As an effort to help the small and medium size enterprises (SMEs) in Bahrain as well as across the region, the United Nations Industrial Development Organization has initiated the set up of a new microcredit bank, Innovation Bank, which is scheduled to commence operations sometime later this year.
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NEWS WIRE: Microfinance Group Reveals Future Plans
MICROCAPITAL STORY: Swiss ResponsAbility Microfinanz-Fonds Begins Microfinance Investing and Loans USD 500,000 and USD 344,456 Respectively to PRESTANIC in Latin America and Al Karama in Middle East
This story comes courtesy of the latest issue of the Microfinance Capital Markets Newsletter of the Consultative Group to Assist the Poor (CGAP) and the MIX, the microfinance information clearinghouse. The responsAbility Microfinanz-Fonds, a microfinance investment vehicle launched this month, has begun its investment business with two loans of USD 500,000 and USD 344,456 to microfinance institutions (MFIs) PRESTANIC and the Association Al Karama de Micro Credit (Al Karama), respectively. Microfinanz-Fonds is managed by responsAbility Social Investment Services Ltd., a Swiss investment firm founded in 2003 specializing in social investment in the developing world. Now the third microfinance investment fund managed by responsAbility, Microfinanz-Fonds has a loan investment portfolio of USD 27.0 million. The fund’s portfolio is financed by its shareholders, Bank im Bistum Essen, a German cooperative financial institution, and Stadtsparkasse Düsseldorf, a German bank.
MICROCAPITAL STORY: Microfinance on the Big Screen? French Film to Explore Millennium Development Goals
LDM Productions, a French production company, and the United Nations Development Programme, a multilateral development assistance network, are working together to produce a full-length feature film that explorers the eight United Nations Millennium Development Goals (MDGs).
NEWS WIRE: Seedvest Microfinance Bank Comes on Board
Source: BusinessDay Online, Oluyinka Alawode
Article available here.
Another microfinance bank with the passion to boost the economic emancipation of the nation especially at the grassroots level has come on board. Seedvest Microfinance Bank Limited commissioned weekend in Ibadan, Oyo State had in attendance representatives of the deputy governor, financial sector surveillance of the Central Bank of Nigeria (CBN), Tunde Lemo and other financial institutions department, trade unions and associations.
MICROCAPITAL STORY: USD 6.12 Million Loan for International Fund for Agricultural Development’s Rural Finance Project up for Ratification by Government of Gambia
A loan by the International Fund for Agricultural Development (IFAD), a specialized agency of the United Nations focused on the eradication of poverty in developing areas, was tabled before members of
NEWS WIRE: Microlending Gives Hope to the HIV Positive
A microcredit program created by Thailand‘s ‘Mr. Condom’ allows the HIV positive to start businesses and earn a living.
(Fortune Magazine) — When Narisara Panya’s husband died of AIDS seven years ago after returning to Thailand from a construction job abroad, it was devastating. With only a small plot of land that didn’t always yield enough food for their two children, 44-year-old Narisara – who became HIV positive herself – needed an income.
NEWS WIRE: Mobile Phones Revolutionize African Banking
BRUSSELS, May 23 (IPS) – Mobile phone banking is expanding across the region from South Africa to Kenya and is putting the poor directly in control of their own finances like never before.
In Africa, traditional banking is not a viable option for many of the poor and those living in rural areas. High fees, low education and literacy, as well as long distances between banking facilities get in the way of simple transactions. According to the Consultative Group to Assist the Poor (CGAP), an estimated 80 percent of those living in the United Nations-designated least developed countries (LDCs) are unbanked.
PRESS RELEASE: UN Group Targets Obstacles that Prevent Poor from Accessing Financial Services
A United Nations group that was formed to promote financial inclusion has released a series of key messages designed to remove the obstacles that prevent poor people from opening a bank account, taking a loan or buying insurance to protect their crops.
The messages, which are targeted at governments, regulators, development partners and the private sector, were formed through a consultative process lead by the UN Advisors Group on Inclusive Financial Sectors.
