Category: Trends/Challenges

MICROCAPITAL.ORG STORY: ‘Fidelity Plc’ of Nigeria to Offer Banking Service Including Check Clearing to ‘Support Microfinance Bank’

According to Marcel Mbamalu of the Guardian in Nigeria, Support Microfinance Bank, a microfinance institution in Nigeria, has entered a “strategic and clearing partnership” with Fidelity Bank Plc, a major universal bank (capable of banking and investment activities) in Nigeria [1,2,3]. Customers of Support Microfinance Bank will now be able to receive banking services, including the clearing of checks, from all 140 branches of Fidelity Bank Plc [1]. Continue reading

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MICROCAPITAL.ORG STORY: Finance Minister of Bangladesh Says Climate Change is Major Factor Impeding Economic Growth for Low-Income Citizens

At a conference on extreme poverty in Bangladesh, the Finance Minister of Bangladesh, Mr. Abul Maal Abdul Muhith, announced that “global climate change poses the greatest challenge today in our poverty mitigation efforts.” He added that microcredit is not the prime tool for poverty alleviation, but that it can “very well be an aid to mitigating poverty” [1, 2]. Continue reading

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MICROCAPITAL.ORG STORY: International Finance Corporation (IFC) Supports Transformation of Kyrgyz Republic’s Bai-Tushum From Microcredit to Microfinance Company With the Intention Becoming a Deposit-Taking Instituion

The International Finance Corporation (IFC), the investment arm of the World Bank, has aided Bai-Tushum and Partners of the Kyrgyz Republic in transforming from a microcredit to a microfinance company [1,2,3]. This transformation will allow Bai-Tushum to provide more services to its clients beyond just small loans [1]. Namely, Bai-Tushum and Partners has now applied for a deposit-taking license from the National Bank of the Kyrgyz Republic in order to offer “deposit, savings, and related services to the public” [1]. Microcapital reported on the early stages of this effort in August 2009 [4]. Continue reading

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MICROCAPITAL.ORG STORY: CEO Of Delhi-Based NGO Access Development Services Warns Of The Risks Of Commercialization And Government Intervention In Microfinance And Discusses The Need For ‘Microfinance-Plus’ Services Including Livelihood Planning

In a recent article in India’s Business Standard online paper entitled ‘There is a tension between scale and soul in microfinance’ [1], reporter Sreelatha Menon interviews the CEO of Access Development Services (ADS) [2], Mr Vipin Sharma, on microfinance and the forthcoming event organized by on ADS later this month on responsible and social finance. Delhi-based ADS is a non-profit company that was established in March 2006 with a focus on ‘incubating emerging MFIs’ and helping them ‘upscale their operations, enhance their portfolio and meet the growing demand among poor communities’. ADS also seeks to facilitate on-lending fund flows from financial institutions through the ACCESS Microfinance Alliance platform [3]. Continue reading

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MICROCAPITAL.ORG STORY: Banco Compartamos SA Applies for Banking License to Accept Deposits from Clients

Banco Compartamos SA, a publicly traded Mexican bank and the largest microfinance institution (MFI) in Latin America with USD 587.8 million in total assets, plans to apply for a license to expand its banking services [1, 2, 3]. The license will allow the bank to take deposits by offering savings accounts to clients. It will also allow third parties to use the deposits to issue credit to and take interest payments from some of Compartamos´ 1.2 million customers. Continue reading

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MICROCAPITAL.ORG STORY: Hong Kong and Shanghai Banking Corporation (HSBC) Partners with Women’s World Banking (WWB) to Launch Loan Product for Small Businesses and Rural Workers in China

The Hong Kong and Shanghai Banking Corporation (HSBC), the fifth largest bank in the world with a market value of USD 104.2 billion, has partnered with Women’s World Banking (WWB), a non-profit that provides support and training to a network of 40 microfinance institutions (MFIs), to launch a product called “happy loans” [1, 2, 3]. The product aims to provide financial services to small businesses and rural workers, particularly farmers, who struggle to obtain loans due to the seasonality of their businesses, which cause variable cash flows. Continue reading

