Banco Compartamos, S.A., Mexico’s largest microfinance bank and a lightning rod in the debate regarding for-profit micro-lending, reported a significant year-over-year increase in net income for 2007, driven primarily by a rapid growth in clients that bolstered the company’s loan portfolio.
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MICROCAPITAL STORY: SKS Teams with ICICI Lombard General to Provide Health Insurance for Rural Poor in Indian States of Karnataka, Andhra Pradesh, and Orissa
Following an announcement earlier this month, SKS Microfinance (previously reported (1), (2), (3)), an Indian microlending organization, has worked with ICICI Lombard General, an Indian insurance company, to roll out a health care product for the rural poor in Karnataka, Andhra Pradesh, and Orissa by March 8 of this year. This is a continuation of a pilot program introduced in Karnataka in February 2007. The problem of health insurance, while of growing concern in Western nations, is just another symptom of the severe poverty afflicting millions in developing nations. According to United Nations Development Programme, of the one billion people in India, 950 million — 95 percent — are living without health insurance.
MICROCAPITAL STORY: International Finance Corporation (IFC), a Member of the World Bank Group, to Lend $20m in Debt and Invest $400k in Advisory Services to Banco Ficohsa of Honduras
The International Finance Corporation (IFC), a member of the World Bank Group, will invest up to USD 20 million in debt and USD 400,000 in advisory services for the expansion of the small and medium enterprise (SME) lending and housing finance operations of Banco Ficohsa, the third largest bank in Honduras.
MICROCAPITAL STORY: MicroCredit Enterprises Lends USD 600,000 to Cambodian Microfinance Institution (MFI) CHC Group Limited
This deal comes to us courtesy of the Microfinance Capital Markets Newsletter of the Consultative Group to Assist the Poor (CGAP) and the MIX, the microfinance information clearinghouse. MicroCredit Enterprises, a California-based nonprofit organization (NGO) that mobilizes private capital for microfinance institutions (MFIs) in the developing world, recently invested USD 600,000 in loans in CHC Limited, a Cambodian MFI.
MICROCAPITAL STORY: Dexia Micro-Credit Fund of Luxembourg Lends $3m to Microfinance Institution FINSOL, $2m to Microfinance Institution FUNDESER, $1.5m to Microfinance Institution Bai Tushum, and $100k to Microfinance Institution Sodruzhestvo
The Microfinance Capital Markets Newsletter of the Consultative Group to Assist the Poor (CGAP) reported that Dexia Micro-Credit Fund, a Luxembourg-based fund, issued loans of USD 3 million to FINSOL, a Honduran microfinance institution (MFI); USD 2 million to FUNDESER, a Nicaraguan MFI; USD 1.5 million to the Bai Tushum Financial Foundation (BTFF), a Kyrgyz MFI; and USD 100,000 to the Fund for SME Support Sodruzhestvo, a Russian MFI.
MICROCAPITAL STORY: IDB Makes Donation to Billion Dollar Standard & Poor’s
The Inter-American Development Bank (IDB) will subsidize USD 405,000 of a Standard & Poor’s (S&P) project to develop a globally accepted rating system of microfinance institutions (MFIs). S&P is a rating service and a division of McGraw-Hill Companies. The actual funding will be by the Multilateral Investment Fund (MIF), a fund administered by the IDB to encourage private sector development of micro-enterprise in Latin America and the Caribbean (LAC).
The stated goal and rationale of this project is to increase capital flow to micro-banks. However, with MIF’s public money subsidizing a company with over USD 1 billion in annual profits, such justification is thin. Top micro-banks do not suffer from too little investment, but rather there is now far too much money chasing too few micro-banks. Has the IDB gotten it exactly wrong?
PAPER WRAP-UP: Microfinance Cracking the Capital Markets II
MicroCapital will review the conclusions from last year’s conference in preparation for the upcoming third annual Microfinance Cracking the Capital Markets conference in May, 2008. The conference was summarized in a 16-page publication written by Rekha Reddy and is part of ACCION’s InSight series, available here. The conference was hosted by ACCION International and sponsored by Credit Suisse. ACCION is a private, non-profit microfinance organization founded in 1961 that specializes in global micro-enterprise loans, business training, and other financial services.
