Publish What You Fund, a UK-based NGO aimed at increasing the transparency of international development efforts, recently launched its DFI Transparency Tool. The tool is meant to provide development finance institutions (DFIs) with guidance on
Category: Transparency
SPECIAL REPORT: “Capital in the Age of COVID” at European Microfinance Week
At this presentation on the effects of the COVID-19 pandemic on financial inclusion, which was subtitled “Navigating the Uncharted Sea of Insolvency,” Lucia Spaggiari of MFR (formerly known as Microfinanza Rating) predicted that the solvency challenges brought on – or simply exacerbated – by the pandemic may haunt institutions for the next 10 years. Although she described the solvency challenges of 2020 as “not drastic,” 22 percent of financial services providers (FSPs) in her dataset still significant solvency risk. Ms Spaggiari believes this may increase to as high as 34 percent over the next two years.
As for the potential effects on clients, there are clusters of greater risk among: FSPs in sub-Saharan Africa, where 17 percent of institutions are in danger; smaller FSPs, those with assets under USD 10 million; FSPs with
SPECIAL REPORT: Aligning Incentives, Setting Realistic Expectations for FSPs’ Outcomes Measurement at the e-MFP Investors Action Group
During European Microfinance Week last week, Célia Fernandez of the French NGO Comité d’Echange, de Réflexion et sur les Systèmes d’Epargne-Crédit (CERISE) described LabODD, a project to help mission-driven organizations measure their progress toward the UN Sustainable Development Goals (SDGs). LabODD is a four-year project funded by the French government’s Agence Francaise de Developpement. Among its outputs is a brief due out in December 2021 that will cover outcomes management for financial services providers (FSPs). Cécile Lapenu, also of CERISE, described several trends that will be presented in the brief.
The demand of impact investors for accountability from FSPs is growing. However, the focus now is more on measuring outcomes – which can be associated plausibly with the work of FSPs – rather than impacts – which must be shown to result from
MICROCAPITAL BRIEF: CERISE, SPTF Invite Microfinance Institutions to Join Client Protection Pathway
Two NGOs, Comité d’Echange, de Réflexion et sur les Systèmes d’Epargne-Crédit (CERISE) of France and the US-based Social Performance Task Force (SPTF), recently announced the Client Protection Pathway, a free service through which financial service providers (FSPs) may get support and recognition for improving the ways they serve clients. The first step in the pathway is to agree that “Our organization has
MICROCAPITAL BRIEF: Cenfri, Cornerstone, GLEIF, London Stock Exchange Collaborate on Legal Entity Identifiers (LEIs) to Boost Financial Inclusion of SMEs in Africa
Four organizations recently launched an effort to equip small and medium-sized enterprises (SMEs) in Africa with Legal Entity Identifiers (LEIs), which are 20-digit codes linked to “business card and ownership structure information about a legal entity which can be verified quickly and efficiently by anyone, anywhere, enabling organizations to know precisely with whom they are doing business.” The participating entities are
SPECIAL REPORT: “Financial Inclusion Compass 2021” Reveals a Sector Grappling with the Consequences of COVID-19 – and Trying to Look Beyond It
In
2018, e-MFP launched the first Financial Inclusion Compass, a new annual publication series to collate sector opinions on emerging short-, medium- and long-term trends in the financial inclusion sector. e-MFP is delighted to now publish the English language version of the Financial Inclusion Compass 2021 – the fourth in the series.
The survey on which this paper is based was open in May 2021, with financial services providers (FSPs), investors, donors, researchers and support services providers evaluating and describing the importance of various current Trends, rating future New Areas of Focus, and providing open-comment qualitative input on the expected (and hoped-for) direction of financial inclusion progress.
The survey had two main sections: in Section 1, respondents rated from 1-10 the current importance of a list of 20 Trends and evaluated a list of 16 future New Areas of Focus to rank their highest five in terms of future significance. Optional comments on each were possible. Section 2 had three optional and open-ended questions, with a focus on the impact of the pandemic.
The Compass received 125 responses from 39 countries. A plurality of respondents were FSPs, followed by consultants/support services providers, infrastructure organisations, funders and researchers. On the main geographic focus of respondents’ work, a plurality selected Global, followed by Sub-Saharan Africa, Asia and Latin America.
