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> Posted by Tyler Owens, CFI Staff
The current era of financial services for the poor is marked by the growth of high-tech delivery mechanisms, innovative start-ups, new socially responsible investing models, and more traditional banks growing their portfolios of base-of-the-pyramid clients. Different players in increasingly crowded markets often collide in trying to win over more clients. Just one recent example is the newly public Alibaba, which has issued more than $16 billion in small loans over the last three years through its SME loan company AliFinance. The result of all this can lead one to question the role that traditional MFIs will play in the years and decades ahead. What will be their unique value proposition and how will they earn and maintain market share and the loyalty of their clients?
There is evidence that microfinance industry practitioners and stakeholders are not prioritizing questions of relevance and long-term customer retention. All too often, thinking strategically about the place of an MFI in a rapidly changing financial services landscape takes a back seat to the daily crush of competition and loan book performance. The 2014 Microfinance Banana Skins report—which is built on surveys of industry practitioners and insiders—concluded that the most urgent risks the industry faces are those of day-to-day business operations, such as credit control, competition, and management quality. The report went on to say that “longer term risks associated with the survival and evolution of the industry such as technological change, product development and funding are considered to be less urgent – and are less well defined.” It concluded that paying scant attention to long-term risks in the industry—at a crucial point in its development—may be a serious risk in itself.
> Posted by Maura Hart, Communications Manager, Microfinance CEO Working Group
In conjunction with the release of two new publications on over-indebtedness, the MCWG has launched the Over-Indebtedness Transparency Discussion Forum as a platform for discussion and encourage readers to join in. We invite you to share your thoughts and questions with other microfinance practitioners.
Understanding the causes and potential remedies for over-indebtedness is critical to socially responsible lending. The fallout from over-indebtedness can be extensive, not only to the clients whose inability to repay loans can lead to social, economic, and personal problems with long-lasting repercussions, but if over-indebtedness is widespread, it can create adverse economic impact on the community and ultimately cause a significant economic crisis in that region. We have seen tragic examples of this in Bolivia and India just in the last 15 years.
Recognizing the ongoing urgency of this issue, the Microfinance CEO Working Group – a collaborative effort by the leaders of eight pioneering microfinance organizations – Accion, FINCA International, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking – commissioned two new studies:
The Working Group and our colleagues in the socially responsible lending community are anxious to avoid a debt crisis in Mexico, similar to those that have caused major upheavals in other countries. The Working Group commissioned Over-Indebtedness in Mexico: Its Effect on Borrowers to learn of the causes of over-indebtedness in Mexico directly from borrowers and those who are on the frontlines of the loan application and approval process.
Over-Indebtedness: A Risk Management Approach is designed to help other microfinance institutions (MFIs) identify the leading indicators of the trend toward over-indebtedness and mitigate the risks—and ultimately reduce the likelihood that over-indebtedness will happen. The study examines the leading indicators of over-indebtedness and suggests steps MFIs can take to avoid over-indebting their clients. It also identifies the risk mitigants and controls that will reduce the likelihood of MFIs being affected should over-indebtedness hit the wider market.
We hope these two papers will be the catalyst for an open dialogue among practitioners and thought leaders in the microfinance sector so that we might collaborate to develop preventive solutions. As these initiatives become established, the Working Group will share these resources with other MFIs and the microfinance sector. We also plan to provide additional platforms to continue the fruitful discussion of over-indebtedness remedies.
> Posted by Elisabeth Rhyne, Managing Director, CFI
I was recently asked to give a talk at the University of Pennsylvania’s 8th (!) annual Microfinance Conference. This year’s theme, “Microfinance Beyond Its Roots” set me in search of ways in which the microfinance industry is moving into areas beyond its original microcredit core. Of course, this process has been going on for a long time, and so there are many topics to choose from.
I decided to look at health care, partly because, as every staff member of a microfinance institution knows, health setbacks are one of the most frequent sources of repayment problems among low income clients. As they learned about the health vulnerabilities of their clients, microfinance organizations began to invest in experiments, bringing their businesslike approach to bear on a challenge that is often dealt with in heavily subsidized, non-market ways. Today, many of these programs have matured and grown, even as new ideas are being tested.
I looked among the organizations belonging to the Microfinance CEO Working Group, and I found that nearly all have something exciting going on in health care. Approaches include some combination of direct health care service provision, health insurance coverage, and education. Many are using technology as a means of reaching people at scale and low cost.
The meetings associated with group lending provide a convenient and cost-effective platform for health services, and adding a health component to group microcredit is probably the earliest and most widespread model. Health education was perhaps the starting point, as pioneered by Freedom from Hunger and also implemented by Opportunity International. Today the services often reach farther (while health education continues to be important). ProMujer, for example, directly employs nurses and other health practitioners to staff fixed and mobile clinics available to ProMujer members. They focus on maternal and reproductive health, as well as screening for the chronic diseases that are increasingly major health issues in Latin America. Hundreds of thousands of women get access to health care through ProMujer’s efforts.
