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> Posted by Kelley Mesa
Center Director Elisabeth Rhyne’s latest Huffington Post blog delves into microfinance interest rates and what should be expected…
Americans often suffer sticker shock when they hear about interest rates charged in international microfinance. At annualized rates above 20 percent, most Americans start getting uncomfortable, and when they hear that in some places annual rates rise as high as 100 percent or even more, their moral outrage beepers start to malfunction. This is unfortunate, because when we are in a state of high outrage, it’s hard to listen.
When asking “how much is too much?” it is important to reserve judgment long enough to examine the conditions that determine international microfinance interest rates. Here are three factors that international microfinance providers have to consider as they face the hard task of determining what constitutes responsible pricing.
Read the article…
> Posted by Anita Gardeva
To solve financial exclusion you have to think big. This is what Mr. Bhagwan Chowdhry, Professor of Finance at UCLA Anderson School, is doing with the Financial Access@ Birth (FAB) initiative. FAB aims to convince governments and financial institutions to provide every child born with a savings account. Behind the simplicity of this big idea lays a powerful rationale and a comprehensive strategy.
Chowdhry, along with a team of experts, plans to bring together governments, multilateral development agencies, banks, technology providers, and non-profits to launch this initiative.
The concept of FAB is to link the birth registration process with the opening of a savings account that has an initial deposit of US $100, provided by government of other philanthropic sources. This account would in effect, give every newborn a financial identity. If FAB takes off-successfully, it can generate a wealth of benefits, including:
- Increase access to formal financial services
- Promote national identification by incentivizing official birth registration
- Facilitate assistance payments (such as government benefits, remittances, or international aid transfers)
- Encourage savings from an early age
The FAB team estimates that it will cost around US $10 billion a year to fund the accounts. Read the rest of this entry »
> Posted by Kelley Mesa
For many Smart Campaign endorsers, how to identify and develop processes to avoid client over-indebtedness prove to be major challenges. At Partner Microcredit Foundation in Bosnia and Herzegovina, the leadership and staff have developed a strategy for avoiding over-indebtedness by recognizing that a risk for the client is a risk for the institution.
To mitigate the risks of over-indebtedness, Partner performs rigorous credit analysis of its clients before issuing a loan and follows up with audits to verify proper staff behavior and discover why clients are not able to meet their obligations. Proactive measures like financial-literacy programs and client-loyalty efforts complement analysis and audits to create a robust system to avoid client over-indebtedness.
Read the complete Smart Note here >
> Posted by Elisabeth Rhyne
To the 30 or so people who came together to talk about microfinance impact during a session at the recent Microfinance USA 2010 conference, I posed the question: “What do you hope to achieve through your work in microfinance?” Not surprisingly, the first thing shouted out was “Lifting people out of poverty.” The list continued: women’s empowerment, stabilizing incomes, smoothing consumption, creating and saving jobs, building businesses, opening the financial system to everyone, promoting a just and equitable society, and more. I was moved by aspirations reflected in this list. The people in the room bring their best hopes for making a difference in the world to their work in microfinance.
"Microfinance Miracle or Myth" session participants sketched out their definitions of microfinance impact.
In the lunchtime session, we noted the variety of ways that the group learns about the impact of their work, from talking with clients, to tracking their performance, to carrying out surveys. As an international microfinance practitioner, I was struck by how much easier it is to get reliable information about client status in the U.S., where business records are more formal than in developing countries. We briefly discussed the randomized control trials that have been garnering great attention. The trials are the only method with a claim to demonstrate causality. Read the rest of this entry »
> Posted by Elisabeth Rhyne
Jonathan Lewis, founder of MicroCredit Enterprises, loves spirited dialogue, and that’s why as moderator of the recent Microfinance USA 2010 panel on interest rates, he went for the jugular. He knew that the hardest – and most sensational – questions to answer are: How much is too much? and Who changes too much? I was interviewed by a reporter recently, who kept repeating this request: Give me a number. Give me a name. We like the concreteness of the numbers and the moral satisfaction of scolding price gougers.
Of course I didn’t want to give a name or a number, though I was surprised that two panelists did come up with upper bounds for the U.S. (Paul Leonard of the Center for Responsible Lending said 36 percent per FDIC limits, while Lynn Trojan of ACCION said that 50 percent would allow everyone to be reached sustainably).
But these questions take the dialogue in the wrong direction. They ask us to ignore the contextual factors that determine the right balance between client affordability and institutional sustainability, necessary to ensure that services remain available to all those who seek them. I am only prepared to call the price a lender charges responsible if I understand how large the loans are, what kind of cost structure the lender faces and how it uses its profits.
The best question of the day came from an audience member who asked, “Why is the price of money so emotionally charged when the price of other goods is not?” The answers to this question are very important to keep in mind as we work for consumer protection. Read the rest of this entry »
> Posted by David Levaï
We are very proud to announce that Barefoot Power, the three-year partner and supplier of solar lanterns for Energy Links projects in Uganda and Mali, won multiple product awards this week at the Lighting Africa conference in Nairobi, an international conference on off-grid lighting organized by the International Finance Corporation (IFC).
