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Truelift’s Progress and Future in Pursuit of Transparency and Accountability in Poverty Alleviation Efforts
January 21, 2015 in Center for Financial Inclusion, Client Focus, Microfinance, Resources, Social Performance | Tags: Microcredit Summit Campaign, MIX Market, Poverty Alleviation, Pro-Poor Performance, Pro-Poor Principles, RESULTS Educational Fund, Transparency, Truelift, Truelift Indicators Tool | Leave a comment
> Posted by the Steering Committee of Truelift
Institutions built upon a promise of poverty alleviation must be motivated and supported to make good on that promise. This continues to be the goal and promise of Truelift, even as we depend more than ever on volunteer leadership and support for Truelift’s journey toward greater transparency and accountability in pro-poor development. Before looking to the future, let’s review where we’ve been.
Among the diverse, and mostly complementary, objectives sought by financial inclusion and social enterprise efforts, poverty alleviation has been by far the most important and the most widely adopted objective, whether in the minds of practitioners, supporters, or the general public. Yet this objective challenges our collective ability to be clear about our intended destination and to show that we are on the right path toward it. It is even more difficult to show how far along this path we have come and how far we have yet to go. How do we motivate and support transparency and accountability for practitioners who claim to pursue poverty alleviation and for those who support them?
January 13, 2015 in Center for Financial Inclusion, Client Focus, Client Protection, Investing in Inclusive Finance, Resources, Savings, Smart Campaign, Social Performance | Tags: Accion Africa Board Fellowship Program, Client Protection Principles, Insurance, MasterCard Foundation, Microcredit, PIIF, Principles for Investors in Inclusive Finance (PIIF) Initiative, Responsible Investing, Savings, Social Performance, The Smart Campaign, Transparency | Leave a comment
> Posted by Karin Malmberg, PIIF Manager, PRI
How do institutional investors in inclusive finance ensure that their investee institutions manage their social as well as financial performance? How do these investors contribute to the sustainable growth of the industry? And, perhaps most importantly how do they ensure that end clients are fairly treated and adequately protected?
The Report on Progress in Inclusive Finance 2014 by the Principles for Investors in Inclusive Finance (PIIF) Initiative addresses these questions, analyzing data submitted by inclusive finance investors on their responsible investment practices.
December 9, 2014 in Center for Financial Inclusion, Client Protection, Events, Financial Inclusion, Investing in Inclusive Finance, Microfinance, Social Performance, Technology | Tags: Andhra Pradesh, Bandhan Bank, Client Protection, Financial Inclusion Equity Council, ICICI, India, Investing in Inclusive Finance, Microfinance, Narendra Modi, Overindebtedness, Pradhan Mantri Jan Dhan Yojana, Raghuram Rajan, Reserve Bank of India, responsibility Investments AG, State Bank of India | Leave a comment
> Posted by Andrew Fixler, Associate, CFI
“Cautious optimism” was the overriding sentiment towards the Indian financial inclusion investment space at the fall 2014 Financial Inclusion Equity Council (FIEC) meeting in Zurich. Four years after the Andhra Pradesh crisis, in financial year 2014 the regulated microfinance market in India saw its loan portfolio grow by 35 percent and client outreach increase by 4.7 million individuals, achieving a record 28 million clients. Although, as FIEC member Christian Etzensperger of responsAbility Investments AG noted, this is “catch-up growth” for India, where only 35 percent of the adult population has a bank account. On an institutional level, the remarkable growth of Bandhan Bank, India’s largest microfinance institution, illustrates the successful scaling up of MFIs. While Etzensperger noted the “dynamic revival of the microfinance sector…partly due to the inertia of the Indian banks”, he also alluded to the significant role played by the policies of the newly elected Prime Minister, Narendra Modi, as well as those of the recently appointed Raghuram Rajan, Governor of the Reserve Bank of India. Indian investor sentiment in general soared on the news of these leaders taking the helm, a trend that clearly resonates in the Indian financial inclusion equity community.
What have these leaders done to inspire confidence in the trajectory of microfinance?
December 8, 2014 in Client Focus, Client Protection, Smart Campaign, Social Performance | Tags: Azerbaijan, Certification, Client Protection, Client Protection Assessment, Microfinance, Smart Assessments, The Smart Campaign | Leave a comment
> Posted by Dan Balson, Lead Specialist, The Smart Campaign
Readers of this blog are likely familiar with the Smart Campaign, a global initiative to embed client protection into the institutional culture and operating principles of the microfinance industry. Smart Certification, introduced last year, awards special status to microfinance institutions (MFIs) that can demonstrate that they meet strong standards of client protection.
