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> Posted by Alix Lebec, Director of Business Development & Investor Relations at WaterEquity, and Hannah Kovich, Investor Relations Manager at WaterEquity

The following post was originally published on NextBillion.

Consumer demand is a force that changes the world. With each purchase, we shape and sometimes even revolutionize the world we live in. A great example of this is the smart phone. The iPhone has changed consumer behavior and unleashed possibilities unimaginable to us 15 years ago. As consumers, we use our dollars as a proxy for our voice, affirming products and brands that best align with our needs and values, propelling them to scale and expand. What if we could tap into this intrinsic power of the consumer to end one of the greatest challenges facing the world today – the global water crisis? What if those in need of safe water and sanitation were empowered to purchase their own solutions?

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> Posted by Alex Silva, Executive Director, Calmeadow, and Jeffrey Riecke, Senior Communications Specialist, CFI

Impact investors, social investors, responsible investors…regardless of name, they claim to serve the greater good. In the world of financial inclusion, impact investors are supporting the development of financial markets that have inadequately served the base of the economic pyramid.

What happens when social investors exit from their financial inclusion investments?

Some exits are non-controversial, but what if responsible investors sell their stake to an investor that doesn’t place priority on the social mission? The risk of mission drift or abandonment is real, and responsible investors must consider it as they make their exit decisions. With financial inclusion sector trends suggesting that impact investing exits are going to become more frequent, it’s worth examining the topic in greater detail.

Investors exit for many reasons

It’s important, especially for critics of impact investors, to recognize that a decision to exit may arise from any number of factors, including factors internal to the investor.
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> Posted by Iftin Fatah, Investment Officer, Overseas Private Investment Corporation (OPIC)

sewingLimited access to credit in the developing world is often exacerbated by conflict, which presents a strong demand for microfinance. In Iraq, for example, only 11 percent of adults hold an account at a formal financial institution, according to the 2014 Global Findex. The Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, is helping to build a more inclusive financial sector in Iraq through its partnership with Vitas Iraq, a subsidiary of Global Communities, which is a non-profit development organization that partners with local stakeholders across a range of topic areas. Vitas Iraq established Al Tamweel Al Saree LLC (ATAS) as the financing vehicle to support expansion of its operations. In 2012, OPIC provided ATAS with a direct loan to enable the expansion of Vitas Iraq’s portfolio of loans to individuals and to micro, small and medium-sized enterprises (MSME), thereby expanding financial access in Iraq.

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> Posted by Ram Narayanan, Market Research Analyst, Symbiotics

Microfinance, a lead sector within the larger impact investing spectrum, has gained prominence from development-minded investors over the past decades. Initially, international funding in microfinance was generated largely from donor organizations, including public development agencies and private foundations. As the market gained traction, the role of private capital grew in importance as not only a means for microfinance institutions (MFIs) to reach scale, but also to increase their social outreach beyond what was possible with donor money.

Private investors and donor agencies thus joined efforts in creating microfinance investment vehicles, better known in the industry jargon as “MIVs” or more simply “microfinance funds.” MIVs act as the main link between MFIs and the capital markets and usually provide debt financing, equity financing or a combination of both to MFIs located in emerging and frontier markets.

The Consultative Group to Assist the Poor (CGAP) began to take interest in MIVs in 2003, a time where several of these vehicles saw the light, and before the investment boom which was witnessed by the sector with the announcement of the United Nations “2005 International Year of Microcredit.” However, the industry was still lacking common definitions, terminology and performance standards. In order to bring forward improved transparency on MIVs’ financial and social performances, a first market report on microfinance funds was produced in 2007 by CGAP, in collaboration with Symbiotics. The inaugural MIV benchmarking tool was thus born – based on a market survey containing a common set of definitions and reporting standards – a landmark that set the stage for regular, annual surveys carried out every year since then.

Fast forward 10 years, Symbiotics and CGAP have yet again partnered to develop a new extensive report (white paper) reflecting back on a decade of MIV operations, shedding light on their progress during the period 2006-2015. The recently released white paper co-authored by both organizations and entitled “Microfinance Funds: 10 Years of Research & Practice” carefully details major market trends.

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> Posted by Center Staff

MeetingRoom_MENA.pngYou’d be hard-pressed to list all the ways corporate governance can make (or break!) an organization. In the financial inclusion sector, strong boards ensure effective strategic planning, manage sustainable growth, bolster attractiveness to investors, balance risks, develop client centric products and delivery channels, and, increasingly, act as “strong digital sparring partners for management.”  Yet, a recent study sponsored by the Sanabel Network and the IFC that inspected risks confronting the microfinance sector in the Middle East and North Africa (MENA) found that half of their interviewees perceived corporate governance risk as “high” or “very high.”

