by the MicroCapital Team -

Call for Technology Projects from Microfinance Leader CGAP

CGAP is the World Bank’s microfinance arm. It is the leading research and policy shop in this fledging industry badly in need of the World Bank’s research muscle (the World Bank employs the most PhDs in the world). In this way, we very much look forward to the outcomes of CGAP’s recently announced technology program. We encourage you to apply if you have the best technology in the industry, or simply aspire to the same.

“CGAP is launching a major technology program that offers grant funding and technical advice for microfinance institutions, credit unions, banks, mobile operators and other organizations. We are interested in proposals of ideas that promise to help
improve a business model, increase efficiency or expand outreach.

The Technology Program invites concept notes for projects that test technology-based approaches to delivering financial services, especially in the most challenging markets not yet reached by microfinance. For example, project ideas could include partnerships with companies offering alternative distribution channels such as electronic payment networks, statistical scoring models for credit appraisal, or the deployment by banks of ATMs in low-income areas alongside branches. The deadline for the first round of proposals is January 2, 2007, and will be followed by a second round in February-March 2007. Learn more about the program, opportunities for project support, and CGAP’s work on technology and microfinance at www.cgap.org/technology.”

by the MicroCapital Team -

Support the Standard in Microfinance Investment: Please Report Deals to CGAP Capital Markets Newsletter

The CGAP-MIX capital markets update of the World Bank group is the only newsletter covering the microfinance capital markets.

If you have recently completed microfinance ratings, equity or debt deals, have hired a new microfinance team member or have other news or information that you would like to announce in the April issue, email capmarkets@cgap.org by Wednesday, March 29th.

To build an asset class, please report every month and encourage your colleagues.

Additional Sources

1) CGAP-MIX Capital Markets Update
2) Consultative Group to Assist the Poor (CGAP)
3) The MIXMarket

by the MicroCapital Team -

Should You Invest in the South Asian Microfinance Market? World Bank, MIX, and CGAP Report Highlights Microfinance Performance and Transparency in South Asia

The World Bank, the Microfinance Information eXchange (MIX), and the Consultative Group to Assist the Poor (CGAP) recently published a report highlighting the performance and transparency of the South Asian microfinance industry. The report is comprehensive åö pulling data from 125 South Asian institutions and close to 600 microfinance institutions (MFIs) worldwide.

The South Asian microfinance industry underwent major advances under the United Nations International Year of Microcredit 2005 initiative and is home to several of the fastest growing MFIs in the world. Overall, this sector has achieved massive credit outreach driven by record productivity and efficiency and a wide range of financial service offerings targeted to the poor. This sector is highly efficient both in terms of cost per borrower and cost per unit of loans outstanding. “Each dollar in loans costs just fourteen cents to maintain, compared with nearly twenty-six cents (p.13) in sub-Saharan Africa. Compared with their peers to the east, South Asian MFIs spend on average twenty-five dollars per borrower, less than half the average for the Philippines, Vietnam, Cambodia or Indonesia.”
Continue reading “Should You Invest in the South Asian Microfinance Market? World Bank, MIX, and CGAP Report Highlights Microfinance Performance and Transparency in South Asia”

by the MicroCapital Team -

SPECIAL REPORT: Digitizing Microfinance to Meet Customer Needs via an Incremental Approach #EMW2023

e-MFP logoAt today’s European Microfinance Week panel on transforming microfinance institutions (MFIs) into digital financial services providers, the focus was on meeting customer needs – not just implementing digital products, but attaining measurable success for clients and MFIs. Given that 80 percent of many microfinance portfolios comprises renewals, the renewal of microloans is a great process to digitize. This can free up staff to focus on recruiting new clients.

The consensus of the panelists was that going digital cannot be addressed primarily as a technology problem; rather it must be looked at as a business problem. The Vitas Group of Middle Eastern MFIs made the conscious choice to build a parallel system rather than

by Rohit Dayanand -

MICROFINANCE PAPER WRAP-UP: “Climate Risk and Financial Inclusion: A Regulatory Perspective on Risks and Opportunities;” by Peter Knaack, Peter Zetterli

This paper analyzes how climate change may impact the stability of financial systems and – particularly – access to financial services for groups that often have difficulty with such access, including micro- and small enterprises (MSEs) as well as low-income households and those in rural areas. The authors emphasize three challenges:

by the MicroCapital Team -

SPECIAL REPORT: The Impact of Digital Financial Inclusion on Global Development

In September 2015, every UN member country endorsed the 2030 Agenda for Sustainable Development, which comprises 17 target areas known as the Sustainable Development Goals (SDGs).

After falling from 10.1 percent in 2015 to 8.6 percent in 2018, the global poverty rate increased to 9.2 percent in 2020 because of the COVID-19 pandemic, reversing a long trend of poverty reduction. Other headwinds such as armed conflicts, rising inflation, food in­security, and political and social unrest also are affecting global devel­opment, and the UN estimates that these crises combined to cause an additional 95 million people to live in extreme poverty in 2022.

