Opportunity International has announced a $75,000 grant from the Levi Strauss Foundation to support the expansion of Opportunity International’s microinsurance initiatives in the Philippines.
The National Committee for Microfinance (NCM) of Cameroon recently met to discuss ways to improve the financial services provided by the sector. The meeting, which was the 4th for the organization, was chaired by the country’s Economic and Finance Minister, Polycarpe Abah Abah. The committee highlighted several areas of action, including:Development of a clearer legal framework for microfinance institutions (MFIs): Promotion of sector-wide transparency:Consolidation and expansion of institutions:Cooperation between governmental projects and MFIs, Development of an industry organization.
Continue reading “Cameroon’s National Microfinance Committee Presents Plan”
Within American Enterprise Insitute’s (AEI) publication, “Development Policy Outlook”, the most recent quarterly volume contains a seven page article entitled “Building on Success: The Next Challenges for Microfinance,” in which the authors Robert Eichfeld and Henry Wendt explore how the expansion and integration of microfinance with the global banking system can accelerate the reach of microfinance institutions.
Continue reading “American Enterprise Institute (AEI) Publication Discusses the Integration of Microfinance and the Commercial Financial Market.”
In the October issue of the MicroCapital Monitor, we reported that “we may look back on September 2006 as the catalyst month for microfinance.” From the microcapital perspective, the Peace Prize awarded to Mr. Yunus will take us from catalytic moment to a flood of capital more quickly than most anticipated.
Are we ready? On this day of great celebration, we urge caution.
Mr. Yunus has traveled the world tirelessly to promote “credit as a human right”, inspiring audiences and global leaders alike with his unflappable charisma and compelling message. To see him is to believe him; to understand his message is to be called to action. The Nobel committee aptly states that he “has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people [because] lasting peace can not be achieved unless large population groups find ways in which to break out of poverty.” For over 30 years, microfinance entrepreneurs like Mr. Yunus have overcome all naysayers to prove the practice: Micro-credit works.
However, for years now, business-minded microfinance luminaries committed to eradicating global poverty in our lifetimes have cautioned us that “microfinance lacks capacity”. This is to say that micro-banks currently lack the institutional strength to become large (“scaled”) organizations due to unprofessional management, opaque governance, and meager balance sheets. Poverty continues to dwarf micro-banks. In short, micro-banks as a class are still immature.
Mr. Yunus’ micro-bank, of course, does not lack capacity. Since 1983, when the Grameen bank was founded, it has lent the equivalent of USD 5.72 billion to some 6 billion Bangladeshis in 70,000 villages. It has a gross loan portfolio (as of December 2005) of USD 424 million on a total asset base of USD 646.5 million, upon which it returned 0.32%.
Such powerful micro-banks are the exception to the rule. Of the estimated 10,000 micro-banks operating around the world (no one knows the actual number), almost all are small “mom and pop” outfits unprepared to handle the coming flood of capital. Around 100 have the capacity of the Grameen Bank. However, this cautionary reality will be lost, lost when millions of people today flock to the wires to learn about microfinance after Mr. Yunus’ long-overdue recognition.
Broad and deep institutional capacity is required to deliver credit as a human right. Until recently, donors have bank-rolled this development. Indeed, Grameen is a success story propelled by millions of dollars in donations and subsidies. However, those days are over. Now that microfinance has turned the corner, such donations and subsidies wreck progress by distorting competition and retarding the institutional capacity of emerging micro-banks. The job of being a responsible donor in microfinance has become very complicated.
Accordingly, microfinance investors also face huge challenges to success. Now that the flood gates have opened, we will soon start to see melt-downs of microfinance sectors in specific countries due to over-investment, be it investments for a return on capital, or subsidies, or donations which continue to flow contrary to established best-practices.
The flood of interest by the Peace Prize will require investors to seek innovation like never before. Examples of buy-side products to watch include: TIAA-CREF’s equity investment, Citigroup’s fund committed to “second-tier” or emerging micro-banks, or Gray Ghosts’ secondary market activity. Donors too are innovating (often led by CGAP); examples of donor innovation include Kiva’s peer to peer lending or the Grameen Foundation’s guarantee fund.
