“Microfinance Institution Tier Definitions;” published by MicroRate; April 2013; 2 pages; available at http://www.microrate.com/media/downloads/2013/04/MicroRate-White-paper-Microfinance-Institution-Tier-Definitions.pdf
This report proposes a “tier system that defines microfinance institution [MFI] peer groups by institutional maturity to provide a foundation for industry analysis and informed dialogue.” The authors argue that the tier system “adheres to conventional, universally accepted metrics,” is based on publically available data and is universally applicable across commercial banks, non-bank financial institutions, non-governmental organizations (NGOs) and cooperatives. As “proxies for MFI maturity,” the system uses sustainability, size and transparency, as determined by return on assets, total assets and level of reporting, respectively. “Tier 1” MFIs are those deemed financially sustainable, highly transparent and mature in age. “Tier 2” MFIs are “slightly less mature,” small or medium sized and “approaching profitability.” “Tier 3” MFIs are start-up firms or small NGOs that are deemed “immature and unsustainable.”
“The Microfinance Revolution in East Africa;” by Christian Etzensperger; published by responAbility Social Investments; April 2013; 10 pages; available at http://www.responsability.com/domains/responsability_ch/data/free_docs/rA_Research_Insight_MF-Re_East_Africa_E.pdf
This report focuses on Kenya in highlighting the advancement of financial-sector development in East Africa. Home to 43 commercial banks, Kenya “boasts the best-developed microfinance segment in sub-Saharan Africa” according to the author. The report argues that developing economies have “been revolutionized by innovations” in microfinance products and delivery channels over the last two decades and that “these efforts are now being boosted by increased use of technology.” With “14,200 active banking agents who had performed 25 million transactions amounting to a volume of USD 1.65 billion” between 2010 and 2012, “there is strong evidence that agent banking enables MFIs [microfinance institutions] to serve rural areas” in Kenya. Despite the “strong presence” of MFIs, such as Equity Bank, and mobile money service providers, such as M-Pesa, the author argues that “semi-formal providers such as savings and credit cooperatives or informal providers such as savings and credit associations” also play an important role in financial inclusion, “particularly in rural areas.” But with “scarce or nonexistent regulation, the development potential” of these providers is restricted. With one in three Kenyans excluded from the financial system, “the absence of a working financial sector severely restricts the capacity of small businesses to grow and the ability of households to save, manage risks, and smooth and diversify income and consumption.”
“Comprehensive Agriculture Risk Management Project;” published by Microinsurance Innovation Facility; March 2013; 10 pages; available at http://www.microinsurancefacility.org/sites/default/files/content/learning_journey/see_also/WRMS%20LJ3%20V1%20Final.pdf
This report examines the Comprehensive Agriculture Risk Management (CARM) project set up by Weather Risk Management Services Limited (WRMS) of Australia, a for-profit “specialist in risk management for weather sensitive industries.” CARM, which “sought to cover approximately 10,000 farmers” in the Indian regions of Howrah and Kamrup, was delivered through rural banks, non-governmental organizations, microfinance institutions, cooperatives and other organizations. The report highlights that “the experience of WRMS suggests that insurance providers should keep contracts short, modular and comprehensible,” as this can increase the demand for insurance products while also reducing the “costs associated with delivery and outreach.” Because “farmers preferred to buy cover against risks that seem most relevant,” such as heavy rainfall and high temperatures, the report notes that “demand for index insurance varies depending on agricultural context.” Index insurance offer payouts when a given criterion such as rainfall occurs outside of predetermined boundaries, mooting the need for the assessment of actual damages sustained by each insured party. As mobile technology can reduce transaction costs and errors and increase outreach, the report also highlights the importance of such technology in “making index insurance commercially viable.”
By Sam Allmendinger, Research Associate
Sources and Additional Resources:
“Microfinance Institution Tier Definitions,”
http://www.microrate.com/media/downloads/2013/04/MicroRate-White-paper-Microfinance-Institution-Tier-Definitions.pdf
“The Microfinance Revolution in East Africa,”
http://www.responsability.com/domains/responsability_ch/data/free_docs/rA_Research_Insight_MF-Re_East_Africa_E.pdf
“Comprehensive Agriculture Risk Management Project,”
http://www.microinsurancefacility.org/sites/default/files/content/learning_journey/see_also/WRMS%20LJ3%20V1%20Final.pdf
MicroCapital. March 19, 2013, “MICROCAPITAL BRIEF: Value of Mobile Money Transactions in Kenya Grows 50% to $16b in 2012 Fiscal Year,” https://www.microcapital.org/microcapital-brief-value-of-mobile-money-transactions-in-kenya-grows-50-to-16b-in-2012-fiscal-year/
MicroCapital. February 12, 2013, “MICROCAPITAL BRIEF: Kenyan Mobile Operator Safaricom Increases Mobile Money Fees in Response to 10% Tax,” https://www.microcapital.org/microcapital-brief-kenyan-mobile-operator-safaricom-increases-mobile-money-fees-in-response-to-10-tax/
MicroCapital. February 4, 2013, “MICROFINANCE PUBLICATION ROUND-UP: Property Microinsurance in Columbia, Portfolio Reviews for Microfinance Funders, Microfinance Rating Comparability,” https://www.microcapital.org/microfinance-publication-round-up-property-microinsurance-in-columbia-portfolio-reviews-for-microfinance-funders-microfinance-rating-comparability/
MicroCapital. March 7, 2013, “MICROFINANCE PUBLICATON ROUND-UP: The Business Case for Life Microinsurance in the Philippines, MIX Map of Financial Inclusion in India, 2012 Sub-Saharan Africa Snapshot,” https://www.microcapital.org/microfinance-publicaton-round-up-the-business-case-for-life-microinsurance-in-the-philippines-mix-map-of-financial-inclusion-in-india-2012-sub-saharan-africa-snapshot-2/
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