The Public Broadcasting Service (PBS) program, “NOW,” covered a story in September 2007 on microfinance entitled “Who’s Making Money from Microcredit?” The twenty minute segment explores the financial success of Mexican microfinance institution (MFI) Compartamos and its April 2007 initial public offering (IPO) that generated over USD 400 million for investors. Supporters of the Compartamos IPO hail the transaction as an achievement that signifies the emergence of the microfinance industry in mainstream financial markets. However, critics accuse the microfinance lender of exploiting the poor in an effort to reap profits.
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MICROCAPITAL STORY: UPS to Issue Grants Totaling USD $1m to Microfinance Organizations ACCION International, Opportunity International and FINCA International
United Parcel Service (UPS), a global package delivery service founded in 1907, has created a Centennial Grants Fund in honor of UPS’s 100 year anniversary. UPS’s fund has issued USD 1 million to three microfinance organizations that support micro-entrepreneurs across the globe. ACCION International will receive USD 400,000, Opportunity International will receive USD 390,000 and FINCA International will receive USD 210,000. The creation of the Centennial Grants Fund is the first time UPS has dedicated such a large portion of its corporate philanthropy to microfinance and micro-lending.
MICROCAPITAL STORY: Indian Government to Set Up Two New Microfinance Funds in Conjunction with Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD)
The Indian Finance Minister, P. Chidambaram, has announced that his government will be establishing two new microfinance funds to help provide easier credit access for the nation’s poor. The two funds, the Financial Inclusion Fund and the Financial Inclusion Technology Fund, will be worth Rs 5 billion (USD 127 million) each.
PAPER WRAP-UP: Beyond Good Intentions: Measuring the Social Performance of Microfinance Institutions, by Syed Hashemi
Focus Note no. 41, May 2007, by CGAP. 12 pages, available at http://www.cgap.org/portal/site/CGAP/menuitem.da0167f15fefd30167808010591010a0/
Syed Hashemi at CGAP, the Consultative Group to Assist the Poor, has put together this overview of social performance measurements of microfinance institutions (MFIs), outlining the requirements, current methods and need for a common set of indicators. He describes the eight most common current systems and also introduces the Common Reporting Initiative that has been designed by the Social Performance Task Force (founded in May 2005 by the Argidius Foundation, CGAP, and the Ford Foundation) to provide a common set of indicators with which all the systems can work.
PAPER WRAP-UP: Beware of Bad Microcredit by Steve Beck and Tim Ogden
By Steve Beck and Tim Ogden. Harvard Business Review, September 2007, Vol. 85 Issue 9, pp 20-22, 2 pages
In their short article published in the Harvard Business Review, Steve Beck and Tim Ogden warn that, though microcredit programs can be highly effective, companies need to exercise caution before investing in them because of the risk for such investments to backfire, both from a social development and a public relations standpoint.
PRESS RELEASE: IBM Partners with Grameen Foundation to Expand Open-Source Microfinance Software Platform Mifos
Effort to expand Mifos functions to better serve broad array of microfinance institution (MFI) technology needs
WHO’S WHO IN MICROFINANCE: MicroCredit Enterprises
MicroCredit Enterprises is a non-profit organization based in Sacramento, California, that leverages private capital to promote micro-enterprises throughout the developing world by issuing loans and guarantees to creditworthy microfinance institutions (MFIs). Founded in 2005, MicroCredit Enterprises’ loan portfolio includes 17 MFIs in 12 countries, impacting 235,000 poor people. The balance of total loans issued is USD 9.3 million and MicroCredit Enterprises’ current loan default rate is 0.00%. The organization has a low operating expense, with approximately 3% of its loan portfolio or USD 300,000 allocated to budgeted expenditures. The low operating expense is possible since MicroCredit Enterprises’ senior management team, with the exception of the Senior Vice President for Portfolio Management, serve the organization on a pro bono basis.
PAPER WRAP-UP: Microfinance: An Emerging Asset Class for Equity and Debt Investors, by Marco Coppoolse
By Marco Coppoolse. A White Paper Published by Microcapital in August 2007. 10 pages. Available at www.microcapital.org/downloads/whitepapers/Emerging.pdf
Mr Coppoolse supports the nascent microfinance asset class in two ways with his whitepaper, which was published by MicroCapital today. First he shows the strength and potential of the sector with some innovative research on nine of the leading MFIs (microfinance institutions) in the world. In the process he introduces a new performance indicator, “comparable return on equity” (CRoE) to be used alongside current indicators to help advise potential equity and debt investors on their microfinance investment decisions.
The conclusions are that the industry show high growth and high returns on a global basis, is still underleveraged, has high expense ratios, has good asset quality and has returns of a global nature that show no geographic bias.
