MicroCapital: Please tell us about the theme of this year’s EUR 100,000 (USD 110,000) European Microfinance Award: serving people in post-disaster, post-conflict and fragile states.
Davide Forcella: This is a very timely issue because of the increasing frequency of microfinance institutions (MFIs) being forced to operate under very difficult conditions, due to both natural disasters and human conflict. The aim of the prize is to reward MFIs that
Through June 3, the European Microfinance Platform (e-MFP), a Luxembourg-based network of approximately 130 microfinance organizations and individuals, is accepting applications for the Sixth European Microfinance Award, which will include a cash prize of EUR 100,000 (USD 106,000). This year’s award aims to recognize providers of financial services in post-disaster, post-conflict and fragile states. Successful applicants will illustrate their strategy for increasing “both their own resilience and that of their clients,” while highlighting how these services will respond to the immediate, medium- and long-term needs of clients in afflicted areas. To qualify, an institution must be based in a developing country and obtain a letter of support from a member of e-MFP.
The European Microfinance Platform (e-MFP), a Luxembourg-based network of approximately 130 microfinance organizations and individuals, has announced that it is accepting applications for the Sixth European Microfinance Award, which will include a cash prize of EUR 100,000 (USD 106,000). This year’s award aims to recognize service providers operating in post-disaster, post-conflict and fragile states. Applications for the award may be submitted until June 3, 2015, by institutions that operate in such areas and provide financial services that are intended to increase the “resilience” of people in these areas. Successful applicants will illustrate their strategy for increasing “both their own resilience and that of their clients,” while highlighting how these services will respond to the immediate, medium- and long-term needs of clients in afflicted areas. To qualify, an institution must be based in a developing country and obtain a letter of support from a member of e-MFP.
Event Name: European Microfinance Week 2015
Event Dates: November 18-20, 2015
Location: Luxembourg
Event Summary: The European Microfinance Platform (e-MFP), a Luxembourg-based network of approximately 130 members, is hosting its annual European Microfinance Week. One day will consist of meetings of e-MFP’s eight action groups: “investors in tier 2/3 microfinance institutions (MFIs),” “making microfinance investment responsible,” “microfinance and the environment,” “remittances,” “research in microfinance,” “rural outreach and innovation,” “university meets microfinance,” and “youth financial inclusion.” The other two days will consist of traditional conference sessions as well as the presentation of the sixth annual European Microfinance Award. Further details regarding the event are expected to be released before the end of April.
Countering the perception that youth are riskier borrowers than older clients, Maria Perdomo, the manager of the UN Capital Development Fund’s YouthStart program, recently presented data from seven African microfinance institutions (MFIs) showing that all but one have lower rates of portfolio at risk (PAR) within the segments of their portfolios serving youth than organization-wide. Nonetheless, she noted, youth often make up a disproportionately small share of an MFI’s customer base because loan officers believe they are less likely than others to repay, which would threaten the bonus that many loan officers receive when more of their clients do repay their loans.
Major David Beskow of the US Military Academy told a crowd at European Microfinance Week, about distributing microgrants in eastern Baghdad, Iraq, largely to women shop-owners for refrigeration, generators or inventory. Funded by the Iraqi government and the US Army’s Commander’s Emergency Response Program, each grant ranged in size from USD 500 to USD 5,000. Although no repayment was required, each beneficiary business was documented through photos and other means before disbursal and after one and six months, in the presence of local police.
“Multiple borrowing was endemic,” in Bangladesh as of 2008, says Shameran Abed, the director of microfinance at Bangladesh-based Brac International, “but we didn’t know if this was bad, although we knew it was a risk.” Mr Abed was speaking this morning at the opening plenary of the last day of European Microfinance Week, which is organized by the Luxembourgish NGO European Microfinance Platform (e-MFP). In the past, he explained, the members of borrowing groups were good at letting Brac staff know who was a good credit risk. As the market was getting saturated, “Groups became less cohesive, so we couldn’t totally rely on them to tell us if individuals were becoming overindebted.”
The Kompanion Financial Group, a microfinance institution (MFI) in Kyrgyzstan, was selected today from three finalists to receive the Fifth European Microfinance Award, which includes a cash prize of EUR 100,000 (USD 125,000). Pictured at the right are Her Royal Highness The Grand Duchess of Luxembourg and Olesya Paukova the development director of Kompanion upon her receipt of the award on behalf of the MFI.
To open the two-day conference portion of European Microfinance Week, which is hosted by the 130-member, Luxembourg-based European Microfinance Platform (e-MFP), panelists and attendees addressed “Balancing financial inclusion, market stability and client protection.” Narda Sotomayor, who leads the Department of Microfinance Analysis at Peru’s Superintendencia de Banca, Seguros y Administradoras Privadas de Fondos de Pensiones, stated that “MFIs [microfinance institutions] moving further down market to serve new people is risky, as this group has less financial education, less collateral. An institution’s credit portfolio can deteriorate quickly unless its lending methodology is revised as part of a dynamic process.” On the issue of increasing financial capability, she added, “We find synergies between financial education and stability. This also leads to benefits for institutions and the whole system.”