> Posted by Center Staff
The Financial Inclusion 2020 Global Forum is a few days away! Kicking off with side sessions this Sunday the 27th on persons with disabilities and the Microfinance CEO Working Group, the landmark event for expanding global financial inclusion is almost here.
Taking place on October 28-30 in London, the event will convene approximately 300 leaders in financial inclusion, spanning sectors and industries, in a collaborative environment where they can map the action agenda for achieving financial inclusion by the year 2020. Participants include key players from the financial sector, technology providers and the corporate sector, international non-profits, and public policymakers. For the full list of attendees, click here.
The Forum agenda includes an assortment of session types, with a number of opportunities for participant engagement. In one roundtable breakout session, participants will discuss how to take the Roadmap recommendations from ideas to action, identifying priorities for implementation. Other sessions include a Forum-opening discussion on factors that put financial inclusion by 2020 within reach, a plenary on mobile money and spurring innovation, a presentation on the forthcoming CFI report Opportunities & Obstacles in Peru, and a fireside chat and Q&A with Ajay Banga and Michael Schlein, CEO’s of MasterCard and Accion. For the full agenda, click here.
Along with Banga and Schlein, Forum speakers include Cherie Blair, Founder of the Cherie Blair Foundation for Women, Aigboje Aig-Imoukhuede, CEO of Access Bank, Nick Hughes, Founder of M-PESA and M-KOPA, Duvvuri Subbarao, former Governor of the Reserve Bank of India, and Bindu Ananth, President of IMFR Trust. For the full speakers list, which includes a handful of newly confirmed speakers, click here.
> Posted by Center Staff
After months of planning, the Financial Inclusion 2020 Global Forum, October 28-30 in London, is coming into view. We’ve shared a few rounds of Forum updates here on the blog over the past weeks (see here and here), and we’re happy to report that more exciting new speakers have been confirmed, and more side sessions have cropped up. Here are the new speakers:
- Luis Gallegos, Permanent Representative of Ecuador to the U.N. Office at Geneva
- Bill Sheedy, Global Executive, Corporate Strategy, M&A, Government Relations and Europe, Visa, Inc.
- Edward Effah, Managing Director, Fidelity Bank
- Alexia Latortue, Assistant Deputy Secretary for International Development Policy, U.S. Treasury
- Carlos Lopez Moctezuma, Global Director for Financial Inclusion, BBVA
- Jean-Claude Masangu, Former Governor, Banque Centrale du Congo
- Bindu Ananth, President, IMFR Trust
- Nachiket Mor, Chair, Reserve Bank of India Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households
- Tony Goland, Director, McKinsey & Company
- Isaac Awuondo, Group Managing Director, CBA
- Gino Picasso, CEO, GloboKasNet
Complimenting the core agenda, there are a number of side sessions convening before and after the Forum. As we’ve mentioned, there will be two special side meetings on financial inclusion for persons with disabilities held before the Forum, the evening of October 27 and the morning of October 28. The event of the 28th, which is open to Forum participants and the public, is a panel of international experts that includes Luis Gallegos.
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Global loan portfolio growth in developing countries slowed in 2011; total number of clients in developing countries shrank slightly in 2011 but increased in Africa and Latin America; and various initiatives aimed at ensuring socially responsible practices have received commitments on industry-wide standards and frameworks over the past few years. These are some of the takeaways from this year’s Microfinance Barometer, an annual report produced by Convergences 2015 that offers a global overview of microfinance activity. The report series shares recent industry figures and trends, and highlights best practices across stakeholder groups.
This year’s report explores microfinance activity in developing and developed countries, and examines mobile money, capacity building, responsible investing, client protection, and social performance management, among other pertinent topics. The report also features an article from Deutsche Bank’s Asad Mahmood on microfinance and ethics, a feature on Accion Texas Inc., which manages the largest microloan portfolio in the United States, and a call to endorse the Global Appeal for Responsible Microfinance. Other key findings include:
- Global loan portfolio in developing countries totaled $US 78 billion in 2011, with portfolio growth slowing to 15 percent compared to 25 percent in 2009
- Activity in developing countries remained concentrated in 2011, as the leading 100 institutions represented 80 percent of the total lending portfolio and 75 percent of borrowers
- Client outreach in developing countries totaled 94 million in 2011, reflecting a 3 percent decrease since 2009
- Still affected by the Andhra Pradesh crisis and subsequent shutdowns of activity, in 2011 client outreach decreased by 10 percent in South Asia and by 20 percent in India
- Client outreach increased by 15 percent in both Africa and Latin America in 2011
- Local funding continues to drive the developing-country sector through increasing deposits and borrowings
- In 2011, 54 percent of institutions in developing countries provided both credit and savings, while 26 percent offered insurance products, and 54 percent offered non-financial services Read the rest of this entry »