In conclusion, Mr. Yunus, thank you so very much for your leadership. The microfinance watershed is upon us thanks to great leaders like you and everyone who has labored for so long to prove that micro-credit works. The next stage, the stage when we provide responsible financial services to the global majority at a good price, will depend on world-class risk management.
Gray Ghost, a for-profit microfinance investment fund, announced recently that it has completed 3 large-scale secondary market deals in the last three months.
In September, Gray Ghost completed a transaction on behalf of Gray Matters Capital (pg 1-2), a sister organization. It bought 2305 shares in the Accion Investments in Microfinance Fund (AIM) for $3.8 million from the Inter-American Development Bank (IADB)’s Multilateral Investment Fund (MIF). This is the fund’s second investment in AIM, after its December 2003 purchase of $1,000,000 in equity to become the largest private investor in the fund. The MIF was established in 1993 by the IADB, an international bank owned by the governments of its 47 member countries. AIM was founded in 2003 with a market capitalization of $19.5 million.
Continue reading “US Gray Ghost Fund Continues Secondary Market Activity”
Exxon Mobil loaned $130,000 to eleven microfinance institutions in Bonny Island, Nigeria. The loans were offered at “minimal interest rates”, and will benefit about 650 residents of the Rivers State island (based on the average Nigerian’s loan of $50).
Continue reading “Exxon Mobil Loans $130,000 to Eleven Nigerian Microfinance Institutions”
Bangladesh Rural Advancement Committee (BRAC), one of the large Bangladeshi microfinance institutions (MFIs), recently revealed that it will soon pursue operations in Pakistan. The announcement came after the Prime Minister of Pakistan, Shaukat Aziz, said that the government would like to encourage the expansion of microfinance services to 10% of the country’s population. The MFI recently applied for a license in the country and is expecting to hear back soon. Last year, Pakistan’s Finance Advisor, Dr. Salman Shah, visited BRAC operations in Bangladesh with a party of other high ranking Pakistani officials to learn more about the field.
Continue reading “Bangladesh’s BRAC to Extend Operations into Pakistan”
Nigerian Bank åö Intercontinental Bank Plc has acquired CITI Savings and Loans Ltd, a microfinance institution (MFI) and transformed it into a bank. The bank will be known as Intercontinental Bank Ghana Ltd, Ghana’s 25th bank. The bank has announced its intent to use this institution to expand microfinance operations in Ghana.
Continue reading “Intercontinental Bank Plc of Nigeria Plans Microfinance in Ghana”The British government announced recently that it will be providing approximately $75 million to the Bangladesh Central Bank in order to set up a program for expanding the country’s microfinance sector. The program, entitled PROSPER, will primarily be a partnership between two Bangladeshi actors: the microfinance-funding organization, Palli Karma-Sahayak Foundation (PKSF), and the Bangladeshi government’s newly established Microcredit Regulatory Authority (MRA).
Continue reading “UK Government to Provide Bangladesh with Aid for Microfinance Expansion”
In a broad reaching agreement, Microfinance Institutions (MFIs) operating in Andhra Pradesh, India have reached an agreement with the state government on MFI interest rates, product portfolio, inter-MFI competition, credit disbursement and loan recovery methodologies. An agreement pertaining to a smaller jurisdiction åö the Krishna district of Andhra Pradesh was earlier reported on MicroCapital.
As per the terms of the agreement, MFIs have agreed to an interest rate ceiling of 15%. They have agreed to desist from providing multiple credit to an existing borrower and recover loans at a pace compatible with the borrower’s income level. MFIs are also to remain strictly within the micro-credit domain, avoiding micro-insurance products.
The Australian government’s aid agency, AusAID, gave $2.2 million to Papua New Guinea-based Bougainville Microfinance Scheme (BMS). The funds, which will be disbursed over three years, are being put towards financial management training and the microloan portfolio.
