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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 | 25 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.
November 14, 2013 in Branchless Banking, Center for Financial Inclusion, Client Focus, Client Protection, Events, Financial Education, Financial Inclusion, Financial Inclusion 2020, Financial Inclusion for Persons with Disabilities, Governance, Microfinance, Microfinance CEO Working Group, Smart Campaign, Social Performance, Technology, Women and Financial Inclusion, Youth and Financial Inclusion | Tags: Financial Inclusion 2020, Global Forum, Microfinance CEO Working Group, Smart Campaign, Social Performance Task Force, Truelift | 4 comments
> Posted by Anne H. Hastings, Manager, Microfinance CEO Working Group
As I traveled to London to attend the FI2020 Global Forum, my mind was filled with many thoughts. First was excitement that I had been invited to attend when I was still very much a microfinance practitioner. I was still in the process of adjusting after 17 years living in Haiti struggling to build an institution that would be a model of a client-centric, double bottom line microfinance institution (MFI) committed first and foremost to reaching the very poorest people in Haiti and providing them a pathway to a better life. For me, this meant providing them with a full range of financial and social services. My commitment to these clients had been solidified through my years in Haiti but also by my service on the Smart Campaign Steering Committee and the Board of the Social Performance Task Force and more recently by my role as a practitioner advisor to Truelift.
But now that I was in the plane and on my way, I had taken on a new role: Manager of the Microfinance CEO Working Group, a collaborative effort of the CEOs of eight pioneering global microfinance networks – Accion, FINCA, Freedom From Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund International, and Women’s World Banking – all dedicated to advocating for more responsible microfinance practices and to instituting the highest standards of performance within their own MFIs. These eight CEOs represent 250 MFIs in 70 countries, serving some 40 million families. Suddenly I had been boosted from deep concerns about the future of poverty in one tiny country of 9.5 million to a preoccupation with the future of MFIs worldwide.
The Forum was a beautiful reflection of the often chaotic financial services marketplace of today where traditional banks, telecoms, retail stores, donors, investors, policymakers, regulators, and MFIs often collide in seeking to capture new markets. In attendance were the CEOs of institutions like Citi and MasterCard, along with several former Governors of Central Banks, technology innovators like the CEO of bKash, executives of insurance companies like MetLife and Swiss Re, Managing Directors of investment companies like Wolfensohn Fund Management, experts in alternative data systems like Cignifi. There were times when I thought maybe I had actually entered the wrong conference! Who were all these people, and what did they have to do with the future of microfinance?
November 7, 2013 in Branchless Banking, Center for Financial Inclusion, Client Focus, Events, Financial Education, Financial Inclusion 2020, Microfinance CEO Working Group, Social Performance, Technology, Women and Financial Inclusion | Tags: Alex Counts, Financial Capability, Financial Inclusion 2020, Global Forum, Grameen Foundation, Microcredit Summit Campaign, Microfinance CEO Working Group, Mobile Money, Truelift, Universal Standards for Social Performance Management, Women | 7 comments
> Posted by Alex Counts, President and CEO, Grameen Foundation
The Financial Inclusion 2020 Global Forum was a remarkable and historic convening. I was honored to have been invited to attend and co-facilitate an “ideas to action” roundtable about one of the five parts of the Roadmap to Financial Inclusion .
Immediately after the event I reached out to Elisabeth Rhyne to understand how I could help build on the groundwork laid at the conference. She suggested I write a blog post about my experience. My immediate reaction was that commenting on such a wide-ranging and successful effort was a bit daunting. But I felt it was worth a try.
Dissecting the Term “Financial Inclusion”
I will admit that I have warmed slowly to the language of financial inclusion and financial capability. Are these just new buzzwords for time-tested concepts? (And if so, why use them?) Let’s assume they are new concepts. If so, financial inclusion feels like more of a means than an end. For me, the end is the reduction of poverty and the empowerment of low-income women – so why not focus on those? If having a poor or even middle-class person simply open their first “no frills” bank account is considered a step towards financial inclusion, regardless of how useful or helpful that bank account is, is this banner a lackluster one to rally under? Further, it is not clear to me that the provision of quality financial services through informal financial institutions (however defined) is being properly valued in the financial inclusion agenda. Finally, does making “financial capability” something of a prerequisite for people accessing formal financial services effectively let financial institutions off the hook for meeting clients where they are and designing appropriate products for them?
While my apprehension about these concepts has not entirely dissipated, I emerged from the Global Forum feeling that this campaign for full financial inclusion, at least as defined by CFI, is evolving as a powerful rallying point for a diverse coalition of providers, regulators, technologists, researchers, and activists. The notion of full inclusion is essential. I now see financial capability as a concept that defines the end state when financial education (through whatever means) is done effectively. The Forum probably had a similar impact on many others – helping them travel from a place of confusion or even wariness towards strong alignment and shared purpose.
