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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
You may have noticed an uptick in headlines over the past few months announcing the selling of microfinance equity shares. Here are a few examples: Accion sells 15 percent stake in Paraguay’s El Comercio to Incofin’s Rural Impulse Fund; Grupo ACP sells its 60.68 percent stake in Peru’s MiBanco to Edyficar; Triodos sells stake in Cambodia’s ACLEDA Bank to ORIX Corporation.
Expect to see more such headlines, as the number of exits from microfinance equity investments is anticipated to accelerate in the next couple of years as a result of a combination of different factors:
- Equity funds are maturing. Many funds were created around the same time and while some have no official time horizon, even patient capital reaches a point when it is time to consider moving on.
- Microfinance institutions (MFIs) are also maturing. Thanks to the patient capital and expertise of many initial microfinance investors, some MFIs are now so large and sophisticated that they need new investors with deeper pockets and different expertise to further their growth and development.
- Social investors are moving into new frontiers. Some social investors are reevaluating where their equity funding and participation can have the biggest impact, for example by moving into more rural or poorer countries. In a number of countries, regulatory environments are becoming friendlier to foreign microfinance investors now that they have a more proven track record.
Given that many social investors are seeking to pass the baton, what does it mean to exit an investment responsibly?
The freshly released paper, The Art of the Responsible Exit in Microfinance Equity Sales, dissects exactly this question. The paper, a joint effort of the Center for Financial Inclusion at Accion (CFI) and the Consultative Group to Assist the Poor (CGAP), shares the thoughts and experiences of 50 investors and industry stakeholders on the topic of exiting an investment in a “responsible” manner.
What did we uncover?
> Posted by Alexandra Rizzi and Alyssa Passarelli, Deputy Director and Communications and Operations Assistant, the Smart Campaign
The Smart Campaign has worked tirelessly for over five years to embed the Client Protection Principles into the microfinance sector, and increasingly, the broader financial inclusion community. Yet until now, the Campaign has had minimal input from the very clients whose well-being drives the entire movement.
In order to better understand the concerns and experiences of the individuals who use microfinance, the Campaign has launched a client voice research and learning project. Through listening directly to clients, market stakeholders can raise awareness, dialogue with each other to identify potential issues, and in turn integrate this learning into their work. The Smart Campaign has a unique role in shining a light on potentially harmful or negative experiences that low-income users of financial services have had and bringing those experiences to the attention of those who can do something about them.
To conduct this project, the Campaign will be working with Daryl Collins and her team at Bankable Frontier Associates (BFA). BFA has conducted extensive global research with low-income households, including projects with an explicit focus on consumer protection. The client voice project will be conducted in four markets – Pakistan, Benin, and two others to be chosen this summer. The markets are selected based on geographic diversity as well as engagement by local stakeholders with the Smart Campaign. In Pakistan and Benin for example, the project is working closely with the Pakistan Microfinance Network and the Alafia Consortium, who have helped convene local stakeholders to give feedback on project design, research locations, and results. This ensures that the research has input and support at all stages from local expertise and will be used by those who are best placed to take action in response to the findings.
> Posted by Fernando Botelho, Founder, F123 Consulting
Microfinance institutions (MFIs) may not be aware of tools and resources at their disposal that can make it easier for them to work with persons with disabilities (PWDs) as clients or staff. A new tool launched a few weeks ago attempts to close this gap, “Inclusion of Persons with Disabilities in Microfinance through Organizational Learning and the Strategic Use of Low-Cost Technologies.” This tool is part of the Framework for Disability Inclusion toolkit produced by CFI through work with Fundación Paraguaya and others.
The new tool provides concrete guidance for selecting appropriate technologies, forming partnerships with disability-related organizations, and incorporating disability inclusion throughout an organization. It was developed by myself and my organization, F123 Consulting, inspired by our work with the staff of Fundación Paraguaya, to make their organization more disability inclusive.
For example, free and open source assistive technologies can be used by organizations that have an interest in ensuring that operational and financial viability are maintained. In that regard, it’s important to take advantage of the many available low-cost, high performing technologies, and to adapt instead of replace existing processes whenever possible. Managers don’t have to roll their eyes and fret about cost. Small modifications to already existing systems can often make MFIs accessible to staff and clients with disabilities. And the best part is that some of these modifications are free!
> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
Over the last two years, the Center for Financial Inclusion has worked to develop a series of tools and trainings (a how-to guide) for MFIs that have decided to become disability inclusive but don’t know how to do so.
Through our strategic partnership with Handicap International, Fundación Paraguaya, and the Smart Campaign, we have now completed a comprehensive toolkit. And today, we are pleased to announce that we are making these tools and trainings available to the industry in English, Spanish, and French on the Persons with Disabilities (PWD) page on the CFI website. Everything is open source and available to any MFI or other financial services provider that wishes to use the tools.
The Center made inclusion of PWD an institutional priority because at 15 percent of the global population, PWD represent a very large vulnerable minority, and are largely unbanked – no more than 0.5 percent of current MFI clients worldwide are PWD.