PRESS RELEASE: Early Bird Deadline is approaching for the 2007 World Credit Union Conference
Madison, WI—The deadline for Early Bird Registration for the 2007 World Credit Union Conference in Calgary, Canada is May 19, 2007. With engaging keynote speakers and exciting pre and post tours, the conference will provide attendees with an unforgettable credit union experience.The 2007 World Credit Union Conference will be held in Calgary, Alberta, Canada on July 29— August 1. Participants can register for the conference, sign up for tours and reserve accommodations at www.woccu.coop/ ca lgary07. Michael Treacy, author of Double-Digit Growth and The Discipline of Market Leaders, has joined the line up of distinguished keynote speakers. In his most recent work, Mr. Treacy has devised a common sense approach for achieving superior profitable growth. He has transformed businesses of all types around the world by aiding senior managers to tackle their greatest strategic challenges. Other keynote speakers include Stephen Lewis, former United Nations Special Envoy on HIV/AIDS; Grzegorz Bierecki, one of the ten most influential people in Poland and President of the National Association of Co-operative Savings and Credit and Martin Eakes, CEO and co-founder of Self-Help Credit Union.Spaces are still available on the tours surrounding the conference. The pre-conference tour to Banff will enable participants to experience the spectacular natural beauty of the Canadian Rockies. The post-conference tour to Quebec City will provide the venue for participants to step back in time and taste the flavor of Canada’s most historic city. Tours in and around Calgary will offer companions opportunities to explore during the conference days. Visit www.woccu.coop/ca lgary07 for more information about the 2007 World Credit Union Conference. New hotels have been added to provide quality and convenient accommodations for all conference attendees. Hotel space and conference attendance are limited. Early registration is encouraged. Information provided by World Council of Credit Unions, Inc. World Council is the apex trade association and development organization of the international credit union system. It promotes the sustainable growth of credit unions and financial cooperatives across the globe. As instruments of economic and social development, World Council, its regional confederations, and national member organizations in 92 countries with 42,616 member credit unions serve more than 157 million people worldwide. Contact Person: Janette KlaehnOrganization: WOCCUPhone Number: (608) 231-8123E-mail: jklaehn@woccu.orgSource: World Council of Credit Unions (WOCCU)http://www.woccu.org/press/press_rel/pressr.php?pressr_id=1352
Assistance Extended to Grenada after Hurricanes Ivan and Emily
The Government of Japan and the United Nations have teamed up to extend assistance to Grenada, as the nation still remains devastated from Hurricanes Ivan and Emily. The Program is entitled, Restoring Livelihoods in Grenada after Hurricanes Ivan and Emily, and is expected to cost roughly USD 1.2 mm, and hopes to mitigate the social impacts of the disaster by providing them with concrete and sustainable benefits such as new skills and employment training. Some activities to be implemented are: increasing resilience and capacity of communities to respond and manage disasters through planning, training and awareness raising improving access to microfinance and business development opportunities and identifying new income-generating opportunities, and assisting farmers and rural households by improving agricultural production, agro-processing and woodcraft industries.
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Ethical Corporation Hosts Sustainable Finance Summit in London, November 28th and 29th
Interest in sustainable finance has been growing appreciably in recent years: in 2003 the initial draft of the Equator Principles, a banking industry framework for addressing environmental and social risks in project financing, was launched by the World Bank Group’s International Finance Corporation (IFC) and in 2005 the United Nations initiated the development of the Principles for Responsible Investment. With this recent increased interest in socially responsible investment in mind, Ethical Corporation is hosting the Sustainable Finance Summit in
Paper Wrap Up: Mobile Phone Banking and Low-Income Customers: Evidence from South Africa
By Gautam Ivatury and Mark Pickens, published by the Consultative Group to Assist the Poor/The World Bank and the United Nations Foundation, Nov 2006, 19 pages, download here: http://www.cgap.org/publications/mobilephonebanking.pdf
This paper reports on a study designed by the Consultative Group to Assist the Poor (CGAP), an NGO which was founded by several multilateral agencies, international financial organizations and interested private organizations to promote the development of financial services for the poor. The study was funded by the United Nations Foundation, a public charity which supports private-public partnerships, and the Vodafone Group Foundation, a charity founded by the mobile phone company Vodafone. The study was based on a survey of 515 low-income South Africans, 215 whom used the mobile phone-based banking (m-banking) service, WIZZIT, and 300 who did not. The first section of the paper introduces WIZZIT, which is a division of the South African Bank of Athens, specifically targeting South Africa’s “unbanked population.” It was launched in December 2004 and currently has 50,000 customers. The m-banking accounts allow customers to make bill payments, check their account balances, and make transactions using their mobile phones. Additionally, the customers are provided with debit cards which they can use to withdraw money from any ATM. Customers are able to make cash deposits into their account at all Absa Bank and Postbank locations. WIZZIT accounts have no minimum balance requirements and charge a per-transaction fee. The second section of the paper reports the findings of the survey. The authors note that low-income customers are pleased with WIZZIT’s service because it is safe, convenient, fast, and cheaper than alternative banking methods. The data also showed that WIZZIT’s low-income customers were better off, as well as more financially sophisticated than low-income non-users prior to using the service. Both customers and non-customers said they were willing to try new technology, but human interaction was still important to them. Finally, the study showed that most non-users had not heard of WIZZIT. The third, and final, part of the paper draws general conclusions from the research findings. It encourages other m-banking providers to build greater awareness of their services and emphasizes the ability of m-banking to provide financial services to the poor in developing countries.
