MICROCAPITAL PAPER WRAP-UP: From Revolution to Evolution: Charting the Main Features of Microfinance 2.0 by Ronald U. Mendoza and Brandon C. Vick

Written by Ronald U. Mendoza of the Office of Development Studies, United Nations Development Program (UNDP) and Brandon Vick of Frodham University, this paper speculates on the future of microfinance and elaborates on the role to be played by private innovations and public policies in this regard. The 43 page document was published by Fordham University, Department of Economics in its Fordham Economics Discussion Paper Series in February, 2008 and the full text is available here.

MICROCAPITAL STORY: International Finance Corporation (IFC), Bharatiya Yuva Shakti Trust (BYST), & VenturEast Micro Equity Managers Private Limited (VMEM) to Launch 5 Million USD Micro Venture Capital Fund For Young Entrepreneurs

International Finance Corporation (IFC), a member of the World Bank Group, has joined forces with Bharatiya Yuva Shakti Trust (BYST), an organization that focuses on “mentoring” as a technique to help young entrepreneurs in India, and venture capital firm VenturEast Micro Equity Managers Private Limited (VMEM) to set up a fund that will provide financing to young Indian business persons with growth potential but limited resources. It will target in particular India’s disadvantaged entrepreneurs between 18-35 years, who are considered too high risk for debt financing and thus require equity injections.

MICROFINANCE PAPER WRAP-UP: Shedding Light on Microfinance Equity Valuation – Past and Present, by Nicholas P. O’Donohoe, Frederic Rozeira de Mariz, Elizabeth Littlefield, Xavier Reille, and Christoph Kneiding, Part I of II

The Consultative Group to Assist the Poor (CGAP), a policy and research center housed at the World Bank dedicated to advancing financial access to the world’s underprivileged, released a path breaking report in February 2009 entitled, “Shedding Light on Microfinance Equity Valuation – Past and Present,” produced with limited analytical support from banking firm JPMorgan Chase & Co. The white paper is notable in providing an empirically grounded analysis of how financial valuation methods are actually applied by external actors to MFIs and other lending institutions with poverty alleviation goals. This is made possible by CGAP’s collection of information on 144 private equity transactions, the largest such dataset gathered to date, as well as information on 10 MFIs and other low income focused lenders that have raised funds through the issuance of securities. The original report is available at: http://www2.cgap.org/gm/document-1.9.9021/OP14v3.pdf

MICROCAPITAL STORY: Acceder and Acceder.com Provide No-interest Microfinance Loans in Argentina

Acceder.com is a non-profit internet-based microfinance charity with the mission, “to accomplish (their) dream of equal opportunity” by providing interest-free loans in Jewish communities. It is run by the New York based ACCEDER Foundation. Loans currently only benefit borrowers in Argentina. Users can scroll through a list of potential borrower’s profiles and decide whom they would like support with a minimum contribution of USD 25. The money is then funneled through Acceder.com to Acceder loan officers in Argentina who are in charge of screening clients, distributing loans and collecting repayments. Although the website does not provide information on standard loan sizes, posted loan sizes range from USD 1700 to USD 2700. The loans finance purposes such as small businesses, trips to Israel, housing improvement, and debt consolidation.

MICROCAPITAL STORY: The Consultative Group to Assist the Poor (CGAP) with Support from JP Morgan Chase & Co. Releases Empirically Based Study of Valuation Models Used in Microfinance Equity Investments

The Consultative Group to Assist the Poor (CGAP), a policy and research center housed at the World Bank dedicated to advancing financial access to the world’s poor, has released a path breaking report in February 2009 entitled, “Shedding Light on Microfinance Equity Valuation: Past and Present,” produced with limited analytical support from banking firm JPMorgan Chase & Co. The white paper is notable in providing an empirically grounded analysis of how financial valuation methods are actually applied by external actors to MFIs and other lending institutions with poverty alleviation goals. This is made possible by CGAP’s collection of information on 144 private equity transactions, the largest such dataset gathered to date, as well as information on 10 MFIs and other low income focused lenders that have raised funds through the issuance of securities. The original report is available at:

http://www2.cgap.org/gm/document-1.9.9021/OP14v3.pdf

MICROFINANCE EVENT: The Center for Financial Services Innovation (CFSI) and SourceMedia Co-Sponsor the 4th Annual Underbanked Financial Services Forum on June 1st-3rd, 2009 in Dallas, Texas, USA

The 4th Annual Underbanked Financial Services Forum

June 1st-3rd, 2009, the Westin Galleria, Dallas, TX, USA

MICROCAPITAL PAPER WRAP-UP: Can Microfinance Reduce Portfolio Volatility? by Nicolas Krauss and Ingo Walter

Written by Nicolas Krauss of the Department of Politics, New York University and Ingo Walter of the Stern School of Business, New York University, this paper analyzes the correlation between microfinance and international and domestic markets. Analyzing the sensitivity of microfinance institutions (MFIs) with global capital markets in terms of income and assets, the study discusses whether the correlation (or lack thereof) positions microfinance as a useful asset allocation technique for fund managers seeking portfolio efficiency and diversification. The 33 page document was published by New York University in January, 2008 and the full text of the report is available here.

