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> Posted by Julie Shea
Large scale commercialization of microfinance institutions (MFIs) has led to an increased focus on profitability and with that a growing fear of “mission drift.” In an industry facing increased demands for both social and financial performance, how can investors in microfinance funds ensure that both of these “bottom lines” are appropriately balanced? One way is to create incentive structures that measure and compensate fund managers and the managers of the microfinance institutions (MFIs) in which they invest in accordance with the stated mission of the fund.
Paul DiLeo of Grassroots Capital Management, in his recently published paper, Re-Positioning Microfinance with Impact Investors: Codes of Conduct and “Social First” MFIs, argues that investors should do a better job of articulating their fund’s priorities. Rather than promoting a single, standard model, DiLeo promotes a framework, developed by the Monitor Institute, that more clearly positions funds along a spectrum from “Social First” to “Financial First”. In adopting this framework, investors are encouraged to provide transparency and to attract likeminded investors that support the mission of the MFI. Read the rest of this entry »
> Posted by Anne Ackermann, Marika Canonica, Emaan Mahmood, and Laura Spicehandler, Credit Suisse Virtual Volunteers
In an earlier blog post, we explored the major challenges the United States and United Kingdom are facing with regards to impact investing, including investing in microfinance in developing countries. In this post, we look at the current state of impact investing in Luxembourg, Switzerland, and the Netherlands, in an attempt to understand how tax and legal frameworks are promoting impact investing in these countries.
Switzerland
Switzerland has been a leader in creating and managing some of the first and largest microfinance investment vehicles (MIVs), with more than 20 MIVs either managed or advised in Switzerland. As of December 2007, 1.5 billion Swiss Francs (approximately USD $1.65 billion), 25 percent of all international private microfinance investments worldwide, were managed in Switzerland. The MIVs present in Switzerland are generally funds and are regulated by the Swiss Financial Market Supervisory Authority (FINMA). FINMA has authority over banks, insurances companies, stock exchanges, securities firms and collective investment schemes. Read the rest of this entry »
> Posted by Anne Ackermann, Marika Canonica, Emaan Mahmood, and Laura Spicehandler, Credit Suisse Virtual Volunteers
Why are investors in some countries so much more involved in “impact investing” – including microfinance – than their counterparts in other countries? Investing in microfinance in developing and emerging markets has gained more traction in certain continental European countries, for example, than it has in the United States and United Kingdom.
Last year the CFI undertook a project in partnership with a group of “Virtual Volunteers” from Credit Suisse to examine how legal and tax frameworks in various countries influence investors’ willingness to invest in microfinance. The Credit Suisse Volunteers examined the policy and regulatory frameworks surrounding impact investing, particularly in microfinance, in five countries: Luxembourg, the Netherlands, Switzerland, the United States, and the United Kingdom. Volunteers also conducted interviews with a variety of actors from impact investing in each country.
This describes some features of the framework for impact investing in the U.S. and U.K. A subsequent post will examine the European countries – Luxembourg, Switzerland, and the Netherlands – in an effort to illustrate the differences. Read the rest of this entry »
> Posted by Center Staff
A New Year for microfinance is fast approaching, and if we’ve learned anything lately, it’s that you can’t be too prepared.
MIX Market, an important tool to research and analyze MFIs, is one place to begin that preparation. You may find the MIX useful for your year-in-review — and beyond.
Below are three quick steps to get started with MIX Market, but if you want to make the most of their data and analytics for your MFI due diligence, you can register for their free webinar on Tuesday, January 10 @ 10:00am EST.
1. Contextualize Before Analyzing
MIX Market MFI profiles provide important context to help you make sense of all the available indicators and performance data. Is this MFI a regulated microfinance provider? You may want to review the legal charter and other institutional background before analyzing those efficiency or capital adequacy numbers. Does this MFI have poverty alleviation or targeting the poor as one of its development goals? Look at the profile’s social performance section before you go looking for data on poverty outreach. Read the rest of this entry »
> Posted by Center Staff
Martin Connell came to microfinance and development by way of the private sector. He brought his business perspective to philanthropy, a perspective that fired his curiosity to find non-subsidized ways of serving the industrious, if poor, self-employed people in developing countries.
Connell and his wife, Linda Haynes, in 1982 founded Calmeadow, a non-profit that funded non-profit agencies helping the working poor in developing countries. While fine-tuning Calmeadow’s approach to development, he was introduced to ACCION International, an early promoter of MFIs in developing countries.
Connell shares his observations on the microfinance industry past, present, and future in the sixth installment of the “Microfinance Matters” interview series:
Martin Connell
Making Microfinance Sustainable
As a young executive, Martin Connell polished his skills in the rough and tumble world of mining exploration. He headed Conwest Exploration Company Limited, a family firm founded by his grandfather. After building Conwest and creating a business platform that successfully moved into the oil and gas field, Connell decided to do some exploration on a personal level.