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MEET THE BOSS: Discussions on Successful Due Diligence When Evaluating Microfinance Investment Vehicles’ (MIV’s) Financial Viability: Interview with Christina Leijonhufvud, Managing Director, Social Sector Finance Group (SSF)/Investment Bank (IB) at JP Morgan (Part I of a Three Part Series)

Ms. Leijonhufvud is Managing Director of the Global Social Sector Finance Group at JPMorgan.  The SSF unit leverages JP Morgan’s products and skills to help bring financial services to microfinance and social enterprises around the world.  The scope includes capital markets, structured products and principal investments.  The unit seeks to achieve a double bottom line of social benefit and financial returns.  According to JP Morgan, potential demand for sustainable financial services is immense, at an estimated USD 300 billion. JPMorgan utilizes its global IB platform to raise capital to support poverty alleviation initiatives in developing economies. Continue reading

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MICROFINANCE PAPER WRAP-UP: “Building Social Business Models: Lesson from the Grameen Experience” by Muhammad Yunus, Bertrand Moingeon, and Laurence Lehmann-Ortega.

Written by Muhammad Yunus, Bertrand Moingeon, and Laurence Lehmann-Ortega. HEC International Business School. Paris. February 2009. 27 pages. Working Paper – 913. http://www.microfinancegateway.org/gm/document-1.9.39135/Building%20Social%20Business%20Models.pdf

The authors show, according to data from the World Bank, that 1.4 billion people in the world were living below the poverty line of $1.25 in 2005. Though the Millennium Development Goals aspire to meet certain objectives by 2015, it is estimated that in 2015, one billion people will still be living in absolute poverty. The authors, thus, conclude that governments, NPOs, multilateral institutions, and existing for-profit companies are insufficient to solve issues of poverty. Governments tend to be inefficient and prone to corruption, NPOs are highly dependent on donations for funding, multilateral institutions have not made a sufficient impact on poverty alleviation, and for-profit companies that claim to exhibit corporate social responsibility (CSR) will always prioritize financial profit over all else. Therefore, the authors justify the need for “social businesses” that integrate aspects of both profit-maximizing companies and socially-motivated NPOs. Continue reading

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MICROFINANCE PAPER WRAP-UP: Strategies for Effective Loan Delivery to Small-Scale Enterprises in Rural Nigeria, by Benjamin Okpukpara

Written by Benjamin Okpukpara, published in the Journal of Development and Agricultural Economics Vol. 1(2), pp. 041-048, May, 2009, housed at Academic Journals.org, 8 pages, available at:
http://www.academicjournals.org/JDAE/PDF/Pdf2009/May/Okpukpara.pdf

This work studies the determinants of micro business loan acquisition for rural entrepreneurs in Nigeria. In Nigeria, only 35 percent of the “economically active” population has access to formal credit [1]. In order to increase access to formal credit to rural areas, the government has enacted various microcredit programs specifically targeting the rural poor. However, according to the author, most of these programs have fallen short of their goals due to “poor targeting” and a “lack of organized ways of administering loan to the rural enterprises” [2,4]. Therefore, this study attempts to ascertain which strategies can overcome the problem of low access to microfinance services. Continue reading

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MICROCAPITAL PAPER WRAP-UP: Will Microfinance Stay as a Separate Asset Class? by Marco Coppoolse

By Marco Coppoolse, published by MicroCapital.Org, August 2009, 9 pages, available at:
http://www.microcapital.org/downloads/whitepapers/Will_Microfinance_Rema…

Microfinance has seen an expansion of its products formula from 2005 to 2007. The author’s view is that the microfinance sector will not stay as a separate asset class for long, as more MFIs are developing into full service microfinance banks for the emerging markets sector. MFIs are becoming members of the emerging market banking asset class. These full service microfinance banks offer even larger individual SME loans, savings, remittances, insurance and sometimes even credit cards. While they still service “the poor,” they have entered into new market segments, introduced new products and partnered with mainstream investors.

