Last week saw two nearly identical financial scandals hit two very different parts of the world. One was the revelation that Wells Fargo, one of the leading US banks, had falsely created some 2 million accounts for customers who never asked for them and were largely unaware of their existence. The other was about banks in India secretly depositing 1 rupee (0.015 euro) into their customer’s accounts. What’s remarkable is the sheer silliness of the scandals – for the most part, this was not a case of money being stolen or fraudulently taken from customers. Instead, the scandals were being driven by the need to meet targets. In the case of Wells Fargo, staff were under pressure to meet sales goals. In the case of India, the banks needed to comply with government targets aimed at expanding savings accounts to financially excluded populations. In both cases staff managed to meet the targets, while completely missing the objectives the targets were meant to achieve. The financial writer Matt Levine put this brilliantly: “Measurement is sort of an evil genie: It grants your wishes, but it takes them just a bit too literally.”
A lack of data is a significant bottleneck for financial institutions and development organizations. The same is true for knowledge about a targeted sector, especially when working in agriculture and agri-finance.
Swisscontact’s Sustainable Cocoa Production Program (SCPP) in Indonesia, aiming to assist 130,000 cocoa farmers by 2020, tackles those two topics through training financial institutions about the cocoa sector and cocoa financials and shedding light on the financial situation and perception of cocoa farmers. Through an advanced program management database, SCPP is able to identify critical and interesting data relations. Baseline data of 17,429 farmers and first conclusions were compiled into a baseline report. This blog post highlights some findings from the report.
One of the most important outcomes of our data analysis is the categorization of farmers into professional, progressing and unprofessional categories, and subcategorizing them into small, medium and large in terms of farm size. This leads to different approaches in targeting farmers, especially in the sense of formal Access to Finance (A2F).
Back in November 2015, a press release briefly made the rounds, announcing that "Opportunity, Inc. . . . has entered into a share purchase agreement to sell six banks serving sub-Saharan Africa to the MyBucks Group, a Luxembourg-based financial technology (fintech) company." This generated some comments on LinkedIn and a blog by consultant Hannah Siedek, who recognized how unusual a deal this was and wondered if she should consider it "a good (or not so good) operation." But aside from this, reaction has been surprisingly muted.
For its annual meeting in Luxembourg this year, CGAP asked e-MFP to organize a session for its members. This was our first opportunity to present some of the lessons being highlighted by the 7th European Microfinance Award “Microfinance and Access to Education”, especially the role that donors and investors can play to support the efforts of MFIs to promote access to quality education at the bottom of the pyramid.
Some lessons are unexpected. Back in 2000, during the height of internet stock craze, I was an amateur manager of a small stock fund consisting of 8 smalltime shareholders who were all my relatives. Being a bit of a contrarian, the fund focused mainly on biotech stocks, which were enjoying quite a strong run, even if not quite as exuberant as dotcom stocks. The fund did well – a roughly 250% return over 3 years, but as always, the lesson was not from this relative success, but from a far larger failure – the missed opportunity to bank a 750% return.
Evidence continues to point towards financial inclusion’s role in helping people move out of poverty, reducing income inequality, and facilitating macroeconomic growth. It will be critical to helping the global community achieve the goal of eradicating poverty by 2030, especially as we strive to reach the places and people where it is most entrenched and the hardest to fight – such as in rural agricultural communities.
We’re delighted to announce the release of the 9th edition of the European Dialogue, a periodic and in-depth analysis of a particular important area of innovation in microfinance. Since the first in 2008, several of the previous editions have paralleled the subjects of the now-annual European Microfinance Award. This year, too, the Dialogue is focused on the most recent Award, recognising excellence in microfinance in post-disaster/post-conflict areas & fragile states.
Each year, e-MFP launches the European Microfinance Award, in conjunction with the Luxembourg Ministry of Foreign and European Affairs and the Inclusive Finance Network Luxembourg (InFiNe.lu). The Award invites applications from financial institutions that are innovating, exploring and testing new ideas, that go beyond their core financial services, and exemplify the evolution of the microfinance sector beyond boilerplate microenterprise credit.
“Refugee microfinance” is too risky, right? After all, refugees are more likely to default on their loan because they don’t have ties to the local community or profit-generating enterprises. They are likely to rejected by existing clients as “competition” or simply as outsiders. Refugees’ lack of collateral and their unstable legal status give them little incentive to develop a long-term relationship with the financial service provider (FSP). Right?
Not necessarily. In fact, quite the opposite has been true for Al Majmoua, a Lebanese microfinance institution (MFI) serving Syrian, Pilipino, and Palestinian migrants and refugees (in addition to low-income Lebanese clients).
This blog is a republication of a post from the MimosaIndex.org website.
Since publishing the first MIMOSA report – on Cambodia – I’ve heard one persistent critique. We say that the market is saturated, yet none of the current indicators appear to support it: repayments are great, there’s no field evidence of widespread overindebtedness, and the major MFIs are all undergoing a process of Smart Certification. How can we assert that Cambodia is at risk of overindebtedness, let alone a credit crisis, when no other indicators seem to support it?