SPECIAL REPORT: European Microfinance Platform (e-MFP) Action Group Proposes Best Practices for Microfinance Institutions Offering Remittances

MicroCapital: Please tell us a bit about the Remittances Action Group of the European Microfinance Platform (e-MFP).

Gera Voorrips: As you know, e-MFP is a membership organization that promotes members working together on specific topics on which they have a shared interest. In 2011, I took the initiative to engage several members who were working on remittances to launch an Action Group to collaborate on this topic. As one of the requirements of an e-MFP Action Group is to work toward specific results, we decided that we wanted to focus on best practices for microfinance institutions (MFIs) that want to be successful in remittances.

MC: What has surprised you during your time with the Action Group?

GV: There is a lot of talk about remittances being the perfect way to expand financial inclusion. You have had the G20 and others talking about it for 20 years, but if you look at the practitioner level – at the MFI level – not much is happening. My surprise was that so few MFIs are really active in linking remittances to other products.

MC: How does this tie into the “Best Practices Guide for Microfinance Institutions Active in Remittances” that the Action Group just released?

GV: There are many MFIs that are active as payout agents for money-transfer organizations, but really linking remittances to savings or loan payments – linking them to productive investments – that’s not happening a lot and definitely not through MFIs. In order to be successful in linking remittances to your products, you really need to have a thorough and multidimensional approach, and I think that is a key finding of the group. MFIs normally start as, and should start as, payout agents. But if you want to go this extra mile and link remittances to your savings accounts or let them be used to facilitate loan payments, then you really have to take into account the six dimensions that we are describing.

MC: These dimensions are: (1) business models and partnerships; (2) client needs and linked products; (3) marketing; (4) operations; (5) information technology systems; and (6) regulation. Please tell us about one.

GV: I’m thinking of how Banco ADOPEM of the Dominican Republic addressed the needs of its clients. ADOPEM’s top people saw they were paying out many remittances to families who weren’t their clients, so they started a program to encourage those receivers to start an enterprise instead of just sitting at home and consuming the remittance money. They did many financial literacy trainings, and that’s really because ADOPEM sees it as its task to have more financial inclusion in the local economy and to prevent people from becoming dependent on remittances. So that is clearly a social motivation. Now ADOPEM has a product whereby the sender of remittances directly repays a loan disbursed to a local client.

MC: How do you hope others will use the guide that the group created?

GV: Our purpose was to create a practical document targeted at MFIs. MFI managers can use it either for self-study or as a basis for training sessions for staff.

Gera Voorrips of European consultancy PHB Development has served as head of the Remittances Action Group of e-MFP since 2011. The “Best Practices Guide for Microfinance Institutions Active in Remittances” is available in English as well as in French

This description of the work of one of the eight Action Groups of the European Microfinance Platform (e-MFP) is sponsored by e-MFP, a 130-member network located in Luxembourg.

Additional Sources and Resources:

European Microfinance Platform (e-MFP) to Host European Microfinance Week, November 12-14, 2014, With On-site Reporting by MicroCapital

MicroCapital’s coverage of European Microfinance Week since 2012