CGAP (Consultative Group to Assist the Poor), an independent policy and research center housed at the World Bank Group, recently responded to proposals made by Dr Sanjay Sinha, managing director at Micro-Credit Ratings International (M-CRIL), which were presented in a recent article covered by MicroCapital on July 15, 2010. Dr Sinha argued that “CGAP needs to modify its conventional messages such as ‘zero tolerance of delinquency’ and ‘no restructuring of client loans’ in the context of emerging over-indebtedness and the financial crisis. It also needs to strengthen its messages in relation to governance, social mission and improving depth of outreach to the poor”. Additionally, he proposed that CGAP encourage greater product innovation, expand its mandate to include technical support initiatives and redesign the MIX Market, the microfinance information clearinghouse, in a manner that would engage local researchers and analysts in developing countries.
CGAP responds that its emphasis over time has shifted from financial transparency and reporting to other areas needing attention, such as social performance reporting, consumer protection and responsible finance and that it continues to support the Microfinance Information Exchange (MIX), a nonprofit organization founded by CGAP that reports both financial and social performance information on microfinance institutions.
Regarding Dr Sinha’s comment about “zero tolerance of delinquency” and “no restructuring of client loans”, CGAP noted that Dr Sinha’s interpretation of CGAP positions is not always accurate or up-to-date. CGAP agrees that 100 percent on-time repayment is neither practicable nor desirable and acknowledges that in its earlier years it discussed zero-tolerance delinquency but failed to adequately clarify its position on the topic. Additionally, CGAP believes that loan renegotiation is acceptable, but not when used to conceal repayment problems or to avoid implementing discipline procedures.
CGAP also commented on the commercialization of the microfinance industry and argues that, with the correct balance, commercialization can lead to benefits for the poor, such as the broadening of services beyond credit and expanded outreach of financial services for poor people.
CGAP concluded its response stating that new ideas, partnerships and innovations must continually be sought to make progress in serving the needs of the microfinance industry.
By Jennifer Shevock, Research Associate
About CGAP (Consultative Group to Assist the Poor):
Housed at the World Bank Group, CGAP is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by over thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors.
About Micro-Credit Ratings International:
Micro-Credit Ratings International is an Indian microfinance rating and advisory services organization. Its services include financial and social rating, systems and portfolio audits, sector analysis and financial research.
Source and Additional Resources:
“The next decade of microfinance” July 14, 2010. http://microfinance.cgap.org/2010/07/14/the-next-decade-of-microfinance/
MICROCAPITAL BRIEF: “Dr Sanjay Sinha of M-CRIL Takes Issue with CGAP (Consultative Group to Assist the Poor)” July 15, 2010. https://www.microcapital.org/microcapital-brief-dr-sanjay-sinha-of-m-cril-takes-issue-with-cgap-consultative-group-to-assist-the-poor/#more-5875
MicroCapital Universe: CGAP: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+(Consultative+Group+to+Assist+the+Poor)
MicroCapital Universe: Micro-Credit Ratings International: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Micro-Credit+Ratings+International
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