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As part of that change in the international microfinance scenery, we have witnessed many MFIs around the world expanding beyond micro loans to include SME loans. Such decision, many times deemed as a “natural growth path”, is caused by more competitive markets that make it more difficult for MFIs to retain traditional clients, higher costs for regulated MFIs, and a natural pursuit of continued growth. Under those circumstances, many MFIs have considered the possibility of “crossing over,” offering loans in higher amounts to their own clients and seeking to enter a new market segment: small and medium enterprise loans (SME loans). The rationale for crossing over as a way to follow a path of “natural growth,” is often times based on the premise that to serve this new market segment, it is not necessary to make major changes to the current methodology, processes, and products, and that MFIs hold a competitive advantage in this market because they already have an infrastructure and a broad knowledge of the microenterprise market. Such reasoning is true up to a certain extent, since by the time most institutions formally decide to serve the SME loan segment many of them already had relatively large loans in their portfolios, which had been “naturally” acquired as they grew and developed. However, some MFIs that decided to go beyond microloans to SME loans, have acknowledged that they underestimated the challenges and overestimated their capacity to serve the SME loan segment. Over time, these organizations have had adverse results on the portfolio, significantly affecting their financial health, and that of the financial market in which they do business. A recent study sponsored by Calmeadow entitled “Crossing Over: The Experience of Microfinance Institutions that Entered the SME Loan Market”, was conducted with the aim to learn about the experiences of MFIs that made the transition. The study was based on a small sample of MFIs in Latin America that were surveyed and visited to learn about their experience. The authors of the study found that MFIs invariably learned, sometimes the hard way, that SME loans were not simply bigger microloans, and that they required a new and different approach. The impact of not managing SME loans correctly could be significant, not only for the institution (that may either take losses on that portfolio or abandon SME loans altogether) but also for the borrower. Therefore, it is fundamental to acknowledge that each SME loan represents a greater risk to the organization given that increasing the amount of the loan also increases its risk. In principle, a microfinance institution can withstand the impact of losing a small loan without major problems. However, that does not apply for loans of significantly larger amounts. An SME portfolio in arrears can significantly affect a microfinance institution’s net worth, compromising its sustainability. Consequently, any microfinance institution that decides to serve the SME segment should establish clear methodologies and set up a specialized department for the management of higher amount loans. The study concludes that the difference between microenterprise and small enterprise goes beyond the purely semantic. The success of “crossing the border” will depend on whether such decision is framed in an appropriate strategy for the SME loan segment. Moreover, the likelihood of success for a microfinance institution serving that market will depend upon the institution’s preparation and adjustment prior to the experiment. The good news is that if done correctly, serving the SME market can successfully expand the product offering of the MFI, and will contribute to strengthening the market and financial position of the organization. author: Georgina Vázquez - Calmeadow

In an effort to raise awareness around this important topic, the SEEP Network’s global Disaster Risk Reduction (DRR) Program, funded by the Citi Foundation, seeks to promote more resilient financial services markets in which financial service providers (FSPs) and their clients have the capacity to better anticipate, cope and recover from the negative impacts of disasters. In the program, SEEP promotes the topic of DRR for low income financial services markets at a number of global industry events and through a learning platform featuring case studies, webinars, peer discussions and an online DRR resource library. These learning outputs highlight the promising practices of organizations working to improve institutional and client resilience through improved internal risk management; forming strong partnerships with humanitarian agencies; establishing protocols for needs-based response for clients in times of crisis and providing innovative loan and insurance products for disaster response. For example, the Aga Khan Agency for Microfinance and Global Communities, provided tangible examples of actions being taken at the FSP level by First Microfinance Bank-Afghanistan, First Micro-Finance Institution Syria and Vitas Group to ensure business continuity in times of crisis, while maintaining a clear ex ante client