Being a board member or CEO of a financial inclusion institution is a great responsibility, and can also be a complex task. All boards have different dynamics and governance best practices can sometimes be nebulous. To address these challenges, Calmeadow, FMO, Sanabel and the CFI are hosting a “Governance and Strategic Leadership Seminar” this March in Amman. This seminar brings together CEOs and board members of leading financial institutions serving the financially excluded in the MENA region to strengthen board capacity through peer learning and exchange. If you’re a leader in MENA’s inclusive finance sector, please consider attending this seminar to contribute your unique experiences and perspectives, and also to learn from the experiences of your peers.

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> Posted by Alex Counts

During my final years as President of Grameen Foundation and Co-Chair of the Microfinance CEO Working Group (MCWG), I advocated that two papers be written that I had neither the time nor the expertise to do justice to myself.

The first paper was a distillation of lessons for practice from recent studies on the impact of microcredit and microfinance. Many papers that set out to determine whether microfinance worked stumbled on important insights about how it could work better. Unfortunately, those discoveries were buried in papers that people barely read beyond summaries and extracts. A paper that presented these “lessons for practice” in a form that was accessible to busy practitioners could make a big impact, by removing friction from the maddeningly difficult process of using research to positively influence policy and practice.

The second paper I advocated for was one that made the case for how philanthropy and social/impact investing, and more broadly, subsidy, could play a positive role in the microfinance industry today. Such a paper would need to start with making the case that such social investments had any role to play, as the conventional wisdom was settling on the idea that it did not have any.

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> Posted by Vitas Argimon, Credit Suisse Global Citizen Volunteer

With financial technology disrupting the industry, banks are turning to startups to help them innovate, and startups are turning to banks to help them scale. Banks are increasingly connecting with financial technology startups to reach the unbanked and underbanked. In the report, The Business of Financial Inclusion: Insights from Banks in Emerging Markets, CFI and the Institute of International Finance (IIF) found that many banks are building a vast ecosystem of partnerships to expand their reach and service offerings and to improve internal processes. This growing interaction between legacy providers and new providers is taking a variety of forms. Many larger banks are engaging with startups in multiple ways, from partnering with the firms to providing support to incubate new firms. In my deep-dive into the ecosystem of this engagement, I discovered three primary types of interaction.

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> Posted by Center Staff

banana.skins.coverWhat do industry leaders feel is the biggest risk facing their institutions in 2016? This question is the focus of the latest Banana Skins report for the financial inclusion sector, Financial Services for All: It’s All about Strategy. The report ranks the top perceived risks facing those providing financial services to un/under-served people in emerging markets. Produced by the Centre for the Study of Financial Innovation (CSFI), and sponsored by Citi and CFI, the study examines the rapidly changing and expanding financial inclusion landscape to better understand how providers view challenges like new technologies, new market entrants, client repayment capacity, and macro-economic risks.

This year’s report, the sixth in the series surveying risks facing the inclusive finance industry, embraces a broader scope than previous editions, which focused exclusively on microfinance institutions. The new report reflects the advances in the provision of financial services to the base of the economic pyramid and encompasses both established providers and newer entrants like commercial banks, technology companies, and telephone and communication companies. A survey with respondents spanning practitioners, investors, regulators, and other industry stakeholders comprise the report’s findings. It’s important to note that in addition to the Banana Skins report series on inclusive finance, there is also a Banana skins report series on insurance and on banking.

So, what were the results?

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> Posted by Sonja Kelly, Director, CFI

What are the biggest unanswered questions in financial inclusion? This isn’t rhetorical—we want your opinion.

In preparation for selecting three CFI Fellows for 2016-2017, we are developing a short list of questions whose answers would drive financial inclusion forward.

Our Research Fellows Program is an initiative intended to tackle the biggest questions in financial inclusion—in order for the industry to take action in new areas and in new ways. The current cohort of fellows is finalizing research ranging from big data to small enterprises to technology infrastructure to G2P payments.

The questions we put forward for this next cohort will only be relevant if they are essential to the financial inclusion community. So we’re coming to you (yes, you!) for your input.

To get the conversation started, here are some of the questions on our working list. Let us know below in the comments which you think are compelling, and please take the liberty of adding your own.
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> Posted by Bruce MacDonald, Vice President, Communications and Operations, CFI

The following post was originally published on NextBillion.

In part one of this post, Bruce discussed the potential impact of ASEAN Integration on banks in the Philippines, informed by his recent visit to the country. In part two below, he continues exploring the challenges and opportunities facing one of these institutions, 1st Valley Bank in Cagayan de Oro, Mindanao. 

Though national bank liberalization has led commercial Philippine banks to acquire more rural and thrift banks, potentially increasing competition for 1st Valley, it has also provided the bank with a unique advantage. A 2013 amendment to the Rural Banking Act allowed foreign investment in Philippine banks which, in turn, permitted a new company called Bridge, led by American Paul Kocourek and Englishman Gus Poston, to invest in 1st Valley. Kocourek and Poston, both with deep regional banking experience, founded Bridge in order to help build a strong network of provincial Philippine banks committed to social impact. Identifying rural finance as the “missing component of inclusive banking,” their aim is to provide critical capital for growth, but also assistance in product design, risk management and more. 

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.