By Xavier Reille and Jasmina Glisovic-Mezieres, CGAP, with research assistance from Yannis Berthouzoz, Symbiotics, published by Consultative Group to Assist the Poor (CGAP), April 2009, CGAP Brief, 4 pages, available at:
http://www.cgap.org/gm/document-1.9.34437/CGAP%20Brief_MIV_FinancialCrisis.pdf
Sahara Mutual Fund (SMF), an asset management company, has lodged a draft offer document with the Securities and Exchange Board of India (SEBI) to create the Sahara Daily Fund (SDF). The SDF will be a daily systematic investment plan (SIP) where people can invest with a minimum of 10 Indian Rupees (Rs.) (USD 0.20). The SDF is aimed at providing daily wage earners with a microfinance saving scheme. Units are purchased and can be traded on any business day. There will be a dividend option (payout or reinvestment) and a growth option. Dividends will be distributed, subject to profits being available, based on the units held by the account holder.
The ‘Alert 1 Manggarai Protection Card’, a microinsurance product which protects against flood, has been jointly launched by Indonesian insurance company Asuransi Wahana Tata (AWT) , German reinsurer Munich Re and the German government’s Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH. AWT is Munich Re’s local partner in Indonesia. A feasibility study has been conducted by Munich Re and GTZ and the product will now be available in 23 sub-districts in Jakarta. The product is literally a small card costingUSD 4.70 and guaranteeing a single payment of USD 23.90 . ‘Alert 1′ is the designation given to a flood if water rises to a minimum of 950 cm at Jakarta’ Manggarai Water Gate. The product was principally designed by Munich Re although most of the logistics, including marketing and sales, will be handled by AWT. Munich Re will act as the re-insurer of the product. GTZ conducted a great deal of background research, including household surveys in the 23 sub-districts and focus groups, and conducted a microinsurance awareness campaign consisting of training material and a brochure. The Promotion of Small Financial Institutions program, supported by GTZ in Indonesia, will be responsible for supporting the product in the field. AWT’s President Commissioner, Rudy Wanandi, comments, “With the right partners, a defined product and through our wide network within the region we are able to reach people and explain our innovative solutions. It will raise the insurance awareness of society and bring more economic stability and social security to people who live in exposed regions.” Currently, 3 percent of poor people have access to insurance products in the world’s 100 poorest countries.
The Islamic Development Bank (IDB) has extended a USD 10 million soft loan to the Development and Employment Fund (DEF) in Jordan to develop microfinance in the country. The IDB consists of 56 countries that are all members of the Organization of the Islamic Conference and contribute to the bank’s capital. In addition to facilitating trade among member countries, the IDB grants loans and provides funding for social and economic development projects in member countries. Because the financial operations of the IDB are intended to be consistent with Shariah law, the IDB also provides technical assistance and training in Shariah banking practices. For more information on the how Shariah law affects banking practices in general and microfinance in particular, see this MicroCapital Paper Wrap-Up. The IDB was founded at the Conference of Finance Ministers of Muslim Countries in Jeddah in December 1973 and commenced operations in October 1975. The DEF is a public government fund that commenced operations in 1991 with the objective of promoting independent employment and developing the small business sector. Initially under the government’s Industrial Development Bank, the DEF has been independently managed since 1992.
KfW Entwicklungsbank (KfW), a development bank that finances investments on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), has made significant contributions to the microfinance sector in recent years. Between January 2007 and April 2009, KfW has invested at least USD 250 million in microfinance services around the world, with its outstanding commitments to the sector likely making that number even higher.
Source: Financial Access Initiative
Source: Innpact
Venture Intelligence, a Chennai-based company that tracks investments deals, reports that there were 11 private equity investments worth USD 178 million into the Indian microfinance sector in the fiscal year ended March 2009, a 242 percent increase versus the three deals worth USD 52 million in the 2008 fiscal year. According to the report on mydigitalfc.com, private equity investments into the Indian microfinance sector began in January 2007.
The CEO of Equity Bank, Dr. James Mwangi, announced that in two months, the bank intends to cross-list on the Uganda Securities Exchange (USE). In April of 2008, Equity Bank bought 100% stake in Uganda Microfinance Limited, therefore forming Equity Bank Uganda. For more details on this acquisition, please read this Microcapital article. The bank has already lodged its application with the USE and the Capital Markets Authority, Kenya’s market regulator.