In its Responsible Treatment of Clients principle, the Smart Campaign emphasizes the importance of non-discrimination. As the Smart Campaign’s principles evolve, MFIs are encouraged to broaden their scope of services to minorities like PWD and promote equal opportunity to financial services.
The Convention on the Rights of Persons with Disabilities (2006) stipulates in Article 27 on Work and Employment that countries that have ratified the treaty must level the playing field so that persons with disabilities have an equal right to employment. The Center’s White Paper “A New Financial Access Frontier: People with Disabilities” made the case for disability inclusion, drawing on the approaches used around the world to guide implementation of the Convention. Now we present the industry with practical implementation guidelines for those institutions seeking to close the financial inclusion gap for persons with disabilities.
> Posted by Josh Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI
On July 17, I addressed delegates from more than 100 countries at the United Nations on CFI’s initiative to make microfinance institutions disability-inclusive and free from discrimination, in accordance with the Smart Campaign guidelines. The Center (with Smart) is establishing guidelines for a model comprehensive nondiscrimination policy which we are now testing at the award winning MFI, Fundacion Paraguaya.
I also emphasized that government cash transfers and other social welfare measures must be designed to complement employment schemes and not have the unintended consequence of pushing persons with disabilities (PWDs) into dependency.
The occasion was the annual Conference of State Parties that monitors compliance with the Convention on the Rights of Persons with Disabilities, the transformative 2006 treaty that mandates equal rights and opportunities for PWDs and has now been ratified by 133 countries.
The theme of this year’s conference was identifying best practices to build “disability-inclusive” development by improving social protection and reducing poverty. The United Nations states that about 80 percent of the more than 1 billion people with disabilities around the world are of working age, and face physical, social, economic, and cultural challenges in gaining access to the building blocks of economic independence.
> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign
The Smart Campaign offers dozens of free tools on its website for microfinance industry stakeholders, including microfinance practitioners, to use as resources to help advance client protection. A great way that an MFI can make the first step to actively instilling responsible client care in their practices is with the “Getting Started Questionnaire”, a self-diagnosis that examines institutional practices in light of the Client Protection Principles and identifies areas for improvement. The Smart Campaign is pleased to announce the debut of the newest version of this tool.
The Getting Started Questionnaire has been revised and updated to align with the standards for the certification program launched in January. It is more user-friendly than the previous version. For example you can choose the desired language from within the spreadsheet interface. The current languages available are English, Spanish, French, and Portuguese.
The Getting Started Questionnaire is often the first step an organization makes after endorsing the Smart Campaign. Smart Campaign staff are pleased to have enhanced how an MFI begins the journey. To download the Getting Started Questionnaire tool, click here. To browse all of the Campaign’s tools and resources, click here.
> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign
The month of May was filled with many exciting events for the Smart Campaign. Smart Campaign director, Isabelle Barrès traveled to Guatemala and Bosnia and Herzegovina for two Client Protection Certification events (please see our last blog post). Smart Campaign Lead Specialist, Sergio Guzmán also traveled to this corner of the world to conduct a Smart Assessor’s Training and to attend the 16th Annual Microfinance Centre Conference in Budva, Montenegro. Although the Campaign is based in Washington, D.C., Campaign staff thrive on opportunities to engage in client protection efforts beyond the office.
It’s a good thing that Sergio does not have a fear of heights. With the amount of time that Sergio spends in the air each month, he might as well be Superman. The Smart Assessor’s Training in Budva brought together a diverse group of financial services experts including donors, investors, consultants, and CEOs of microfinance institutions (MFIs), among others in the Eastern Europe/Central Asia region. Even with the ranging backgrounds of these participants, Sergio notes that the evident common denominators are the enthusiasm to incorporate the Client Protection Principles (CPPs) into their work and a keen desire to improve their commitment to those they serve.
It is very exciting for the Campaign to generate interest among such a wide range of actors at events like the training in Budva. The Smart Campaign’s growing involvement in activities among participants from different backgrounds reflects client protection’s increasing foothold. This layered interest and further desire to cement client protection into business practices is a promising achievement for the movement.
> Posted by the Smart Campaign
Smart assessments. You know, a tool to help MFIs diagnose if their institutional practices adequately account for the well-being of their clients and can help them towards becoming ‘Client Protection Certified?’ We’ve written about them through the years (The Dawn of Client Protection Assessments in India, Straight Talk on Client Protection – Aggressive Sales Techniques, Mapping the Numbers of the Smart Campaign, etc.) but this is our very first video on the subject. Smart Assessments examine an MFI’s implementation of the client protection principles, taking the institution through a process of internal review to identify strengths, weaknesses, and ultimately opportunities to enhance business practices around client protection.
In the video, Smart Campaign Lead Specialist Sergio Guzmán offers an overview of assessments, discussing the client protection principles, how assessments benefit MFIs, what the assessment process looks like, common client protection challenges, and next steps for interested institutions.
As Sergio mentions, to date the Smart Campaign has trained a total of 29 lead assessors and 45 support assessors, who have conducted roughly 75 assessments around the world. For more information – including the self-assessment Getting Started Questionnaire – head over to the Smart Campaign website. And stay tuned to our newly launched Smart Campaign YouTube channel for the release of more videos on client protection in microfinance.