You are currently browsing the monthly archive for August 2012.
>Posted by Jeffrey Riecke
A few weeks ago I wrote a post highlighting microfinance as a tool for achieving environmental sustainability and in it I looked at CFI’s now-completed Energy Links project. During its three years of operations, Energy Links explored, and ultimately demonstrated, how MFIs can help to significantly expand the micro-energy industry. With Energy Links finished, I wondered, what is the microfinance community doing now to support sustainable energy?
Not even a day after writing my Energy Links post a colleague introduced me to MicroEnergy Credits (MEC), an organization that is earning large-scale success in supporting MFI clean energy lending. Since it was founded in 2007, MEC estimates that it has helped provide clean energy to over 100,000 households across several countries.
>Posted by Josh Goldstein aka Mr. Provocative
What do we know about gender wage equality at microfinance institutions? Is greater operational efficiency at MFIs achieved in part at the expense of women’s pay? Discrimination against women as employees is pervasive around the world. For example, in the United States, it was only in 2009 that the Lilly Ledbetter Fair Pay Act became law. Even today, American women continue to earn significantly less than men for comparable work—77 cents to every dollar, according to some studies. I have looked around for evidence that MFIs are conscious of this issue, but my research uncovered no clear insistence for compensation equality for the employees of microfinance institutions from either social investors or industry standard setting groups. In fact, the issue isn’t discussed or even raised.
The highly regarded and influential Social Performance Task Force (SPTF) recently adopted Universal Standards for Social Performance Management, which sets social performance goals for MFIs. The standards are representative of this striking silence on the issue of gender wage equality. While the document includes treating “employees responsibly” as one of the six key areas that must be addressed, it merely affirms blandly: “5a.2 Employee compensation levels constitute a living wage for employees.” It is only in the “Additional Good Practices” annex that the SPTF is more expansive about management standards when it comes to employees, but even then it does not specifically address wage discrimination, see the following: Read the rest of this entry »
>Posted by Center Staff
The following post by Alexandra Fiorillo and Louis Potok, the vice president and an analyst at ideas42, respectively, was recently shared on the CGAP Microfinance Blog. The post presents the field of behavioral research as an important tool for informing consumer protection policy. Some policy-relevant research in the areas of information presentation and transparency has already been conducted, but there remains the need for additional investigations as well as strategic policy implementation, the authors assert. The post begins:
Behavioral economics is the science of human decision-making and how people’s biases and weaknesses can lead them to make harmful economic decisions. Behavioral research in consumer finance can help improve financial consumer protection. As Rafe proposed in the first blog post in the series, if we want to design policies that improve consumers’ outcomes in the marketplace, we need to understand their choices and motivations.
Some policy-relevant behavioral research has already begun…
Read the rest of the article on the CGAP blog.
Have you read?
Progress toward Improved Client Protection in the Indian Microfinance Sector
An Excellent Resource on Regulating Client Protection: IFMR Trust’s Blog Series
>Posted by Center Staff
Peter Kasprowicz of Credit Suisse and CFI’s Elisabeth Rhyne have recently completed an examination of global demographic trends and their implications for financial inclusion. What they found could change how we think about financial inclusion. Elisabeth Rhyne will launch the publication, “Financial Inclusion and the Demographic Window,” at the 2012 Global Youth Economic Opportunities Conference hosted by Making Cents International. The Microlinks blog has posted some key findings from the publication in advance of its release. The post begins:
1. The youth bulge is ending for much of the developing world. It is axiomatic to think that in the developing world the population is very young and birthrates high. However, things have already changed for many of the world’s middle income countries. In Mexico, South Africa, and many other countries there will actually be fewer children by the end of the decade than there are today, while the number of elderly people, though still small, will grow rapidly. Only in the poorest countries, particularly in Africa, are children and youth still the fastest growing segments. For those countries with changing demographics, now is the time to begin focusing on the financial needs of older adults.
2. The “demographic window” challenges countries to use financial inclusion to make the most of a unique economic opportunity…
Read the rest of the article on the Microlinks blog.
For more information, sign up for updates from the Financial Inclusion 2020 campaign.
Have you read?
> Posted by Siddhartha Chowdri
As part of a worldwide “listening tour” Larry Reed, Director Microcredit Summit Campaign, gathered around 20 of the leaders of the Indian microfinance sector for a roundtable discussion. This dinner took place on the eve of the Sa-Dhan Financial Inclusion Conference. In the two weeks since this candid discussion I have been dwelling on the questions Mr. Reed proposed to the attendees and their responses.
To paraphrase, the questions that were posed to these stalwarts of Indian financial inclusion were:
- Should microfinance institutions measure the poverty levels of their clients?
- If yes, how should this then be communicated to the world at large?
Given the beating that the Indian microfinance sector has taken over the last two years it was amazing to see such simple questions provoke such thought and passionate responses from some of the architects of the Indian microfinance movement. As these leaders of MFIs, support organizations, investors, and NGOs gave impromptu responses, several themes and trends emerged.