Globe, a leading telecommunications company in the Philippines, plans to introduce a mobile microfinance banking facility in partnership with Bank of the Philippines Islands (BPI) and Ayala Corporation, a large holding company in the Philippines. This will be the Globe’s first foray into microfinance. Chairman Jaime Augusto Zobel de Ayala announced the mobile microfinance banking facility at Globe’s annual stockholders meeting as part of the company’s plan to remain focused on its core business while creating new sources of growth by tapping into adjacent sectors that allow it to leverage off the company’s resources.
Macro to Micro: Performance of Investment in Microfinance in the Current Financial Crisis moderated by Andrea M Esposito, Managing Director (Standard and Poor’s NY) and sponsored by the Financial Women’s Associate of New York (FWA), Microfinance Club of New York.
May 7, 2009, at the McGraw-Hill Companies, Rockefeller Center, New York.
Despite the credit crunch Indian MFIs Grama Vidiyal, and Madura Microfinance reported strong credit growth as Indian banks eased credit in order to meet their priority sector targets. Grama Vidiyal’s disbursements grew 81.2 percent to USD 74.6 million from USD 41.2 million in the prior year. Madura’s disbursements grew 33 percent to USD 25.3 million from USD 18.9 million in the previous year.
Bandhan, an Indian microfinance institution, has sold Rs 180 crore (USD 35.4 million) worth of farm loans to several Indian commercial banks including Punjab National Bank (PNB), IndusInd Bank, Development Credit Bank (DCB), and Kotak Mahindra Bank, according to a report in the Economic Times.
The Inter-American Development Bank (IDB), a Latin America focused microfinance institution (MFI), and Corporación Financiera de Desarrollo (Cofide), a government-run development bank created in 1992, have developed a financing facility, which would allow Peruvian MFIs to support the country’s low-income housing market. Peru’s low-income housing deficit currently stands between 1.7 million and 2.1 million units. Both IDB and Cofide have allocated USD 10 million to supporting the program, which could potentially help six to ten micro-lenders and finance thousands of home loans.
The rate of job creation and recruitment in the Cambodian microfinance sector is expected to drop sharply this year, according to microfinance industry experts in the region. A press release on the Cambodian based newspaper Phnom Penh Post states that the current global crisis has forced the fast-expanding microfinance institutions (MFIs) in the region to scale down their recruitment plans. The release quotes Mr. Bun Mony, Chairman of the Cambodian MFI Sathapana Limited and member of the Cambodian Microfinance Association (CMA), as saying that the sector-wide employment growth in the region is expected to be only around 5 to 10 percent this year. As per available estimates, this year’s growth forecast is far lower than the past few years which had registered growths of nearly 30 percent.
Nguon Sovan and George Mcleod, writers for Cambodian newspaper The Phnom Penh Post, reported in March 2009 that although the microfinance institutions (MFIs) have so far avoided the worst of the current economic recession, they are expecting slower growth rates and higher interest rates as the global credit crunch hits foreign lenders who have been a key source of funding in the past. This is a new perspective on the Cambodian microfinance market, as in February 2009, The Phnom Penh Post published a far more optimistic article stating that although the growth of the microfinance sector this year would be at a slower pace than previous years, the industry is still stable and expected to grow at double-digit rates. For more on The Phnom Penh Post’s February 2009 article, please read this MicroCapital article.
In its latest issue Microfinance Insights explores how industry stakeholders have been affected by the global liquidity crisis. While microloan clients have been squeezed by the crisis and MFIs have struggled to work with less liquidity, equity investors continue to show interest in investing in large microfinance institutions, confident they will weather the crisis. In this issue the magazine surveys 120 MFIs and 40 investors from around the world.
Microinsurance provider Allianz Life Indonesia has announced that its microinsurance client base grew 417 percent in 2008, from 42 thousand policyholders at the end of 2007 to 183.8 thousand at the end of the year. Its line of microinsurance products, dubbed “Payung Keluarga” (meaning “Family Umbrella”), generated a modest premium income of USD 82.5 thousand for the year, up 350 percent from USD 19.6 thousand in 2007. The significance is not the profit, but rather the increase in business volume. Payung Keluarga offers a range of life insurance products from basic credit life protection, which prevents microcredit borrowers from leaving debt to their family, to products that offer additional payouts to family upon the death of a breadwinner. Allianz Life Indonesia settled 76 microinsurance claims in 2008.