By Drew Rifkin
Iraq’s Microfinance Sector: A Survey
Since the Baath Party government fell in 2003, Iraq’s economy has been in turmoil. One of the key problems that has plagued the country in recent years is unemployment resulting from the change in government as well as the near-civil war conditions raging on the ground.
One of the ways in which outsiders, including international NGOs and the US government, have tried to help the recovery and fix the problem of high unemployment is by assisting in the creation of local microfinance institutions. Prior to the US invasion, no microfinance activity existed in Iraq, outside of local moneylenders and rotating credit organizations. The large state-owned banks required collateral for loans, thereby excluding 95% of Iraqis from the financial system. In 2003, the Coalition Provisional Authority (CPA) provided a $10 million grant to the development of microfinance programs. This money was managed by ACDI/VOCA, a Washington-based NGO which provides technical assistance to microfinance institutions (MFIs). According to the United Nations Capital development Fund (UNCDF), the majority of the funds were used up by March 2004. By May, the CPA allocated another $10 million to developing microfinance and in the south of the country. There is very little public information as to how this money was disbursed.
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
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Four Groups Syndicate a $35 million Fund for African Microfinance Investment
Four organizations have joined forces to create a $35 million syndicate fund for microfinance investment in Africa. The fund will loan money to African microfinance institutions (MFIs), and by coordinating lending, seek to lend more efficiently.
The contributors are no strangers to microfinance investment. Most significantly, the Dutch social investment society OikoCredit is one of the world leaders in microfinance investment with a loan portfolio of E60 million. Also on board is Stromme Microfinance, a Norwegian Christian charity that has funded NGOs and churches since 1976. Less information is available on the other two contributors. Jitegemee Trust, which was created as a joint venture between the Kenyan and Dutch governments, is dedicated to providing aid to arid regions. The European Union and Kenyan government fund the Micro Enterprise Support Programme Trust (MESP). The MESP provides monetary and institutional support for MFIs. But it appears to be typical of quasi-governmental agencies that try to do everything from making loans to developing products to providing technical assistance to public policy.
The syndicate will be based in
In addition, the syndicate will consider loan applications from MFIs throughout
Additional Resources
1) Consultative Group to Assist the Poor (CGAP): “Microfinance Capital Markets Update” is the best source for monthly updates on debt and equity deals in microfinance.
2) “Group Raises Sh2.6bn to Fund Small Business”
3) “Overview of the Outreach and Financial Performance of Microfinance Institutions in Africa”
4) Microfinance Information Exchange
Current Trends in Microfinance: The Growth of Commercial Microfinance
Downsizing of commercial banks, greater number of partnerships, increasing amount of local currency deposits, and the integration of the commercial and microfinance sectors—all current trends—are tightly linked.
As commercial banks have realized that poor people’s finance can be profitable, an increasing number have gone down market to tap lower income clientele. The World Bank’s microfinance unit, the Consultative Group to Assist the Poor, estimates that there are currently around 225 commercial banks “engaged in microfinance”— a figure that is increasing.
The main reasons for the emergence of commercial banks at the low-income level are: 1) Competition in existing markets driving banks into new ones, 2) Excellent repayment rates by micro-entrepreneurs, and 3) Technology allowing the poor greater access while transactions remain cost-effective. Though governments in some developing countries have required commercial banks to work in certain sectors, banks are increasingly lured in by the low risk, stability, and potential growth opportunities in the microfinance market. They are entering either directly by utilizing their own resources such as an internal microfinance unit, or with existing providers through partnerships.
