Several microfinance organizations were selected as winners of the 2007 Fast Company/Monitor Group Social Capitalist Award. The Calvert Social Investment Foundation, Grameen Foundation USA, Unitus Inc., and ACCION were among a group of 43 winners chosen out of a pool of 314 nominees. Grameen, ACCION and Unitus have all won the award in previous years. The award-winners will be featured on the cover of the December issue of Fast Company magazine.
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Paper Wrap Up: Microfinance: "Harnessing Enterprise to Fight Poverty"
Edited by Tom Clougherty, published by the Globalisation Institute, Nov 2006, 25 pages, download here: http://www.globalisationinstitute.org/publications/microfinance.pdf
The Globalisation Institute, which published “Harnessing Enterprise to Fight Poverty”, is a British think-tank focusing on how globalization can alleviate poverty. It was founded in 2005 and headed up by Director-General Alex Singleton. The paper summarizes the successes of microfinance and urges the British Department for International Development (DFID) to focus on microfinance as a development tool. It starts with a foreword by former British High Commissioner to Uganda, Mike Cook CMG. He bemoans the fact that the DFID’s fund distribution does not directly involve the poor and contrasts the institution’s projects with the success of microfinance. The report then emphasizes these achievements, arguing that microfinance is a key to establishing better governance and property rights in the developing world, and provides several case studies, including stories from Jamii Bora Trust in Kenya, SKS in India, and ACORD Ethiopia. They note that there is plenty of donor money available to microfinance institutions (MFIs), but ultimately, they must find commercial funding to meet global demand. Finally, the report argues that the DFID has not done enough to support microfinance. It says that development agencies should focus their funds at “contributing to the start-up costs and fostering the establishment of truly self-sustaining microfinance institutions.” However, they warn policymakers to be wary of “throwing money” at microfinance or believing that one variety of microfinance can work globally. Specifically, the Globalisation Institute argues that the DFID should have a team focusing on microfinance, with a head that reports monthly to the Secretary of State. Additionally, they suggest that the government host an “annual summit on microfinance, drawing together the leading figures in the world of microfinance and the major international banks, to encourage greater private funding of microfinance and to promote the exchange of expertise and best practice.” (pg 24) Ultimately, the report laments the fact that the DFID prefers to “support ‘big name’ development charities instead.” Now that microfinance is one of the “big names” we shall see how state development organizations, such as the DFID, react.
The Grameen Foundation Receives $1.5 Million Grant from the Gates Foundation for Strategic Plan
The Gates Foundation has made an unrestricted grant to the Grameen Foundation as a show of support for the latter’s strategic plan. On June 1, 2006, MicroCapital reported on the Gates Foundation $1.46 million donation to nonprofit microfinance network Unitus. Earlier in March, it also reported on Bill Gates’ focus on microfinance investing. And in January, ACCION International received a $5.8 million grant from the Gates Foundation to develop partnerships with microfinance institutions in West Africa and India. The Gates Foundation gave $8.7 million in microfinance grants in 2005 (see MicroCapital Blog’s December 14, 2005 and December 1, 2005 articles). The recipients of these grants were Opportunity International, FINCA International, and California-based Freedom From Hunger.
A Little Breath of Fresh Air Teases the Microfinance Buy Side
Accion and Unitus, two
As we hope to see consolidation of the 10,000 world-wide micro-lenders, we also hope to see consolidation of all the public and charitable organizations that spawned them.
Additional Resources
1) ACCION Press Release: “Microfinance Leaders ACCION and Unitus Establish Strategic Alliance for India.”
2) MicroCapital Blog: “Microfinance Networks (transnational second-tier): Defined and Listed.”
3) “Registered Non-Profit Organizations by Level of Total Income.”
Microfinance Networks (wholesale transnational): Defined and Listed
Microfinance “networks” facilitate financial services to the poor by offering support to lower-level partners. The term “network” refers to the main organization and its partner organizations as a whole. The diversity of network structures makes a precise definition difficult, and herein we only define and list what we call “wholesale networks” defined as transnational, not national or regional, partnerships.