Getting Smart Certification is not easy. A third-party certifier conducts a thorough desk review and extensive field visit where the candidate MFI’s policies and practices are placed under a microscope. To become certified, MFIs must be in full compliance with all the Smart Campaign’s indicators, both in letter and in spirit. These indicators are derived from the seven Client Protection Principles and touch on everything from appropriate product design to the existence of effective complaint resolution mechanisms. The certification process often requires an MFI to make significant adjustments to its internal policies and practices. But once certified, an MFI can affirm its responsible practices to investors, staff, partners, regulators, and clients alike. To date, 26 organizations worldwide have received certification, covering nearly 9 million clients.
VisionFund Azercredit became the first MFI in Azerbaijan and in the Caucasus region to acheive certification. The Smart Campaign sat down with Mehriban Yusifova, VisionFund Azercredit’s Head of Marketing & Product Development, to better understand the significance of certification from the MFI’s perspective.
Smart Campaign (SC): When and why did VisionFund AzerCredit decide to get Smart Certified? What inspired you to pursue your certification?
August 12, 2014 in Center for Financial Inclusion, Client Focus, Client Protection, Microfinance, Smart Campaign, Social Performance | Tags: Client Protection, Client Protection Principles, Collection Practices, Complaints Resolution, Ethical Staff Behavior, European Microfinance Platform, Financial Performance, Fundación Mundo Mujer Popayán, Microfinance, Overindebtedness, Privacy, The Smart Campaign, Transparency | Leave a comment
> Posted by Nadia van de Walle, Senior Africa Specialist, the Smart Campaign
Serve clients with suitable products. Prevent over-indebtedness. Be transparent and price products reasonably. Treat clients respectfully, listen to their grievances, and protect their privacy.
The seven client protection principles make undisputedly good sense on paper. It’s hard to argue against any one of these practices, either normatively or from the perspective of the financial bottom line. We assume that well-treated, well-understood clients using appropriate products through the right delivery channels are more loyal, satisfied, and likely to refer their friends and family, provide useful feedback, and repay loans. Right?
August 1, 2014 in Center for Financial Inclusion, Client Protection, Microfinance, Smart Campaign, Social Performance | Tags: Client Protection, India, Microfinance, Overindebtedness, The Smart Campaign | Leave a comment
This post was originally posted on the Grameen Foundation blog by Alex Counts, President and CEO of Grameen Foundation and a member of CFI’s Advisory Council.
As a result of a complex combination of unwarranted attacks and self-inflicted wounds, the microfinance sector in India experienced a crisis starting in late 2010 after many years of strong growth and recognition for its contribution to poverty alleviation and financial inclusion. When I was asked to give a keynote address at a microfinance conference in India in 2012, I said that it was important to leverage the sector’s strengths and accomplishments, while also addressing its failures and shortcomings.
I visited India in May and July and found that these things were finally happening and leading to on-the-ground progress as well as tangible support from both the outgoing and the newly elected Indian governments. And as this blog went to press, there was another promising development: the government published draft guidelines on creating a pathway for NBFC-MFIs to become specialized or “differentiated” banks, which would enable them to take deposits directly for the first time legally. (Though not all NBFC-MFIs would likely be eligible unless the “stringent norms” proposed are made more flexible.)
One of the highlights of the second trip was speaking with Alok Prasad, the CEO of theMicrofinance Institutions Network (MFIN), a respected microfinance industry association. He spoke eloquently about the progress the industry has made recently and the reasons behind it. Below are excerpts from our conversation.
Alex Counts (AC): I sense a new optimism related to Indian microfinance after some difficult years. Would you agree? How would you characterize the last 12 months in terms of how the Indian microfinance sector has developed? What were some of the key contributions of MFIN?
Alok Prasad (AP): Clearly the mood is buoyant, but not in an irrational way! Looking at the last fiscal year (April 1, 2013 to March 31, 2014), much has gone well for the industry. Growth, both in terms of gross loan portfolio and clients, has been strong. Portfolio performance stays at levels which commercial banks can only dream of (for unsecured lending). Branch networks have expanded, and new geographies have been covered. Funding (both debt and equity) has improved markedly. The regulatory environment remains broadly positive, notwithstanding the Microfinance Bill falling by the wayside.
In specific terms, the aggregate gross loan portfolio of MFIN’s member institutions (Non Banking Financial Company-Microfinance Institutions or NBFC-MFIs) stood at Rs. 279.31 billion (US$4.63 billion), an increase of 35%, over the prior fiscal year. Clients covered stood at 28 million, representing growth of 20% over the previous year. Debt funding grew by 46%, along with a definite revival of investor interest.
