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> Posted by Center Staff
Alex Counts captures the excitement at the Global Microcredit Summit in the latest post on his blog, the cyberspace outpost where he describes the process of writing a book about Haitian microfinance pioneer Fonkoze.
Counts, the CEO of Grameen Foundation, notes that Fonkoze “was, among participating organizations working in a single country, the one that received the most exposure to tell its story.”
Counts, who was interviewed for the Center’s “Microfinance Matters” series, joined other friends of Grameen Bank to set up Grameen Foundation in 1997. During his recent trips to Haiti, he has been meeting with microfinance industry leaders in general, and in particular with Fonkoze staff.
“Fonkoze at the Global Microcredit Summit,” his most recent post, begins:
The recent Global Microcredit Summit held in Valladolid, Spain brought significant new exposure to the innovations and accomplishments of Fonkoze. Anne Hastings spoke at the first substantive plenary (right after the ceremonial opening session), and followed that up with presentations at several workshops and finally well-received remarks at the closing plenary. Gauthier Dieudonne presented Fonkoze’s institutional action plan in a plenary alongside the head of CARE’s microfinance initiative, ACCESS Africa. (CARE is one of the largest humanitarian organizations in the world.) Finally, Fonkoze Diaspora liaison Katleen Felix chaired a workshop while CLM regional director Steve Werlin presented an important paper that he had co-authored with Anne. Read the rest of this entry »
> Posted by Center Staff
Beth Rhyne’s latest contribution to the Huffington Post examines how the industry is putting its own practices under the microscope, with an eye to making good consumer protection practices part of microfinance’s DNA. The piece begins as follows:
Judging from last year’s lobbying by the financial sector to block the new Consumer Financial Protection Bureau, one would think banks are just plain anti-consumer protection regulation, almost by reflex. That’s why it is so encouraging to see the global microfinance industry embrace a campaign to promote strong consumer protection principles.
Like the mainstream financial sector, the microfinance industry has come in for criticism in the past year. Problems of over-indebtedness among microfinance clients surfaced in India, Nicaragua and a few other countries. Given that their clients are among the vulnerable people of the world, providers of microfinance take such problems very seriously. Across the microfinance industry a deep examination of performance is under way, as well as work to create structures that will incentivize good practices.
To read the rest of this piece on the Huffington Post, please click here.
Have you read?
Three Secrets of Safe Microfinance
A Tale of Microfinance in Two Cities
An Open Letter to Elizabeth Warren
> Posted by Danielle Donza
Take this quick survey to evaluate the governance of your MFI:
- Do you have an independent board chair?
- Do you conduct board evaluations?
- Does your board discuss the social mission of the organization?
- Has anyone ever dissented at a board meeting?
- Does your institution have a succession plan?
- Do you have risk and audit committees?
- Does the board package go out in a timely manner before the board meeting?
- Do you have Directors & Officers insurance?
- Do you offer any type of board training?
- Do your board members have diverse and relevant backgrounds?
If you answered “yes” to the majority of these questions, then you are probably in fairly good shape. Actually, that might be a dangerous claim to make. In fact, as the British hacking scandal unfolded, The New York Times wrote that “News Corporation is in full compliance of the rules set by Nasdaq” and met the requirements to have a majority of independent board members. This means that News Corporation would probably have answered “yes” to most of these questions. And I’m pretty sure the same could be said for Enron and WorldCom. Yet these boards still consisted of faces that were just a little too “friendly,” and despite conforming to the technical “best practices” for governance, were still not providing adequate oversight. Read the rest of this entry »
> Posted by Adriana Magdas
Why is educational inclusion for children with disabilities so essential to financial inclusion?
The answer to that question came to me one day while I was browsing the BBC News. A headline caught my attention: “Disabled Children Excluded from Education.” That article and a bit more research revealed statistics on the extent of the exclusion from education faced by children with disabilities. Among the facts I learned:
- according to UNICEF’s “State of the World’s Children Report,” approximately 150 million children around the world have a disability; and,
- the UNESCO “Education for All Global Monitoring Report” claims that more than one-third of out-of-school children have a disability, and in Africa, fewer than 10 percent of disabled children are in school.
The statistics I gathered show that children with disabilities are disproportionately excluded from education, a human right that enables them to be more competitive and access a wider range of future income-generating opportunities. Since over 80 percent of the 785 million people with disabilities worldwide live in developing countries (Enable/United Nations), it’s obvious that most of these children with disabilities will face many hardships and obstacles to earning a decent income when they mature.
So to return to the question, why, indeed, is educational inclusion for children with disabilities key to financial inclusion? Read the rest of this entry »
> Posted by Center Staff
No one argues against the importance of client protection. Indeed, the fact that financial institutions (FIs) should operate in a responsible way vis-à-vis their clients is such a universal principle that it is sometimes taken for granted.
Recent problems highlighted in the press, as well as assessments of financial institutions’ client protection practices by raters, investors, and the Smart Campaign, show that there is still a lot of work to be done to ensure that all microfinance institutions are acting responsibly. The microfinance community has come together around a set of Client Protection Principles (CPPs) which are widely endorsed by financial service providers, funders, investors, supporting organizations, and individuals. In order to provide assurance that the CPPs are being implemented, it is agreed that self-reporting is insufficient. A process of third-party certification is needed.
