Category: Trends/Challenges

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


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


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.

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


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, 8 pages, available at:

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


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:…

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.

Continue reading


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