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Author: Daniel Rozas

The publication of the 2017 Global Findex has generated much reflection on the state of financial inclusion – and plenty of analysis of the data, looking for the buried treasure of some new trend or pattern. This yields important insights. "The Financial Inclusion Hype vs. Reality report" by the Center for Financial Inclusion (CFI) is particularly worth reading for its in-depth and honest reflection of what Findex tells us. But when using Findex, there are important things to keep in mind. First, while the overall figures and trends are important, the numbers for any one country should be treated with caution. This is not because we mistrust the Findex team or their work. It’s simply the result of what Findex is – a set of surveys based on randomly selected (hopefully representative) population samples of more than 150,000 adults in over 140 economies. And surveys can – and often do – go wrong, particularly when they deal with difficult or personal subjects (like finance) or are conducted in countries undergoing political and economic turmoil. This reality forms the backdrop of our work at the Microfinance Index of Market Outreach and Saturation (MIMOSA) project, which since last year has been supported by a strategic partnership with e-MFP. A huge part of MIMOSA is collecting and comparing data – from credit bureaus, microfinance and banking associations, central banks, third-party surveys like Findex, and our own field surveys.

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Author: Daniel Rozas - Sam Mendelson

For most, socially responsible investing means just that - investing in a manner that not only generates financial returns, but also produces positive social value. But what does it mean for an investor to be “responsible” when selling their holdings? How does one stay responsible at the very moment when one ceases to be an investor? This is a basic challenge facing investors seeking to “exit,” i.e. sell their equity stakes to a new buyer. The issue isn’t entirely new. It first emerged in the mid-2010s, when several microfinance investment vehicles (MIVs) were starting to reach the end of their ten-year terms, and were seeking to divest their assets. This issue was first addressed in the financial inclusion sector by a 2014 paper commissioned by CGAP and CFI, which first defined many of the key questions that socially responsible investors need to address when selling their equity stakes. With another four years of multiple exits under the sector’s belt, NpM, Netherlands Platform for Inclusive Finance, along with the Financial Inclusion Equity Council (FIEC) and the European Microfinance Platform (e-MFP) asked us to take a closer look at one particularly tricky part of the exit process - selecting a buyer that is suitable for the microfinance institution (MFI), its staff and ultimately its clients.

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Author: Sam Mendelson

There’s a saying in technology circles: “If you’re not paying, then you’re the product.” Nothing could be more axiomatic in the current zeitgeist, as shown by Mark Zuckerberg’s recent testimony in front of Congress to explain the ongoing furore about the sale of Facebook users’ personal data to nefarious entities. Facebook, of course, is free to use. Its users – and the data we produce – are the product. The advertisers and other beneficiaries of that data are its customers. Surprisingly, this little axiom long pre-dates social media. In fact, it goes back at least as far as 1973, when artists Richard Serra and Carlota Fay Schoolman broadcast a short video entitled “Television Delivers People.” But whatever people have until now understood of their relationship with technology platforms such as Facebook and Google, there can be no doubt that the mood has turned. For all the Pollyanna-ish talk of liberation, efficiency and modernization, technology is increasingly seen as the proverbial double-edged sword – something not just from which to benefit, but also, as CFI’s Elisabeth Rhyne has argued just this week, from which to be protected. The protection of clients is central to financial inclusion (or, at least, it is when done well). Technology, too, becomes more and more embedded in how financial services can be offered to low-income and excluded client segments. Coming with it are the well-known opportunities to reduce costs, increase outreach, drive financial education and in particular help remote populations access information and tools to increase their income and protect themselves from shocks.

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Author: Oliver Schmidt

As outlined in a workshop session at European Microfinance Week 2017, Financial Education (FE) is one of the pillars of financial inclusion. Without it, microfinance clients are not able to make informed and appropriate choices; they cannot compare the costs of financial products, understand the risks of failing to repay their own loans or of taking on someone else’s risk in cases of guarantees, or accurately assess how much credit, and what type, they actually need – if any. FE may be important, but there are key challenges to its provision. First, the link between offering FE and achieving positive impacts are not always direct and clear. Evaluation of the outcomes of FE shows impact to be inconsistent – a function of that impact’s sensitivity to the content and delivery of the education. Second, it is also unclear how, even if the content and delivery to achieve impact were standardised, financial education can be provided sustainably at scale. Provision of any type of training is costly.

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Author: e-MFP

We’re delighted to announce the publication of the latest European Dialogue, presenting the outcomes of the European Microfinance Award 2017 on 'Microfinance for Housing'. The Dialogue series has been published since 2008, and each year one of them is dedicated to the European Microfinance Award, providing e-MFP a great opportunity to present the process, the applicants and the findings from the extensive Award process to a broader audience than those at European Microfinance Week and the Award ceremony. This latest Dialogue was written by e-MFP’s Sam Mendelson with support from Award consultants Katarzyna Pawlak and Ewa Bańkowska, and e-MFP’s Gabriela Erice and Daniel Rozas, and presents the housing programmes of the ten semi-finalists across several sections. Entitled 'Building New Foundations in Housing Microfinance', it looks at the innovations underway in what has for too long been a niche product, but which is growing in importance as MFIs respond to the fact that so many of their financial services are used for housing anyway. Now, they increasingly see the opportunity to innovate in providing a range of financial products and non-financial support to help clients improve their homes, addressing issues of safety, security, health and income-generation in the process.

