MICROCAPITAL BRIEF: Center for Financial Inclusion Releases “Over-Indebtedness of Microborrowers in Ghana” by Jessica Schicks

The Center for Financial Inclusion (CFI), an affiliate of US-based nonprofit ACCION International, recently released a report on “Over-Indebtedness of Microborrowers in Ghana,” which explores the gap between providers’ and clients’ perceptions of indebtedness [1]. Written by Jessica Schicks, the paper discusses the experiences of microborrowers in repaying their loans, measures the prevalence of debt struggles, suggests possible drivers of over-indebtedness, sheds light on the phenomenon of over-indebtedness from a customer protection perspective and identifies opportunities for preventing over-indebtedness [2].

CFI Managing Director Elisabeth Rhyne said, “This study challenges providers to take greater care in observing the situation of clients and to study adjusting products to make repayment easier, while avoiding the pitfall of restricting access to finance (and therefore pulling back from their mission).” [1]

Eva Terberger, head of the Independent Financial Cooperation Evaluation Unit of KfW Entwicklungsbank said, “Even though these results are restricted to a single country and certainly do not answer all of our questions, they offer new insights from the clients’ perspective that must be incorporated into our understanding of over-indebtedness.” [1]

The report was released with the support of The Smart Campaign, KfW Entwicklungsbank, the Center for European Research in Microfinance (CERMi), the Université Libre de Bruxelles and the Solvay Brussels School of Economics and Management [1].

To view the report, you may visit: http://centerforfinancialinclusionblog.files.wordpress.com/2011/11/11110….

By Kristha Abores, Research Associate

About Center for Financial Inclusion (CFI):
The Center for Financial Inclusion (CFI) was started by US-based nonprofit ACCION International with the goal of connecting the microfinance community with major drivers of the global economy, such as capital markets and technology. CFI works with microfinance experts, banks, investors, regulators, technology firms, universities and others to facilitate global financial inclusion.

About Smart Campaign:
The Smart Campaign, which was founded with seed money from US-based nonprofit ACCION International and is located at ACCION’s Center for Financial Inclusion in Washington, DC, is an “effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry.” It promotes seven core consumer protection principles including: appropriate product design and delivery, prevention of over-indebtedness, transparency, responsible pricing, fair and respectful treatment of clients, privacy of client data and mechanisms for complaint resolution. As of October 2011, approximately 1,900 microfinance institutions (MFIs), microfinance support organizations, investors, donors and individual industry professionals have endorsed the Smart Campaign.

About KfW Entwicklungsbank (KfW):
KfW Entwicklungsbank (KfW) is a state-owned development bank in Germany. KfW has three goals: to reduce poverty, to make globalization “fair” and to conserve natural resources. KfW Entwicklungsbank collaborates with local financial institutions in approximately 60 countries, including microbanks, commercial banks, village savings banks, non-governmental organizations and regional microfinance funds. As of 2009, KfW Entwicklungsbank has a portfolio of EUR 2.15 billion (USD 2.57 billion).

About Centre for European Research in Microfinance (CERMi):
The Centre for European Research in Microfinance (CERMi) is a Belgian research center founded in 2007 by the Solvay Business School of the Université Libre de Bruxelles and the Faculté Warocqué of the Université Mons-Hainaut. It aims to develop suitable frameworks to examine existing microfinance practices and to promote academic research through supporting doctoral research programs, international publications and organizing workshops, seminars and conferences.

Sources and Additional Resources:

[1] Information submitted to MicroCapital by the Center for Financial Inclusion, November 2011

[2] “Over-Indebtedness of Microborrowers in Ghana,” by Jessia Schicks, Center for Financial Inclusion: November 2011,http://centerforfinancialinclusionblog.files.wordpress.com/2011/11/11110…

MicroCapital.org article, September 29, 2011, “MICROCAPITAL BRIEF: In Center for Financial Inclusion (CFI) Report, “Opportunities and Obstacles to Financial Inclusion,” Microfinance Stakeholders Cite Financial Education as Top Need,” https://www.microcapital.org/microcapital-brief-in-center-for-financial-i…

MicroCapital.org article, August 18, 2011, “MICROCAPITAL BRIEF: Microfinance Centre (MFC) for Central and Eastern Europe and the New Independent States’ “Financial Education Program” Reaches 100,000 Low-Income Households in Eastern Europe, Central Asia,”https://www.microcapital.org/microcapital-brief-microfinance-centre-mfc-f…

MicroCapital.org article, February 2, 2011, MICROCAPITAL PAPER WRAP-UP: Over-Indebtedness and Microfinance: Constructing an Early Warning Index; by Vivien Kappel, Annette Krauss and Laura Lontzek; published by Center for Microfinance, University of Zurich, responsAbility Social Investments AG, Triodos Bank and Council of Microfinance Equity Funds,” https://www.microcapital.org/microcapital-paper-wrap-up-over-indebtedness…

MicroCapital Universe Profile: Center for Financial Inclusion (CFI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Cen…

MicroCapital Universe Profile: Smart Campaign, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SMA…

MicroCapital Universe Profile: KfW Entwicklungsbank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=KfW…

MicroCapital Universe Profile: Center for European Research in Microfinance (CERMi), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Cen…

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

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