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> Posted by Center Staff

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The volume of data in the digital universe doubles in size roughly every two years, estimates indicate. The phrase “data rich” has become common business parlance. In the financial inclusion sector, big data is revolutionizing credit underwriting, product development, client segmentation, financial capability-building, and more. But how is this revolution actually happening? For many banks, it’s through partnerships with fintechs. Ujjivan, one of the largest microfinance institutions in India, recently chartered as a small finance bank, had until recently a limited portfolio at the SME level, which was hindered by high operating costs. This changed thanks to a partnership with the Bangalore-based fintech Artoo.

This partnership is described in CFI’s new joint-report with the Institute of International Finance (IIF), How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. We discovered dozens of partnerships between mainstream financial institutions and fintechs in emerging markets, and we detailed the workings of 14 of them. The partnership between Ujjivan and Artoo is just one example among many of how financial institutions are increasingly turning to fintechs to improve how they effectively collect, use, and manage data.

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> Posted by James Militzer, Editor, NextBillion Financial Innovation

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The following post, which was originally published on NextBillion, shares a conversation between Anna Kanze, COO of Grassroots Capital Management, and Daniel Rozas, Independent Consultant, on initial public offerings (IPOs) in microfinance. Both Anna and Daniel have contributed to a number of Financial Inclusion Equity Council (FIEC) publications.  Anna was the principal author of the recent FIEC report, “How to IPO Successfully and Responsibly: Lessons From Indian Financial Inclusion Institutions”. The podcast draws from the report’s findings and focuses on the effects of IPOs on Equitas Holdings, Ujjivan Financial Services, SKS Microfinance, and Compartamos.

Initial public offerings have long been a controversial topic in microfinance, and rightly so. The IPOs of Compartamos in Mexico and SKS Microfinance in India, in 2007 and 2010 respectively, made a lot of money for investors and turbocharged the sector’s growth. But they also sparked hyper commercialization and debt crises that rocked the industry, gravely harming its clients and tarnishing its public image.

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> Posted by Anna Kanze, Chief Operating Officer, Grassroots Capital Management, and Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

2016 has been dubbed “the year of IPOs” in India: as of September, there had been 21 initial public offerings (IPOs) worth nearly $3 billion, according to Indian news source Livemint. Among these are two high-profile IPOs for microfinance institutions (MFIs): Equitas Financial Holdings and Ujjivan Financial Services. IPOs are seen as the hallmark of commercial success, but in those industries like financial inclusion that are driven by social missions, inevitable questions arise over whether organizations can preserve their double bottom line priorities when they go public. The cases of these two Indian MFIs offer some answers to this increasingly pertinent question.

But before we get to that, let’s look at why these institutions went public in the first place.

Never waste a good crisis, right? In 2010, when the Andhra Pradesh crisis froze microlending in India, regulators and MFIs rose to the occasion and implemented measures that restored confidence in the microfinance industry and helped cement the social mission of microfinance in India. Most notably:

  • Social Standards – In an effort to promote responsible lending, a group of the largest for-profit MFIs in the Indian microfinance sector formed the Microfinance Institutions Network (MFIN). MFIN developed a Code of Conduct by which members commit to client protection, ethics, and transparency, and the group began to “self-police” adherence to responsible lending principles.
  • Credit Bureaus – The members of MFIN also collaborated with High Mark Credit Information Services to form the first credit bureau to track microfinance borrowing in India. All MFIN members contribute data to the microfinance credit bureau.

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> Posted by Anna Kanze, Chief Operating Officer, Grassroots Capital Management

The initial public offering (IPO) of Chennai-based Equitas Holdings Ltd., the holding firm for the fifth-largest microlender in India, was very successful, raising nearly US$235 million (Rs 1,525 crore) and demonstrating the maturation of the microfinance and financial inclusion sectors in India.

When the stock opened on April 7 to the domestic market, the demand greatly exceeded the number of available shares (16x oversubscribed) and provided a strong exit (an average multiple of 3.6x) for Equitas’ shareholders, which included a mix of social and responsible investment funds and traditional private equity investors. The stock opened to international buyers on April 21 and closed with a price on the first day of trading 23 percent above the issue price.