Trends
Two new trends, introduced in response to the uniquely challenging context of the pandemic, took the top two spots
MICROCAPITAL BRIEF: CGAP, GOGLA, IFC’s Lighting Global Launch PAYGo PERFORM Standards, Seeking to Boost Investment in Off-grid Solar
Two NGOs, US-based CGAP (Consultative Group to Assist the Poor) and the Netherlands-based Global Off-Grid Lighting Association (GOGLA), along with the Lighting Global program of the World Bank Group’s International Finance Corporation (IFC) recently launched a framework for measuring the outcomes of selling off-grid solar products on a pay-as-you-go (PAYGo) basis. The PAYGo Performance, Reporting and Measurement (PAYGo PERFORM) plan “offers the PAYGo solar industry a standardized and transparent set of key performance indicators (KPIs)…
MICROCAPITAL BRIEF: CDC Updates Environmental, Social, Governance (ESG) Toolkit for Financial Services Providers, Adding Climate Component
CDC Group, a development finance institution backed by the UK government, recently launched an updated environmental, social and governance (ESG) toolkit to assist financial services providers (FSPs) in addressing common ESG challenges such as corruption, money laundering, and gender-based harassment and violence. It is targeted at
MICROFINANCE PAPER WRAP-UP: “Weathering the Storm II: Tales of Survival from Microfinance Crises Past;” by Daniel Rozas; Published by Accion’s Center for Financial Inclusion, e-MFP
Mr Rozas evaluated 16 case studies of microfinance institutions’ (MFIs’) reactions to various crises that arose between 2004 and 2018 as a follow-up to the paper, “Weathering the Storm,” which was published in 2010 as a response to the global financial downturn that began in 2007. The new publication considers “the decade that followed the original paper,
MICROCAPITAL BRIEF: Jamaica Moves Forward on Micro Credit Act to Regulate Microfinance Institutions
The Senate of Jamaica recently passed the Micro Credit Act, 2021, paving the way for its approval by the Governor-General. The legislation aims to reduce
MICROFINANCE PAPER WRAP-UP: “ESG and Accountability to Communities;” Published by Publish What You Fund
This report examines 20 development finance institutions (DFIs) to learn how these organizations: (1) are transparent in terms of their policies on environmental, social and governance (ESG) issues; (2) disclose ESG risks and plans to manage those risks; and (3) implement independent accountability mechanisms (IAMs) to ensure policies are being followed. Among the benefits of ESG transparency
MICROCAPITAL BRIEF: Bank of Ghana Issues Crowdfunding Policy
Bank of Ghana (BOG), the central bank of the country, recently launched a policy aiming to promote and guide the use of crowdfunding, whereby people fundraise in small amounts from many individuals. Since long before it could be performed electronically, people have used the concept to raise funds from friends and family for purposes such as business, medical, education and funeral expenses. The new policy encourages users to crowdfund via financial institutions, with the goal of
MICROCAPITAL BRIEF: Pakistan Launches Digital Payment System Raast to Promote Financial Inclusion, Strengthen Rule of Law, Boost Government Services
The country of Pakistan recently began the rollout of Raast, an “instant digital payment system,” through which the government will route payments to individuals, such as salaries, pensions and welfare. Individuals and businesses
SPECIAL REPORT: European Microfinance Week Closes, Looking to Future of Financial Inclusion: Wooing Regulators, Women Leveraging Loans by Factor of 5, Investor Collaboration, New Customers for MFIs
Claudio 
Gonzalez-Vega, a board member of Spain’s BBVA Microfinance Foundation, spoke of the huge impact of the COVID-19 pandemic at the closing plenary of European Microfinance Week, with life expectancy falling and an estimated 115 million people being pushed into extreme poverty. Despite the difficulties for microfinance institutions (MFIs), he said they may soon find a larger, very appropriate market for their services, given that many of these newly poor people have business experience. Dr Gonzalez-Vega argued that the “pandemic will make microfinance more important,” as – given MFIs’ “intimate knowledge of clients – the role of microfinance will be appreciated in a new light.”
Dina Pons of Belgium’s Incofin Investment Management agreed that microfinance clients have gotten
MICROFINANCE PAPER WRAP-UP: “Gender Equity in Development Finance Survey,” by Nancy Lee et al, Published by Centre for Global Development
Based on a survey of 16 development finance institutions (DFIs), this document offers a baseline of the extent to which “institutions incorporate gender objectives or analysis when developing investments, assessing development effectiveness, sourcing deals, and making investment decisions.” In particular, the survey investigates:
SPECIAL REPORT: Lessons, Tools for the Pandemic from Prior Microfinance Crises
Deborah Drake of Accion’s CFI opened a European Microfinance Week session on crises in microfinance by noting that the effect of COVID-19 on the financial inclusion industry “is a different crisis because it is global.” In past crises, which were centered on a single economy, microfinance investors had sufficient capacity to inject into stronger institutions to help them survive. The global nature of the current downturn, however, may exceed the capacity of investors to sustain “worthy” financial services providers (FSPs) in certain markets. “There is inevitable
SPECIAL REPORT: During Pandemic, VSLAs Support Members Struggling with Barriers to Income, Education, Gender-based Violence, Lack of PPE
During a European Microfinance Week session on village savings and loan associations (VSLAs), speakers from several affiliates of Switzerland-based CARE International described their organizations’ responses to the COVID-19 pandemic. As the pandemic set in, they surveyed members of VSLAs, which commonly include 30 women, in various formats to learn how they were adjusting to the pandemic and what support they need.
Maryam Garba Usman of CARE Nigeria described her organization’s survey of 100 VSLAs, largely via an interactive voice response telephone system. The team also used a mobile app to distribute information on COVID-19 and a range of gender-related issues. Most groups continued to meet in person, incorporating social distancing. In addition to accessing financial services, VSLA members addressed problems such as gender-based violence, child marriage, interruptions to children’s education and
SPECIAL REPORT: Protecting Consumers, Tracking Business Cash Flows, Cutting Costs for Digital Microfinance
During a session entitled “Digital Credit Beyond Consumer Finance” at European Microfinance Week 2020, Michael Rothe, the co-founder of UK-based Flow, argued that there are both good and bad players in digital lending. He said that “most development finance institutions think digital credit is dangerous” and that “because providers are not being differentiated, Flow is being lumped in with” consumer finance. In fact, Flow is a fintech that lends to businesses only. During the COVID-19 pandemic, some Flow customers – many of whom operate shops that offer mobile-money services as a sideline – had to close down due to government restrictions on travel and trade. However, those that remained open saw an uptick in transactions. This is partially because governments encouraged the use of mobile money in an effort to minimize virus transmission. While other lenders stopped operating during the early days of the pandemic, Flow continued to lend, resulting in brand loyalty that Mr Rothe describes as very high. The ratio of the firm’s portfolio at risk peaked at