by the MicroCapital Team -

Papua New Guinean Bank and Microlender Form Agreement, as Another Commercial Bank Enters Microfinance Investment

Papua New Guinea’s largest bank—Bank South Pacific (BSP)—and PNG Microfinance, a Papua New Guinean microfinance institution, signed an agreement recently, in which BSP acquired $1.37 million equity (40%) in PNG Microfinance. The other sixty percent of the company is owned by PNG Sustainable Development Program (PNG SDP), a Papua New Guinean non-profit, which initially created PNG Microfinance. Subscribed equity in the institution could reach up to $5.15 million in the near future, with the International Financial Corporation also planning on taking up a stake. Established in 2004, PNG Microfinance provides credit and financial services to micro and small businesses. It has almost 35,000 depositors, $1.55 million in total savings, and 1,400 active borrowers.

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) Main article discussed in entry, The National: “BSP Buys 40pc of PNG Microfinance.”
3) “IFC Projects.”

by the MicroCapital Team -

Dr. Yunus Goes Big Time while his US Spin-off Announces $50 Million Guarantee Fund for Microfinance Investment

Dr. Yunus, founder of Grameen Bank, a Bangladeshi microbank, sat down with the likes of Secretary of State Condoleezza Rice, Prime Minister Tony Blair, Secretary General KofÌÐ Annan, World Bank Group President Paul Wolfowitz, and Omidyar Network founder Pierre Omidyar at Clinton’s Global Summit. The Grameen Foundation USA (GFUSA), a non-profit spin-off of Dr. Yunus’ Bangladeshi microbank, took the opportunity to announce the launch of its $50 million guarantee fund, $5 million of which is already committed by Ms. McKinley, a California philanthropist who made her money as the director of Capital Research and Management Company. GFUSA seeks to hit its $50 million target within the next year.

Additional Resources

1) “Clinton Global Initiative.”
2) “New Fund Featured in Clinton Global Initiative Book Offers up to $50 million to Guarantee Microfinance Loans for the Poor.”
3) “California Couple Donates $10 Million to Combat Poverty Around the World.”
4) “Insight 15: Bridging the Finance Gap: ACCION’s Experience with Guarantee Funds for Microfinance Institutions.”
5) “IFC Supports Financiera Compartamos Bond Issue in Mexico through Partial Credit Guarantee First Investment Grade Bond Issue to Finance Microfinance Activities in Mexico.”
6) “Microcredit Development Fund Helps Transform Household Scraps into Sustainable Entrepreneurship.”

by the MicroCapital Team -

Will Documentation Kiosks in Rural India Increase Access to Credit?

An American company, Wyse Technology is working with Indian consulting company Comat Technologies to bring computer kiosks to 5000 villages around the Indian state of Karnataka. The ICICI Bank, Indian government, and the International Finance Corporation (IFC), which is a division of the World Bank (WB), will also participate. Six to ten networked terminals containing information about education, healthcare and land records will be set up in each village.

Some say simple projects to legally document property ownership will enable millions of villagers to access credit. However, the jury is still out on this theory. After property rights advocate and economist De Soto researched and published this theory, several quantitative studies contradicted his results. It is safe to assume that the security of private property under the law will increase access to credit by stabilizing the economy in general. The question before us is how best to achieve this property security in the context of the developing world. The current kiosk initiative may help us answer this important question if it can deliver property documentation efficiently to the general public in India.

Additional Resources

1) Main article discussed in entry: "Group Plans Kiosks for Rural India.”
2) “Thailand, China Eye Property Rights As Growth Key.” Reuters News 30 Jan 2003. Valisno, Jeffrey
3) "Thousands of Poor to Get Lots in Gov’t-Owned Land.” 21 Jan 2005. Field, Erica4) “Do Property Titles Increase Credit Access Among the Urban Poor? Evidence from a Nationwide Titling Program.” Working Paper. Harvard University: Jan 2004. Field, Erica
5) Review of de Soto’s “The Mystery of Capital.” Journal of Economic Literature. Dec 2001. Vol 39, No 4, pg. 1215-1223. Bishop, Matthew
6) Financial Times: "A Little Credit Can Go Far."
7) BBC News: "Insuring Ethiopians Against a Poor Harvest."
8) Center for International Private Enterprise: "An Interview with Hernando de Soto."
9) Cato Institute: "Hernando de Soto’s Biography."