MICROCAPITAL STORY: ‘MySME News’, Backed by the European Commission’s Asian Invest Programme, Brings Business Information to Microfinance Borrowers in India and Nepal

A news source called “MySME News” has been launched in the Indian states of Karnataka and West Bengal, and Nepal, with the goal of reporting tailored business news via newsletters, mobile messaging, and community radio to microfinance customers and small and medium enterprise owners. MySME News is the initiative of three organizations: Internews Europe, a Paris-based company that funds community media projects around the world; Plural India, a New Delhi-based non-profit with a focus on reducing information asymmetries in the low-income sector; and Mahiti Infotech Pvt. Ltd., a social enterprise (for-profit, with all proceeds funneled back into the mission) that provides low-cost information technology to civil society groups. Shivendra Sharma, executive director of Plural India and former executive director of microfinance support network, PlaNet Finance, explained that the main source of information among the low-income sector is word of mouth, “Most people get it from 10 houses this side and 10 on that side.” Mahiti’s executive director, Sreekanth S. Rmeshaiah, said that the information gap is an impediment to smart investment choices: “The main idea of the project is to offer the poor a chance to make intelligent decisions through information.” Business information is also important to foster competition among microfinance enterprises (MFIs), as borrowers become more aware of their options.

MICROCAPITAL EVENT: 2009 Coalition of Community Development Financial Institutions (CDFI) Policy Conference to be held in Washington D.C. from March 1-3

2009 Community Development Financial Institutions (CDFI) Policy Conference

March 1-3, 2009

The 2009 CDFI Institute Policy Conference will be held in Washington D.C., USA from March 1-3, 2009. The three day conference, which will feature dialogue with community development finance experts about issues facing the field of development finance, will be held at The Liaison Capitol Hill, an Affinia hotel. Participants at the event include policy makers, CDFI members, socially responsible investors, pension funds and banks. The event website can be found here.

MICROCAPITAL EVENT: Bankers Institute of Rural Development (BIRD) to Organize Conference on ‘Building Efficient Human Resources in MFIs’: February 28, 2009, Lucknow, India

Conference on ‘Building Efficient Human Resources in MFIs’

Feb 28, 2009, Lucknow, India

The Bankers Institute of Rural Development (BIRD) in India is organizing a conference to address issues faced by microfinance institutions (MFIs) in recruiting and retaining the right talent. The conference would prepare a roadmap for MFIs to build an efficient human resource base. The conference will focus on the following modules:

MICROCAPITAL STORY: Increased Competition for Kenyan Low-Income Financial Market between Microfinance Institutions and Commercial Banks

The East African reported that just as the Microfinance Act has granted particular Kenyan microfinance institutions legal status as deposit taking institutions, they are feeling squeezed from commercial banks which have begun to attract a larger share of what has traditionally been the microfinance market. This trend is occuring as commercial banks are offering more attractive financial products to the best performing microfinance clients, with better terms and more easily met conditions. Particularly at stake are the savings deposits from hundreds of thousands of small businessmen, artisans, and women groups, worth an estimated USD 126.2 million. According to Benjamin Nkungi, the chief executive of the Association of Microfinance Institutions (AMFI), “Banks are able to identify the very best clients of the MFIs, whom they then proceed to poach.”

MICROFINANCE PAPER WRAP-UP: Microfinance Industry – Microfinance Reporting Standards Initiative: Business Models Review (Draft), by Drew Tulchin

Compiled by project facilitator, Drew Tulchin of Social Enterprise Associates, and Ayani Consulting, this report outlines the Microfinance Industry Financial Reporting Standards Initiative (MRSI) – an initiative to promote standardized financial reporting in the global microfinance industry. The initiative is supported by the Small Enterprise and Education Program (SEEP) Network, a membership association connecting organizations from around the world that support micro- and small enterprise development programs. It is currently housed as a subcommittee of the Financial Services Working Group (FSWG). The paper is a draft and welcomes additional comments and suggestions. Full text of the document is twelve pages and is available here.

MICROFINANCE PAPER WRAP-UP: Female Empowerment and the Promise of Microfinance, by Roshaneh Zafar

Social entrepreneur Roshaneh Zafar, Founder and Managing Director of Pakistan’s third largest microfinance institution the Kashf Foundation, wrote an article entitled “Female Empowerment and the Promise of Microfinance” published on January 20th, 2009 in Pakistan International News. The article summarizes the credit sources available to the impoverished in developing countries, and elucidates how microfinance can help the “unbankable” poor, especially women, break out of the vicious circle of debt and poverty. The full article is available at: http://www.thenews.com.pk/daily_detail.asp?id=157976

PAPER WRAP-UP: Performance and Corporate Governance in Microfinance Institutions (MFIs) by Roy Mersland and R. Oystein Strom

Written by Roy Mersland of Agder University and R. Oystein Strom of Ostfold University College, this report analyzes the relationship between firm performance and corporate governance in Microfinance Institutions (MFIs). It studies the effects of ownership type, competition and regulation using a global data set on MFIs, collected from third-party rating agencies. The 36 page document was published by the University Library of Munich, Germany in June 2007 and the full text of the report is available here.

MICROCAPITAL STORY: A Kiva-like Internet Microfinance Brokerage “Lend-for-Peace” is Founded for Palestine

Two Jews and two Palestinians joined together at the Wharton School of Business at the University of Pennsylvania to launch a non-profit internet microfinance brokerage called “Lendfor Peace.org” (LFP).  Like Kiva.org, LFP facilitates microloans from individuals around the world to partner microfinance institutions (MFIs) who on-loan the funds to women living in poverty that want to start small businesses.  LFP, however, focuses exclusively on the Palestinian territories.  During the most recent escalation of violence in Gaza, LFP cofounders released a blog explaining their common motivation in launching the microfinance support platform: “The current crisis will increase the number of people who are financially and emotionally strained and has the potential to result in echoes of desperation and violence in the future. We believe that support systems in these regions are more crucial than ever and that an infrastructure for rebuilding the economies of the affected areas will be important for the success of any accord.”