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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.
> 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.
> Posted by Center Staff
What 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?
> 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.
Read the rest of this entry »
> 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.
> Posted by Jeffrey Riecke, Communications Specialist, CFI
If you’re plugged into the world of online marketplace lending then you heard this week’s news about Lending Club’s internal scandal which culminated in the resignation of its founder, chairman, and chief executive, Renaud Laplanche. Lending Club, a U.S.-based company, is the first billion dollar online lending marketplace, and Laplanche was viewed by many as the industry’s biggest advocate and one of its pioneers. Accordingly, industry participants and followers are wondering what Lending Club’s news means for the future of the company and the industry. Is this a sign that the promise of marketplace lending is too good to be true?
For dramatic pause, and context, a few facts on what happened. On Monday, after an internal review, Lending Club announced that $22 million in subprime loans sold in March and April of this year to a single investor went against the investor’s expressed terms. Furthermore, certain staff members, including Laplanche, were aware that the loans did not meet the investor’s criteria, and during the review process there was less than full disclosure by staff including Laplanche, which the board deemed unacceptable.
> Posted by Julia Arnold, Financial Inclusion Consultant and Sarah Willis, MetLife Foundation
MetLife Foundation’s goal is to improve financial inclusion across its footprint, which includes economically and geographically diverse markets. Ensuring that low- and moderate-income families in these markets can acquire and successfully use the products and services they need to build a better, more secure life is complex and therefore requires innovative solutions that reach different consumers in different ways.
In China, our newest approach to improving the financial health of everyday consumers is through harnessing the power of social entrepreneurs. As part of a broader global push to strengthen ventures and organizations working in the area of financial inclusion, we’ve teamed up with Verb to run a series of competitions, called Inclusion Plus. Beginning on May 19, 2016 we will invite social enterprises (nonprofit and for-profit alike) throughout China that are focused on increasing access and use of financial services among low- to moderate-income people to enter their products, services, or programs for the chance to win grant capital and mentoring from MetLife advisors.
Opening a competition in China meant we needed to better understand the local financial inclusion landscape. We know that the rapid economic growth in China over the past 20 years has been the envy of the world. More surprisingly, however, is that between 2011 and 2014 China made significant strides toward financial inclusion adding around 180 million adult account holders, bringing the number of adult account holders to 79 percent of the population. According to the 2014 Global Findex, these account holders include marginalized groups such as women and poorer rural households, though the bulk of China’s unbanked population resides in rural areas, and over half of whom are women. As such, the Foundation’s focus for the Inclusion Plus competition is on ensuring the unbanked or underserved populations, such as low-wage workers, smallholder farmers, small business owners, and migrant workers have access to affordable and convenient financial services and products which focus on day-to-day financial well-being.
> Posted by Center Staff
Today, around the world individuals, governments, and organizations are celebrating women and calling for increased action towards gender parity, including in the financial services arena. And for good reason. Research indicates that when women control finances, they’re more likely to be spent on household necessities, like food, water, and children’s education and healthcare. In recognition of International Women’s Day, we compiled some of our favorite recent industry efforts to further financial inclusion for women. But first, here’s a quick run-down of where inclusion for women stands.
The Global Findex tells us that there is a gender gap in access to accounts at seven percentage points globally (65 percent vs. 58 percent), and across developing countries it’s nine percentage points. In some regions, this gap is significantly more severe – 18 percent in South Asia, for example. Gender gaps exist in other areas, too. GSMA estimates that in developing countries there are 200 million fewer women than men who own a mobile phone. And as one example of the gap in financial capability, in the World Bank Group’s 2014 Financial Capability Survey in Morocco women scored significantly lower than men.
Prioritizing financial inclusion for women is not only the right thing to do, it benefits everyone. In addition to benefitting women and women’s households, financial inclusion of women augments economies writ large. About half of women worldwide are missing from the workforce. In Egypt, for example, the IMF estimates that achieving equal labor participation among men and women would increase GDP by 34 percent. The IFC estimates that women-owned businesses have an unmet financing need of $320 billion worldwide.
Many organizations are working to close the gap: