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> Posted by Alex Counts, Founder, Grameen Foundation
On Sunday, August 23, as I was enjoying some of the final days of summer visiting friends in New Hampshire, I noticed that I had been tagged in a tweet by Dean Karlan, the founder and president of Innovations for Poverty Action. He provided a link to an article about FINCA that included extensive quotes from its CEO, Rupert Scofield. He asked Rupert if he really believed microfinance could reduce terrorism, and asked me what I thought (“whatcha think?” was the precise formulation of his question). He tweeted again on Monday, asking whether I was “still going to stand by [my] claim that no microcredit leaders make grandiose and overselling impact claims?”
First of all, I have never said that no microcredit leaders have ever exaggerated impact claims. I believe that those exaggerated claims have been rare and atypical, especially in recent years. In other words, the tendency for practitioners and advocates to make exaggerated claims not backed up by data has itself been quite exaggerated.
But I don’t think Twitter is the best medium for exploring such topics. So I was grateful when the Center for Financial Inclusion agreed to publish this response to Dean’s public queries of me, in which I could address some related issues about microfinance advocacy and research. (This post builds upon some of the observations I made in reviewing Dean Karlan and Jacob Appel’s impressive but flawed book, More Than Good Intentions.)
Regarding the article Dean tweeted about, I am supportive of Rupert’s statements and encourage others to read it and come to their own conclusions. (Having been the public face of an international humanitarian organization for 18 years, I also realize that journalists sometimes focus on a very small part of what someone says in an interview, often on those things that are potentially the most controversial.) For the most part, Rupert comments on specific microfinance clients he and the journalist met and on his past experiences and how they shaped his view of microfinance. It’s impossible to challenge any of those observations and recollections. They are statements of personal experience and opinion.
> Posted by Alvina Zafar, Deputy Manager, Financial Education and Client Protection, BRAC Microfinance
Financial Inclusion 2020 (FI2020) is a global multi-stakeholder movement to achieve full financial inclusion, using the year 2020 as a focal point for action. This blog series will spotlight financial inclusion efforts around the globe and share insights from key thought leaders in financial inclusion, with a specific focus on quality beyond access.
“I am not sure if I can repay more loans, and I don’t want to be overburdened by debt.” That was how Noyon, a small grocery shop owner with a physical disability, replied when BRAC asked whether he would like to take a loan to expand his business. This is a common response we hear from clients with disabilities when they’re offered credit products. Many prefer to avoid taking loans unless absolutely necessary. They guard their reputations closely against a society that sees persons with disabilities as less capable, and defaulting on a loan is not a risk they are willing to take. This insight raises an important question with regard to the financial inclusion of persons with disabilities: Is access the biggest barrier?
In 2015, BRAC scaled up its Engaging People with Disabilities project with ADD International, an organization that focuses on campaigning for equal rights and ensuring social justice for people with disabilities. The objective of this partnership is to leverage the access and coverage that ADD International has with people with disabilities in Bangladesh and provide financial services (e.g. savings, loans, insurance, etc.) to interested beneficiaries. As of May of this year, the project has a client base of over 7,000 people with disabilities, with an average loan size of US$ 282 and a repayment rate of 100 percent. Clients are saving on a regular basis, with an average saving account balance of US$ 50. The majority of the clients are entrepreneurs—they own and operate grocery shops, tea stalls, small vending businesses, and the like. One objective of BRAC’s is to empower all clients by building their financial capabilities. A by-product we see in many of our clients from this pursuit is, on top of enhancing their knowledge about financial management, it raises their confidence and self-respect. Since the early days of BRAC’s disability inclusion work, we’ve been grateful to receive technical, advocacy, and other support from CFI. Read the rest of this entry »
> Posted by Elisabeth Rhyne, Managing Director, CFI
I recently attended the annual meeting of the Microfinance Network (MFN), which was hosted by the Alexandria Business Association in Alexandria, Egypt. MFN is a global network of some of the largest and leading microfinance institutions, and its annual meeting has long been known for candid and in-depth sharing of experience among the leaders of these institutions, as this post demonstrates.