focus to ensure that community-based, people-focused responses are applied to support clients’ recovery. Mercy Corps, Catholic Relief Services (CRS) and Habitat for Humanity India are evolving public private partnerships to bring micro insurance to particularly vulnerable populations in the very distinct markets of Guatemala, Senegal, Mali, Gambia and India. Studies undertaken by Mercy Corps in India and Freedom from Hunger in Burkina Faso have attempted to shed light on the financial needs of vulnerable populations in times of crisis to better understand the types of financial and insurance products needed to help increase client resiliency. IRC worked closely with SEEP Network to develop a tool that aids humanitarian agencies to better assess FSP partners capabilities, readiness and effectiveness in administering cash transfer programs. To support institutions that have not identified disaster preparedness as a priority or are unaware of disaster mitigation strategies for institutional and client resiliency, the Institute for Financial Management and Research (IFMR), with guidance from SEEP, developed and conducted a mapping study to assess India’s DRR preparedness among FSPs. While study findings focused on the Indian context, the mapping process is transferable to other locations, and serves as a useful methodology to understand FSPs’ awareness and preparation for disaster risk mitigation. These are just a few examples of the excellent work being performed at the cross-section of DRR and financial service provision. For more detailed information about these practices, approaches and institutions, please visit SEEP’s Disaster Risk Reduction Initiative page. e-MFP Note: The First Microfinance Institution Syria was a finalist of the 2015 European Microfinance Award on Microfinance in Post-Disaster, Post-Conflict Areas & Fragile States which recognised MFIs that provide financial and non-financial services aimed to increase the resilience of affected, vulnerable populations in crisis situations. For more on the topic see e-MFP’s publication Resilience & Responsibility author: Christopher Addison - Sonya Salanti of SEEP Network

The event was opened by Andy Thorpe (Portsmouth Business School) and Christoph Pausch (e-MFP) and commenced by asking whether microfinance would live to the year 2030, a chilling prospect in itself. If so, under what guise would it do so – is there still the well-trodden ‘promise’ of microfinance? What are the challenges to its realisation? In the opening session chaired by Dirk Zetzsche (University of Luxembourg) perspectives were shared by Marek Hudon (Université Libre de Bruxelles and CERMi), Annette Krauss (University of Zurich), Sam Mendelson (Financial Inclusion Forum UK and Arc Finance) and Kimanthi Mutua (Sidian Bank Kenya). The panellists set the tone for the ensuing debate across increasing risks and regulation in the sector, the likelihood or not of possible downscaling by commercial banks and upscaling by microfinance institutions and the growing need for institutions to have appropriate strategies to survive. The panel arrived at a broad consensus as to the requirement to adjust to increasingly emerging technology-driven solutions in the context of growing levels of private capital and related product solutions offered by new market participants. Following the opening panel, two parallel sessions allowed for the presentation of 42 research papers distributed by four streams: Products, Processes and Innovation; Clients and Social Performance; Markets and Regulation; and Institutions, Strategies and Performance. Closing the first day, the panel ‘Islamic Microfinance – faith-based cosmetic or an advance for everyone?’ was brought to the fore of the research agenda – Islamic Microfinance is a topic still underexplored by European researchers. The panel was moderated by Ajaz Khan (Care International UK) and valuable contributions were made by Malcolm Harper (Cranfield Management School), Habib Ahmed (University of Durham), Amjad Saqib (Akhuwat Pakistan) and Mohammed Kroessin (Islamic Relief Academy). The highly experienced academics and practitioners addressed a number of critical questions to understand Islamic Microfinance and, particularly, its differences and similitudes with conventional microfinance. The third parallel session of paper presentations included 23 different research papers and preceded the afternoon plenary sessions which explored new frontiers in microfinance. Ariane Szafarz (ULB/CERMi) discussed social finance and its consistencies in mission with microfinance and Tyler Wry (The Wharton School) offered a sociological viewpoint on the relationship between outreach intensity and financial sustainability. The final panel of the day revolved around the increasing connections between Fintech and microfinance. If technology as a driver were to potentially yield the death-knell of microfinance as we know it, how then should Fintech be embraced or shaped to reach the bottom billion and more? The Fintech panel and parallel session attracted young entrepreneurs and researchers drawing on their combined experiences in research and practice. In the