MICROFINANCE PUBLICATION ROUND-UP: Microfinance Trends in Latin America and the Caribbean; Livestock Insurance in India; Using “Digital Footprints” to Boost Financial Inclusion

“Latin American and the Caribbean Microfinance Market Trends 2006-2011;” by Renso Martinez Ramirez; published by Microfinance Information Exchange; June 2012; 22 pages; available at: http://www.themix.org/publications/mix-microfinance-world/2012/06/latin-american-and-caribbean-microfinance-market-trends-

This report assesses the performance of microfinance in Latin America and the Caribbean and serves as an update to the 2005-2010 trends report published in 2011. The author examines a sample of the 48 larger microfinance institutions (MFIs) in the region that together account for 55 percent of microfinance clients. The author found an overall growth of 20 percent in the market, with increases of 24 percent and 19 percent in gross loan portfolio and assets, respectively. The number of borrowers also increased from 2010 by 17 percent. Leverage decreased in 2011, which the author attributes to lower equity in Mexico, and the overall debt to capital ratio in South America also showed a decrease. Overall, delinquency levels decreased and there was an increase in returns, although Mexico’s results showed greater risk and lower profitability. The author concludes that growth varies when comparing sub-regions: Central America is recovering in terms of risk and profitability while such indicators remain strong in South America.

“A Case for Livestock Insurance;” by Aparna Dalal, et al; published by the International Labour Office; June 2012; 33 pages; available at: http://www.ilo.org/public/english/employment/mifacility/download/mpaper17_livestock.pdf

This study reviews the lessons learnt in the implementation of a 27-month pilot program in India that united the Indian Farmers Fertilizer Cooperative Limited (IFFCO) and Tokio Marine and Nichido Fire Incorporated (Tokio) of Japan to offer livestock insurance to rural farmers. The study begins with background on livestock insurance in India and then describes the product offered by IFFCO-Tokio and the technology used. The authors explain the insurance distribution strategy and how it relates to IFFCO-Tokio’s decision to partner with cooperative banks. The next three sections of the document highlight the changes in the enrollment and claims processes as well as pricing of the product. The authors found that in terms of product pricing, poorer farmers presented a lower risk because they tended to care better for their animals. The authors finally summarize their findings in client value and business viability to state that the pilot project had a high level of success. The authors conclude that livestock insurance can become viable with scale as long as the administration of the program is carefully controlled.

“Can Digital Footprints Lead to Greater Financial Inclusion?” by Kabir Kumar and Kim Muhota; published by CGAP (Consultative Group to Assist thePoor); July 2012; 4 pages; available at: http://www.cgap.org/p/site/c/template.rc/1.9.58461/

This brief discusses the “digital footprint” left by mobile phones and how they can be used to provide microcredit to poor people via mobile technology. The authors theorize that several indicators tracked by mobile phone companies, such as length of client subscription, frequency of airtime top-ups and frequency of pre-paid balance reaching zero, could be used together to identify clients as low- or high-risk. Cignifi, a US-based credit scoring company, built such a model and through testing in Tanzania and Brazil found that the model was an accurate predictor of loan default. The authors state that the main interest in examining these “digital footprints has been in credit thus far, but that it could also be used to match people with types of insurance and aid insurance providers in developing plans and payment methods. The authors identify two models for using mobile phone data: (1) “predictive” models intended to help providers design financial products and (2) “propensity” models intended to be used for marketing. The brief then touches on privacy laws and how data companies can use data without violating such regulations. The authors conclude that better understanding of mobile phone data, more provider willingness to experiment and improvements in privacy regulations are necessary for the digital footprints to have an impact on poor people.

By Charlotte Newman, Research Associate

About Microfinance Information Exchange
The Microfinance Information Exchange (MIX) is a US-based nonprofit provider of performance data and analysis on microfinance institutions (MFIs), funders, networks and service providers dedicated to serving the financial needs of low-income clients. The mission of MIX is to strengthen the microfinance sector and financial inclusion in general by promoting transparency. The organization’s MIX Market website offers access to financial and social performance information covering approximately 2,000 MFIs. MIX publications include the MicroBanking Bulletin and MIX Microfinance World, which feature periodic research and data analysis. Incorporated in 2002, MIX is headquartered in Washington, DC, with regional offices in Azerbaijan, India, Morocco and Peru. Its supporters include the Bill & Melinda Gates Foundation, CGAP (Consultative Group to Assist the Poor), Omidyar Network, The MasterCard Foundation, the UN’s International Fund for Agricultural Development, the Michael & Susan Dell Foundation, Citi Foundation, Ford Foundation and Deutsche Bank.

About CGAP (Consultative Group to Assist the Poor)
CGAP (Consultative Group to Assist the Poor) is a US-based nonprofit policy and research center dedicated to providing financial access to poor people worldwide. CGAP is supported by approximately 30 development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors. CGAP reported total revenue of USD 29.5 million and total assets of USD 24.2 million for the fiscal year ending June 2011.

Sources and Additional Resources:

“Latin American and the Caribbean Microfinance Market Trends 2006-2011,” http://www.themix.org/publications/mix-microfinance-world/2012/06/latin-american-and-caribbean-microfinance-market-trends-

“A Case for Livestock Insurance,” http://www.ilo.org/public/english/employment/mifacility/download/mpaper17_livestock.pdf

“Can Digital Footprints Lead to Greater Financial Inclusion?” http://www.cgap.org/p/site/c/template.rc/1.9.58461/

MicroCapital.org story, July 19, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Financial Advisors on Sustainable Investing; Risk Management in Microfinance; Supply-Side Financial Inclusion Data,” https://www.microcapital.org/microfinance-publication-round-up-financial-advisors-on-sustainable-investing-risk-management-in-microfinance-supply-side-financial-inclusion-data/

MicroCapital.org story, June 21, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Impact of Property Insurance in Ghana; Priority Issues for the Microfinance Sector; Investment in Sub-Saharan Africa,” https://www.microcapital.org/microfinance-publication-round-up-impact-of-property-insurance-in-ghana-priority-issues-for-the-microfinance-sector-investment-in-sub-saharan-africa/

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