MICROFINANCE PUBLICATON ROUND-UP: Drivers of Over-Indebtedness in Cambodia, Accelerating Impact Investing, Mobile Banking in Tanzania

“Study on the Drivers of Over-Indebtedness of Microfinance Borrowers in Cambodia: An In-depth Investigation of Saturated Areas;” by Dannet Liv; published by BlueOrchard Microfinance Investment Management, Incofin Investment Management, Oikocredit; March 2013; 83 pages; available at: http://www.blueorchard.com/jahia/webdav/site/blueorchard/shared/Publications%20and%20Resources/News%20%26%20Press%20releases/OID-Final%20Report.pdf

This report presents an analysis of the factors that drive microfinance borrowers in Cambodia to take on excessive levels of debt. According to the report, “Cambodia’s microfinance sector has grown tremendously over the past decade, expanding from just USD 3 million of outstanding loans and 50,000 borrowers in 1995, to a remarkable USD 732 million and 1,197,722 borrowers in 2012.” This influx of credit, as well as the rising numbers of microfinance institutions (MFIs) operating in Cambodia, has led to growing concern that “the increase in competition among MFIs may be leading to cross-lending and possibly, the over-indebtedness of borrowers.” In an effort to study the causes of over-indebtedness, the study explores the following four phenomena: (1) the degree of multiple borrowing and over-indebtedness (OID) in selected saturated markets; (2) how OID is perceived by microfinance borrowers; (3) the relationship between multiple borrowing and OID; and (4) the internal and external drivers of OID, including lending behavior and client borrowing behavior.

In studying the degree of OID in saturated areas, the study used two definitions of OID, one subjective and the other objective. The objective definition was based on “the traditional view of over-indebtedness that looks at the repayment capacity of the borrower by comparing the debt installments to the net income.” Under this definition, the authors found that 22 percent of the 1,480 clients surveyed were insolvent or over-indebted. The subjective definition was “derived from a client protection perspective and takes into account the sacrifices that borrowers make to repay their debts on time.” Of the 465 clients surveyed, 6 percent of clients fit this subjective definition of OID. Through two separate econometric analyses, the authors identified the “two variables statistically significant in clarifying differences in objective OID” to be multiple loans and lack of profit from economic activity.

“Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry;” by E.T. Jackson and Associates Limited; published by the Rockefeller Foundation; July 2012; 86 pages; available at: http://www.rockefellerfoundation.org/uploads/images/fda23ba9-ab7e-4c83-9218-24fdd79289cc.pdf

This report includes an overview of “the structure of and key actors in the impact investing field,” as well as “an examination of the recent achievements and challenges in building the impact investing marketplace.” The report is based on interviews with approximately 100 impact investors from 11 countries. According to the authors, “while investing for a mix of financial and social or environmental returns is not new, four factors…have converged in recent years to generate new interest and activity in what has come to be known as impact investing.” These factors are: (1) broader consideration of risk in investment decisions; (2) growing recognition that existing resources are insufficient to address severe poverty, income and gender inequality, environmental destruction and other complex, global issues; (3) emerging recognition that it is possible to finance scalable business models that create social and environmental value; (4) the growth of a group of high net-worth individuals who seek to invest their funds in ways that create social change. To continue to grow the sector, the authors recommend urging industry leaders to join together to catalyze further acceleration of the impact investing industry including through greater market penetration, increased scale of impact, a wider range of products offered and increased focus on financial sustainability and social impact.

“Tanzania Mobile Money Tracker Study: Wave Four Report;” published by InterMedia; 2013; 47 pages; available at: http://www.intermedia.org/wp-content/uploads/TZ-MM-Wave-4-Report-FINAL.pdf

This report presents the findings of a study of the trends in awareness and use of mobile money in Tanzania between September and October 2012, which was conducted by InterMedia. The study found that the proportion of the adult population that is aware of mobile money services and products increased to a high of 99 percent of the population. This represents a 2 percent increase since the “third wave” study, conducted by Intermedia between May and June 2012. The study further found the percent of the adult population that had been exposed to mobile money advertisements rose from 71 percent to 82 percent during the same four month period. According to the report, 40 percent of customers interviewed reported that lack of access to a mobile money agent prevents them from using mobile money services and products. This represents a 5-percent increase from the proportion of customers who indicated that lack of access to an agent prevented them from using mobile money services or products at the start of the period. The percentage of the Tanzanian population that indicated that they actively use mobile money services and products increased from 31 percent to 45 percent of the population during the period studied. Finally, the report found that Tanzanian adults still consider mobile money to be the safest, most convenient, least expensive and fastest method for sending and receiving money.