Nicaragua-based ACODEP received a $1.5 million loan from BANPRO. The Grameen Foundation is providing a $500,000 guarantee for the loan, and Global Partnerships conducted a due diligence assessment. ACODEP stated it will use the funds to build its client base from the current 51,444 to 118,000 by 2009.
Poverty Eradication Commission chairman, Dr. Gilbert Oluoch claims lending institutions targeting microenterprises are ignoring farming for fear of losses due to the current erratic rain patterns. This, Oluoch says, has adversely affected economic development in Kenya.
Continue reading “Microfinanciers in Kenya Ignore Farmers Says Poverty Eradication Commission”
M.M.M. Aheeyar, research associate at Hector Kobbekaduwa Agrarian Research and Training Institute, Colombo, Sri Lanka, recently concluded research on the impact of cash grants on the microfinance market in areas of Sri Lanka affected by the tsunamis of 2004. Mr. Aheeyar writes, “There were reports of uncoordinated and poorly targeted cash grants. Some areas attracted a large number of NGOs and aid agencies, resulting in more cash and in-kind assistance than was required. According to the MFIs, this had a negative impact on repayment cultures and on the honesty of beneficiaries. There is insufficient evidence to prove that excessive cash grants affected the repayment of culture of beneficiaries. In any case, the problem lies not with the concept of cash assistance, but with a lack of coordination and improper targeting in its delivery” (15).
Continue reading “Researcher Examines the Effects of Cash Grants on Microfinance in Tsunami-Affected Sri Lanka”
Bangladesh’s Microcredit Regulatory Authority (MRA) recently announced that all MFIs in Bangladesh now have to apply for special microfinance licenses. The applications will be available November 1st of this year and the institutions will have until February 26, 2007 to file them. The application fee will be $7.50, while the fee for the license, which is expected to be the primary cost of the policy, will be decided on a later time. According to the agency’s director, Dr. Salehuddin Ahmed, ““The MRA will examine the source of funds, ownership, internal governance and the real financial position of the NGOs before giving the license.”
Continue reading “Bangladesh Microfinance Agency Requires MFIs to Register for Licenses”
India’s largest Life Insurance Company, the Life Insurance Corporation of India (LIC) has quickly followed through on recent announcements of MicroInsurance plans with the launch of a microinsurance life product åö ‘Jeevan Madhur’ (roughly translates to ‘sweet life’). Under this product scheme, life insurance coverage from a minimum of Rs5,000(about USD110) to a maximum of Rs30,000(about USD650) can be obtained. The product is customizable in the sense that the customer can make minimum premium payments of Rs25 (USD0.55) per week, Rs50 (USD 1.1) fortnightly, Rs100 (USD 2.2) per month and a minimum of Rs250 (USD 5.5) over longer periods. The term of the policy ranges from 5-15 years.
Continue reading “India’s Largest Life Insurance Company ‘sweetens’ MicroInsurance Space with a New Product”
The CGAP (Consultative Group to Assist the Poor) Working group on MicroInsurance and the Munich Re foundation, is hosting a MicroInsurance Conference in Cape Town, South Africa with the support of Finmark trust from 21st to 23rd November 2006. The theme of the conference is ‘Making Insurance work for Africa’.
MicroInsurance Case studies from the CGAP findings on a variety of institutional models and product types shall be discussed and assessed. This event is a follow-up of the MicroInsurance Conference 2005 that took place in Munich, Germany in October 2005.
Continue reading “MicroInsurance Conference scheduled in Cape Town in November 2006″
Bangladeshi newspapers have reported that a Los Angeles based organization called ‘The Green Child Foundation’ is going to make a music video on Grameen Microcredit.
The song is titled ‘Hear me now’ and follows the life of a microcredit borrower Monika Rani. A group from the organization has been shooting the video in several Bangladeshi villages and is said to feature preschool children from ‘Grameen Shikkha’. A portion of the income from the music video will be distributed across various Grameen organizations.
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