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MICROCAPITAL.ORG STORY: India Goes For Agent Banking – Reserve Bank Of India To Encourage Indian Microfinance Institutions To Adopt ‘Business Correspondent’ Model To Improve Outreach And Relax Requirements On Transaction Reporting

It was recently reported in India’s Economic Times [1] that the central bank, the Reserve Bank of India (RBI) [2] may widen the scope of the ‘Business Correspondent’ model for Indian MFIs following receipt of preliminary feedback from some Indian banks. Under the Business Correspondent model, banks are entitled to engage intermediaries to disburse ‘small value credits’, recover principal and interest payments, collect ‘small value deposits’, sell microinsurance or pension products and receive or deliver ‘small value remittances’ according to information on the RBI website [3]. The intermediaries engaged as Business Correspondents must be ‘well established’ and enjoy a good reputation locally. The idea is for Business Correspondents to improve an MFIs outreach without compromising the quality of services provided to microfinance clients. The RBI has now proposed to ‘unveil new norms for Business Correspondents’ in a way that would relax certain requirements and widen the geographical coverage of many MFIs. The RBI’s aim is to encourage more ‘banks with scattered branches particularly, private and foreign banks’ to adopt the Business Correspondent model. Examples of intermediaries that can be engaged as Business Correspondents include ‘NGOs, farmers’ clubs, cooperatives, community based organisations, IT enabled rural outlets of corporate entities, post offices [and] insurance agents’. Continue reading

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MICROCAPITAL STORY: Gates Foundation Gives USD 35m to Alliance of 64 Countries to Train Central Bankers, Funds Managed by German Aid Agency GTZ

The global Alliance for Financial Inclusion (AFI), a coalition of developing countries committed to financial inclusion, was launched in Nairobi, Kenya, with a USD 35 million grant from the Bill & Melinda Gates Foundation’s .[2] The AFI is based in Bangkok and managed on behalf of its members by the German government development organization Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ), the recipient of the Gates grant. [1] Continue reading

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MICROFINANCE PAPER WRAP-UP: “Asia – Commercialise Microfinance” by Nicholas Kwan, Kelvin Lau, and Elizabeth Lee from Standard Chartered Bank (Hong Kong) Limited. Released on Aug 31, 2009.

Written by Analysts Nicholas Kwan, Kelvin Lau, and Elizabeth Lee. Released on August 31, 2009 in “On the Ground” through the Standard Chartered Bank (Hong Kong) Limited. Ref: GR_20Jul09

http://www.microfinancegateway.org/gm/document-1.9.37784/Asia%20Commercialise%20Microfinance.pdf

This is a paper written by analysts from the Standard Chartered Bank that describes to the public the role of commercialization in the transformation of the microfinance industry. In this paper, the authors note that though microfinance has been growing in popularity throughout the world in the past few decades, Asia has not maximized its potential in this investment sector. The authors use the term “commercialization” of microfinance to refer to the idea of microfinance institutions (MFIs) becoming very much integrated into the for-profit, business and financial sector, rather than the non-profit, subsidized sector. According to them, especially considering Asia’s growing economy, Asian MFIs are currently well positioned to become more involved in commercialized microfinance and cross-border investment. Many Asian MFIs have begun to further integrate themselves with commercial banks and the financial sector. Continue reading

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MICROFINANCE PAPER WRAP-UP: Who is Reaching Whom? Depth of Outreach of Rural Micro Finance Institutions in Ghana, by Kofi Awusabo-Asare, Samuel K. Annim, Albert M. Abane and Daniel Asare-Minta

Written by Kofi Awusabo-Asare, Samuel K. Annim, Albert M. Abane and Daniel Asare-Minta, published in the International NGO Journal Vol. 4 (4), pp. 132-141, April 2009, 10 pages, available at: http://www.academicjournals.org/ingoj/PDF/Pdf2009/Apr/Asare%20et%20al.pdf

This paper aims to study the socioeconomic status of clients being reached by different “types” microfinance institutions (MFIs) in Ghana. Using a poverty index, the study shows which type of MFIs reach relatively poorer or richer clients. The study also attempts to explain these results through reasons relating to the “source of funds, strategies for outreach and mission of the institution.” Lastly, MFI policy recommendations are made. Continue reading

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