Adding to the challenge of a clean definition, some organizations such as ACCION and Credit and Savings for the Hard-Core Poor (CASHPOR) simultaneously exist as individual institutions as well as a network of secondary partners.
Unfortunately, much of the confusion about networks is self-imposed. Donors prefer to give to actual micro-lenders “where the rubber hits the road”, not supporting organizations. Networks at times present the aggregate micro-banking activities of their partners with the implication that they themselves actually provide microfinance services. Another opaque outcome generated by the counter-incentives inherent to donation-driven “development aid”.
Twenty-one second-tier networks are listed below. Fourteen of those are based in North America, one in South America, one in Asia, one in
“Networks” can be grouped broadly in four ways: 1) Degree to which they provide technical support, 2) Extent of ownership over partners (0-100%), 3) whether they invest in partners through loans or equity (or both), and 4) amount of donor cash inflow (private or public) to secondary partners (p. 8).
Microfinance networks are either involved only within the microfinance industry and/or in multi-sector development. The World Savings Bank Institute (WSBI) focuses on microfinance and business development services for instance, while Catholic Relief Services “works in microfinance, community health, education, and emergency response among other development sectors.” (p. 4). With the exception of ShoreCap International, a subsidiary of Shore Bank in
Numerous subcategories further clarify distinctions between networks—this information appears in the article, “What is a Network? The Diversity of Networks in Microfinance Today.” Broadly speaking however, “NGOs, cooperatives, non-bank financial institutions, MFIs, and banks,” may all be part of a network. While some of these organizations were simply strengthened by higher-level partners, many were formed by them. Mennonite Economic Development Associates (MEDA) for example, both supports existing institutions and creates others.
Due to the diverse roles different networks play, microfinance institutions may belong to multiple networks such as SHARE Microfinance, Ltd. of
WHOLESALE TRANSNATIONAL MICROFINANCE NETWORKS:
ACCION, US
Catholic Relief Service (CRS), US
Developpement International Desjardins (DID), Canada
Finca International (FINCA), US
Freedom from Hunger (FFH), US
Mennonite Economic Development Associates (MEDA), Canada
Opportunity International, US
Pro Mujer, US
Save the Children, US
ShoreCap International, US
Unitus, US
Women’s World Banking (WWB), US
World Council of Credit Unions (WOCCU), US
World Vision, US
International Network of Alternative Financial Institutions (INAFI), Costa Rica
Credit and Savings for the Hard-Core Poor (CASHPOR), Malaysia
Banking with the Poor Network (B.W.T.P.), Australia
Ecumenical Church Loan Fund International (ECLOF), Switzerland
PlaNet Finance, France
Microfinance Centre for Eastern Europe and the New Independent States, Poland
World Savings Bank Institute (WSBI), Belgium
Will Documentation Kiosks in Rural India Increase Access to Credit?
An American company, Wyse Technology is working with Indian consulting company Comat Technologies to bring computer kiosks to 5000 villages around the Indian state of Karnataka. The ICICI Bank, Indian government, and the International Finance Corporation (IFC), which is a division of the World Bank (WB), will also participate. Six to ten networked terminals containing information about education, healthcare and land records will be set up in each village.
Some say simple projects to legally document property ownership will enable millions of villagers to access credit. However, the jury is still out on this theory. After property rights advocate and economist De Soto researched and published this theory, several quantitative studies contradicted his results. It is safe to assume that the security of private property under the law will increase access to credit by stabilizing the economy in general. The question before us is how best to achieve this property security in the context of the developing world. The current kiosk initiative may help us answer this important question if it can deliver property documentation efficiently to the general public in
Additional Resources
1) Main article discussed in entry: "Group Plans Kiosks for Rural India.”
2) “
3) "Thousands of Poor to Get Lots in Gov’t-Owned Land.” 21 Jan 2005.
5) Review of
6) Financial Times: "A Little Credit Can Go Far."
7) BBC News: "Insuring Ethiopians Against a Poor Harvest."
8) Center for International Private Enterprise: "An Interview with Hernando de Soto."
9) Cato Institute: "Hernando de Soto’s Biography."