Funds managed by Caspian Impact Investment Adviser (Caspian), an Indian investment management and advisory services company that invests capital in businesses delivering both financial and social value, were early investors in Equitas and active in its governance. (Another Caspian-­backed microfinance firm, Bengaluru-­based Ujjivan Financial Services Ltd., the fourth-largest microfinance lender in India by assets under management, raised approximately Rs 900 crore in an initial public offering that opened on April 28 and was nearly 41 times oversubscribed as of closing on May 2, 2016.) Given this market activity, we at Caspian and Grassroots Capital Management PBC, who work together closely on this and other investments, are prompted to take a closer look at what this IPO means for the company, its clients, and the industry.

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> Posted by Center Staff

“We would not be here without the visionary work of the pioneers who came before us, especially the women leaders who fought to build the very first banks for women in countries with seemingly insurmountable barriers,” writes Mary Ellen Iskenderian, President and CEO of Women’s World Banking in the forward of a new online book, Celebrating Women Leaders: Profiles of Financial Inclusion Pioneers. The book shares the stories of 31 women leaders from around the world who made the financial inclusion landscape what it is today.

Those recognized in the book include practitioners, academics, researchers, regulators, thought leaders, financiers, and more. Among them, the industry’s earliest pioneers, like Ela Bhatt, founder of Self-Employed Women’s Association (SEWA), as well as those who joined more recently, like Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance, and Jennifer Riria, CEO of Kenya Women Holding. Full disclosure: of the 31 included in the book are also CFI leaders and partners, including Anne Hastings, Elisabeth Rhyne, Essma Ben Hamida, and Jayshree Vyas.

The book was the idea of Samit Ghosh, CEO and Founder of Ujjivan. Ujjivan and Women’s World Banking worked together on the project, with young women working in the sector researching, conducting interviews, and writing the leader profiles.

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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

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In the client protection section of the FI2020 Roadmap to Financial Inclusion, a specific recommendation was made for financial providers to embrace consumer protection as part of their professional identity, and applying a “financial consumer bill of rights” was identified as a key action point.

Looking into the state of this industry area for our upcoming FI2020 Progress Report on Financial Inclusion, I came to realize that the subject of consumers’ bills of rights is not as straightforward as it seems. Although the recommendation from the roadmap was aimed specifically at providers, the truth is that this is an area where a diversity of players is getting involved. I found a range of approaches: codes of conduct, codes of ethics, charters of rights, and bills of rights, coming from a wide spread of stakeholders, from MFIs to global associations to governments. At the heart of each of these initiatives was the same objective: for service providers to operate ethically and responsibly.

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> Posted by Center Staff

December 31st is the first application deadline for the 2013 Harvard Business School-Accion Program on Strategic Leadership for Microfinance.

The Program – the world’s first education course to provide high-level management and leadership training for those shaping the microfinance industry – will be held April 1-6 at the HBS campus in Cambridge, Massachusetts. As in previous years, the course will employ the HBS-pioneered case method approach in which participants work through real-life situations and decisions while exploring the key issues shaping financial inclusion.

Past Program participants encompass an array of financial inclusion leaders, including executives from microfinance institutions to conventional commercial banks and policymakers. Here’s what a few of them have said about their experiences with the Program:

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> Posted by the Smart Campaign

The Smart Campaign is pleased to announce the release of a new tool to be used during the “Compulsory Group Training” portion of many group lending methodologies.

The tool – available for download on the Smart Campaign website – is designed to help microfinance institutions incorporate the Client Protection Principles into their compulsory group trainings (CGT). These trainings are group-level customer education programs MFIs use to interact with and screen prospective clients. CGTs are conducted by institutions practicing village banking methodology, and Grameen-style Joint Liability Group methodology, prior to the client group’s obtaining credit. The trainings are often the first formal interaction between the prospective clients and the MFI.

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>Posted by Maggie Long

Since the Smart Campaign was launched in 2009 we have had the opportunity to engage with many endorsing organizations to learn about a wide range of creative client protection initiatives being implemented around the globe.

To celebrate and share the efforts of our endorsers, we have officially launched an Endorser Spotlight section on our website.  Every 2 weeks we will post a new spotlight highlighting a Campaign endorser and their client protection practice. Read the rest of this entry »

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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.