Partnerships between MFIs and commercial banks have enabled each to leverage their competitive advantages. While MFIs are more knowledgeable at the community level for instance, banks have the advantage in greater access to capital and existing infrastructure. The meeting of the commercial and microfinance sectors has come about through their collaboration. MFIs have scaled up to “access higher levels of credit, augment their portfolios, and strengthen management and efficiency levels,” while commercial banks have purposely scaled down to profit from this emerging industry. Both types of institutions “scale-up and scale-down” by redesigning their financial products to suite the clientele they are targeting.
Integration between these sectors leads to another current trend in microfinance—the increase in deposits as a source of funding. It is important for MFIs to turn from foreign debt investment, which is vulnerable to foreign exchange risk, to their own domestic and regional markets so that domestic savings can be transformed into “productive loans for the poor.” Due to limited knowledge and a lack of trust beyond the community, the local poor may therefore be more inclined to make deposits into local savings accounts. Within the last year for instance, the number of accessible savings and loan accounts among the poor has gone from 750 million to 1.4 billion. Furthermore, and importantly, foreign currency risk can be avoided when MFIs borrow and lend in the local denomination.
One of the main links between these trends is technological advancement. Efficient technology has allowed smaller and simpler banking transactions to become more cost effective, motivating commercial banks to scale down and reach a greater number of people. Low cost ATMS with picture and voice prompts for example, are bringing in rural and illiterate clientele. An in-country example is the State Bank of
Additional Resources
1) Main article discussed in entry, United Nations Capital Development Fund (UNCDF): “Microfinance—Where We Are Now: And Where We Are Headed.”
2) The Consultative Group to Assist the Poor (CGAP): “Commercial Banks and Microfinance: Evolving Models of Success.”
3) “Microfinance Sustainability through Private Sector Partnership.”
4) Inter American Development Bank (IADB): “Savings Becomes First Source of Funding for Microfinance.”
5) “Managing Foreign Exchange Risk: The Search for an Innovation to Lower Costs to Poor People.”
6) “Microfinance: Facts and Figures.”
7) “Financial Institutions with a ‘Double Bottom Line’: Implications for the Future of Microfinance.”
8) “WSBI’s Contribution to the Collection of Data on Accessible Finance: Telling the Supply Side of the Story.”
Growing Interest in Tracking Remittances Opens a Door for Microfinance
At the Inter-American Development Bank’s (IDB’s) forum last week on remittances, a million dollar tracking agreement was signed, addressing a lack of uniformity in collecting information on remittances to Latin America and the
Migrants to more industrialized countries, or even from a rural to an urban area, often send home a portion of their income, commonly referred to as remittances. The United Nations Capital Development Fund (UNCDF) estimates that in 2003, more than $88 billion was sent to developing countries from workers based elsewhere. Remittances follow foreign direct investment (FDI) as the world’s second largest source of capital flows. However, in developing countries, remittances play a much larger role relative to FDI, representing 2.9% of the total GDP ($26 billion) and 380% of FDI. Figures for remittances are generally conservative, as the true value is most likely much higher because a significant portion is transferred through informal methods (not through wire services or banks). In comparison to other forms of capital flow, such as FDI, remittances offer a steady source of funds that is relatively immune to political or economic fluctuations.
In recent years, “remittances sent by migrant workers have become a major source of hard currency for many countries in Latin America and [the] Caribbean.” According to the Multilateral Investment Fund (MIF), autonomously administered by the IDB, this region last year received around $45.8 billion from its expatriates. Approximately $1 trillion is generated by foreign-born adults in the
The microfinance industry stands to benefit greatly from a more intimate involvement with money transfers related to remittances. Research shows that recipients of these funds are often the same people as those targeted by microfinance institutions. This offers microfinance institutions (MFIs) an important opportunity to facilitate money transfers for a fee, as well as to cross-sell other financial products. By commercially linking with money transfer institutions, MFIs have the opportunity to expand their operations, by offering a (formal) savings mechanism for micro-borrowers, and also providing a guarantor of credit to the same people.
Additional Resources
1) Inter-American Development Bank (IDB): "Remittances."
2) Inter-American Development Bank (IDB) Remittance Forum: "The Impact of Remittances on Microfinance"
3) Inter-American Development Bank (IDB) Press Release: "Competition, Coverage and Technology Seen As Key Factors In Cutting Cost of Remittances to Latin America and the Caribbean"
4) Development Gateway: "Leveraging Remittances for Microfinance"