You are currently browsing the monthly archive for December 2008.
> Posted by Kelley Mesa
TheCenter for Financial Inclusionis teaming up with CGAP and industry leaders around the globe to launch a Campaign for Client Protection. The Campaign will build awareness, consensus, and commitment on client protection through a set of client-protection principles formulated as a Microbanker’s Oath in the spirit of the Hippocratic Oath.
The overall objective of the Campaign is to unify the industry around the principles’ implementation – in effect turning client protection into a basic tenet of the industry. What would make YOU excited about the Campaign? Please weigh in here with your thoughts and suggestions for how the Campaign can become a truly industry-unifying force.
If you haven’t signed up for our monthly Inclusions e-newsletter, then now is a great time to do so! Create a Center login account and check the Inclusions box.
> Posted by Sergio Guzmán
“Every client sits at this table with me and has coffee,” said the branch manager of a microfinance institution Bogotá’s neighborhood of Patio Bonito, “from the $1,000 clients to the $35,000 clients.” It was my first field visit, and I was impressed with this branch manager who had been working in the financial industry for more than 28 years.
After a two hour session of learning about the institution’s products and services we set out to the field to see clients. Patio Bonito is adjacent to the city’s largest food wholesaler center, Corabastos, with a large variety of businesses and clients. During my visit, I met clients who borrowed from multiple banks at market rates as well as clients who had been faithful and borrowed exclusively from this Colombian MFI. What surprised, though, me was that none of them knew what interest rates they were paying. None. While the clients knew how much they were supposed to pay each month, they had no knowledge of the total annual cost of their loans.
Patio Bonito is home to branch locations for almost all of Bogotá’s financial institutions. One would think that with so much competition around, the clients could benefit from competing rates and services. Not knowing their interest rates doesn’t necessarily imply that the institution has failed to provide adequate information about costs, but rather displays the clients’ level of financial literacy. Competition alone will certainly not fill the financial-literacy gap clients face—transparency is the other side of the coin here. In fact, transparent and reasonable pricing is one of the six principles espoused by the new Campaign for Client Protection.
Only when clients are empowered to ask questions and demand more from their financial services providers, taking real advantage of the competition that exists, will there truly be improved services overall. Perhaps then, it will be the client who eventually can say, “All of the credit providers have coffee with me at this table.”
> Posted by Kelley Mesa
Viewpoint: Standards for Microfinance Growth
American Banker
By Elisabeth Rhyne
American Banker
By Elisabeth Rhyne
Elisabeth Rhyne
As mainstream credit markets seize up, the world’s microfinance organizations, or MFIs, have not yet felt much heat. If anything, the crisis of confidence has highlighted what a good credit risk most microfinance clients have proven to be.
Isolated in most cases from their countries’ formal economies, the self-employed poor are also resilient during downturns. Indeed, microfinance may be a bright spot in the banking industry’s future — a huge market of hundreds of millions, whom pioneering microfinance specialists are learning to serve in a sustainable way.
But the credit crisis highlights a threat of another kind. The subprime lending abuses that fueled the U.S. housing bubble demonstrate the dangers of financial services to the poor done wrongly. The subprime industry’s core failures in consumer protection — tempting low-knowledge customers into overindebtedness, ignoring capacity to repay when approving loans, failing to clearly disclose and explain loan terms — are the fruits of intense competition and ineffectual regulation. Though these practices are not widespread in microfinance, competitive conditions in some markets could tempt providers to adopt some of them.
In some microfinance markets…
To read the entire article, click here (subscription required, free trial available).
> Posted by Kelley Mesa
Paul Rippey is at it again in the latest two Energy Links podcasts. First, he speaks with Patrick Avato of the World Bank Group’s Lighting Africa Project, an initiative to provide up to 250 million people in Sub-Saharan Africa with access to modern, off-grid lighting products by 2030.
In the following podcast, Paul is joined by April Allderdice and James Dailey of Microenergy Credits, who discuss their efforts to link microfinance loans to carbon markets through a low-cost, web-based platform, reducing the cost of accessing base-of-the-pyramid markets.
View all Center for Financial Inclusion podcasts here.
> Posted by Cara Forster
The Microfinance Network’s annual conference brought me to India this year, as it was hosted by SKS Microfinance, which graciously arranged for us to visit some of their clients in Agra. I had been warned that the places we would visit were filthy and the poverty in India overwhelming. However, I found the homes of the SKS clients we visited to be rather decent, especially in comparison to what had been forecast.
We visited one woman whose business is sewing bridal veils from crimson organza embellished with all manner of gold colored trim. She makes 3-4 veils a day, earning her about $1. The way I saw it, her problem was that she sells the veils to a middleman from whom she obtains her inputs. We asked her what it would take to free herself from the middleman, but she replied that the middleman was necessary, that the ladies themselves could not sell their work in the market because they couldn’t get a permit for a stall, that she was comfortable with the way things are. She was staunchly defending the status quo.
The seamstress lived in two pink rooms in a cement apartment building with her husband and four children. From my perspective – based on years as a Peace Corps Volunteer in rural Nicaragua -painted cement walls indicate relative prosperity. I was somewhat surprised to see the painted walls, gas cooking stove, and wooden bed frames.
But more than their physical assets, I was surprised that this lady could spend 9 or 10 hours a day sewing lovely veils and make only $1 for her trouble. It seemed to me that if progress is to be made in expanding the income of people like the seamstress, it will take more than credit – some restructuring of the current value chain might be required. This is not the kind of assistance that is usually packaged with commercial microfinance, but it is receiving increasing attention. The whole third day of the MF India Summit, dedicated to livelihoods, focused on Inclusive Value Chains. Perhaps in the seamstress’ neighborhood there is an unemployed son or husband, or even one of the women, who could take over the responsibilities of the middleman. With some organizational assistance, someone from the neighborhood could obtain a permit and operate a stall, collect and transport the veils, etc. This could provide a living for that person as well as return more of the profits from their labor to the women. Hopefully this increased emphasis on value chains by practitioners will translate into real increases in income for the laborers, like the seamstress, who work at the very end of the value chain.
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