PAPER WRAP-UP: Credit Information Systems in Less-Developed Countries: A Test with Microfinance in Guatemala, by Jill Luoto, Craig McIntosh and Bruce Wydick
By Jill Luoto, Craig McIntosh and Bruce Wydick, published by the University of Chicago Press, January 2007, 42 pages, available on the Microfinance Gateway at http://www.microfinancegateway.org/content/article/detail/41758
The paper written by Jill Luoto, Craig McIntosh and Bruce Wydick explores the impact of credit information systems on microfinance institutions (MFIs) in developing economies. It is divided into five sections and presents data that attempts to measure the effect of a credit information system on a Guatemalan MFI.
NEWS WIRE: HSBC First Foreign Bank to Launch China Rural Bank
PAPER WRAP-UP: E-banking with the Poor: Opportunities and Implications for Microfinance Providers, By Stuart Mathison
By Stuart Mathison, published by the Foundation for Development Cooperation (FDC), March 2007, 4 pages, available at http://www.microfinancegateway.org/content/article/detail/41751Stuart Mathison’s paper explores the impact of e-banking on microfinance. He highlights information and communication technologies (ICT) and their potential uses. He argues ICT innovations are crucial elements in the industry’s long-term objectives. Yet, core business models and methodologies that have served microfinance for years will require adaptation. Microfinance institutions (MFIs) need to reevaluate and revise policies in order to successfully implement new technologies.
MICROCAPITAL STORY: Bangko Sentral ng Pilipinas Decreases Regulations of Agriculture and Microfinance Lending in the Philippines
Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has lessened credit regulations for bank loans in the agriculture and microfinance sectors. According to the Governor of the BSP, Amando Tetangco Jr., there are two specific measures that the BSP has adopted. First, the BSP has created the Micro-Agri Loan Product (MAP), agricultural bank loans formerly governed by rules for regular loans which now fall under the requirements for microfinance loans. Secondly, non-bank microfinance institutions (MFIs) will now be considered, within the Filipino banking system, as small enterprises.
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.
Central Bank Nigeria (CBN) Prepares for Microfinance Certification Programme to Commence in 2008
Following news that the Central Bank Nigeria (CBN) would impose new regulations on microfinance banks last year (see article on microcapital.org) the CBN is preparing a systematic certification programme for microfinance banks operating in Nigeria. When the regulations were announced last year the deadline imposed for microfinance institutions (MFI’s) to comply with the new measures and convert to microfinance banks was December 2007. Once this deadline has passed and the micro-banks are all regulated, the certification process will begin (January 200). It forms part of a capacity building programme to try and make the domestic microfinance industry more robust and transparent. The CBN intends to base the certification on international best practices, and expects to enforce compliance with the certification requirements within 3 years.
IDB’s Report Concludes that Microfinance Outreach has Increased Immensely in Latin America and the Caribbean, but still has a Long Road Ahead
The success attained by microfinance institutions in recent years, has greatly expanded the outreach of the financial system to millions of households in Latin America and the Caribbean. However, although previous measurements of success have been made on a general level, the enclosed report by the Inter-American Development Bank adequately explores the magnitude of the microfinance market in Latin America and the Caribbean.
Proof of Microfinance’s “Social Impact”? Look at Price in Bangladesh
According to the head of ASA’s new private equity fund, Dirk Brouwer, the Bangladeshi microfinance market is almost saturated with micro-loans. In by far the largest microfinance market in the world, three Bangladeshi microbanks åö Grameen, BRAC, ASA åö serve 20 million clients in a market of 25 million potential borrowers. As this market approaches saturation, ASA has now lowered its rates, forcing the others to follow. The maturing microfinance market in Bangladesh means poor people pay less for capital. While significant resources are spent each year in microfinance to measure “social impact,” this measure åö price åö is beautiful in its simplicity.
The Grameen Foundation’s Microfinance Awards Honors LAPO of Nigeria, Pro Mujer Bolivia, and the Ford Foundation’s Asset Building & Community Development Program
The Grameen Foundation presented its annual Microfinance Awards this year on November 9, 2006 in New York City. LAPO of Nigeria received the Excellence in Microfinance Award and Pro Mujer Boliva received the Pioneer in Microfinance Award. A third award was introduced and presented to the Ford Foundation’s Asset Building & Community Development Program, a program that develops models to measure how the lives of microfinance clients have changed.
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Unitus Releases the Details of Its Efficiency-Enhancing Initiative Funded for $1.46m by the Gates Foundation
Unitus, a global non-profit organization which assists microfinance institutions (MFIs) with accessing market capital, officially announced a USD 1.46 million grant from the Bill and Melinda Gates Foundation. The grant money will fund a new project geared toward enhancing efficiency within the microfinance industry. Unitus will analyze the business practices four of its “partner MFIs,” and recommend steps to improving their overall business efficiency. The ultimate goal is to create a report at the end of the three-year project which will provide insight into efficiency-enhancing measures that can be utilized by MFIs across the globe. According to Unitus’ overview of the project, the four MFIs which most likely will be researched are Grameen Koota (from India), Bandhan (also Indian), Pro Mujer Mexico, and Fondo Inversion Social (Argentina).