Category: Trends/Challenges

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


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


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

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


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:

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


MICROFINANCE PAPER WRAP-UP: Global Recession and Sustainable Development: The Case of Microfinance Industry in Eastern Europe by Dr. Dragan Loncar, Mr. Christian Novak and Dr. Svetlana Cicmil

Written by Dr. Dragan Loncar, Mr. Christian Novak and Dr. Svetlana Cicmil, published September 2009, 10 pages, available at

This research paper attempts to answer why the microfinance industry in Eastern Europe in particular is more vulnerable to contemporary economic trends and why, unlike microfinance industries of other countries, it performs cyclically. It is divided into three sections: the first discusses microfinance and general trends within the industry; the second narrows in on trends within the microfinance industry in Eastern Europe; and the third analyzes the impact of the current global recession on microfinance in Eastern Europe. Continue reading


MICROCAPITAL.ORG STORY: Gender Related Challenges In Pakistan’s Microfinance Sector – ‘The News’ Online Portal Observes That Microbusinesses Started By Women Rarely Graduate Into Small And Medium Enterprises

It was reported in an article on Pakistan’s online The News portal entitled ‘Women face hurdles to developing business’ [1] that successful women microentrepreneurs who have the support of microfinance loans seldom develop their ventures into small or medium-sized businesses ‘due not only to gender-specific impediments’ but also ‘to their inability to access institutions established to facilitate them’. The report was authored by senior commerce reporter, Mr Mansoor Ahmed, at The News, Lahore. This conclusion was based on a study conducted by The News which revealed that in cities such as Sialkot and Gujranwala, many male entrepreneurs who started their businesses at a micro level subsequently ‘graduated’ and developed their enterprises into medium or large ones. The News found that such ‘graduation’ rarely occurs in relation to women microentrepreneurs, subject to a small number of exceptional cases. Specific details of the study conducted by The News are not currently available in the public domain. Continue reading


MICROCAPITAL.ORG STORY: India-based Credit Rating Agency Crisil Observes That Percentage Of Bad Loans In Indian Microfinance Institutions May Triple As Microborrowers Feel The Impact Of The Global Economic Crisis

In an article entitled ‘MFI’s bad loans may triple: Crisil’ on India’s Business Standard online news portal [1], it was stated that the percentage of bad assets of MFIS’ is expected to triple to 1.5 percent from 0.5 percent by March 2010, as compared to the levels of bad assets in March 2009.This was the conclusion of India-based credit rating agency, Crisil. The agency attributed the increased levels of deteriorating assets to the global economic crisis which has had an adverse impact on microborrowers’ ability to repay their loans. Nonetheless, Crisil’s managing director and CEO, Ms Roopa Kudva stated that the deterioration in asset quality was still not at the levels seen in 2007 and that MFIs’ asset quality was generally healthier than those of other participants in India’s financial sector. Continue reading


MICROCAPITAL.ORG STORY: Observations In The Philippine Star and The Manila Times On Rural Microfinance Institutions In The Philippines – The Philippines Central Bank Bangko Sentral ng Pilipinas Moves To Allow Rural Banks to Sell Microinsurance And Consolidation May Benefit A Minority Of Rural Microfinance Institutions That Are Undercapitalized

It was recently reported on the online news portal of The Philippine Star [1] that the Philippine central bank, Bangko Sentral ng Pilipinas (BSP) [2], is taking steps to allow rural banks and other community-based banks to sell simple microinsurance products. BSP officer-in-charge Mr Nestor Espenilla Jr informed members of the Rural Bankers Association of the Philippines [3] that a formula allowing rural banks to sell simple insurance products to cover mortgage redemption, the protection of farm equipment and services vehicles as well as health insurance would soon be presented to the Monetary Board [4] in the Philippines for approval.
At the moment, foreign and commercial banks can sell insurance products of their affiliates as long as they hold a minimum 5 percent stake in the insurance affiliate. Unlike such banks, rural financial institutions often lack the resources to invest in insurance companies. Continue reading


MICROCAPITAL.ORG STORY: CGAP Microfinance Blog Comments On Case Studies On The Liquidation Of Microfinance Institutions And Highlights Challenges Associated With Retaining Borrower Repayment Incentives In The Midst Of A Deteriorating Loan Portfolio

In a blog on the CGAP Microfinance Blog portal entitled ‘When MFIs fail, is their loan portfolio worth anything?’ [1], Senior Advisor to Research and Market Intelligence Team at CGAP, Mr Richard Rosenberg refers to Mr Daniel Rozas’s publication entitled ‘Throwing in the Towel: Lessons from MFI Liquidations’ [2]and makes some observations about the steps an MFI should take to maximise collections on a deteriorating loan portfolio. Mr Rosenberg notes that Mr Rozas’ article offers a ‘useful, timely, concise, and readable study of a half-dozen MFI failures, focusing on efforts by creditors and others to collect the loan portfolio of the defunct institutions’ but cautions that some of Mr Rozas’ recommendations may be difficult to implement in practice. Continue reading


MICROCAPITAL.ORG STORY: Founder And Officer Of India-Based SKS Microfinance Comment On Prospects For Microfinance In China In A Wall Street Journal Report