The Rural Outreach & Innovation Action Group of the European Microfinance Platform (e-MFP) met today as part of a full day of Action Group meetings at European Microfinance Week, which is being hosted in Luxembourg by e-MFP, a 130-member NGO. Michael Tarazi, a senior financial sector specialist at CGAP (Consultative Group to Assist the Poor) argued against pushing lending products on new rural clients, instead proposing a multi-stage approach. For example, farmers can be offered mobile phones for free, with the promise of receiving information such as crop management suggestions via SMS (text message). Then crop buyers can purchase access to the farmers’ phones, such as to request the preparation of a wholesale load of crops from a group of the farmers at a given price. This can increase the income of the farmers, putting them in a better position to repay future loans for improvements to their processes. As Mr Tarazi put it, “Finance comes at the end; first you develop the digital ecosystem with other valued services such as information.”
Today, the University Meets Microfinance Action Group of the European Microfinance Platform (e-MFP) is presenting awards of EUR 500 (USD 620) each to students Hayyan Alia for “A Modified Household Economic Portfolio Model for Assessing Impact of Microfinance Using Diaries” and Eike Haas for his paper titled “Do Agent-assisted Banking Beyond Branches Channels Decrease Costs in Downscaling? A Qualitative and Quantitative Review.” The group also met earlier in the day as part of the series of Action Group meetings held during the first day of European Microfinance Week, which is hosted by e-MFP, a 130-member NGO located in Luxembourg.
MicroCapital: You will be speaking in a few days at European Microfinance Week. How will you describe the state of risk management within microfinance and where it fits in the broader context of the industry?
Kevin Fryatt: In the last several years, we have seen a lot of focus on new technology and serving clients better through new product development, savings mobilization and agent networks, amongst other avenues. Similarly, institutions’ balance sheets are getting increasingly diverse in the types of funding they are sourcing. But within this, the conversation of risk management isn’t happening. There’s a sense of cynicism within the leadership of microfinance institutions (MFIs) toward risk management. It is often misunder-stood and confused with the roles of internal audit or compliance. It is often very difficult to quantify the value of risk management.
MicroCapital: Please describe one of the key issues to be covered this year at European Microfinance Week.
Christoph Pausch: The question of over-indebtedness is still the major risk for the sector, as identified in the most recent Banana Skins survey. We had a very successful plenary last year exploring the issue from a research perspective. This year, we’re taking a very different approach by bringing CEOs of leading microfinance institutions (MFIs) from three countries – Bangladesh, Morocco, and Mexico – to discuss how they’ve been dealing with the issue. Each of these countries has had a different experience, with Bangladesh having successfully averted a potential crisis by slowing market growth (as described in an excellent paper by Stuart Rutherford and Greg Chen). Morocco was one of the original “microfinance crisis” countries during 2008 and 2009, and the MFIs there have had an interesting experience in resolving the problems from that period. Finally, Mexico is a major market with serious concerns regarding over-indebtedness, and MFIs there are working to avert a potential crisis.
MicroCapital: Can you tell us a bit about your talk planned for European Microfinance Week on “balancing financial inclusion with market stability”?
Narda Sotomayor: A key element to achieve this balance is the principle of proportionality, under which regulations vary based on the risks associated with the product or service in question. For instance, for microloans for businesses with overall debt below PEN 20,000 (USD 7,000), the required documentation is minimal, and loan provision requirements are based only on the number of days any loans are overdue. The lender has the freedom to establish prices to cover its costs, such that institutional sustainability is guaranteed. It was determined that anti-money-laundering rules were making it too costly to open deposit accounts for the poor, mainly because of the heavy burden of “know-your-customer” documentation.
The European Microfinance Platform (e-MFP), a Luxembourg-based network of approximately 130 microfinance organizations and individuals, has announced that there are three finalists for the Fifth European Microfinance Award, which is themed “Microfinance and the Environment” for 2014[1].
“Does Good Client Protection Impact Financial Performance?”; by B. Perez-Rocha, A.G.F. Hoepner, L. Spaggiari, C. Lapenu and B. Brusky in collaboration with the European Microfinance Platform (e-MFP) Making Microfinance Responsible Action Group; May 2014; 28 pages; available at http://www.e-mfp.eu/sites/default/files/resources/2014/05/Brief_No_4_2014_web.pdf
This paper explores the relationship between the financial performance of microfinance institutions (MFIs) and the Client Protection Principles (CPP) that are promoted by the Smart Campaign, a US-based consumer protection initiative targeting microfinance clients worldwide.
MicroCapital: Would you please tell us about the European Microfinance Platform (e-MFP) Microfinance and Environment Action Group?
Marion Allet: The e-MFP Microfinance and Environment Action Group was officially launched in February 2013. It is an initiative of various organizations that were already involved in “green microfinance,” such as MicroEnergy International, ADA, PlaNet Finance, Enclude, PAMIGA (the Participatory Microfinance Group for Africa), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) etc. A few years ago, there were very few actors addressing the issue of the environment within microfinance, so we thought there was a real need for sharing experiences. We also wanted to provide some practical tools to help stakeholders understand what green microfinance is and how to get involved.
MicroCapital: Please tell us a bit about the Remittances Action Group of the European Microfinance Platform (e-MFP).
Gera Voorrips: As you know, e-MFP is a membership organization that promotes members working together on specific topics on which they have a shared interest. In 2011, I took the initiative to engage several members who were working on remittances to launch an Action Group to collaborate on this topic. As one of the requirements of an e-MFP Action Group is to work toward specific results, we decided that we wanted to focus on best practices for microfinance institutions (MFIs) that want to be successful in remittances.