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> Posted by Sonja Kelly, Fellow, CFI
If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the Global Microscope 2014: The Enabling Environment for Financial Inclusion. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?
We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.
This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten. Read the rest of this entry »
> Posted by Elisabeth Rhyne, Managing Director, CFI
The following post was originally published on The WorldPost blog of The Huffington Post.
In a recent retrospective, Rich Rosenberg called Pancho Otero, the founding leader of Bolivia’s Prodem and BancoSol, a genius. With Pancho’s sudden death last month, I find myself surprised to speak with many people who work in microfinance or financial inclusion today but do not know about Pancho’s genius. And so, I would like to take this moment to tell the story of who Pancho was and what he accomplished.
Genius can be applied in many spheres, from art to action. But all notions of genius share the idea that a genius sees beyond the things ordinary people see and works in some extraordinary way to bring that vision into being, disregarding conventional boundaries. I think Pancho would have enjoyed this thought about genius, by seventeenth century English author Jonathan Swift, “When a great genius appears in the world you may know him by this sign; that the dunces are all in confederacy against him.” But that is the end of the story, not the beginning.
In 1986 Pancho was hired by Accion to start a microenterprise lending organization in Bolivia. His signal accomplishment was to create an organization that was so good at what it did that it gave rise to the idea – and then the reality – that a microfinance operation lending exclusively to the poor could become a full fledged commercial bank. And when Prodem launched BancoSol, Pancho became President of the first private commercial bank in Latin America dedicated to the microenterprises of the poor. BancoSol, in turn gave impulse to the transformation of microfinance NGOs into financial institutions all over the world and set the ball rolling for the widespread commercialization of microfinance.
> Posted by Center Staff
ReVista: Harvard Review of Latin America has just released an issue that maps out Bolivia’s changing social, political, cultural, and economic landscape.
CFI Managing Director Beth Rhyne’s article “Microfinance: A World-Class Performance” takes readers on a tour of the “Bolivian model” of microfinance, which has “led to the transformation of dozens of MFIs around the world, launching the expansion of microfinance from a few tiny, donor-driven programs to a global industry that today brings access to financial services to 150 million people.”
Rhyne’s analysis begins:
When I first saw the photos of the sacking of BancoSol, I cried. The slide show began with chaotic pictures of the mob hauling desks, computers and files into the street and setting them on fire. Next were two captured looters lying face down and handcuffed amid the wreckage of what hours before had been a functioning bank branch. Finally, next-day photographs documented the ravaged premises of BansoSol’s branches all over La Paz and El Alto.
Thinking back to 2003 when these events occurred, I ask three questions. Why did protestors ransack a socially motivated bank that lends to the poor? Why did that make me cry? And what has become of BancoSol and the rest of the microfinance sector since then? Read the rest of this entry »
> Posted by Center Staff
Andhra Pradesh’s shadow is long, and particularly dark where it falls across the media. But beyond the bleaker headlines are stories of a different kind, about countries where microfinance is working.
The Center’s managing director, Beth Rhyne, this week published an article on this topic in The China Daily. It may cast a new light on microfinance for the newspaper’s nearly 400,000 readers, many of whom hail from Asia’s business and investor community.
Here are some excerpts from “Five Countries Where Microfinance Works”:
- “Indian policymakers created a perfect storm for a microfinance shipwreck … MFIs, locked out of the ability to provide a range of services, had no other channel for growth than unbridled credit expansion.”
- “Tiny Bolivia got many things right … competition between … strong institutions brought interest rates in Bolivia below 20 percent, among the lowest microfinance rates in the world.”
- “Cambodia and Mongolia followed Bolivia’s example. Acleda Bank in Cambodia and Xac Bank in Mongolia … added savings and other services, offering a solid range of products.” Read the rest of this entry »
> Posted by Jon Pattee
Pilar Ramírez, a pioneer of microfinance in Latin America, in 1985 launched FIE, Bolivia’s first MFI. Her personal journey in the industry parallels the Bolivian microfinance sector’s development from its beginnings to its current mature status.
Ramírez, whose passion for social justice has never flagged, believes that she, FIE, and microfinance in Bolivia have all made significant contributions to the lives of low-income Bolivians.
Today, however, she sees troubling developments that are products of the industry’s very success. As MFIs become more profitable, Ramírez worries that the field is luring in professionals who lack the social commitment of the founding leaders. “It’s becoming like any business,” she laments.
As 2011 begins, Ramírez shares her thoughts on the microfinance industry past, present, and future, in the second of the “Microfinance Matters” interview series:
Pilar Ramírez
Defying Conventional Wisdom, Pursuing Social Justice
Although born into a wealthy family in Bolivia, Pilar Ramírez was part of a generation whose social conscience was formed by the events of the late 1960s. As a high school student, Ramírez was galvanized into activism when the revolutionary hero Ché Guevara came to Bolivia and was killed by the military dictatorship in 1967. “Ché had impressed the youth here, as he represented change and hope that a ‘new man’ – one who cared about the needs of the poor – was possible,” she says. At that time, she might have been stunned to learn that her belief in social justice would ultimately lead her to become a banker, and eventually the chair of CONFIE, a bank holding company.
To read more of the interview with Pilar Ramírez, click here.
> Posted by Elisabeth Rhyne
CGAP has just come out with an important new Focus Note analyzing recent microfinance repayment crises in Nicaragua, Morocco, Bosnia, and Pakistan—“Growth and Vulnerabilities in Microfinance.” Reading it set me thinking back to the Bolivian repayment crisis of 1999-2000 and to the lessons that came out of it.
The Bolivian crisis had all the same hallmarks as recent crises. New entrants, in this case consumer lenders, came in with very aggressive growth strategies, as second movers behind the more established MFIs. They tolerated and even welcomed multiple borrowing. Borrower difficulties were triggered by a recession, which in turn triggered a virulent—and politically motivated—debt protest movement. At one point protestors piled all the computers of MFI branches into the street and set fire to them. At the height of the crisis, the outlook for Bolivian microfinance was bad. But today, Bolivian microfinance is thriving, and that includes all of the leading microfinance institutions who experienced the crisis.
A number of key short- and longer-term actions made it possible for Bolivian microfinance to survive, recover, and move to a more stable footing. Read the rest of this entry »
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