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> Posted by Michelle Romeu
So far, March offers a mixed bag of news – largely good, some bad – from the microfinance world. From International Women’s Day to troubles at Grameen Bank, here are our Top Picks for this week:
- In honor of the 100th anniversary of International Women’s Day, March 8th, NextBillion features videos of three microcredit success stories from women in Bangladesh and Mali.
- In the same vein, Kiva.org President Premal Shah describes a vivid memory from a visit to India , and tells of many other women she’s been able to give a hand up through microfinance. As she says, “Microfinance created a way to allow people to invest in each other.” Read the rest of this entry »
> Posted by Center Staff
One of the more profound reflections on the crisis in Indian microfinance comes to us from Vijay Mahajan, who is undertaking Shodh Yatra, an “extended grassroots enquiry into the lives and livelihoods of poor people.”
His journey comes in the form of a “walk while in a village or a town, stopping by every once in a while to have a dialogue; and drive between habitations.”
Mahajan, who makes Gandhi a spiritual touchstone as he blogs about his experiences, is a trailblazer in Indian microfinance who was listed by BusinessWeek’s Asia edition as being among the country’s 50 most powerful people.
“I intend to do this [Shodh Yatra] for 60 days over a period of Jan 30, 2011 (today) till April 18, 2011,” he writes. “The beginning date and place are significant to me – today is Gandhiji’s martyrdom day and I am starting from his Ashram in Sevagram, Wardha; near Nagpur in Central India.” Read the rest of this entry »
> Posted by Center Staff
The Council of Microfinance Equity Funds (CMEF) recently responded to the Reserve Bank of India’s invitation to comment on the Malegam Committee Report.
Sixteen members of CMEF, which brings together the leading private entities that make equity investments in MFIs in the developing world, have invested Rs. 8.1 billion (813 crores; US$178 million) of equity in Indian microfinance institutions, and other members are in negotiations with potential investee institutions. As direct investors in MFIs, CMEF members place great importance on their corporate governance role as board directors, shareholders and guardians of the double bottom line.
The CMEF concern is that “Although implementation of many of the proposed recommendations would indeed add to a sustainable development of the sector — through the enhanced institutionalization of transparency in pricing, client protection and corporate governance — it is our opinion that several recommendations could seriously set back the clock for microfinance in India.” Read the rest of this entry »
>Posted by Cara Forster
How well do MFIs implement client protection principles? Are there identifiable performance trends relating to MFI characteristics (e.g. size, age, or type)?
Beyond Codes, the research arm of The Smart Campaign, is helping to make sense of these and other questions through the systematic assessment and analysis of MFIs’ performance in implementing consumer protection practices. During the first year of Beyond Codes the team conducted structured assessments at ten institutions within five countries—Bosnia and Herzegovina, Kenya, Mexico, Philippines, and India. The MFI sample contained both regulated and unregulated institutions of various sizes.
The Beyond Codes team has identified some clear trends as a result of their preliminary assessments:
- MFIs were strongest on appropriate collections practices (100% of sample had good practices in this area) and avoiding client over-indebtedness (at least 80% of sample MFIs’ practices were adequate or better). Regulated MFIs generally showed stronger performance on both principles than unregulated ones, although MFI size was not a factor influencing performance.
- Performance on transparent pricing and ethical staff behavior was mixed, with 50% of sample MFIs demonstrating strong or good practices on each respective measure and the remaining 50% scoring fair or inadequate on each.
- MFI’s performed weakest overall on mechanisms for redress of client grievances with 60% of the sample demonstrating weak practices. More mature MFIs had stronger practices than newer institutions, but MFI size was not a relevant factor. Read the rest of this entry »
> Posted by Kelley Mesa
An article in yesterday’s Business Mirror (Philippines), highlights the Rural Bankers Association of the Philippines (RBAP) and its recent participation in the Center’s Beyond Codes action research project.
In her most recent round of field work, wrapped up this week, Center Senior Fellow Heather Clark trained staff from RBAP, the Microfinance Council of the Philippines Inc.(a national network), and the Philippines Central Bank, in the how to’s for conducting guided self-assessments and analyzing client protection practices. One rural bank, two NGOs, and one cooperative are participating in the Beyond Codes Philippines project and will be carrying out the consumer protection assessment process this month. Read the rest of this entry »
> Posted by Kelley Mesa
If you haven’t signed up for our monthly Inclusions e-newsletter, then now is a great time to do so! Create a Center login account and check the Inclusions box.
Along with updates on Center happenings, the e-newsletter will include a “Question of the Month,” on which we’d love to hear your thoughts and comments. This month’s question is on one of the Center’s core projects – consumer protection:
Is there a business case for client protection in inclusive finance? Do you believe the implementation of client protection will improve the financial bottom line of microfinance institutions?
Comments:
“The MFI market in Nicaragua is one of the most competitive ones in Latin America, with over 300 MFI’s. The presence of just about every donor, a large influx of international funding, and banks downscaling has created an environment of market saturation and over-indebtness of clients. MFIs have begun to see a significant increase in arrears and a decrease in margins. Some MFIs have toughened their collection methods, creating friction among clients. This, compounded with a more populist regime, interest-rate caps, and a very weak legal system, has resulted in a number of customer complaints being printed in the press. A group of people with criminal backgrounds and the backing of the political party have begun striking against MFIs and threatening employees, even setting one branch on fire.
Banex identified the risk in the middle of 2007 and made significant changes, including prevention, changes in its internal processes, the addition of appropriate collection technology, and, in general, a strong client focus. This included implementing a code of ethics for collectors and attorneys, training them on customer rights, preventing judicial collections whenever possible, adding an ombudsman to protect the customer, and giving a written statement to customers explaining their rights.
These steps have helped to reduce our political exposure and keep our arrears much lower than the industry average.”
- Gabriel Solorzano, Banex
Audio comment
- Nejira Nalic, MiBospo
“We believe in protecting our customers in the following ways: avoiding overindebtedness, and educating them in the correct use of financial instruments, such as credit and deposits.
Protecting clientes, both depositors as well as borrowers will generate loyalty. This in turn will reduce the costs of losing customers, and thus improve the bottom line.”
- Kurt Koenigsfest, BancoSol S.A.
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