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Author: Sam Mendelson

European Microfinance Week evolves each year, with new thematic streams, new Action Groups, and, of course, a new major area of debate based on the year’s European Microfinance Award topic. One constant are the plenaries that bring together all participants regardless of their professional background or interest. These plenaries always tackle the big issues and bring the top people in their fields to the podium – and at EMW 2017 there were three.

The opening one was on the European Microfinance Award – this year on Housing – which gave representatives from the three finalists’ organisations the chance to present their programs. This kicked off with a keynote address from Sandra Prieto from Habitat for Humanity’s Terwilliger Center for Innovation in Shelter during which she laid out the key challenges in increasing access to affordable housing: lack of collateral, lack of guarantees, a relative lack of funding for housing finance, the need for Technical Assistance to help clients either build homes from scratch or expand or otherwise improve their homes, and the problem of land tenure. Despite these challenges, housing microfinance has massive potential for social impact and diversification of MFIs’ portfolios. The three Award finalists, Sandra said, have common elements: first, they all address not only access to housing, but also other housing-related social needs such as water, sanitation, health and energy; and they each put client needs at the centre of their interventions.

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Author: e-MFP

Today, as our friends and colleagues across the continent mark European Microfinance Day, we would like to offer a view from the South. After all, e-MFP occupies a distinct place – we’re a platform for Europe-based microfinance actors who are specifically focused on working in the South as their core objective. Like an astronomer atop a lonely mountaintop, we find ourselves in the heart of Europe, yet our minds are focused on the world beyond. So what does European microfinance look like when seen from the South? Well, it is a bit like looking at the stars – the light shines bright yet comes from a distant past. Microfinance institutions (MFIs) in Europe look remarkably similar to the global MFIs of the 80s and 90s -- small, local organizations with a deep focus on lending to micro-enterprises while maintaining basic financial sustainability. They're treading the paths laid by MFIs in countries like Bangladesh and Peru. MFI clients in Europe and in the South share one key thing in common: these are people to whom banks aren’t interested to lend.

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Author: Marina Iodice - Kiva

Veronica Herrera co-founded MiCrédito in 2004 with the support of the Canada-based development association MEDA (Mennonite Economic Development Associates). “Empowering youth is vital to see the change in Nicaragua that we seek” Mrs Herrera says. “I believe education, in addition to microfinance, is a powerful tool to […] empower youth” she adds. MiCrédito is one of few MFIs today in the country to provide student loans at very low interest rates, enabled through Kiva – the San Francisco-based not for profit. While the Sandinista government managed to reduce the illiteracy rate in the country dramatically in 1980 (from 50.3% to 12.9% within only five months[1]), which earned it the UNESCO Literacy Award, today’s education level in the country is relatively low compared to the rest of Latin America, with around 45% of the population attending secondary education, versus an average net enrolment rate of 74% in 2011 across Latin America[2]. In what could be her motto, Mrs Herrera adds: “How does one get out of poverty? It is through education”.

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Author: Patrick Kelley - Steven Evers

A few weeks ago, headlines covered former U.S. President Jimmy Carter’s health while building Habitat for Humanity Homes in Canada. For the 34th year, Jimmy and Rosalyn Carter brought hundreds of volunteers to construction sites where donated materials and contributions from donors were used to build homes for low-income households.That image of volunteers coming together to build a home is what people expect from Habitat for Humanity. But some are surprised when they find out we also sponsor a US$100 million investment fund for housing microfinance that finances work around the globe. Why do we do that? Some of Habitat’s history with microfinance and markets traces back to an accidental discovery. Typically a Habitat for Humanity house comes with a zero percent home loan to the family. Nonetheless, regulations on non-profits in Egypt prevented Habitat from lending out any funds; and a microfinance institution (MFI) offered to help. So a partnership formed whereby our funding was lent to households via an MFI partnership. Soon after, the MFI began lending its own money for housing. At first Habitat did not pay much attention to this – it wasn’t our program nor was it being done with our funding, after all. But eventually we realized how powerful this was. The MFI went on to lend much more for housing than our program ever could, and competing financial institutions responded with similar products. This was the beginning of a change in the market that would result in much more widespread access to housing finance than any of our non-profit programs could have on their own. And, indeed, unmet demand for finance for housing is massive.

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Author: Anais Concepción - Omtrix

In 2010, Omtrix, a microfinance fund manager based in Costa Rica, saw that the greatest barriers to higher education for low-income youths was lack of access to financing. Omtrix wondered if this need could be met by microfinance institutions. Serving this sector would certainly meet their mandates, and MFIs already knew how to reach and serve low-income people. Omtrix hypothesized that under the right conditions, and with the right approach, student loans could be a viable product for MFIs. They decided to create a new fund to promote higher education. The new fund, called The Higher Education Finance Fund (HEFF), would lend to MFIs so that they could in turn on-lend to bright young people whose aspirations lay beyond their financial reach. HEFF’s funding would be accompanied by a technical assistance program to train MFI staff in how to appraise, monitor, and collect on student loans, as well as offer other tools to launch a new product. Additionally, HEFF would serve as a pilot program to be replicated by other MFIs or funds in the future and across the globe. Over the past six years, HEFF’s original assumptions have been tested, and the innovative program has experienced some growing pains. Omtrix has begun the process of capturing lessons learned and best practices to disseminate those lessons to anyone who may want to replicate or build on HEFF’s model.

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