May 22, 2013 in Center for Financial Inclusion, Financial Inclusion, Microfinance, Microfinance CEO Working Group, Social Performance | Tags: Financial Inclusion, Microfinance, Microfinance CEO Working Group, Social Performance, Social Performance Task Force, Universal Standards of Social Performance Management | Leave a comment
> Posted by Meghan Greene, Manager, Microfinance CEO Working Group
Last June, at the annual Social Performance Task Force meeting in Jordan, the members of the Microfinance CEO Working Group and their lead social performance directors announced their plan to conduct the first large-scale analysis of the Universal Standards for Social Performance Management (USSPM) in practice, a process we called “beta testing.” You may recall our blog post about the plan last summer.
After a year of work, we’re ready to share our results, as detailed in the new working paper, “Insights from ‘Beta Testing’ the Universal Standards for Social Performance Management.”
As many of you know, the Universal Standards for Social Performance Management are a set of 99 “Essential Practices,” organized into six sections:
- Section 1: Define and Monitor Social Goals
- Section 2: Ensure Board, Management, and Employee Commitment to Social Goals
- Section 3: Treat Clients Responsibly (Essentially tracking the Smart Campaign)
- Section 4: Design Products, Services, Delivery Models, and Channels that Meet Clients’ Needs and Preferences
- Section 5: Treat Employees Responsibly
- Section 6: Balance Financial and Social Performance
The Universal Standards are considered applicable to all double bottom line microfinance institutions, and meeting the Standards signifies that an institution has strong social performance management practices. Clearly, implementing all 99 Essential Practices requires careful thought, planning, and execution, but we wanted to learn more about the process of translating the Standards into action. We partnered with more than 20 MFIs to work to answer a number of questions, including: Read the rest of this entry »
May 16, 2013 in Center for Financial Inclusion, Client Focus, Financial Inclusion, Microfinance, Social Performance | Tags: Financial Inclusion, India, M-CRIL, Micro-Credit Ratings International Limited, Microfinance, Sanjay Sinha | 2 comments
> Posted by Center Staff
“The old ideas have become akin to the sixteenth century assertion that the world was flat; yet it did gradually became established that the earth was round after all. Microfinance needs to be rounded too.” – Sanjay Sinha
Sanjay Sinha, founder of Micro-Credit Ratings International Limited (M-CRIL), recently released a candid wake-up call for the industry to move beyond the now outdated microfinance principles initially propagated in the 1990s and employ a more diverse and client-friendly approach. In his note, A Challenge to Flat-Earth Thinking in Microfinance, Sinha cites four tenets he finds especially problematic, contextualizing their adoption and negative implications, and positing how the industry can better move forward in meeting the needs of the poor. Sinha’s note follows:
The intensive promotion of microfinance worldwide as a palliative if not a panacea for poverty started in the mid‐1990s with initiatives like the establishment of CGAP, the Microcredit Summit Campaign, and various national-level apex agencies often sponsored by multilateral or bilateral development agencies like the World Bank and the regional development banks. Led by CGAP, as the main international technical agency for the support of microfinance, a strong message on the principles of good microfinance practice was propagated worldwide. These principles included (but were not limited to) the following:
- MFIs must adopt the principle of “zero tolerance of delinquency” in order to minimize default.
- There must be a continuous effort to limit operating costs in order to deliver microfinance at the lowest possible price to low income clients.
- Microfinance services must be offered by specialist MFIs in order to ensure that there are no conflicts of interest that confuse MFI managements, staff or borrowers.
- MFIs should focus on growth in order to maximize outreach to the vast numbers of financially excluded families across the globe.
This note argues that while these principles may have been appropriate at the time when they were formulated (in the mid‐1990s) their time passed a few years ago and the entrenchment of these principles as microfinance orthodoxy is now damaging the development objective – financial inclusion to serve the needs of poor and low income people, and facilitating income enhancement – for which the microfinance movement was propagated. Therefore, the time has come for a concerted effort to swing the pendulum back to equilibrium.
March 29, 2013 in Center for Financial Inclusion, Client Protection, Financial Inclusion, Investing in Inclusive Finance, Microfinance, Smart Campaign, Social Performance | Tags: Blue Orchard, Certification, CGAP, Client Protection, Client Protection Principles, Incofin, Investing in Microfinance, Microfinance, Oikocredit, PIIF, Smart Assessments, Social Performance, Social Performance Task Force, The Smart Campaign, Universal Standards of Social Performance Management | Leave a comment
> Posted by Antonique Koning and Kate McKee, Microfinance Specialist and Senior Adviser, CGAP
The following post was originally published on the CGAP Blog.
Microfinance investors are now openly discussing responsible investment, including balancing returns and how to reduce risks of market saturation and over-indebtedness, more than ever before. Investors agree it’s time for action. At the mid-year Social Investor Roundtable, convening of the Sangam Group (CEOs of the ten largest MIVs) and annual Development Finance Institutions (DFI) consultation on responsible finance last month they agreed on a “to-do” list of six concrete actions:
1. Join the discussion on balanced returns: Many participating investors had signed the Principles for Investors in Inclusive Finance (PIIF). Most agree that the balanced returns principle is the most difficult to pin down. The topic came up frequently: How much is too much, when it comes to prices and profits in the sector? Several MIV CEOs asserted that their commercial business model was the most effective way to drive responsible financial inclusion at scale. Eyebrows around the room shot up when one fund manager stated the target return of his fund: 20 percent. Other fund managers disagreed with the philosophy that such returns are consistent with responsible practice and desirable client outcomes. “We’re fooling ourselves” to suggest that there are few trade-offs between the financial and social bottom lines, they said. By policy some funds agree to take a lower return in the short run if it translates into better rural outreach or services like deposits that clients need and want. Sangam MIVs formed a working group on balanced returns and will feed their perspectives into related discussions led by the PIIF and Social Performance Task Force (SPTF). If you’re an investor, you should join one of these processes and help the search for a pragmatic but meaningful understanding on balanced returns.
