You are currently browsing the category archive for the ‘Microfinance’ category.
> Posted by Paul DiLeo, Todd A. Watkins, and Anna Kanze
Discussion of impact investing has grown increasingly heated. There’s a conference nearly every week. Several weekly clipping services—even a daily one—share news of the latest investments and conversions: 100% for impact! New benchmarks! New sectors! Perpetual motion! What fuel is creating this heat? The cold conviction that someday soon, all investing will be impact investing!
Meanwhile, in a parallel universe worried about losing its gravitational pull, a debate waxes and wanes over whether microfinance should be disqualified as an impact investment, either because its subsidized, non-profit origins magnetically repel VCs or because randomized controlled trials find that the average benefit to clients of microcredit is modest.
Which is ironic, because microfinance and its sister star, financial inclusion, remain the largest impact sectors in annual investor surveys.
This hyperactivity and incoherence can only mean one thing: the term “impact investing” has achieved its financial industry apotheosis: it means whatever we need it to mean. It’s a gaseous cloud that shapeshifts depending on who’s looking.
> Posted by Robert Stone, Project Director, Savings at the Frontier
In his excellent debunking of the myth that technology solves everything, Geek Heresy, Kentaro Toyama argues that “technology’s primary effect is to amplify human forces… Even in a world of abundant technology, there is no social change without change in people.” That means a change in their capabilities, in the broadest sense, as defined by Amartya Sen, the Nobel Prize winning economist and philosopher. In Sen’s work, especially in The Idea of Justice, he argues that justice requires people to have the freedom to do what they would choose to do if they could, if they had the capability to choose.
> Posted by Paul DiLeo, Todd A. Watkins, and Anna Kanze
Most foundations and development finance institutions have moved on from microfinance, in search of the leading edge of innovation and impact. They have concluded that their work is done now that leading microfinance institutions (MFIs) have definitively cracked the capital markets with healthy balance sheets and two large, heavily oversubscribed Indian IPOs just in the last year. Meanwhile, impact investors, particularly in the U.S., are divided on whether microfinance is, or ever was, an impact investment. In any case, they prefer to focus their attention on new “disruptive” business models. In impact industry publications, conferences and even terminology, microfinance is dead; yesterday’s solution at best.
> Posted by Miranda Beshara, Arabic Microfinance Gateway
Alex Silva, Executive Director, Calmeadow
Governance is a business imperative, and investors are willing to pay a premium for effective corporate governance. This was one of the key takeaways from the Middle East and North Africa (MENA) Governance and Strategic Leadership Seminar, held recently in Amman, Jordan. We’ve seen this stated priority of governance in the MENA microfinance market exhibited elsewhere, too. A joint IFC-Sanabel report assessing the top perceived risks facing the microfinance industry in the Arab world uncovered that the market’s stakeholders viewed weak corporate governance structures as one of the more threatening risks out of roughly 30 risk categories. Financial service providers in particular perceive this risk to be rising.
> Posted by Tanvir Rahman Dhaly and Panuel Rozario Prince, BRAC
The market for microinsurance in Bangladesh has been growing rapidly over the last 10 years, with over 25 million subscribers. Yet it is still met with skepticism among many poor microfinance clients. As of this January, BRAC, in partnership with Guardian Life Insurance Company, joined the market making its Credit Shield Insurance product available nationwide to a further 5 million of its clients across the country.
Its first microinsurance product, BRAC initially started piloting Credit Shield Insurance in November 2014. After years of testing, we finally have a solution that is simple, accessible, affordable and, unlike most other microinsurance products on the market, voluntary for our clients and their families, while being sustainable for the institution.
> Posted by Elissa McCarter-LaBorde, CEO, Vitas Group
Alex Silva and Jeffrey Riecke’s recent blog post entitled “What’s ‘Responsible’ about Impact Investing Exits?” hits squarely on the head a critical issue facing our industry. But it doesn’t go far enough. They ask “What if responsible investors sell their stake to an investor that doesn’t place priority on the social mission?” They argue for investors to take a “pragmatic” course and find “a buyer in the middle,” meaning something in between the “high-priced but questionable offer” and the “capital-starved social investors.” This left me wondering, who exactly is in the middle?