Travels to Egypt, India and Bangladesh sparked his desire to promote development. In 1982, Connell and his wife, Linda Haynes, founded Calmeadow, a non-profit that funded non-profit agencies helping the working poor in developing countries…
To read more of the interview with Connell, click here.
Have you read?
Nancy Barry: Change Agent for Financial Inclusion
Martin Burt of Fundación Paraguaya: Stretching Microfinance, Narrowing Poverty
Grameen Foundation CEO Alex Counts Tackles ‘Re-engineering’ Microfinance
Pilar Ramírez, Microfinance Trailblazer
Where is Microfinance Headed? Essma Ben Hamida Interview Kicks Off ‘Microfinance Matters’ Series
> Posted by Center Staff
The world is witnessing a rebound in Web-facilitated, peer-to-peer microlending. That creates some interesting mirrors in which developing-world microfinance can reflect.
Slate‘s Farhad Manjoo mulls how peer-to-peer lending pioneer Prosper.com has overcome a rough patch and “has … seen the public becoming more interested in lending and borrowing through the site; lending activity is rising, and so far, borrowers are paying back their loans at a rate that keeps lenders coming back.”
Prosper (whose CEO and founder, Chris Larsen, sits on CFI’s Advisory Council) may mean different things to different people. But progress for peer-to-peer lending sites of this kind, which Manjoo tags as a sort of “eBay for credit,” at a minimum seems to be evidence for:
- a potentially reinvigorated intersection of technology and microlending
- an industry with a capacity to come through growing pains with lessons learned and a promising horizon
All of which means what for financial inclusion? It’s too early to say, but we want to keep our finger on that pulse.
Image credit: Tango! Desktop Project
> Posted by Jon Pattee
It is with great sadness that we note the imminent departure of Glenn Beck from Fox News, an exit that may or may not be linked to his show’s crumbling audience share.
We will miss Beck’s chalkdust-fuelled theorizing about “micro financing” as embodied in lines from his show, like this classic:
“[D]o you know who Barack Obama was doing micro financing with? The Ford Foundation. Guess who was also doing micro financing on the Ford Foundation. His dad. Timothy Geithner. Isn’t that — what are the odds? Man, it’s just — it [sic] just becoming a very, very small, small world. Very small.”
Small indeed. Small, and surreal. We will miss the depth of analysis that Beck brought to the debate surrounding microfinance. But we’re comforted to know that others, with similar mental acuity, are surely waiting to hoist his fallen standard.
Nominations?
Image credit: y6y6y6
> Posted by Jennifer Maurer, RESULTS
How much of the US federal budget do you think goes to foreign aid, including microfinance and microenterprise? If you think around 25 percent, you wouldn’t be alone — that’s the median estimate from the most recent poll. The poll also asked how much Americans thought would be “appropriate” to spend on foreign aid; the median response was 10 percent. But how much do we actually spend? Just 1 percent. This is consistent with numerous polls over the years. Americans grossly overestimate what we spend overseas on development and diplomacy.
Yet the House of Representatives continues to attack the foreign aid budget in an attempt to cut the national deficit. Michael Gerson — Washington Post columnist and former policy advisor to President George W. Bush — called the attacks on the international affairs budgets “both irrelevant and destructive.” It’s irrelevant because cutting funding from less than 1 percent of the budget is not going to make a dent in our national deficit. Instead, the attempt creates a distraction from the real, difficult decisions that have to be made.”
These cuts would be destructive because the programs are saving lives and building stable countries. Read the rest of this entry »
> Posted by Center Staff
The Council of Microfinance Equity Funds (CMEF) recently responded to the Reserve Bank of India’s invitation to comment on the Malegam Committee Report.
Sixteen members of CMEF, which brings together the leading private entities that make equity investments in MFIs in the developing world, have invested Rs. 8.1 billion (813 crores; US$178 million) of equity in Indian microfinance institutions, and other members are in negotiations with potential investee institutions. As direct investors in MFIs, CMEF members place great importance on their corporate governance role as board directors, shareholders and guardians of the double bottom line.
The CMEF concern is that “Although implementation of many of the proposed recommendations would indeed add to a sustainable development of the sector — through the enhanced institutionalization of transparency in pricing, client protection and corporate governance — it is our opinion that several recommendations could seriously set back the clock for microfinance in India.” Read the rest of this entry »
> Posted by Center Staff
The Microfinance Banana Skins report, now in its third year, reflects changing perceptions of risk in a dynamic and fast-moving industry. This year’s report shows that microfinance has come of age, and with that, new issues have arisen. In an increasing number of markets, the rapid rate of growth and outreach means that microfinance is confronting the same forces of competition, credit cycles, and consolidation seen in other sectors.
This survey explores the risks facing the microfinance industry at a time when hard questions are being asked about its future, prompted by growing doubts about its effectiveness as a source of small-scale finance for the poor.
One of the respondents summed up the significance of these doubts, saying they could “dissipate the fairy dust that has historically coated everything related to microfinance.” Many of the risks explored in this report reach the heart of the debate about where microfinance goes next. Read the rest of this entry »
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