MFIN, I believe, has played a key role in bringing stability to the sector. Deep and sustained dialogue with the government and the Reserve Bank of India (RBI) has resulted in regulatory changes that are conducive to growth; a much greater appreciation of our industry’s role in promoting financial inclusion; and, the recognition that the industry is an essential component of the national financial architecture. From a systemic standpoint, the development of the credit bureau ecosystem had been a big win. As of this date, more than 150 million client records are present on the databases of two national bureaus. These records are updated on a weekly cycle; and, all lending is only after a bureau check. This has given remarkable results in controlling multiple lending and over-borrowing by clients. Our recognition by the RBI as the self-regulatory organization (SRO) for NBFC-MFIs is a sign of both a certain maturing of the industry and the regulator’s acceptance of that reality. A nice ‘new normal’ for an industry which just 18 months ago appeared deep in the throes of a crisis!
AC: MFIs outside of Andhra Pradesh have begun growing again. Can you give us a sense of this growth and how it compared to other parts of the financial sector? What are the main reasons? Are there risks?
May 22, 2014 in Center for Financial Inclusion, Client Focus, Client Protection, Microfinance, Policy, Smart Campaign, Social Performance | Tags: Banana Skins, CGAP, Client Protection, Client Protection Principles, Complaint Resolution, Fair Treatment, India, Microfinance, MIX Market, Myanmar, Product Design, Regulation, Smart Assessments, Social Performance Management, SPTF, The Smart Campaign, Transparency, Truelift, UNCDF, UNDP | Leave a comment
> Posted by Hema Bansal, India Director, the Smart Campaign
As a child growing up in India, I was always intrigued by stories from Myanmar, but disturbed by conflicts that it had witnessed. Not knowing much about the country, as an adult I still had an innate desire to visit. On May 7th and 8th, I attended the Responsible Finance Seminar, organized by Entrepreneurs du Monde (EDM), held in Myanmar’s city of Yangon. I was completely awed by the mystical peace of the city, I was also impressed by the demonstrations of support at the seminar for instilling client protection in Myanmar’s microfinance industry. It’s a great opportunity for a young market to secure responsible practices from its outset.
Myanmar, the second-largest country in Southeast Asia, remains one of its poorest. Decades of isolation have severely affected its development. In terms of financial inclusion, a large proportion of the population in Myanmar relies on informal lenders. The formal sector only serves about 20 percent of the population, largely because of the existing financial institutions’ limited capability.
In May 2011, President Thein Sein publicly recognized microfinance as a means of development by enabling local and foreign investors to establish fully privately-owned MFIs. Since the rationalization of licensing in Myanmar, around 110 MFIs have been registered. Deposit-taking institutions have been allowed to set-up shop rather easily due to low minimum capital requirements and the absence of separate prudential regulations from non-deposit-taking institutions, such as rules pertaining to reporting standards and portfolio quality management.
March 11, 2014 in Center for Financial Inclusion, Client Protection, Microfinance, Resources, Smart Campaign, Social Performance | Tags: Client Protection, M-CRIL, Microfinance, MicroFinance Transparency, MicroFinanza Rating, MicroRate, MIX, Planet Rating, Social Performance, Social Performance Task Force, The Smart Campaign | 26 comments
> Posted by Elisabeth Rhyne, Managing Director, CFI
Nearly every industry requires infrastructure to thrive, and this goes for the microfinance industry too. But the infrastructure that the global microfinance industry has constructed over the past two decades is looking a bit shaky today. Infrastructure investments are urgently needed to keep the industry sound and prepare it for the future.
One could argue what exactly constitutes the microfinance industry’s infrastructure, and there are a range of organizations to choose from, but for this conversation, let’s look at several key organizations dedicated to setting standards and providing information for microfinance globally: the Microfinance Information Exchange (MIX), the four specialized microfinance rating agencies, the Social Performance Task Force (SPTF), Smart Campaign, and Microfinance Transparency (MFT). These organizations, which perform vital functions for the industry, arose during two different phases of microfinance industry development.
The first generation of organizations – MIX and the rating agencies – were created to provide financial transparency and standards, primarily so that investors could identify well-performing institutions, and also so microfinance institutions could evaluate their own performance against common standards. It took a lot of work to create these organizations. MIX had to find ways to incentivize MFIs to report and to devise a system for data quality assurance. The founders of the rating agencies – Microrate, Planet Rating, Microfinanza Ratings, and M-CRIL – took substantial personal risk in devoting their careers to promoting financial transparency in microfinance. Together, these organizations have helped spread financial standards throughout the microfinance industry and contributed to improving the financial performance of MFIs, enabling the entry of private social investors who now contribute very importantly to the funding of microfinance. We sometimes now take financial transparency for granted, but if these organizations were to stop playing their role in upholding it, adherence to standards across the industry would undoubtedly drop, with consequences for investor interest, which up to now has remained strong.