MICROCAPITAL STORY: Multilateral Investment Fund (MIF) of Inter-American Development Bank (IDB) Grants $3.1m for Micro and Small Business Development in Peru, Ecuador
The Multilateral Investment Fund (MIF) of the Inter-American Development Bank, a multilateral financial institution, recently approved grants for two technical cooperation projects in Peru and Ecuador, valued at USD 1.6 million and USD 1.5 million, respectively. In addition, each country will contribute approximately USD 1 million as counterpart financing. Both projects will aim to boost income and employment levels among low-income entrepreneurs, while also incorporating this market segment into private-sector business development.
MICROCAPITAL STORY: Standard and Poor’s to Launch Rating Program for Microfinance Institutions in Latin America
In a press release, Standard and Poor’s Ratings Service (S&P) announced that it intends to launch a pilot ratings program for Microfinance Institutions (MFIs) in Latin America and the Caribbean. The Inter-American Development Bank (IDB) will sponsor the pilot program and will work closely with the S&P throughout the process.
MICROCAPITAL STORY: India-Based Compulink Sees 1.8 Percent Uptick in Share Price After Announcing Contract to Provide SKS Microfinance of India With Software and Networking Systems
Compulink and SKS Microfinance, both from India, recently entered into a contract wherein Compulink will provide SKS with its entire suite of business applications. The new system will utilize Compulink’s proprietary “Whizible” framework on top of Microsoft’s Net Platform to link all 650 SKS branches using a set of web-based applications. The contract covers all of SKS’s core businesses including microcredit, microinsurance and health insurance as well as providing new accounting systems and a centralized IT infrastructure.
MICROCAPITAL STORY: SKS Microfinance Raises $37 Million in Equity Sale
SKS Microfinance of Hyderabad, India, recently raised 147 Crore Rupees, the equivalent of over USD 37 million, through its third round of equity sales in recent months. Investors include Silicon Valley Bank (SVB) of California, Columbia Pacific, Sequoia Capital of California, Vinod Khosala of California, and Odyssey Capital.
PAPER WRAP-UP: Foreign Exchange Rate Risk in Microfinance: What Is It And How Can It Be Managed?, A Focus Note by the Consultative Group to Assist the Poor (CGAP)
Published by CGAP, January 2006, 16 pages, available for viewing here.
Because most microfinance institutions operate in developing countries where risk of currency depreciation is high and debt restructuring occurs periodically, they are particularly vulnerable to foreign exchange rate risk. A recent CGAP survey not only revealed that 50 percent of MFIs have no protection mechanisms in place, but also indicated a general lack of understanding of both foreign exchange risk and the extent to which MFIs are exposed. This paper seeks to raise awareness of the issue of foreign exchange rate risk within the microfinance sector first, by providing a brief overview of the different components of risk, second, by looking at current techniques employed by microfinance institutions (MFIs) and investors to manage these risks, and finally, by making recommendations on mitigating or avoiding exposure to exchange risk.
MICROCAPITAL STORY: Planet Rating of Paris, France, Introduces New Microfinance Rating Methodology
In a press release Paris-based Planet Rating, a microfinance rating agency, announced a number of changes in its GIRAFE rating methodology. These changes take effect as of January 14, 2008 and adjust rating factor weightings and evaluation methods with regards to microfinance institution (MFI) governance, capital structure, market/financial risk, and profitability structure.
MICROCAPITAL STORY: Forbes’ Special Feature on Private Investment in Microfinance Includes Top 50 Microfinance Institutions
Forbes, a American business and financial news magazine, presented the list of top 50 microfinance institutions (MFIs) of 2007 in its special feature on the private investment in the microfinance industry.
NEWS WIRE: USA: Forbes Names Top Microfinance Institutions
Source: Forbes.
NEWS WIRE: USA: More From Forbes – On the Pitfalls of Microfinance Investing
Forbes: “A lot of people are chasing returns in barefoot banking. Here’s what you should know before you follow.”
MICROCAPITAL STORY: ACLEDA Bank the first bank in Cambodia to be rated by Standard and Poor’s
ACLEDA Bank Plc. – Cambodia, the largest microfinance institution and the third largest bank in Cambodia, received a rating of B+/B from Standard and Poor’s, four levels below investment grade (Associated Press). This is the first Standard and Poor’s credit rating on a Cambodian financial institution.
WHO’S WHO IN MICROFINANCE: Dr. Jennifer Riria
In the microfinance industry, Dr. Jennifer Riria is internationally known first, as the chief executive officer (CEO) of Kenya Women Finance Trust (KWFT), the largest microfinance institution (MFI) in Kenya, and second, as a board member of Women’s World Banking, a global microfinance network consisting of over 53 MFIs from 30 countries.