individuals without the “intermediation of a traditional financial institution.” US-based nonprofits Kiva and United Prosperity primarily use the microlending model while UK-based for-profit company Zopa, US-based nonprofit Zidisha and for-profit LendingClub, also of US, use the peer-to-peer lending. Ms Castrataro points out that choosing the right platform based on sector, location and project needs is imperative for a successful crowdfunding project.

As reported in a MicroCapital story in January, Kiva has recently piloted a peer-to-peer platform called Kiva Zip in Kenya and the US city of San Francisco. In 2011, approximately USD 90 million in loans were made via Kiva and its 146 partner microfinance institutions (MFIs) to borrowers in 60 countries. As of June 2010, United Prosperity reports working with 850 families that have received total loans worth USD 165,000. Zidisha reports that it has facilitated approximately USD 50,000 in loans from 250 lenders to 80 low-income entrepreneurs in Kenya and Senegal as of 2011.

By Nisha Koul, Research Associate

About Kiva: Incorporated in 2005, Kiva is a US-based online portal allowing individuals to make loans to microfinance institutions (MFIs), which then make loans to people with low incomes. As of September 2011, Kiva reports that: it has engaged 990,000 users, 625,000 of whom have funded a loan; 81 percent of loans have been made to women entrepreneurs; the repayment rate on these loans is 98.9 percent; and the average loan size is USD 385. In 2011, approximately USD 90 million in loans was funded through Kiva and Kiva’s field partner MFIs to microentrepreneurs in 60 developing and rich countries.

About United Prosperity: Launched in May 2009 in the US as an NGO, United Prosperity aims to help entrepreneurs and “transform the lives of their families and communities.” It uses a variation of the microlending model of crowdfunding wherein the money contributed by lenders is used as collateral or a loan guarantee with a local bank which then lends double the amount to the microentrepreneur through a local microfinance institution (MFI). United Prosperity claims that this helps the microentrepreneur build a strong relationship and credit history with the MFI and the local banking system. As of June 2010, United Prosperity reports working with 850 families that have received total loans worth USD 165,000.

About Zidisha: Zidisha is a nonprofit organization that was launched in 2009 in the US by Julia Kurney, a founding partner of Senegal Ecovillage Microfinance (SEM). Zidisha intermediates loans from individuals to entrepreneurs with credit histories in Senegal and Kenya. Lenders are able to browse listings written by the entrepreneurs themselves and then bid on interest rates with the entrepreneur able to select the lowest offered rate. As of 2011, Zidisha has facilitated approximately USD 50,000 in loans from 250 lenders to 80 low-income entrepreneurs in Kenya and Senegal. As of 2011, Zidisha reports a 100 percent repayment rate.

Sources and Additional Resources:

[1] Social Media Week, “Crowdfunding Platforms: To Each Their Own,” http://socialmediaweek.org/blog/2012/01/02/crowdfunding-platforms-to-each-their-own/

MicroCapital.org story, January 26, 2012, “MICROCAPITAL BRIEF: Kiva Piloting Peer-to-Peer Microfinance Lending Platform Kiva Zip in Kenya, San Francisco,” http://www.microcapital.org/microcapital-brief-kiva-piloting-peer-to-peer-microfinance-lending-platform-kiva-zip-in-kenya-san-francisco/

MicroCapital.org story, January 22, 2012, “MICROFINANCE OPINION: Crowdfunding May Be Next Frontier for Microenterpirse Funding,” http://www.microcapital.org/microfinance-opinion-crowdfunding-may-be-next-frontier-for-microenterpirse-funding/

MicroCapital.org story, September 8, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions (MFIs) in India Attempt to Raise Funds Using “Crowd Sourcing,” http://www.microcapital.org/microcapital-brief-microfinance-institutions-mfis-in-india-attempt-to-raise-funds-using-%E2%80%9Ccrowd-sourcing%E2%80%9D/

MicroCapital.org story, May 5, 2011, “MICROCAPITAL BRIEF: 17 Websites Now Allow Individuals to Commit as Little as USD 20 as Microfinance Loans,” http://www.microcapital.org/microcapital-brief-17-websites-now-allow-individuals-to-commit-as-little-as-usd-20-as-microfinance-loans/