Ask a microfinance CEO what’s making his or her life hard these days, and the answer is likely to be politics.
That’s hardly surprising when the speaker is Motaz Tabaa, CEO of the Alexandria Business Association (ABA), one of the largest microfinance institutions (MFIs) in Egypt. On January 28, 2011, when the occupation of Tahrir Square in Cairo held the world’s attention and led to the resignation of then-President Mubarak, it became impossible for ABA to operate. But before the week was over, staff were back on the streets, collecting and disbursing loans, and sleeping at the office to guard the cash that couldn’t be deposited in banks, which remained still closed.
Nearly every MFI in the group had a similar encounter with crisis – consider the political violence (and/or natural disaster) that has touched Uganda, Nigeria, Armenia, Mexico, Haiti, and Bangladesh in recent years. Today, Al Majmoua in Lebanon and Tamweelcom in Jordan are overwhelmed with the attempt to serve the Syrian refugees that have crossed their borders. The CEOs who have experienced such upheaval agreed about the role of MFIs in responding quickly to help clients obtain cash, keep their businesses open, and then rebuild. Given how prevalent political and natural crises are, organizations have developed protocols for responding quickly. Even while we met, Enrique Majos of Compartamos received news of a tornado in Mexico, and sent the Compartamos natural disaster team into action.
> Posted by Leora Klapper, Lead Economist, Development Research Group, the World Bank
Eroll Asuncion runs a grocery store on the remote Philippine island of Rapu-Rapu. It’s a three-hour boat ride to the nearest bank. Fortunately, that’s no longer a problem – thanks to the mobile phone revolution and new regulations that make it easier for people to open and use an account.
Eroll’s customers now pay bills and send and receive remittances through a mobile money account they access via mobile phones. Eroll’s SuperStore has become something of a bank for islanders using these mobile accounts, allowing them to send and receive cash at the store.
“My husband sends (me) money twice a month, on the 15th and 30th,” Yolanda, a customer, explains.
Hundreds of millions of others like Yolanda are opening new accounts through their phone or at a bank or similar institution. It’s part of a financial revolution that’s sweeping the developing world. Since 2011, 245 million more people in East Asia and the Pacific have become part of the formal financial system by opening an account.
The World Bank has just released our much-anticipated second edition of the Global Findex, the world’s only comprehensive gauge of global progress on “financial inclusion”—how people save, borrow, make payments, and manage risk. The data give us insight into account ownership around the world, and how people are using – or not using – those accounts.
The Global Findex offers good news. As of 2014, 62 percent of adults around the world had access to a bank account. Put another way, the number of people who are “unbanked” has tumbled to 2.0 billion from 2.5 billion in 2011, when the Global Findex was first released.
The following post was originally published on the MasterCard Center for Inclusive Growth blog.
Reaching full financial inclusion by 2020 will require supportive policies in every country around the globe. The Economist Intelligence Unit’s “Global Microscope on Financial Inclusion, 2014” assesses the policy environment for financial inclusion in 55 countries. The Microscope examines 12 policy dimensions essential for creating an inclusion-friendly regulatory and institutional framework. The rigorous model incorporates input from hundreds of policy makers and participants in the financial sector and a review of existing policies and implementation. The resulting rankings represent the best readily available source for judging the state of financial inclusion policy around the world.
What’s surprising about the 2014 Microscope results is their wide range. Out of a possible 100 points, the top scorer (Peru) received 87 while the lowest (Haiti) earned only 16. If full inclusion requires good policies, it is disappointing to learn that the median score across all countries was a mediocre 46.
> Posted by V. McIntyre, Freelance Writer for the Harvard Kennedy School
Often, we hold out hope that innovation will happen through the great leap forward, the stroke of luck, the miracle cure – and when one candidate fails, we go off in search of another.
