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> Posted by Sergio Guzmán
As previously announced, the Smart Campaign included the concept of non-discrimination in the Client Protection Principles under the heading Fair and Ethical Treatment of Clients. The principle now affirms the idea that microfinance clients and staff should not suffer discrimination on the basis of gender, political affiliation, religious belief, or disability, among others.
This work has been done in collaboration with the Center for Financial Inclusion’s program on persons with disabilities (PWD). One of the action items that resulted from a June 2010 roundtable on Financial Inclusion for Persons with Disabilities hosted by the World Bank was to document how financial institutions currently include PWDs in their activities.
In that context, we’re pleased to release a new Smart Note focusing on the efforts of AccessBank Azerbaijan to practice non-discrimination among employees through deliberate efforts to hire persons with disabilities. Additionally, the Smart Note provides a testimonial from one of AccessBank’s employees, Asad Aslanov, that talks about his experience as a person with disabilities working as a cashier at the MFI. Through inclusive hiring policies, targeted recruitment of PWDs, and specialized training, AccessBank demonstrates a commitment to non-discrimination. Read the rest of this entry »
> Posted by Ignacio Mas and Claire Alexandre
A policymaker’s dilemma: how to pursue a policy of access to a bank account for everyone, while at the same time erecting regulatory barriers to the opening of those accounts to prevent their misuse. It’s like pushing the accelerator and putting on the brakes at the same time. This is not to belittle law enforcement concerns, chiefly the need to prevent or detect money laundering. But as we argued in a previous blog post, neither financial inclusion nor law enforcement are well served by keeping the bulk of the population away from modern digital — and hence, inherently more traceable — payment systems.
These objectives can be easily reconciled by making account opening trivially easy at first, and tightening the requirements for documentation and record-keeping progressively as the accounts become larger and more active. With this approach, everyone wins. New-to-banking customers can learn about how to use the account before they are asked to submit to onerous Know Your Customer (KYC) obligations. Banks don’t need to put in place costly KYC processes for customers that are not yet profitable. And law enforcement agencies can get relevant information on accounts commensurate with the risks involved. Read the rest of this entry »
> Posted by Center Staff
Book-writing is partly about voracious reading, Alex Counts reminds us on his blog, which chronicles the process of penning a book about Haitian microfinance pioneer Fonkoze.
Counts, the CEO of Grameen Foundation, most recently finished The Blue Sweater by Jacqueline Novogratz (Rodale, 2009) and The Social Entrepreneur’s Handbook by Rupert Scofield (McCraw Hill, 2011). (We previously gave a nod to Scofield’s book here on this blog. )
Counts joined other friends of Grameen Bank to set up Grameen Foundation in 1997. He was interviewed for the Center’s “Microfinance Matters” series. During his trips to Haiti, he has been meeting with microfinance industry leaders in general, and in particular with Fonkoze staff.
“Two Memoirs to Inspire and Educate Social Entrepreneurs,” his most recent post, begins:
I am returning from Istanbul, where I attended and spoke at a historic meeting of microfinance leaders from around the Arab World and from Turkey. A long layover in Amsterdam is giving me the opportunity to return to this blog while I prepare to head to Haiti via Washington and New York over the next two days. It has been a whirlwind fall for me, but my book on Fonkoze has never been far from my mind. Professor Muhammad Yunus, the founder of the Grameen Bank and my mentor, was the most recent person to ask me about it when we were driving to a university in Turkey where he gave a speech two days ago. Read the rest of this entry »
> Posted by Holly Padgett
Since I started working with the Center for Financial Inclusion this fall, I’ve been inspired to observe the client-centered nature of the microfinance industry. For example, I recently read a report by MicroSave, an organization that focuses on market-led microfinance in Africa and Asia, which confirmed this client-centered trait. The report examines client experiences in the wake of the microfinance crisis in Andhra Pradesh.
Below are some of the findings of the report that I found most striking:
- With MFIs in Andhra Pradesh drastically reducing new lending, borrowers have been forced to seek out alternative sources for lending. In 66 percent of the research sessions MicroSave conducted, clients described the major burden of these alternative loans as the “exorbitant” interest rates. Read the rest of this entry »
> Posted by Beth Rhyne
As leaders of the microfinance industry in India assemble in Delhi this week for the ACCESS Microfinance India Summit, India-watchers outside the country can follow events in the sector by taking a look at the latest report from M-CRIL: “M-CRIL Microfinance Review 2011: Anatomy of a Crisis.” The executive summary is available as a stand-alone document, and it provides instructions for purchasing the entire data-drenched report.
For me, the best parts of the report are the numbers that help dimension the sector and its crisis, as well as its no-holds-barred approach to stating conclusions. Here is a small sampling:
On the role of microfinance in India: “Microfinance is now established as a significant component of the financial system in the country and its contribution to financial inclusion continues to rival, if not exceed, that of the rural banking system.” “With 31.8 million borrower accounts the size of the microfinance sector more than matches significant parts of the Indian financial system in terms of the number of citizens affected. This number is more than three times the number of micro‐credit accounts serviced by the Regional Rural Banks and is greater even than the total number of such micro‐accounts held by the commercial banks.” Read the rest of this entry »
> Posted by Siddhartha Chowdri
The Indian Parliament is bogged down with critical legislation on foreign direct investment, anti-corruption and food security. The Micro Finance Institutions Bill is low on the priority list, behind at least 30 other bills. Many microfinance industry players were concerned that uncertainty around the norms for MFIs would continue indefinitely.
Officials at the Reserve Bank of India (RBI) decided not to keep waiting for Parliament to pass a bill on microfinance (the first of which was introduced in 2007). On December 2, 2011 the RBI created a new category of non-banking financial company (NBFC) called the NBFC-MFI.
This bold step goes a long way towards giving the microfinance industry in India the legitimacy it has sought for more than a decade. Much of the credit for the RBI’s expediency in moving this forward should go to the team at MFIN and Sa-Dhan for their relentless efforts and representations to the RBI.
The requirements for an NBFC to qualify as an NBFC-MFI are in large part defined by the Malegam Committee report circulated in January 2010. However, there remain some significant concerns that one hopes will be addressed as these regulations and guidelines evolve:
- The NBFC-MFI is only a microcredit institution. Financially excluded clients will have to look to other types of institutions (or individuals) to fulfil their other critical financial service needs. Read the rest of this entry »
> 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 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 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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