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

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

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

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

MICROCAPITAL BRIEF: Development Seed, Key2Flex Offer Geospatial Technology Services to Analyze Availability of Financial Services in Developing Countries

Natalie Baer — Tue, 31 Jan 2012 16:34:54 +0000

Geospatial mapping is being used to show the geographic distribution of banks, automated teller machines (ATMs) and banking agents in relation to low-income and other population groups, thus giving an indication of the accessibility of financial services to those groups. Improvements in geospatial mapping technology, global positioning system (GPS) receivers and geographic information system (GIS) software combined with the increasing availability of spatial and population data allow for the mapping and analysis of a country’s “financial landscape” for about USD 100,000 [1].

The US-based Microfinance Information Exchange, US-based data visualization company Development Seed and the Canada-based MasterCard Foundation have partnered to map microfinance data in Nigeria. In the Philippines, the People’s Credit and Finance Corporation (PCFC), a governmental microfinance organization, has partnered with Philippines-based Key2Flex to use GIS software to analyze microfinance information.

By Natalie Baer, Research Associate

About the Microfinance Information Exchange (MIX): The Microfinance Information Exchange (MIX) is a US-based nonprofit provider of performance data and analysis on microfinance institutions (MFIs), funders, networks and service providers dedicated to serving the financial needs of low-income clients. The mission of MIX is to strengthen the microfinance sector and financial inclusion in general by promoting transparency. The organization’s MIX Market website offers access to financial and social performance information covering approximately 2,000 MFIs. MIX publications include the MicroBanking Bulletin and MIX Microfinance World, which feature periodic research and data analysis. Incorporated in 2002, MIX is headquartered in Washington, DC, with regional offices in Azerbaijan, India, Morocco and Peru. Its supporters include the Bill & Melinda Gates Foundation, CGAP (Consultative Group to Assist the Poor), Omidyar Network, The MasterCard Foundation, the UN’s International Fund for Agricultural Development, the Michael & Susan Dell Foundation, Citi Foundation, Ford Foundation and Deutsche Bank.

About the MasterCard Foundation: Based in Canada, the MasterCard Foundation is a private foundation with the goal of enabling people living in poverty to improve their lives with increased access to microfinance and education. The foundation was established in 2006 by a gift of shares from global payment processor MasterCard Worldwide during the company’s initial public offering. As of 2010, the MasterCard Foundation reported approximately CAD 3 billion (the equivalent of USD 2.9 billion) in assets.

About the People’s Credit and Finance Corporation: The People’s Credit and Finance Corporation (PCFC) is a government-owned finance company based in Manila, Philippines. Its sole focus is microfinance, and it is mandated by the government to provide financial services to the poor through retail microfinance institutions. As of December 31, 2010, the PCFC had total assets of PHP 3.78 billion (USD 88.2 million).

Sources and Resources:

[1] Geospatial Analysis for Financial Inclusion Tracking
http://mmublog.org/blog/geospatial-analysis-for-financial-inclusion-tracking/

Mapping Nigerian Microfinance Banks
http://www.themix.org/publications/mix-microfinance-world/2011/08/mapping-nigerian-microfinance-banks

Philippines’ PCFC to develop Microfinance Geographic Information System
http://www.microfinancefocus.com/news/2010/05/25/philippines%E2%80%99-pcfc-to-develop-microfinance-geographic-information-system/

MicroCapital Universe Profile: Microcapital Universe: Microfinance Information Exchange (MIX) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Information+Exchange+%28MIX%29

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

MicroCapital Universe Profile: People’s Credit and Finance Corporation
http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=People%27s+Credit+and+Finance+Corporation+%28PCFC%29

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

MICROCAPITAL BRIEF: Beyond Microfinance, Metafinance can Serve Communal Needs Such as Access to Clean Water, Reports Melanie Walker of Bill and Melinda Gates Foundation