2. Use the new Lender Guidelines on avoiding over-indebtedness. Market saturation was another hot topic: What can and should investors do about risks of market saturation and over-indebtedness? Investors in the AvOID Working Group have developed a Lender Code of Practice, which outlines steps investors should take in market analysis, due diligence, monitoring, and governance engagement. The Code has now been finalized and integrated in the PIIFs. Your investment organization can benefit by integrating the guidelines into your processes.
3. Support country-level research on market saturation and over-indebtedness: In addition to guidance that individual investors can use to rein in over-indebtedness, investors are also working together on analyzing such risks at the country or market level. DFIs and MIVs have supported this work in countries such as Azerbaijan, Bosnia-Herzegovina, Kosovo, the Kyrgysz Republic. Most recently, Blue Orchard, Incofin, and Oikocredit stepped up to jointly fund an innovative methodology in Cambodia that combined country-level proxies for market penetration, indicators of MFI lending practices, and surveys and qualitative research on borrower indebtedness and related factors. Findings were presented at the Social Investor Roundtable and will be formally released later this month. Sangam members committed funding to replicate the study elsewhere. Other investors can join and support expansion of this important work in additional markets.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
Listening to the poor without preconceptions has generated remarkable insights about their desires, challenges, and capabilities, with significant implications for designing programs that more effectively meet their needs. What about listening to those who talk to clients every day – the front line staff of microfinance institutions?
To complement direct client surveys, Freedom from Hunger undertook a study called Voices from the Frontlines: A Research Project Focused on Listening to Microfinance Credit Officers in order to listen to the frontline workers of financial service providers who use the village-banking model to provide financial and non-financial services to groups of poor women. Freedom from Hunger worked with five microfinance institutions to conduct this research: CRECER in Bolivia; Confianza, PRISMA, and Finca in Peru; and Alsol in Mexico. Almost 200 interviews and focus-group discussions were conducted with credit officers, clients, and supervisors. We wanted to answer five questions:
- What motivates credit officers?
- What is the state of the relationship between the credit officer and the client?
- What can we learn from credit officers about the people they serve?
- How can we better support credit officers?
- How faithfully are programs, policies, and procedures carried out by credit officers?
We found credit officers of these five institutions to be primarily socially motivated; they work for these organizations “to help people.” Their relationships with clients are crucial for client as well as organizational success. For example, the relationship creates both mutual satisfaction of clients and credit officers; on the other hand, the relationship can create huge risks of dissatisfaction and drop-out when the relationship is weak or falters for any reason. Therefore, these relationships can make or break client recruitment and retention. Product attributes and relationships with credit officers are intertwined. For example, a strong relationship between the client and the credit officer can overshadow poorly designed or less competitive products and services; however, poorly designed products and services also strain the relationship between the client and the credit officer. Products and services that respond to the clients’ needs better are an aid to building a stronger relationship between the client and the credit officer. The client’s relationship with the credit officer therefore deserves more attention than it normally receives when evaluating client satisfaction and outcomes.
January 8, 2013 in Center for Financial Inclusion, Client Focus, Client Protection, Financial Inclusion, Microfinance, Resources, Smart Campaign, Social Performance | Tags: Banana Skins, CGAP, Client Focus, Client Perspective, Client Protection Principles, Financial Literacy, Ghana, Jessica Schicks, Microfinance, Microfinance Gateway, Microinsurance Network, Overindebtedness, Risk, Smart Campaign | Leave a comment
> Posted by Jeffrey Riecke, Communications Assistant, CFI
There are endless ways to measure the successes of a given year. Number of clients reached. Total new stakeholder endorsement. Amount of capital invested… Though when assessing almost anything, it’s important to think holistically and not be biased by the numbers. That said, I think I can speak for most of the Center in saying that we are excited to share that several CFI-affiliated publications were among the Microfinance Gateway’s Most Popular Publications of 2012. No small feat considering 546 new resources were added to the Gateway this past year. Here’s a brief listing of the CFI pubs that made this top cut:
Over-Indebtedness in Microfinance: An Empirical Analysis of Related Factors on the Borrower Level
This paper by Jessica Schicks analyses the over-indebtedness of microborrowers in Ghana, examining its relationship with poverty, adverse shocks, loan returns, and financial literacy. In defining over-indebtedness, the paper adopts a client perspective, taking into account clients’ repayment struggles and the sacrifices they make to fulfill payment obligations. Some of the paper’s findings are the following: Read the rest of this entry »