This morning, following a day of member meetings, the European Microfinance Platform (e-MFP) opened its eighth European Microfinance Week, which is themed “Combining Strength, Delivering Results” and aims to address the loss of confidence in many circles that microfinance benefits poor people. In the opening plenary session, Sanjay Sinha, managing director of India’s Micro Credit Rating International Limited (M-CRIL), said that, “Moderate growth is good for inclusion. Rampant growth, which is what we had for a long time in India, is a recipe for disaster…. In order to reduce growth, we need to temper the egos of the promoters of microfinance institutions (MFIs). And we all know we need to dampen the expectations of investors – I’m talking mainly of the Indian commercial banking sector.”
Regarding the idea that microfinance may contract due to reputational and other problems, Mr Sinha argued, “We need to be careful about abandoning systems that will reduce income inequality,” which has been increasing worldwide in recent years.
On the issue of expanding the product offerings of MFIs, Bob Annibale, the global director of microfinance at US-based bank Citi, said that, “We have enormous interest among large buyers to reach small producers that could be certified for quality and labor and organic practices.” To serve small producers, he continued, MFIs must “move from group lending to individual loans based on the agricultural season.” Such loans often are repaid in a lump sum at harvest time rather than via equal weekly or monthly payments.
Regarding improving outreach, Mr Annibale cited the example of Mexico where he said 6 million banking transactions have been recorded at 10,000 retail shops acting as banking agents.
Ousmane Thiongane, chairman of the Benin-based Africa Microfinance Network (AFMIN), reported that AFMIN is focusing on mobile banking because it “is not being used to its full potential to have wider reach.” Mr Thiongane, who also serves as managing director of Senegalese MFI Union des Institutions Mutualiste Communautaire d’Epargne et de Credit Dakar (U-IMCEC) added that having a range of service providers is important: “We need to strengthen the national associations [and] break with the old idea that you go into a country and create two or three institutions and that’s that.”
Regarding reputational risks, Mr Thiongane said that interest rates have been an issue: “In Africa, the sector has suffered because some people feel that, instead of getting people out of poverty, microfinance has aggravated their poverty. We have to be more transparent. Financial education is important. MFIs should not be too commercial; we have strike the right balance.”
In order to counter those who say microfinance does not benefit poor people, Mr Sinha suggested focusing on statistics. For example, he cited data indicating that – of 70 million savings accounts in India with balances under the equivalent of USD 500 – 20 million are housed at MFIs.
This content is sponsored by e-MFP, the organizers of European Microfinance Week. It is the third in a series of articles covering the proceedings of the event, which is taking place in Luxembourg from November 14 to November 16. MicroCapital is reporting onsite throughout this time.
Additional Resources
November 14, 2012, “SPECIAL REPORT: European Microfinance Platform Remittances Action Group, GIZ, PHB Development Release Handbook: “Financial Literacy for Remittances and Diaspora Investments,” https://www.microcapital.org/special-report-european-microfinance-platform-remittances-action-group-giz-phb-development-release-handbook-financial-literacy-for-remittances-and-diaspora-investments/
November 14, 2012, “SPECIAL REPORT: At European Microfinance Platform’s Microfinance Week, ADA, REDCAMIF Detail Support for MFIs, National Networks in Developing New Products as Part $7m Effort in Central America, Caribbean,” https://www.microcapital.org/special-report-at-european-microfinance-platforms-microfinance-week-ada-redcamif-detail-support-for-mfis-national-networks-in-developing-new-products-as-part-7m-effort-in-central-america/
September 22, 2012, “MICROFINANCE EVENT: European Microfinance Platform’s Microfinance Week, Luxembourg, November 14-16, 2012, Onsite Reporting to be Provided by MicroCapital,” https://www.microcapital.org/microfinance-event-european-microfinance-platforms-microfinance-week-luxembourg-november-14-16-2012-onsite-reporting-to-be-provided-by-microcapital/
October 11, 2011, “MICROCAPITAL BRIEF: MicroFinanza Rating, MicroRate, Planet Rating Sign Microfinance Rating Agency Code of Conduct, Sanjay Sinha of Micro-Credit Ratings International (M-CRIL) Criticizes Commercial Rating Agencies as “Too Liberal” with Microfinance Institutions,” https://www.microcapital.org/microcapital-brief-microfinanza-rating-microrate-planet-rating-sign-microfinance-rating-agency-code-of-conduct-sanjay-sinha-of-micro-credit-ratings-international-m-cril-criticizes-commercial-rat/
MicroCapital Universe Profile: Citi: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Citigroup
MicroCapital Universe Profile: Africa Microfinance Network: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Africa+Microfinance+Network+%28AFMIN%29
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/
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