Nisha Koul — Mon, 30 Jan 2012 14:08:47 +0000

In an article published in the US-based website Huffington Post, Melanie Walker of the US-based nonprofit Bill and Melinda Gates Foundation expounds the concept of “metafinance,” which is defined as the provision of financial service that “occupies the intermediary space between individual finance and large-scale municipal finance…. It enables creditworthy individuals and families to pool their discrete capacity to save or to borrow into a single loan for a communal purpose–hence the “meta” or “transcending” dimension, extending beyond and bridging existing microfinance or municipal finance paradigms” [1]. One example is the work of K-Rep Bank, a microfinance institution (MFI) in Kenya, which is financing such loans for community-level water projects [2]. Ms Walker states that the increasing global population and lack of basic infrastructure, especially in urban areas, form a major obstacle to “self-improvement” and economic growth. Microfinance, which often offers financing in the range of USD 100 to USD 1,000, cannot finance community-level infrastructure projects for which the costs range from USD 30,000 to USD 150,000. This project size is where metafinance can bridge the gap between microfinance and municipal loans that start in the range of USD 1 million.

Ms Walker is the deputy director of the “Urban Development Special Initiative” of the Bill and Melinda Gates Foundation that is supporting efforts to identify sustainable approaches to metafinance. Acknowledging that metafinance cannot substitute for needed city-wide investments, she believes that metafinance, just like microfinance once did, “will likely need strong support from philanthropic organizations as it establishes itself as a mainstream and financially sustainable service.”

By Nisha Koul, Research Associate

About Bill and Melinda Gates Foundation: Based in the US, the Bill and Melinda Gates Foundation provides grants to organizations in approximately 100 countries with the aim of enhancing health care, reducing poverty and expanding access to education and information technology. The Bill and Melinda Gates Foundation’s Financial Services for the Poor initiative focuses on providing people with secure places to save money. To support this initiative, the foundation works with financial organizations to increase access to technology (point-of-sales devices, automated teller machines, etc.) and to forge partnerships among mobile phone companies, banks and microfinance institutions. It also supports the startup and growth of new banks in “difficult markets”. As of June 30, 2011, the Bill and Melinda Gates Foundation reported an asset trust endowment of USD 36.3 billion. In 2010, the Foundation awarded USD 2.6 billion in grants.

Sources and Additional Resources:

[1] “Towards Metafinance Slum Dwellers around the World Need Financing Options beyond What Microfinance and Traditional Banking Can Offer: Metafinance Shows the Way Forward By Melanie Walker and Franck Daphnis,” http://www.metafinance.org/

[2] Huffington Post, “From Microfinance to Metafinance: A New Tool to Fight Global Poverty,” http://www.huffingtonpost.com/melanie-walker/metafinance_b_1223712.html

MicroCapital.org story, September 19, 2011, “MICROCAPITAL BRIEF: Housing Microfinance Not a Viable Solution for Slums, Opines Ruban Selvanayagam,” http://www.microcapital.org/microcapital-brief-housing-microfinance-not-a-viable-solution-for-slums-opines-ruban-selvanayagam/

MicroCapital Universe Profile: Bill and Melinda Gates Foundation, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bill+and+Melinda+Gates+Foundation

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

MICROCAPITAL BRIEF: Switzerland’s Azure Partners Launches Azure Global Microfinance Fund

Nisha Koul — Mon, 30 Jan 2012 13:47:37 +0000

Azure Partners, a Swiss company specializing in “socially responsible investments,” has launched Azure Global Microfinance Fund, a microfinance-focused “fund of funds” that will accept investments from both private and institutional investors [1]. A fund of funds is defined as an “investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.” The fund will invest 65 percent in debt funds, 25 percent in private equity and 10 percent in cash. The fund targets annual returns of 5 to 6 percent.

Mr Jack Lowe co-founded Azure Partners with Mr Vincent Oswald, both of whom were formerly with Geneva-based microfinance investment company Blue Orchard. Mr Lowe argues that “Microfinance has three distinct advantages for the investor: negative correlation with most other asset classes, extremely low volatility and enormous geographic diversification in emerging markets…. This combination of factors has provided historic returns of 4-8 per cent for debt funds and 12-18 per cent for private equity funds. The sector has never experienced a negative yearly performance.”