First, many people were quite clear that microfinance and financial services alone will not alleviate poverty. Even though at this point the whole “microfinance is not a panacea” conversation seems to be beating a dead horse, most of the discussants felt that this was an important message to reemphasize. After reading this recent Forbes article “Microfinance as a Tool to Alleviate Poverty“, I realize that this message is still is not clear to everybody.
Read the rest of this entry »
> Posted by Ignacio Mas
Giving personal credit is about judging people. Banks have established information standards about customers, designed to make the judging process routine. How long have you lived at a given fixed address? What is your level of education and profession? How much salary do you earn? What is your history of past debts? etc.
The problem is that this standard information set is not at all standard for the informal majority in developing countries. People may not have a fixed address, they are likely to be jacks-of-all-trades, no one guarantees them a wage, and prior borrowing and repayments have left no trace.
There is much talk about using online social networks to create a new systematic profile for customers whose data is now invisible to banks (such as Lenddo). The deal seems to be: reveal more to the lender about what you do, how you spend your time, what your interests are, who your friends are, and it will be better able to judge you. With today’s computing machines, the information collected from people can be a lot more bitty and diverse, and the code will crunch it into a standard profile. Powerful stuff: now, pretty much any information can be thrown into the judging machine.
Read the rest of this entry »
> Posted by Elisabeth Rhyne
According to the Financial Trust Index, a quarterly survey of public opinion, only 21 percent of Americans trust the financial system and only 23 percent trust large national banks.
On the other hand, nearly 63 percent, according to the same survey, trust credit unions. Hmm…impressive.
What’s more, in a survey rating the reputation of 34 different industries, credit unions had the most positive rankings, higher than all other segments of the financial system and also higher than non-financial industries including retail stores, schools, technology and communications companies, automobile companies, health care companies and the federal government. That’s right — numero uno.
Read the rest of this entry »
>Posted by Center Staff
One cannot discuss the Indian microfinance industry without considering the crisis in Andhra Pradesh, but the sector has undergone dramatic changes since the incidents two years ago. Hema Bansal of the Smart Campaign staff recently attended the Financial Inclusion Conference 2012 in New Delhi to talk about how changes in the Indian microfinance sector have affected consumer protection. Here are highlights from her talk.
While acknowledging that numerous obstacles remain for the sector as a whole, Ms. Bansal praised specific improvements in the client protection environment: the Reserve Bank of India provision of a framework for regulating client protection; the development by industry associations of an industry Code of Conduct; and the influence of social investment funds.
One area where improvement can be seen is pricing transparency. Just two years ago, transparency levels were purely market driven and MFIs were hesitant to communicate their pricing. Today, regulations and social investors are driving higher transparency standards. For the first time, microfinance institutions in India are introducing an element of competition by communicating their loan pricing, which makes it easier for clients to select the correct loan.
Read the rest of this entry »
> Posted by Elisabeth Rhyne
If you want a crash course on consumer protection regulation in financial services, there is no better place to look than the IFMR Trust’s blog. Since last December, analysts at the Trust, based in Chennai, India, have been systematically learning all they need to know to be informed about consumer protection regulatory issues facing India today. They have generously shared their learning process in public through a blog series that is a great resource for the rest of us, whether in India or anywhere else.
While IFMR Trust’s primary concern is of course India, the series ranges widely around the world, and moves from theory to detailed accounts of how specific countries are handling their challenges. Here is a quick look at what is on offer:
- An accessible summary of the traditional economic rationale for consumer protection regulation, followed by a discussion of the insights coming from behavioral economics. The post on behavioral economics is perhaps the best concise explanation of these insights and how they affect the case for regulation that I’ve seen.
- Detailed descriptions of the approaches taken in two countries that IFMR is looking towards as possible models: Australia and South Africa.
- A graphic description of the origins of Indian financial consumer regulation starting with English law before the 12th century and ending with the present (much less arcane than it sounds).
- An extended interview with Kate McKee of CGAP, focusing especially on how regulators can best move from the inadequate client protection regulation present in most countries today to put effective measures in place.
>Posted by Jeffrey Riecke
As a newcomer to CFI, I can remember my first impression of the name “Center for Financial Inclusion.” Coming from an environmental background, I didn’t think the work of an organization called the Center for Financial Inclusion would have pervasive environmental impacts. I settled with the notion that CFI simply worked to ensure that quality financial services were widely available. In learning more about CFI and microfinance, it hasn’t taken long to discover that environmental sustainability is an aspect of nearly every prong of CFI’s work.
For me, this relationship with the environment is nicely illustrated in the findings of CFI’s publication Microfinance and Energy Poverty: Findings from the Energy Links Project, which was released in September 2011. The publication summarizes the findings of the Energy Links project, a three-year pilot by CFI, financed by USAID’s Microenterprise Development Office and the Wallace Global Fund. In the words of the publication’s authors:
“Energy Links’ aim was to determine how the established microfinance sector in African countries can alleviate energy poverty by increasing access to small-scale clean energy solutions at the household level.”
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