On the other hand, the digital revolution has made many people’s lives easier with access to mobile phones, the internet and other tools. Digital financial inclusion (DFI) and its innovative business models have had a particularly disruptive effect, bolstering financial inclusion worldwide.

Impact on Sustainable Development Goals
DFI is enabling all types of pathways to advance the achievement of the SDGs, strengthening the link between financial inclusion and de­vel­opment. In 2016, CGAP and

by Ben Barba -

MICROCAPITAL BRIEF: G20, SME Finance Forum Showcase Digital Finance Solutions for MSMEs Via Online Database, Seek Submissions

The Group of Twenty (G20), an association of the world’s larger economies, recently released a digital database hosting descriptions of “innovative financial products and services” – other than lending – that are available to micro-, small and medium-sized enterprises (MSMEs) across the globe. The entries are classified as offering Cash Management, Credit Guarantees

by the MicroCapital Team -

SPECIAL REPORT: Small Is Beautiful – Sustainable Agriculture Finance

What financial institutions can do to help poor smallholder farmers secure their livelihoods and make their communities more climate-resilient

Big in numbers, small in size
When German-born British economist E F Schumacher published his book Small Is Beautiful in 1973, he proposed an alternative to the main­stream economic principle of “bigger is better.” Mr Schumacher was an early proponent of sustainable development, demanding that people and planet should matter more than mere profits.

Agriculture plays a key role in global and local sustainable development. It is not an exaggeration to say: Farming is everyone’s business! Just think about the following mind-blowing facts:

  • The world population will reach 10 billion by the year 2050, and global food demand will increase by some 50 percent by then.
  • 30 percent of global food production is wasted after harvest.
  • Every year, we lose almost 1 percent of global farmland due to environmental degradation.
  • 26 percent of global greenhouse gas emissions, which cause climate change, come from the food sector.
  • Up to 2,000 species of wild animals and plants are estimated to become extinct each year, and agriculture is a main driver of this biodiversity loss.
  • There are an estimated 570 million farms worldwide, 84 percent of which are smallholdings with less than 2 hectares of land (equivalent to a plot of 200 meters by 100 meters).
  • Smallholder farms comprise only 12 percent of all agricultural land on our planet, but still produce roughly one third of the world’s food.

Distribution of the world’s farms and farmland area by land size class.
Source: CGAP.

e-MFP logo

Why do smallholder farmers matter?
To consider sustainability in all its

by the MicroCapital Team -

SPECIAL REPORT: Saluting MFI Staff, Promoting Flexible Products, “Keeping the Client at the Heart” as European Microfinance Week Closes

e-MFP logoA panel of microfinance luminaries shared their moments of pride and disappointment at the closing plenary of this year’s European Microfinance Week. Yannick Milev of the Cambodian microfinance institution Chamroeun expressed his admiration for the staff members of Chamroeun, who continued to work through the COVID-19 pandemic at significant risk to their and their families’ health because “stopping operations completely would have had a terrible effect on us and on our clients.” Mr Milev added that Chamroeun issued many loans during the early days of the pandemic to help clients diversify in response to the economic effects of COVID-19.

Marc Labie of Belgium’s University of Mons described the pandemic as “a chance for the industry to

by the MicroCapital Team -

SPECIAL REPORT: How to Achieve Responsible Digital Financial Services: European Microfinance Week Opens

e-MFP logoAt the opening plenary of European Microfinance Week, where over 500 attendees are gathering now in-person and online, Tidhar Wald of the UN’s Better Than Cash Alliance noted that over 1 billion more people worldwide have achieved financial inclusion over the past decade. While this has helped some to boost their livelihoods, many have accessed financial services via digital services, which carry different risks than in-person services. Data protection is an obvious example, as more client data is being digitized, and fraud is on the rise. Other risks, even though well-known to providers of in-person financial services, require different

by the MicroCapital Team -

SPECIAL REPORT: Christoph Pausch of e-MFP on European Microfinance Week 2022, Luxembourg & Virtual, November 16-18

Christoph Pausch, e-MFPMicroCapital: European Microfinance Week (EMW) 2022 will be in-person for the first time in 3 years. What can we expect?

Christoph Pausch (pictured): We’re very excited to be going back to an in-person conference at the beautiful Abbaye de Neumünster in Luxembourg. For the last two years, EMW has been virtual, and we are very proud of how both editions went, but – as I think everyone agrees – an online conference, however professional and comprehensive, can never entirely substitute for meeting in-person. You cannot fully replicate the richness of dis­cussion within a room or the opportunities for exchange, debate and networking that gathering face-to-face allows.

You’ll see some innovations at EMW2022, as we’re taking much of what worked over the last couple of years and incorporating it into the in-person event. Among other things, that means some sessions will be in a hybrid format, so attendees and speakers who cannot come to Lux­em­bourg can take part. Also this year, the conference proper starts on Wed­nesday at lunchtime, so that our opening will be timezone-suitable for more remote participants.

MC: What range of sessions can attendees choose from?