As of January 2012, the Azure Global Microfinance Fund has made three investments and reports a “pipeline of 10 investable funds” [2]. The amount of funds raised by Azure Global Microfinance Fund has not been made public. The fund received the LuxFLAG Microfinance Label from Luxembourg Fund Labeling Agency (LuxFLAG), an organization that investigates whether investment vehicles actually support the microfinance sector. Company wide, Azure Partners has invested in 74 microfinance funds, 36 fund managers, 10 microfinance networks and 10 development banks as of 2011.

By Nisha Koul, Research Associate

About Azure Partners: Azure Partners is a Swiss company specializing in socially responsible investments. It focuses mainly on microfinance and acts as investment advisor to the Azure Global Microfinance Fund. As of January 2012, the Azure Global Microfinance Fund has made three investments and reports a “pipeline of 10 investable funds.” Company wide, Azure Partners has invested in 74 microfinance funds, 36 fund managers, 10 microfinance networks and 10 development banks as of 2011.

Sources and Additional Resources:

[1] Financial Times, “Microfinance men launch fund of funds,” http://www.ft.com/intl/cms/s/0/cf573ec0-42c3-11e1-93ea-00144feab49a.html#axzz1kUrKPJZS

[2] Azure Partners, “Azure Global Microfinance Fund,” http://www.azure-partners.com/docs/Azure_partners.pdf

MicroCapital.org story, January 18, 2012, “MICROCAPITAL BRIEF: FINCA International Launches For-Profit Subsidiary: FINCA Microfinance Holdings LLC,” http://www.microcapital.org/microcapital-brief-finca-international-launches-for-profit-subsidiary-finca-microfinance-holdings-llc/

MicroCapital.org story, January 10, 2012, “MICROCAPITAL BRIEF: Private Equity Investors Wary As Return on Equity for Indian Microfinance Institutions Drops from Over 45% to Under 20%,” http://www.microcapital.org/microcapital-brief-private-equity-investors-wary-as-return-on-equity-for-indian-microfinance-institutions-drops-from-over-45-to-under-20/

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

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

MICROCAPITAL BRIEF: MicroRate Founder Damian von Stauffenberg is First to be Named to LuxFLAG Microfinance Label Eligibility Committee

Nisha Koul — Fri, 27 Jan 2012 09:05:34 +0000

The Luxembourg Fund Labelling Agency (LuxFLAG), a microfinance investment vehicle (MIV) and environment-related investment vehicle (EIV) certification organization, recently announced that Mr Damian von Stauffenberg, the founder of US-based microfinance rating agency MicroRate, has been named to the eligibility committee of LuxFLAG’s Microfinance Label [1]. The remaining committee members are to be announced shortly [2]. Mr Stauffenberg served as the Chairman of MicroRate until 2009 and has also worked with the World Bank and its private sector affiliate, the International Finance Corporation. Mr Kenneth Hay, Chairman of LuxFLAG, says, “The appointment of Damian von Stauffenberg to the eligibility committee not only brings to LuxFLAG the expertise and experience of one of the leaders in the microfinance industry, but will also help promote the recognition of LuxFLAG as a Labelling Agency of truly international dimension.”

The LuxFLAG Microfinance Label is granted to MIVs in an effort to “reassure investors that the MIV actually invests, directly or indirectly, in the microfinance sector.” The role of the eligibility committee is to examine applications for the label and recommend to the Board of Directors of LuxFLAG whether or not the label should be awarded to the applicant.

By Nisha Koul, Research Associate

About MicroRate: MicroRate is a microfinance rating agency formally approved by CGAP (Consultative Group to Assist the Poor); the Inter-American Development Bank; and Peru’s Superintendency of Banking, Insurance and Pension Fund Managers (SBS). It was founded in the US in 1997 with the intent of objectively evaluating microfinance institutions (MFIs), thereby increasing transparency and driving additional funding into microfinance. MicroRate has completed approximately 600 ratings of approximately 200 MFIs worldwide as of 2012 and claims to perform its evaluations not through “rigid rating formulas,” but through the “evaluation of critical risk.” A private company, MicroRate is based in Washington, DC, with offices in Peru and Morocco.