By Makai McClintock, Research Associate

Sources and Additional Resources

“Study on the Drivers of Over-Indebtedness of Microfinance Borrowers in Cambodia: An In-depth Investigation of Saturated Areas,” http://www.blueorchard.com/jahia/webdav/site/blueorchard/shared/Publications%20and%20Resources/News%20%26%20Press%20releases/OID-Final%20Report.pdf

“Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry,” http://www.rockefellerfoundation.org/uploads/images/fda23ba9-ab7e-4c83-9218-24fdd79289cc.pdf

“Tanzania Mobile Money Tracker Study: Wave Four Report,” http://www.intermedia.org/wp-content/uploads/TZ-MM-Wave-4-Report-FINAL.pdf

MicroCapital. March 8, 2013, “MICROFINANCE EVENT: Microfinance and Impact Investing Initiative (MI3) to Host Symposium “US Poverty, Microentrepreneurs and Microfinance: Needs, Responses and Prospects,” March 28-29, 2013, Haverford, Pennsylvania, US,” https://www.microcapital.org/microfinance-event-microfinance-and-impact-investing-initiative-mi3-to-host-symposium-us-poverty-microentrepreneurs-and-microfinance-needs-responses-and-prospects-march-28-29/

MicroCapital. February 26, 2013, “MICROFINANCE EVENT: Association of the Luxembourg Fund Industry (ALFI), LuxFLAG Host “Responsible Investing Conference,” May 15, 2013, Luxembourg,” https://www.microcapital.org/microfinance-event-association-of-the-luxembourg-fund-industry-alfi-luxflag-host-responsible-investing-conference-may-15-2013-luxembourg/

MicroCapital. January 21, 2013, “MICROFINANCE EVENT: Information Management Network’s Spring Investment Series “Impact Investing Summit,” March 14-15, 2013, Huntington Beach, California, USA,” https://www.microcapital.org/microfinance-event-information-management-networks-spring-investment-series-impact-investing-summit-march-14-15-2013-huntington-beach-california-usa/

MicroCapital.org story, March 12, 2012, “MICROCAPITAL BRIEF: Freedom from Hunger, Oikocredit to Implement Health Protection through Microfinance Institutions in Ecuador, Peru,” https://www.microcapital.org/microcapital-brief-freedom-from-hunger-oikocredit-to-implement-protection-through-microfinance-institutions-in-ecuador-peru/

MicroCapital. August 19, 2011, “MICROFINANCE PAPER WRAP-UP: Discovering Limits: Global Microfinance Valuation Survey 2011; By Frederic de Mariz, Xavier Reille, Daniel Rozas; Published by JP Morgan, CGAP (Consultative Group to Assist the Poor),” https://www.microcapital.org/microfinance-paper-wrap-up-discovering-limits-global-microfinance-valuation-survey-2011-by-frederic-de-mariz-xavier-reille-daniel-rozas-published-by-jp-morgan-cgap-consultative-group-to-assist/

MicroCapital. April 13, 2011, “MICROCAPITAL BRIEF: “Principles for Investors in Inclusive Finance” (PIIF) Created as Separate Work Stream Within United Nations’ Principles for Responsible Investment (PRI); CGAP (Consultative Group to Assist the Poor), Global Impact Investing Network (GIIN) Standards Observed,”https://www.microcapital.org/microcapital-brief-“principles-for-investors-in-inclusive-finance”-piif-created-as-separate-work-stream-within-united-nations’-principles-for-responsible-investment-pri-c/

MicroCapital Universe Profile: BlueOrchard
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=BlueOrchard

MicroCapital Universe Profile: The Rockefeller Foundation
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+Rockefeller+Foundation

MicroCapital Universe Profile: Incofin Investment Management
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Incofin+Investment+Management+%28Incofin+IM%29

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

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