In the past, the NGO founders of what are today profitable microfinance banks were expected to be the keepers of a social mission, if not through ownership then through some form of continuing sponsorship or governance role. Compared to five years ago, today we see term sheets that force NGO shareholders out in the name of successful exits. In fact, even the large open-ended funds, presumably more socially-responsible leaning ones, and the development finance institutions (DFIs) that technically don’t require tighter exits of 5-7 years, are coming with term sheets that require a put option (an option contract giving the owner the right to sell assets at an agreed price) in 5-7 years back to the NGO founder or the company, or that include a drag-along right that forces a majority sale to a future “strategic buyer.” In other words, if the minority investor finds a strategic buyer who wishes to buy a majority stake or to acquire the whole company, the investor can drag other shares along to constitute a majority sale.
> Posted by Allyse McGrath, Specialist, CFI
Join us in accelerating financial inclusion conversations globally!
We are excited to announce the third annual Financial Inclusion Week, an initiative to drive the global conversation around financial inclusion. In 2015 and 2016, over 70 partner organizations brought together thousands of people worldwide to discuss the most pressing actions needed to advance financial inclusion globally. In 2017, from October 30 to November 3, we will continue the conversations from last year and engage an even wider community of stakeholders to explore this year’s theme: New Products, New Partnerships, New Potential.
Around the world, digital channels are revolutionizing the way that customers access financial products and transforming the landscape of the financial inclusion industry. Financial service providers are harnessing an array of new technologies, data, and schools of thought to re-configure their products and how they offer them. New providers, including fintech startups, are entering the inclusive finance fold and legacy providers are increasingly partnering with them to expand service offerings and reach previously under-served customer segments. These new products and new partnerships bring great potential for creating a more inclusive global financial ecosystem. However, they may also bring new problems – such as issues surrounding data security, transparency on mobile platforms, and discrimination in alternative credit scoring. During Financial Inclusion Week 2017, partner organizations around the globe will hold conversations focused on how new products and partnerships are advancing financial inclusion.
> Posted by Deepak Saxena, George Cheriyan and Amol Kulkarni, CUTS International, India
The Consumer Care Center managed by CUTS International in Jaipur, Rajasthan
When a business makes a mistake, does that influence your decision to keep using its product or service? How about if that mistake costs you money and you can’t get the business to correct the mistake?
To date, the importance of efficient and effective grievance redress as a building block for consumer trust has unfortunately remained understated. Across sectors, focus remains predominantly on enabling access to goods and services, with limited thought on post-sale customer engagement and grievance redressal.
This holds true for the financial inclusion sector as well. The success of financial inclusion efforts have mostly been calculated in terms of number of accounts opened or the amount of credit disbursed. Limited thinking goes into putting in place timely and effective recourse processes capable of dealing with fraud and related consumer protection issues. In many countries, state capacity in managing consumer grievances has also remained limited. This is a huge missed opportunity. In the inclusive finance sector, more than in many other industries, establishing trust among first-time users of services is essential.
Consumer Care Centers in India
> 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?
> Posted by Daniel Rozas, Independent Microfinance Consultant
The following post was originally published in The Phnom Penh Post.
On March 13, the National Bank of Cambodia announced a major new policy. Starting April 1, all microfinance institutions operating in Cambodia will be required to lend at interest rates no higher than 18 percent per year. This is a deeply misguided regulation that will undo over a decade’s worth of successful financial policies.
At the dawn of this century, Cambodia’s financial sector was largely nonexistent. There were no ATMs, few bank branches, and equally few customers. In rural areas, there were no banks at all, and moneylenders held a monopoly on lending.
How times have changed!
Facebook
Twitter
Recent Comments