by Hio Kyeng Lee -

MICROCAPITAL BRIEF: World Bank and Central Bank of Azerbaijan (CBA) Present Consumer Protection Plan for Microfinance and Traditional Financial Service Consumers

The World Bank and the Central Bank of Azerbaijan (CBA) recently presented a plan titled, “The Protection of Rights and Financial Literacy of Financial Service Consumers in Azerbaijan.”  According to the Azerbaijan Microfinance Association (AMFA), which is a trade association representing Azerbaijani non-bank credit organizations, approximately 1,200 consumers provided feedback towards the development of the consumer protection plan.  Mr. Alim Guliyev, CBA First Deputy CEO, states that the plan is based on two developments in the financial services sector, i.e., the introduction of financial sector legislation and regulation as well as the rise in the financial literacy of the population.  CBA will be the coordinating body between different areas of the financial services sector, including banking, insurance and investment services. In connection with these developments, CBA will create a special unit and hotline dedicated to responding to consumer complaints regarding business practices. Mr. Guliyev comments that the “[P]rotection of the consumers’ rights is especially important in the conditions of financial crisis.”

by Hio Kyeng Lee -

MICROCAPITAL BRIEF: SmartAid for Microfinance Index 2009 Publishes Results

CGAP (Consultative Group to Assist the Poor) has announced its SmartAid for Microfinance Index 2009 results. The SmartAid for Microfinance Index is an index created by CGAP to measure and rate the performance of funders in microfinance. A group of eleven funders, which include development finance institutions and multilateral agencies, participated in the 2009 SmartAid Index and together represent more than fifty percent of all cross-border funding in microfinance. The 2009 SmartAid Index results show that funders scored best on “strategic clarity,” followed by “appropriate instruments” while they scored the lowest in the category of “accountability for results”. Barbara Gahwiler, member of SmartAid team, states, “This means that funding can continue regardless of performance. Without knowing the performance of its microfinance portfolio, an agency cannot manage it effectively, and important lessons from past experience are lost. What’s more, the industry still has a long way to go to develop indicators for tracking the performance of support to the market.”

by Christopher Maggio -

MICROCAPITAL BRIEF: Kenya’s ‘Pamoja Women’s Development Programme’ (PAWDEP), ‘Project Partner’ of Oikocredit, Becomes First African Microfinance Institution (MFI) to Submit Data to MFTransparency

The Pamoja Women’s Development Programme (PAWDEP), a Kenyan microfinance institution (MFI) that lends only to women, has become the first African MFI to submit product pricing data to MFTransparency, a company that provides pricing data for the microfinance industry [1,2]. PAWDEP is a “project partner” of Oikocredit, a “financier of microfinance” based in the Netherlands that was an early endorser of MFTransparency [1]. Oikocredit and PAWDEP began their relationship in 2008 when PAWDEP received a loan from the investor worth KES 84 million, the equivalent of over USD 1.1 million [1]. According to an Oikocredit press release, MFTransparency is now working with other Kenyan MFIs on the process of submitting product pricing data [1].

by Hio Kyeng Lee -

MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Reviews Disclosure Rules

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, will review its rules and regulations concerning the disclosure of interest rates, fees, and charges on microfinance loans with the goal to enhance consumer protection. At this stage, Pia M. Roman, the Director of BSP’s Inclusive Finance Advocacy department, states that the focus is to gather information through consultations with banks on the adoption of uniform standards for computing interest rates. Ms. Roman supports the use of “declining balance method” in which “interest charges are computed based on the balance of a loan and not the original size of the loan.” It contrasts with the “flat rate method” which calculates rates based on the amount of the loan at the beginning regardless of any amount that the borrower has already repaid.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG BRIEF: Chinese Association of Microfinance (CAM) Calls for Microfinance Reform in Country

During the China Microfinance Summit Forum 2009, Secretary General of the China Association of Microfinance (CAM) Bai Chengyu, stated that microfinance institutions (MFIs) must refine their systems of assessing social impact by enforcing better regulations and decision-making processes. Mr. Bai argued that in order for domestic MFIs to truly cater to poverty alleviation, they should not require borrowers to provide collateral in exchange for loans. He cited data from the People’s Bank of China (PBC), which details that 87.1 percent of total loans issued by the end of 2008 were collateral loans, whereas 12.9 percent of total loans were non-collateral loans.

by Kenny Kline -

MICROCAPITAL.ORG STORY: The 2009 Social Performance Reporting Awards for Microfinance Are In

To qualify for the award, an MFI must meet certain standards developed by the Social Performance Task Force. The Social Performance Task Force (SPTF) was formed in March 2005 by CGAP, the Argidius Foundation, and the Ford Foundation to define social performance for the microfinance industry and address questions relating to social performance measurement and management. The SPTF consists of over 350 leaders from the microfinance field, including practitioners, donors and investors, national and regional networks, technical assistance providers, rating agencies, academics and researchers.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG STORY: The Nigeria Deposit Insurance Corporation (NDIC) “Overwhelmed” by Microfinance Responsibilities

A recent article from Next.com, [1] an online source for Nigerian news, reported that the Nigeria Deposit Insurance Corporation (NDIC), the financial industry regulator and subsidiary of the Central Bank of Nigeria (CBN), is unable to regulate and keep up with the rapidly expanding microfinance sector in the country. [2] At a workshop for finance correspondents in Kaduna, Nigeria, [2] [4] Jacob Afolabi, a deputy director at the NDIC, stated that the NDIC and the CBN are “overwhelmed by the number of microfinance banks in the country.” [2]

by Christopher Maggio -

MICROCAPITAL.ORG STORY: Citi Foundation Provides $25,000 Grant to MFTransparency, Provider of Data of Price Transparency for the Microfinance Industry

Citi Foundation, a grant-making charitable foundation that is part of the financial services company, Citigroup, has provided a USD 25 thousand grant to MFTransparency, a “global initiative for fair and transparent pricing in the microfinance industry” [1,2,3,4]. MFTransparency plans to use the grant to “increase its industry presence and visibility, secure additional long term funding, and progress towards its near and long term goals” [1].

by Diya Chopra -

MICROFINANCE PAPER WRAP-UP: Advances in Measuring Social Performance for Microfinance Institutions by Micol Pistelli

Written by Micol Pistelli, Manager of Social Performance at MIX for Workshop 8 at the IDB Foromic 2009 (Inter-American Forum on Microfinance) in Arequipa, Peru. Published October 2009 by the MIX, 2 pages, available at: http://www.themix.org/publications/executive-summary-social-performance-standards-presentation-2009

by Stefanie Rubin -

MICROCAPITAL.ORG STORY: MicroFinance Transparency Launches First Publicly Available True-Cost Pricing Data for Microfinance Loan Products

MFTransparency, founded in July of 2008 as part of a global initiative for fair and transparent pricing in the microfinance industry, has launched the first phase of its “Data Launch Rollout Plan,” beginning with Bosnia and Herzegovina. The publicly available data include up-to-date interest rates for microfinance loan products throughout specific countries. According to MFTransparency, “It will be the one and only place to find the ‘market price’ for the majority of micro-credit products within a country” [1].

by Christopher Maggio -

MICROFINANCE PAPER WRAP-UP: Turning Principles into Practice: A Nicaraguan MFI Commits to Consumer Protection, by the Microfinance Gateway

Written by the Microfinance Gateway, Published on the Microfinance Gateway in July 2009, available at: http://www.microfinancegateway.org/p/site/m/template.rc/1.26.10904/

This article covers the steps taken by Banex, a Nicaraguan microfinance institution (MFI), to ensure that the Client Protection Principles put together by ACCION’s Center for Financial Inclusion and the Consultive Group to Assist the Poor (CGAP) are put into practice [1,2,3,4]. The principles were formed following the initial public offering (IPO) of Compartmos, a Mexican MFI, led to speculation over whether MFIs are taking profits into consideration more than the best interest of their clients [5]. The Client Protection Principles are as follows:

by Hio Kyeng Lee -

MICROCAPITAL.ORG STORY: The Smart Campaign Industry Leaders Call For Key Consumer Protection Initiatives

On October 20, 2009, Vikram Akula of SKS Microfinance in India,  Elizabeth Littlefield of CGAP at The World Bank and  Kurt Koenigsfest of BancoSol in Bolivia spoke during a panel discussion on how to instill consumer protection principles within the microfinance industry.  Elisabeth Rhyne, managing director of the Center for Financial Inclusion at ACCION International, made introductory remarks and Robin Ratcliffe, Director of the SMART Campaign, moderated the discussion.[1]

by Zoran Stanisljevic -

MEET THE BOSS: Discussions on Successful Due Diligence When Evaluating Microfinance Investment Vehicles’ (MIV’s) Financial Viability: Interview with Christina Leijonhufvud, Managing Director, Social Sector Finance Group (SSF)/Investment Bank (IB) at JP Morgan (Part III of a Three Part Series)

Ms. Leijonhufvud is Managing Director of the Global Social Sector Finance Group at JPMorgan. The SSF unit leverages JP Morgan’s products and skills to help bring financial services to microfinance and social enterprises around the world.  The scope includes capital markets, structured products and principal investments.  The unit seeks to achieve a double bottom line of social benefit and financial returns. According to JP Morgan, potential demand for sustainable financial services is immense, at an estimated USD 300 billion. JPMorgan utilizes its global IB platform to raise capital to support poverty alleviation initiatives in developing economies

Ms. Leijonhufvud has led J.P. Morgan’s Social Sector Finance unit since its inception in late 2007. A double bottom line initiative that brings financial services and financing to microfinance institutions and other enterprises serving the base of the economic pyramid, Social Sector Finance also focuses on engaging the firm’s employees in these sectors. Outside J.P. Morgan, Ms. Leijonhufvud serves on the Advisory Board for the Center for Financial Inclusion, has been a consultant to Ashoka-Innovators for the Public in their social financial services venture, and has lectured widely on financial globalization and emerging markets risks. Ms. Leijonhufvud has held various risk management positions at J.P. Morgan, including as head of Country Risk Management & Advisory, Credit Portfolio Market Risk Management, Emerging Markets Market Risk Management, and Industry Concentrations. Prior to joining J.P. Morgan in 1996, Ms. Leijonhufvud worked at the World Bank as Country Officer, helping develop reform programs and borrowing strategies for the former Soviet Republics of Central Asia. In 1991, she served on the Economic Reform Committee for the Government of Kazakhstan. Ms. Leijonhufvud earned a M.Sc. degree in Economics from the London School of Economics, a M.A. degree in International Affairs from George Washington University, and a B.A. in Sociology from UCLA.