A recent article entitled ‘Microfinancing China’ in the Wall Street Journal [1] by Mr Vikram Akula and Mr Tarun Khanna discuss the scope for microfinance in China and explores why the concept of microcredit has a ‘notably minimal footprint’ in a mammoth economy such as China. Mr. Akula is founder and chairperson of India-based MFI, SKS Microfinance [2]. Mr. Khanna, the author of the book ‘Billions of Entrepreneurs’ [3] is Jorge Paulo Lemann Professor at Harvard Business School and serves on SKS Microfinance’s board of directors. The view taken by Mr Akula and Mr Khanna is that ‘it will take hard work and reform to grow microfinance in China’ but that millions of poor people in the world’s third largest economy could derive benefits from microloans. Continue reading


MICROCAPITAL.ORG STORY: Former Founding Member Of Amanah Ihktiar Malaysia And Current Professor At Universiti Sains Malaysia Professor Sukor Kasim Appointed As Government Adviser To Northern Malaysian State Of Perak to Help Address Problems Related To Poverty And Income Disparity

It was recently report in in Malaysia’s Bernama press portal [1] that Professor Sukor Kasim of Universiti Sains Malaysia’s (USM) [2], a tertiary educational institution in Malaysia, will be appointed adviser and consultant to the Perak state government in its bid to narrow income disparities in the state. Perak is a state in the northern half of Western Peninsula Malaysia. Professor Kasim was co-founder of Malaysia’s earliest microfinance NGO, Amanah Ihktiar Malaysia (AIM) [3] in 1986. AIM’s operations were modelled after Grameen Bank [4]. Continue reading


MICROCAPITAL.ORG STORY: Partners with Moody’s to Receive Credit Ratings, Risk Management Tools, and Financial Support

According to a recent press release by Marketwire,, known as the first person-to-person online microfinancing website, plans to partner with Moody’s Corporation to provide pro bono credit ratings of partner microfinance institutions (MFIs), risk management training for staff, and financial support to expand its partnership with MFIs. [1] Continue reading


MICROCAPITAL.ORG PAPER WRAP-UP: Acute Poverty Alleviation Through Women’s Targeting by Micro nance Programs, by Alexandra Dobra

Written by Alexandra Dobra, published in March 2009 by the Munich Personal RePEc Archive, 8 pages, available at:

This paper, by Alexandra Dobra of the University of York Department of Politics, is a literature review that attempts to address the merits of female-targeted microfinance [1]. In addition to microfinance, Ms. Dobra has also done research on immigration in developed countries [1,2]. The paper is published by the Munich Personal RePEc Archive, an archive that houses economics papers for authors who want their work to be freely available [3]. Continue reading


MICROCAPITAL.ORG STORY: Peru Ranks First in 2009 Microscope Microfinance Index, A Global Index on Business Environment for Microfinance Developed by the Economist Intelligence Unit (EIU), Released by the Inter-American Development Bank (IDB), the Corporación Andina de Fomento (CAF), the International Finance Corporation (IFC), and the EIU

Peru has been named the best country for microfinance in terms of business climate by the 2009 Microscope microfinance ranking from the Economist Intelligence Unit (EIU), the research arm of the Economist Magazine that provides “country, industry and management analysis” [1,2,3]. The 2009 Microscope was published jointly by the Inter-American Development Bank (IDB), the “main source of multilateral financing” in Latin America and the Caribbean, the Corporación Andina de Fomento (CAF) the primary source of multilateral financing in the Andean region, the International Finance Corporation (IFC), the investment arm of the World Bank, and the EIU [4,5,6]. Last year, Peru was named the best country for microfinance in Latin America and the Caribbean. This was covered by Microcapital in October of 2008 [7,8,9]. This year, the rankings were made globally and Peru still topped the list of 55 countries [1]. Continue reading


MICROCAPITAL.ORG PAPER WRAP-UP: Microfinance Mission Drift?, by Roy Mersland and R. Øystein Strøm

Written by Roy Mersland and R. Øystein Strøm, published in July 2009 by Elsevier Ltd., 9 pages, available at:

This paper studies the tendency of microfinance institutions (MFIs), as they grow, to cater to groups that are different from those in the “mission” of microfinance. Basically, this mission includes serving low-income people who have less access to credit, namely poor, rural women. To do this, loan size, the main market, lending methodology, and gender bias were studied in 379 MFIs in 74 counties. The MFIs reported 4-6 years of data each. Continue reading


MICROCAPITAL.ORG STORY: The International Banking Systems Online Journal Comments On How Key Stakeholders Influence Purchasing Decisions Of Microfinance Institutions In Relation To Information Systems And Includes Observations By Grameen Foundation, CGAP And The Bill And Melinda Gates Foundation

The International Banking Systems publication (IBS), an online journal that provides information on banking systems and operations, have produced a detailed supplement on the role of technological systems in microfinance [1]. An article within the supplement entitled ‘Analysis: Microfinance Stakeholders – Guiding hands’ [2] explores how major stakeholders shape the market for microfinance information systems (MIS). The thrust of the article is that there is an important difference between the microfinance and commercial banking sectors when it comes to information systems and that MFIs depend heavily on key stakeholders such as the Bill and Melinda Gates Foundation [3], CGAP [4], the IFC [5] and GTZ [6] for guidance and direction in making technology decisions. The conclusion arrived at is that ‘directly or indirectly, it is these stakeholders that influence purchasing decisions by MFIs, on the business case for investment, the process of selection, and which products to choose’ in respect of MIS. Continue reading