CP: As always, EMW sessions have been put forward largely by our members and organised across several thematic streams, such as “Financial Inclusion that Works for Women” (the topic of the Euro­pean Microfinance Award), climate-smart finance, digitalisation and

by the MicroCapital Team -

SPECIAL REPORT: Networks in Nigeria, Latin America & Caribbean Boost Trajectory of Women Staff, Clients of Microfinance Institutions (MFIs)

European Microfinance PlatformAt a session titled “Professional Women’s Networks and Women’s Leadership in Financial Inclusion,” Mariana Martinez of FinEquity, a platform hosted by CGAP that promotes women’s financial inclusion, described the platform’s new Spanish-language arm, FinEquityALC. FinEquityALC focuses on Latin America and the Caribbean, serving as a pilot project that could lead to FinEquity establishing other regional projects. The goals of FinEquityALC are to improve public policy that impacts women’s financial inclusion as well as financial products and financial education that are targeted at women. Its 1,100 users span 250 institutions.

Barbara Magnoni of Andares and EA Consultants described how Andares connects 

by Divya Deshmukh -

MICROCAPITAL BRIEF: IFC Lends $12m to Garanti BBVA Leasing Romania for Microenterprises, SMEs, Including Women-owned Enterprises

The International Finance Corporation (IFC), a member of the World Bank Group, recently loaned EUR 10 million (USD 12 million) to Garanti BBVA Leasing Romania, which is controlled by Spain’s Banco Bilbao Vizcaya Argentaria (BBVA). The investment is intended to support microenterprises as well as

by Sophie Fiala -

MICROFINANCE PAPER WRAP-UP: “Enabling Women’s Financial Inclusion Through Digital Financial Literacy,” by Catherine Highet, Published by FinEquity

In this paper, Catherine Highet evaluated the gender gap in digital financial literacy (DFL) and identified related enabling and constraining factors in various countries including Bangladesh, Cambodia and Ghana. The enabling factors include

by the MicroCapital Team -

SPECIAL REPORT: Lessons, Tools for the Pandemic from Prior Microfinance Crises

Deborah European Microfinance PlatformDrake of Accion’s CFI opened a European Microfinance Week session on crises in microfinance by noting that the effect of COVID-19 on the financial inclusion industry “is a different crisis because it is global.” In past crises, which were centered on a single economy, microfinance investors had sufficient capacity to inject into stronger institutions to help them survive. The global nature of the current downturn, however, may exceed the capacity of investors to sustain “worthy” financial services providers (FSPs) in certain markets. “There is inevitable

by the MicroCapital Team -

SPECIAL REPORT: Resilience Among Microfinance Institutions? “Region of Crisis” Relatively Stable; “Moratorium Veil” Yet to Lift

As European Microfinance Platformpart of the opening day of European Microfinance Week, Mohammed Khaled of the World Bank Group’s International Finance Corporation stated that the effects of the COVID-19 pandemic on the microfinance sector in the Middle East and North Africa (MENA) so far have not been as bad as was feared earlier in 2020. Most of the large microfinance institutions (MFIs) in the region have maintained 30-day portfolio-at-risk (PAR) ratios below 4 percent. Mr Khaled said, “Among leading MFIs, PAR did not rise as high as expected. We thought [it might rise to] 10 percent to 20 percent, but many MFIs have kept things under control.” Part of the reason for this, he believes is that “this is

by the MicroCapital Team -

SPECIAL REPORT: Diffusing Excuses for Failing to Measure Microfinance Institutions’ Social Performance

Amelia SAM 2019Greenberg of the Social Performance Task Force (SPTF), at a SAM session on measuring social impact, reviewed some of the excuses microfinance institution leaders use to postpone measuring client outcomes. Some say satisfaction surveys are sufficient, or they feel a robust process will be too expensive. Some worry that it is unreasonable to claim a cause-effect relationship between their institution’s financial services and changes in clients’ lives.

Colin Rice of South Africa’s Small Enterprise Foundation (SEF) argued that it is valuable to start by measuring just a few parameters that the organization is already tracking. Monitoring the amount that clients save over time is a prime example. It is easy to

by the MicroCapital Team -

SPECIAL REPORT: Fostering Economic Resilience in the Face of Climate Change with Microinsurance, Savings, Investments in Agriculture

Dan SAM 2019Zook of ISF Advisors opened the SAM session on “Fostering Economic Resilience in the Face of Climate Change” arguing that smallholder farmers are the “number one most vulnerable in the world to climate change…so it’s important that we talk about adaptation financing.” A survey by CGAP segments the needs of farmers as follows: (1) subsistence farmers are the poorest and most vulnerable; they need savings and insurance; (2) commercial farmers that sell cash crops can benefit from investments such as drip irrigation; and (3) larger-scale farmers need to think about adaptation as well as how to reduce their own environmental impact. Although agriculture is the source of a quarter of greenhouse gas emissions worldwide, Mr Zook said, smallholders have minimal environmental impact, except in the case of those raising a few particularly resource-intensive crops.

Yann Groeger of BlueOrchard cited his firm’s InsuResilience Investment Fund, which works with insurers to