Fintech panel, Wei Wu (University of Birmingham) outlined the growth in crowdfunding platforms in China and Phil Mader (University of Sussex) related this to understanding the implications of the increased activity in the context of society and the wider political economy. After Gunnar Camner of the GSMA outlined the challenges of the growing mobile economy in Africa, Niall Dennehy of Aid:Tech took to the floor to demystify the blockchain and its uses in forging digital identities and lowering transaction costs in existing financial products offered to the financially excluded, notably in terms of remittances. Questions from delegates challenged the permanence and immutability of data stored on the blockchain together with the much-espoused tenets of such solutions in delivering increased client-focused transparency. The afternoon ended with a very special moment, the Best PhD Paper Award ceremony. Muluneh Hideto (ULB/University of Agder) took the first place with the paper ‘Association between Social Performance Rating Scores and Governance Structure in Microfinance Institutions’ and Francisco Bächler and Jann Goedecke were awarded the second place with the paper ‘Do multiple bank relationships push borrowers into indebtedness? Evidence from a microlending market’. The winners will receive €1000 and €500, respectively and were invited to present their work at the European Microfinance Week next November, courtesy of the European Microfinance Platform. The conference highlights also include the social events held on both evenings of the event. Delegates had a chance to take time to meet old and new colleagues at the barbeque on Monday and at the networking event the following evening in Portsmouth Historic Dockyard. Tuesday evening was opened by Maude Massu of the Financial Inclusion Forum UK. Guests enjoyed a fantastic sunset and were treated to a moving performance by young people from a local charity, Music Fusion. The charity, led by Jinx Prowse, enables socially disadvantaged and deprived children to channel their inner emotions through music. ‘Valery’ by the late Amy Winehouse offered delegates a very memorable start to the evening. Through the generosity of delegates at the evening, Music Fusion is able to further its inspiring work in the local community. The final day started with the last parallel session with 17 further paper presentations and concluded with a challenging panel on the role of research in microfinance. James Copestake (University of Bath) presented a flexible framework for reframing microfinance research while Maren Duvendack (University of East Anglia) drew attention to the methodological challenges faced by researchers in the sector. The panel moderated by Marc Labie (University of Mons/CERMi) followed with a number of provocations and suggestions from practitioners Maude Massu (Financial Inclusion Forum UK), Lucia Spaggiari (Microfinanza Rating/SPTF) and Grzegorz Galusek (Microfinance Centre). The three days of the conference passed very quickly. They were full of new ideas, new approaches to old issues and emotions and hopefully they will shape new projects and collaborations in a near future. As the delegates waved goodbye to their days in Portsmouth, they eagerly awaited the announcement of the next destination for the conference! Read the conference report author: Michael O'Connor-Joana Afonso of Portsmouth Business School

At BSHF we were very interested to learn about the European Microfinance Awards and really keen to hear more about some of the great practice being identified. We have been running the World Habitat Awards since 1985. In searching for and sharing the best examples, we have a lot in common with e-MFP. Our objective is to identify and highlight approaches to housing across the world which make outstanding contributions to people’s living conditions. As a minimum we believe everyone should be able to afford their home, have access to basic services, and be free from the threat of eviction or displacement. This might seem like stating the obvious, but it isn’t something that can be taken for granted. Over the years, a large range of excellent examples have been identified in the countries of the global North and the global South. From the very beginning, our focus has been not only on the identification of good housing practices but also in the sharing of knowledge and experience to others who can transfer them in their own situations. The first international peer exchange to a World Habitat Award project winner was in 1987 and the exchanges have continued ever since. Really great approaches recognise, provide and guarantee the right to safe and secure housing; treat people and the environment with dignity; and work collaboratively to get the best out of people and places. Contexts, actors and circumstances vary hugely, but everybody tackling housing faces three crucial ‘sustainability’ challenges – social, environmental and financial: For homes to really work they need to be within a community that also works. Great housing is inclusive; encouraging and enabling wide participation and universal access to a place, for all those who have