About Luxembourg Fund Labeling Agency (LuxFLAG): Established in 2006, the Luxembourg Fund Labeling Agency (LuxFLAG) aims to “promote the raising of capital for Microfinance and Environment related sectors by awarding a recognizable label to eligible microfinance investment vehicles (MIVs) and environment-related investment vehicles (EIVs).” Its objective is to reassure investors that the MIV or EIV actually invests, directly or indirectly, in the microfinance or environment sector. LuxFLAG only certifies MIVs and EIVs that are either subject to European Union member state supervision or located in nations with financial supervision on par with countries in the European Union. As of 2011, 20 MIVs and three EIVs hold current LuxFLAG labels.

Sources and Additional Resources:

[1] Press release submitted to MicroCapital, January 2012.

[2] Email conversation between MicroCapital and LuxFLAG representatives.

MicroCapital.org story, January 13, 2012, “MICROCAPITAL BRIEF: MicroRate, LuxFlag Launch Luminis Looking to Increase Transparency of Microfinance Funds,” http://www.microcapital.org/microcapital-brief-microrate-luxflag-launch-luminis-looking-to-increase-transparency-of-microfinance-funds/

MicroCapital.org story, October 10, 2011, “MICROCAPITAL BRIEF: LuxFLAG Grants Microfinance Label to Microfinance Enhancement Facility, Selectum, Etimos Fund, Dual Return Fund Vision Microfinance Local Currency; Renews Label for Six Other Microfinance Investment Vehicles (MIVs),” http://www.microcapital.org/microcapital-brief-luxflag-grants-microfinance-label-to-microfinance-enhancement-facility-selectum-etimos-fund-dual-return-fund-vision-microfinance-local-currency-renews-label-for-six-other-micro/

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

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

MicroCapital Universe Profile: Luxembourg Fund Labeling Agency (LuxFLAG), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=LuxFLAG

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

MICROCAPITAL BRIEF: “SPM in Microfinance 24*7 Helpline” Offers Advice to Front-Line Workers Regarding Social Performance Management

Nisha Koul — Mon, 23 Jan 2012 14:12:05 +0000

Founded in 2011 in India, “SPM in Microfinance 24*7 Helpline” is an online resource that aims to help institutions and individuals worldwide with issues related to social performance management (SPM) in microfinance [1]. SPM is defined as “an institutionalized process which involves setting clear social objectives, monitoring and assessing progress towards achieving these, and using this information to improve overall organizational performance.” The helpline has a specific focus on “last-mile” microfinance staff who are responsible for collecting and compiling SPM data and might have queries about interpreting data and understanding different reporting formats. Queries can be posted on the helpline’s Facebook page at https://www.facebook.com/spmhelpline or submitted through email at spmgyan at gmail.com.

By Nisha Koul, Research Associate

Sources and Additional Resources:

[1] Information provided to MicroCapital, January 2012.

MicroCapital.org story, December 3, 2011, “MICROCAPITAL BRIEF: New Imp-Act Website Goes Live, Covering Social Performance in Microfinance,” http://www.microcapital.org/microcapital-brief-new-imp-act-website-goes-live-covering-social-performance-in-microfinance/

MicroCapital.org story, July 18, 2011, “MICROCAPITAL BRIEF: Imp-Act, MicroSave Launch Guidance Notes on Social Performance Management for Microfinance Institutions (MFIs),” http://www.microcapital.org/microcapital-brief-imp-act-microsave-launch-guidance-notes-on-social-performance-management-for-microfinance-institutions-mfis/

MicroCapital.org story, April 26, 2011, “MICROCAPITAL BRIEF: MicroSave Launches Social Performance Management (SPM) Toolkit for Microfinance Institutions (MFIs),” http://www.microcapital.org/microcapital-brief-microsave-launches-social-performance-management-spm-toolkit-for-microfinance-institutions-mfis/MicroCapital Universe Profile:

MicroCapital Universe Profile: SPM in Microfinance 24*7 Helpline, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SPM+in+Microfinance+24*7+Helpline

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