Barefoot Power's solar-powered LED Firefly lamp (two lamps on left) won numerous awards in the recent Lighting Africa conference.
Twenty-four finalists were evaluated and judged in 4 different categories. Barefoot Power won three of the four first prizes for room lighting, best value, and top performance. They also took the second price in the fourth category: task lighting. The solar lantern that Energy Links helps commercialize, called the Firefly, specifically won in the best value category for products that cost under $40 and came second in the task-lighting category.
The Energy Links project first started collaborating with Barefoot Power after extensive market research; Barefoor Power was offering the best quality lighting products at the lowest cost for the customers. We are happy that an international competition confirmed that this socially-minded business was one of the most reliable energy suppliers for off-grid distributed systems. Read the rest of this entry »
> Posted by Kelley Mesa
In her latest Huffington Post article, Elisabeth Rhyne discusses overindebtedness in microfinance…
When does a borrower cross the line from leveraged into losing it? Every borrower wants to avoid sliding into debt stress. Lenders, too, have a stake in ensuring that their clients cope successfully with their debt burdens.
If no one wants debt stress, why is there so much of it around?
This is an emerging challenge for the microfinance institutions around the world that have finally succeeded in providing access to credit to hundreds of millions of previously excluded low income people. Some of the top microfinance markets in the world – in countries as diverse as Nicaragua, Morocco and Bangladesh – are becoming saturated. Since their clients are among the world’s most vulnerable people, microlenders have a special responsibility to avoid over-lending. This brings up a new problem for microlenders: how and when to put on the brakes. Read more >
> Posted by Julian Sosa
Financial inclusion is gaining momentum with policy makers around the world and there is a good reason why; in the past decade, households surveys conducted in close to 20 developing countries illustrate that on average 74 percent of households do not have a bank account in a formal institution.
However, few are talking about financial exclusion in developed countries, such as the 
United States. Over 22 million people in the United States do not have a formal bank account, showing that developing countries are not alone in dealing with this problem and that our own country still has a long way to go. And estimates suggest that unbanked families spend approximately five percent of their annual incomes on managing their basic finances alone. Once again the poor pay much more than the average American for poor quality services.
This is why in 2006 the city of San Francisco launched Bank On San Francisco with the goal of reaching out to U.S. families that lack access to mainstream financial institutions. The initiative helps to bring together financial institutions, local governments, and community organizations in creating and implementing a local strategy to extend banking services to individuals on the “fringe” of the U.S. financial system (in other words, those who are excluded by cost barriers or have a poor bank history). At the core of this program is the provision of special banking benefits to unbanked individuals Read the rest of this entry »
> Posted by Elisabeth Rhyne
At next week’s Microfinance USA conference, I have the honor of leading a session on one of the hottest topics in microfinance these days: impact. Interest in impact has surged recently because of the big press coverage garnered by the researchers associated with MIT’s Poverty Action Lab and their new randomized controlled trials. At the session we’ll talk about how these new studies work (in layman’s terms – I’m no econometrician) and what their results are showing about microfinance.
To start off, I’d like us to consider all the ways we can learn about the impact of microfinance. Like these:
- The seeing-is-believing method – otherwise known as talking to clients or anecdotal evidence.
- The market method – if customers pay for the services, they must value them.
- The institutional method – sustainable institutions that serve the poor are prima facie contributions to more inclusive societies.
- The anthropological approach – talking intensively to clients in a structured way that allows inferences to be drawn. Recently the Financial Diaries approach has done this.
- The simple quantitative-survey approach – used for years despite suffering from many design flaws.
- And finally, the experimental-design approach, a statistically rigorous model patterned after medical drug trials, which is capturing today’s headlines.
I think we learn from all of these methods. It’s like we are painting a picture using different kinds of paint and brushes. Gradually, our picture takes on shape, color and texture, and ultimately all these elements come together to convey meaning. Read the rest of this entry »
> Posted by Kelley Mesa
From conversations with microfinance professionals around the world, it’s clear there is a lot of agreement about the importance of incorporating the Client Protection Principles into MFI practices. The big questions now is “how?”
Enter the tools and best-practice resources being developed by The Smart Campaign. And now you can learn more about them.
RSVP today for the first Smart Campaign Tools Webinar >
Date: Thursday, May 20, 2010
Time: 9:30 – 10:30 a.m. Eastern Daylight Time*
Speakers: Robin Ratcliffe, Director, The Smart Campaign
Elisabeth Rhyne, Managing Director, The Center for Financial Inclusion
Victoria White, Vice President and Program Manager, ACCION International
Valerie Kindt, Principal Senior Director, ACCION International
In this first webinar we’ll introduce the Campaign’s tools and resources and walk participants through the newest tool “Smart Lending: Client Protection in the Credit Process.” Read the rest of this entry »
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