Since June 2010, the Smart Campaign has been working with the microfinance industry (through a task force of over 30 experts representing various stakeholders) to develop a Client Protection Certification Program. The Certification Program will enable financial institutions worldwide to demonstrate their adherence to the Campaign’s core CPPs as verified by third parties. Financial institutions that have met adequate standards in Client Protection will be highlighted publicly. Read the rest of this entry »
> Posted by Steven Werlin
[The following post is Pt. II of a two-part series. In this post, Steven Werlin explains what his organization, Fonkoze, is trying to accomplish through group microfinance. The first part, by Beth Rhyne, appeared on November 17, 2011.]
It is easy to imagine solidarity-group microcredit as a method that both minimizes the costs an MFI faces in making its loans and protects the institution from risk. It’s easy to imagine both those things, because they are both true.
Using groups to makes loans means that the loans can be delivered and reimbursements collected at central locations without the borrowers’ having to come in to a branch. The borrowers save much of the direct transportation cost they would otherwise be stuck with if they live far from a branch, and the branch saves mileage because its loan officer doesn’t have to find each borrower individually. Borrowers and loan officers meet halfway, in a credit center.
The group also significantly reduces the lender’s risk. Group members can be held responsible for one another’s delinquent payments. Their need to vouch for one another means they are likely to choose fellow-members carefully, selecting friends whom they believe to be good risks. And making members agree on the size of each loan can protect against the over-indebtedness responsible for many write-offs. Read the rest of this entry »
> Posted by Beth Rhyne
[Pt. I of a two-part series. Pt. II, by Steven Werlin of Fonkoze, will appear tomorrow.]
Fifteen practitioners and experts gathered in Valladolid, Spain on Sunday, before the Microcredit Summit, to consider this question, and I sat in. Group methodologies are coming under criticism by those who think they lead to over-indebtedness and provide rigid, inflexible products. The practitioners in the room, from Haiti, Bolivia, South Africa, Tanzania, Uganda, Georgia and India, convinced me that there is a lot more going on in group microfinance than those stereotypes suggest.
Some providers see groups as delivery mechanisms for a range of financial services. ESAF in India, for example, offers or facilitates microloans, housing loans, savings, insurance and pension products. Other providers, like ProMujer, take an even broader view. They see groups as a channel for addressing the multiple access gaps that define poverty and as providing an experience of empowerment.
“You have to get the finance right,” said Lauren Hendricks of CARE, explaining that financial services anchor groups that can then expand to additional services. However, Lisa Kuhn of Freedom from Hunger said, “If groups are only about financial services, they will go away.” Read the rest of this entry »
> Posted by Center Staff
Two new articles about the Smart Campaign report “Implementing Client Protection in Microfinance – The State of the Practice, 2011” are now online:
- “Microfinance Industry Embraces Accountability, Report Finds,” a write-up from Philanthropy News Digest, leads by noting that “While problems remain, 88 percent of rated MFIs received overall passing marks for their client protection practices.”
- “The Smart Campaign’s ‘State of the Practice’ report claims that the effort to embed client protection deeply in the microfinance industry is still young, but is thriving,” says the Microfinance Focus article “Microfinance Industry Embracing Client Protection – Smart Campaign Report.”
Have you read?
IFC to Finance the Smart Campaign’s Microfinance Client Protection Initiatives in India
‘Client Protection: Are We There Yet?’ – Smart Campaign Director Isabelle Barrès Blogs at CGAP
The Only Solid Basis for Microfinance Having a Bright Future?
> Posted by Siddhartha Chowdri
Over the last couple of months, I’ve noticed this advertisement by the State Bank of India in several newspapers (in many cases on the front page), billboards, and other media throughout the country. Take a minute to try to figure out how much this loan costs and then continue reading. (For those outside India, 1 Lac = 100,000 rupees.)
Over the last four to five years the microfinance industry has been aggressively pushing for greater client protection standards. One place where there has been very specific and measurable improvement is in pricing transparency. This is large part due to the efforts of movements like the Smart Campaign and institutions like MFTransparency.
Although (as many people who work directly with clients know) no matter how well we as institutions disclose and explain prices in standard formats, the only thing that is of concern to the clients is how much they will have to repay on a monthly/weekly basis. Concepts of IRR, APR and time-value of money are not as much of a concern to them as how much money they are going to get and when. Regardless of whether the client is able to understand the full terms of their loan, it is extremely important that those who claim to be in the business of responsible finance stick to their guns and continue promoting full disclosure and transparency. Read the rest of this entry »
> Posted by Marco De Natale
This post marks the Center’s launch of “Over-Indebtedness of Microborrowers in Ghana,” a new report written by Jessica Schicks.
“Over-Indebtedness of Microborrowers in Ghana” is an innovative and already influential study on what is currently the main concern of microfinance practitioners (cf. “Microfinance Banana Skins 2011,” CSFI).
The research considers a very relevant country for global microfinance trends, as Ghana is a prime example of a well-developed sector where observers have noted potential warning signs of over-indebtedness: Urban markets (especially in the capital, Accra, and in the business capital, Kumasi) are increasingly served by a variety of financial institutions (mainly deposit-taking NBFIs and NGOs), the credit bureau system is arguably still not up to speed, and there is a relatively large number of informal/unregulated credit providers.
Indeed, a recent study of the Center for Microfinance at the University of Zurich identifies Ghana having a “medium to high level of early warning signals for over-indebtedness” based on a set of 14 macro/industry indicators. Read the rest of this entry »
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