PAPER WRAP-UP: The Role of International Capital Markets in Microfinance, By Brad Swanson

Published by Developing World Markets, 2007, 16 pages, available for viewing here.

This paper explores the entry of commercial investors into the sector of microfinance and the associated evolution of capital markets1 funding. The potential demand for microfinance is estimated at fifteen times the current market size of USD 17 billion. While more than 75 percent of that amount can be attributed to domestic funding, Swanson speculates that domestic sources are unlikely to remain sustainable for three main reasons: most existing microfinance institutions (MFIs) do not take deposits, due to the cost and complexity of operations; capital markets in most developing countries are thin; and major institutional players, including domestic commercial banks, are typically averse to accepting MFI risk. On the other hand, only USD 4 billion of the market is currently being funded by international sources, leaving over USD 200 billion of demand open to be filled by international capital markets. Continue reading

MICROCAPITAL STORY: Swiss Investment Fund for Emerging Markets (SIFEM) Lends USD 6 Million to Micro Finance Bank of Azerbaijan (MFBA)

Swiss Investment Fund for Emerging Markets (SIFEM), on behalf of Swiss Confederation, granted a six-year USD 6 million loan to Micro Finance Bank of Azerbaijan (MFBA), marking the first deal between the two entities. The loan will be applied toward financing micro, small, and agricultural businesses of Azerbaijan; a minimum of USD 3 million will be used exclusively for granting agrarian credit, a bank product that MFBA first launched in August 2007. By supporting Azerbaijan’s agricultural sector, SIFEM hopes to foster a diversification of the Azerbaijan economy away from oil and gas sectors. Continue reading

MICROCAPITAL STORY: Khushhali Bank (KB) of Pakistan to Receive Human Resource Training Support from ShoreBank International (SBI) Under Widening Harmonized Access to Microfinance (WHAM) Program

Khushhali Bank (KB), a Pakistani microfinance institution, signed a contract to receive consulting, training and technology support of ShoreBank International, Limited (SBI), the international consulting arm of ShoreBank Corporation. The SBI will develop and deliver to KB a customized training on staff management and financial analysis & management, under the Widening Harmonized Access to Microfinance (WHAM). WHAM, a program implemented by SBI, is sponsored by the United States Agency for International Development (USAID) as a part of USD 1.5 billion, 5-year-long USAID aid to Pakistan. Continue reading

MICROCAPITAL STORY: Study by Consultative Group to Assist the Poor (CGAP) and Innovations for Poverty Action (IPA) Reveals that Marketing Affects Savings Among Poor in Peru

CGAP’s (Consultative Group to Assist the Poor) most recent issue of its Portfolio Newsletter outlined a recent study conducted by Innovations for Poverty Action (IPA) and funded by CGAP that focused on specific marketing techniques to encourage long-term savings among poor Peruvians. Continue reading

MICROCAPITAL STORY: European Investment Bank (EIB) Supports Tunisian Microfinance with EUR 2 million Loan to ENDA Inter-Arabe

In a recent press release, the Facility for Euro-Mediterranean Investment and Partnership (FEMIP), a division of the European Investment Bank (EIB) dedicated to the economic development of nine Mediterranean countries1, announced that it granted a long-term loan of TND 3.6 million (EUR 2 million/USD 2.9 million) to ENDA Inter-Arabe, a Tunisian microfinance institution (MFI). Based on an earlier MicroCapital report in July 2006, this marks EIB’s second loan to ENDA, and will be used to generate micro-loans and stimulate local investment. Continue reading

MICROCAPITAL STORY: World Bank Approves $30m Grant to Microfinance Institutions in Afghanistan Provided by International Development Association (IDA)

The World Bank has approved a USD 30 million grant to microfinance providers in Afghanistan under the Expanding Microfinance Outreach and Improving Sustainability Project. The project is designed to scale up financial outreach to poor people, particularly women, across Afghanistan and to increase the financial self-sufficiency of microfinance institutions (MFIs). Continue reading

MICROCAPITAL STORY: Pakistan Trade Association Sialkot Chamber of Commerce and Industry (SCCI) to Offer Microfinance Services

Dr. Khurram Anwar Khawaja, president of Pakistan trade association Sialkot Chamber of Commerce and Industry (SCCI), recently announced that the organization is actively considering introducing micro-credit loans into its repertoire of financial services. Dr. Khawaja stated that the objective of the micro-loans is to reduce unemployment by encouraging entrepreneurship. Continue reading

MICROCAPITAL STORY: Another Microfinance Institution (MFI) Closes in Uganda as Chaos Continues in the Sector

The Support Organisation for Micro Enterprises Development (SOMED), a microfinance firm in the Kibaale District of Uganda was shut down in December last year while police claim they are investigating allegations of extortion, embezzlement and fraud. The company had been offering low-interest loans since 2004. Continue reading

MICROCAPITAL STORY: Uganda’s Construction Sector Suffers from Soaring Interest Rates, Microfinance Institutions (MFIs) May Hold the Key

African Alliance, a group which provides investment banking services across the African continent, recently released a report on Uganda’s construction sector which found that, despite unprecedented growth, the industry is being threatened by financial risk. To mitigate the likelihood of default, most financial institutions charge construction firms high interest rates coupled with short repayment periods. However, the increasing number of players, particularly microfinance institutions (MFIs), is expected to help drive down interest rates. Continue reading

MICROCAPITAL STORY: Jamaica Agricultural Society (JAS) to Set Up MicroCredit Scheme for Farmers

The Jamaica Agricultural Society (JAS) will this year establish a Micro Credit Revolving Loan Scheme to support farmers. Individual applicants may qualify for loans ranging from a minimum of USD 72 to a maximum of 363, while groups could get between USD 145 and USD 727. Disbursements under the loan programme are due to begin in March. Continue reading