Recently addressing loan officers from the Ark Finance Company Ltd. (TAFCOL), a local microfinance institution (MFI), Mr. Lance Kashugyera of the Finance Ministry indicated that MFIs should be designing measures to mitigate risks.
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MicroCapital is Pleased to Introduce the Symbiotics Microfinance Index
Today, MicroCapital.org launched the Symbiotics Microfinance Index (SMX) on our website. The SMX is made up of publicly listed global fixed income funds that invest primarily in microfinance. Funds are weighted in the index according to their total assets, and they must provide monthly valuations and use U.S. dollars as their investment currency, in addition to having a valid ISIN market identifier. The SMX has charted growth of 5.01% over the trailing 12 month period with a volatility of just 0.49%.
Index values are indicative of the growth of microfinance assets held by the funds. The index value of 100 for January of 2004 is the baseline for performance measurement, and each additional point is equivalent to one percentage point of growth across the microfinance industry. The index is revalued during the first week of each month and is not adjusted for inflation.Symbiotics SA, Information, Consulting & Services is the Swiss firm that publishes the index. Symbiotics main line of business is microfinance investment intermediation services as well as other services.
Another Scorecard for Microfinance Investing: Grameen Foundation USA Introduces Poverty Progress Index
If there is one thing that the microfinance industry needs, it’s more and better performance indices. It looks like that is precisely what the Grameen Foundation USA (GFUSA) is serving up with a novel tool for tracking poverty alleviation called the Poverty Progress Index (PPI).
The UN Millennium Development Goals have placed a large challenge on the table: halve the number of people living in extreme poverty by 2015. In order to meet this challenge, effective means of measurement and evaluation are essential. In response to this need, Grameen Foundation USA has created this PPI measurement and management tool.
Continue reading “Another Scorecard for Microfinance Investing: Grameen Foundation USA Introduces Poverty Progress Index”
Does Microfinance Really Reduce Poverty? What You Should Know Before Investing
The question of poverty reduction is for good reason of the highest importance to those within the microfinance community. Maybe the answer is intuitive to you, but the details make for great controversy. A recommended retrospective on the topic (52 pages long):
"Written by Nathanael Goldberg, Measuring the Impact of Microfinance: Taking Stock of What We Know provides an interesting guide on the effectiveness of microfinance programs and the divergence in opinion among experts. It examines roughly 100 impact evaluations released since 1986, including Reaching the Poor with Effective Microcredit, Mahabub Hossain and Catalina P. Diaz’s report on Grameen-style microfinance in the Philippines, and Microfinance and Poverty, a new study published in 2005 by Shahidur Khandker."
Mr. Goldberg conducts a comprehensive review of studies evaluating the impact of microfinance, something that up till now has been lacking. Although there are discrepancies among the data, he finds evidence that microfinance impacts include increases in empowerment, contraceptive use, and improved nutrition. He also highlights the key determinants of impact which include the control of loan, incoming poverty level and family crises. Measuring the Impact of Microfinance: Taking Stock of What We Know is certainly worth a read. Links to the original studies are also available and useful for a more in-depth look. While the paper provides clarity in many respects, this is still an area of tremendous debate åö what are the types of impacts investors want to see? And what is the best approach to measuring impact? The battle roars on between those favoring quantitative methods and others who back social performance measures.
ABN AMRO Bank Makes $4.5 Million Microfinance Investment into Indian Microfinance Institution SKS
Dutch ABN AMRO Bank recently loaned Indian SKS Microfinance Private, Ltd., a microfinance institution (MFI), $4.5 million. With over å¥855 billion in total assets as of June 2005, ABN AMRO ranks as the 20th largest commercial bank in the world, measured by tier 1 capital (equity capital and disclosed reserves).
Established in 1997 as a “non-profit society”, SKS India began operations in microfinance services, then incorporated SKS Microfinance PrivateLtd (SKSML) in 2003 as a “for-profit spin-off” that took over the microfinance operations specializing in savings, loans, and insurance. As of June 2005, the organization had total assets just over $458 million and total loans close to $400 million for about 87,000 clients.
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) “ABN AMRO: Profile.”
3) “SKS: Product and Services.”
4) “SKS Milestones.”
PlaNet Finance Lands Another Big Bank: ABN AMBRO Bank to Award Excellence in Indian Microfinance
After a busy year of successes, PlaNet Finance announced a partnership with ABN AMBRO Bank, the 20th largest bank in the world measured by “tier 1 capital (equity capital and disclosed reserves) to establish an award to Indian microfinance organizations. The Microfinance Process Excellence Awards (MPEA) is made up of 18 awards which will be given to small, medium, and large—so-called “Flint, Flame, and Fire” categories—microfinance institutions throughout India.
Additional Resources
1) “Microfinance Process Excellence Awards 2006.”
2) “Corporate Profile.”
3) “MPEA 2006.”
4) “Tier 1 Capital.”
5) “MPEA 2006: Number of Awards.”
MicroCapital Paper Review: “Microfinance and Socially Responsible Investment in Latin America”
To access this article visit: “Microfinance and Socially Responsible Investment in Latin America”
Authors: J. Cheng and M. De Sousa-Shields
Published by: Enterprising Solutions Global Consulting and the Inter-American Development Bank, September 2003
Quantitative Information: The statistics on Latin American microfinance are drawn from other sources. The article has information on “socially responsible” investment (SRI). Three to five billion dollars are invested in (SRI) projects each year, but only $250 million of that goes to microfinance. The bulk of the article deals with the qualitative reasons for this relatively low number.
Qualitative Information: The article argues that main reason for low investment in microfinance is that investors do not understand the industry, and therefore do not have the expertise to decide where to invest in microfinance. One solution is to invest in intermediary funds, which have the expertise to evaluate MFIs and make good investments. Rather than educate investors about MFIs, the article argues that MFIs should adapt to investors. MFIs lack of credibility with investors because many are from non-profit backgrounds. The article recommends that MFIs use financial tools that investors understand, such as portfolio securitization and bond offerings. Lastly, MFIs need better measurements of their social impact for investors.