There is justifiable concern that this yes-or-no approach hampers international development. A recent article in the New Republic listed “big ideas” in international development that failed – not because they were bad, but because they were big. The article describes a $15 million-plus project to install thousands of water pumps attached to merry-go-rounds in sub-Saharan Africa, as well as Jeffrey Sachs’s Millennium Villages which sought to overhaul entire villages by building housing, schools, clinics, roads, and other key infrastructure. In these and the article’s other cases, with expectations high and money and attention flowing in, the projects sank, often because they outgrew the scale at which they had proven to work. Yet some of a project’s apparent lack of success may simply come down to the measurement you’re using. Many of the world’s most successful development efforts – deworming campaigns, for example – only improve the average life in tiny increments.
> Posted by Maria May, Senior Program Manager, BRAC
Even when introducing herself, Babita’s enthusiasm is contagious. “Maybe you think that you can’t change how you manage your money. It’s too hard. Well, I used to think that I could never get up in front of a group of people and give a presentation. But here I am. BRAC taught me how. So if I can do this, then you can do anything.”
Babita Akhtar is one of 900 women recruited by BRAC as a customer service assistant. She greets every person who walks into the branch office—people coming for loans, seeking support from BRAC’s legal aid clinics, teachers or community health promoters coming for training, and even visitors. Before loan disbursement begins, she runs a short orientation session for all borrowers that covers important information about the loans, BRAC’s services, and good financial practices. The branch manager comes in at the end to answer any questions and greet the clients personally.
The messages provided in this orientation are timed for maximum impact. Pranab Banik, who heads BRAC’s Financial Education and Client Protection Unit, said, “The time when clients are waiting at the branch to take a loan seems the best moment to deliver basic financial awareness at scale and cost effectively. Our pre-disbursement orientation is an integral precondition for comprehensive client protection; it is intended to empower all clients to better understand their options and manage their finances responsibly.”
> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
Last June, in my hotel room in Delhi, I read in the Sunday edition of the Times of India that hiring white girls to work wedding parties is the new status symbol in Bangalore. Though this might sound surprising, alabaster skin as the ideal of beauty (and the status that goes with it) is neither new to nor specific to India. This is not a trivial matter but a deadly serious business.
One need only look at skin whitening products, like Unilever’s “Fair and Lovely”, which are great sellers in the beauty product category in India, Bangladesh, and Thailand—indeed, in 30 countries around the world. The Unilever Sri Lanka website reads: “Today, 250 million consumers across the globe strongly connect with Fair and Lovely as a brand that stands for the belief that beauty empowers a woman to change her destiny.”
> Posted by Jeffrey Riecke, Communications Associate, CFI
Islamic finance is expected to expand substantially in 2015, from 2014’s total of $2.1 trillion to $2.5 trillion, according to figures released last week by the Al-Huda Centre of Islamic Banking and Economics. In 2011, the industry had assets of about $1 trillion. Islamic microfinance, the segment of Sharia-compliant services targeting clients at the base of the pyramid, only occupies a small slice of the pie, at 1 percent of all Islamic finance globally. However this uptick in Sharia-compliant finance, as well as encouraging recent support for the 650 million Muslims living on less than 2 dollars a day, suggest a rising tide for Islamic microfinance.
The industry findings indicate that not only did Islamic finance surpass the $2 trillion landmark in 2014, it gained traction in nascent markets and entered new ones. Markets still green in offering Islamic finance that showed growth in 2014 include Morocco, Tunisia, Azerbaijan, Libya, and several non-Muslim-majority countries including Nigeria, Tanzania, and South Africa. Among the new markets where Islamic finance took root last year are Australia, Brazil, and China. Globally, there are 1,500 organizations working in Islamic finance across 90 countries – 40 percent of which are non-Muslim-majority countries. The expansion of Islamic finance opens the door for the many Muslims whose beliefs preclude them from accepting finance with interest rates and fee structures outlawed by Sharia doctrine.
> Posted by Sonja Kelly, Fellow, CFI
If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the Global Microscope 2014: The Enabling Environment for Financial Inclusion. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?
We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.
This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten. Read the rest of this entry »