March 7, 2014 in Branchless Banking, Center for Financial Inclusion, Client Focus, Financial Inclusion 2020, Microfinance, Resources, Social Performance, Technology, Women and Financial Inclusion | Tags: Alliance for Financial Inclusion, Bankable Frontier Associates, Data, Data Explorer, Gates Foundation, Global Findex, Grameen Foundation, GSMA, IFC, International Women's Day, Microfinance, Middle East and North Africa, Visa, Women, Women's World Banking | 2 comments
> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI
Tomorrow, people around the world will celebrate International Women’s Day. In honor of the day, and the tremendous impact that financial services can have for women, we’d like to highlight some of the top resources from the past year that focus on financial inclusion of women. Though there are many great resources out there, below are a few that have caught our attention.
Drawing from the Global Findex Database, the World Bank and the Bill and Melinda Gates Foundation created a briefing on the state of women’s access to and use of financial services globally. It’s a concise snapshot of financial inclusion data on women. It highlights gaps that persist for women, as compared to men, globally and across regions. It looks at variations in account ownership for savings and credit, as well as barriers to usage identified by women. And if you’re looking for more, I suggest exploring the Findex database or the CFI Data Explorer and conducting your own analyses!
DFID and GIZ on behalf of the German Federal Ministry for Economic Cooperation and Development prepared a toolkit aimed at policymakers, donors, and NGOs who want to learn how to design and implement programs to enhance the financial inclusion of women. It provides insight into factors that contribute to financial exclusion of women and offers recommendations to address access barriers. In addition, the toolkit provides methods for client segmentation as well as several illustrative case studies. Rather than suggesting focusing on women exclusively, the toolkit also recommends understanding the distinct needs of men.
December 20, 2013 in Center for Financial Inclusion, Client Focus, Client Protection, Microfinance, Microfinance CEO Working Group, Resources, Social Performance, Women and Financial Inclusion | Tags: Client Protection Certification, Gender Performance Initiative, Smart Campaign, Universal Standards for Social Performance Management, Women, Women's World Banking | 2 comments
> Posted by Jaclyn Berfond, Senior Associate, Network Engagement, Women’s World Banking
Women have long been the face of microfinance, a fact reflected by the mission and goals of the institutions that serve them. According to the Microfinance Information Exchange (MIX), most microfinance institutions (MFIs) claim to target women (74 percent) and just over half declare women’s empowerment or gender equality as an objective.
Big commitments are all well and good, but if we are going to espouse the importance of serving low-income women, we must be able to hold ourselves accountable. How do we do that?
For many years now, the microfinance industry has focused on financial performance, with sustainability and later profitability driving outreach. In the wake of crisis – often the consequence of rapid growth – the industry has re-focused on social performance, getting back to the basics of ensuring that financial institutions adhere to their mission of serving low-income clients. We strongly believe that there must be a balance between financial and social performance, and that in order to achieve either, the industry must take a good look at their clients – still predominantly women. By truly analyzing this client base, MFIs can both build the business case for serving women, and ensure that they are serving these women well. This is gender performance.
In 2011, Women’s World Banking launched the Gender Performance Initiative (GPI) to develop a framework that defines what it means to serve women and measures how effectively MFIs do so. We wanted to establish a set of indicators that would enable MFIs to consider not only how many women they serve, but how they can enhance their understanding of customers to tailor products, marketing strategies and delivery channels to meet women’s needs. The initiative also set out to demonstrate the benefits of financial inclusion for women and their households, as well as the benefits of gender diversity among staff, management, and board.
Developing the indicators. There is no easy place to start when it comes to measuring performance, and we wanted to be sure that the metrics we chose would truly tell us whether an institution was serving women well. First and foremost, we needed to start with the right questions, in the areas that matter most to women. Beyond outreach, we looked at product design and diversity, service quality, and client protection, as women have specific life-cycle needs and goals that must be considered. For example, women may need a convenient and confidential way to save for children’s education expenses, or an insurance product that offers cash benefits for hospitalization to cover lost income from time away from their business (and includes maternal health coverage). We also looked at the diversity of staff and management, because we believe that in order to be the best place for women customers, a microfinance institution should be a place that welcomes women employees and women leaders. Finally, we wanted to understand how serving women clients contributes to institutional financial sustainability, as well as outcomes for clients.