a stake in it. Genuinely inclusive housing can have a profound impact on the confidence and capacity of communities. Strong social sustainability can be achieved through interventions to improve people’s health, safety, security, capacity and independence. This might be through training for new skills; education about things like health and hygiene; support for community building; or activities which empower marginalised or oppressed groups. The World Habitat Awards contain many approaches which have achieved social sustainability. To take one, “The Intercultural Neighbourhood, Argentina” (World Habitat Awards Finalist 2016) created high levels of empowerment and inclusion, and generated substantial impacts through the solidarity this created. The neighbourhood was created through a partnership between the indigenous Mapuche Curruhuinca community and impoverished Creole communities, who had both often been excluded from access to housing. The partnership boasts many great accomplishments including new social enterprises, health education and environmentally sustainable practices. It has created a precedent for government land being handed back to indigenous communities. Environmental Sustainability Some approaches work to protect the environment using materials which are locally sourced, recycled or have low embodied energy to build homes. Others make use of existing buildings or structures instead of building new. It’s also possible to support environmental sustainability in other ways, for example through improving sanitation, or decreasing levels of pollution and waste. Work led by the Umande Trust, “Promoting Eco-sanitation in Informal Settlements, Kenya” (World Habitat Awards Finalist 2016) provides housing as part of a larger social enterprise which supplies improved toilet and washing facilities in urban informal settlements. The approach improves the health of people living in these communities, and the wider environment. The process of bio-sanitation produces fuel which can be used for cooking and lighting. The proceeds from charging a small fee for use of the facilities are reinvested into activities chosen by the host communities. These range from youth centres to IT rooms, to communal rooms for viewing football matches. Financial Sustainability All housing requires funding which can come from many different sources. Over time reliance on external funding can threaten sustained impact, so we look at how activities are funded over the long term. This might include capacity building (for example in building techniques, and ‘training of trainer’ schemes), so the skills needed to provide homes are embedded in the local community. Good examples of this are “Passive Solar Verandas, Afghanistan (World Habitat Awards Finalist 2016), and “Build Back Safer with Traditional Construction Methods, Pakistan” (World Habitat Awards Finalist 2014). Income generating activities can be set up which reduce dependency on external funding. This might involve developing and supporting social enterprises, entrepreneurial activity, or other approaches to boost the local economy (for example increasing the ability to cater for tourists). Sustainable funding doesn’t happen overnight, but it’s important to think about and plan for. Microfinance is featured in World Habitat Awards applications fairly regularly. We don’t often see it as the sole source of funding for development, but it can be used to lever in more substantial funding or investment (this was the approach of PASO A PASO: Strategic Alliances for Better Housing, Ecuador, World Habitat Awards Finalist 2007). We also see microfinance used to support capacity building in communities, which is hugely important in ensuring social sustainability. For example the MEDINA Project: Economic Development of Historic Cities in Yemen, (World Habitat Awards Finalist 2012) used microfinance as part of a holistic strategy for urban renewal, so that communities were able to establish a stronger skills base and grow their local economy. Azerbaijan Integrated Community Shelters (World Habitat Awards Finalist, 2007) used microfinance for a similar purpose, to help refugees and internally displaced persons to establish communities with sustainable social and economic infrastructure. We think there is real potential for microfinance to support safe, secure housing and thriving communities and we would love to see more examples of it. If you have a great example of microfinance supporting housing, please do contact us. Holistic Housing Because housing is a basic need, getting it wrong or being denied access to it has a profound impact on individuals as well as society’s health and well-being. Housing as a human right is recognised in international law, but as a global society we are struggling to reduce the number of people that are inadequately housed. It is becoming one of the most pressing social problems of the modern world. Thousands of people are working to bring together socially, environmentally and financially sustainable solutions to this problem. The best solutions are holistic, drawing together all these elements. A great example of a holistic approach to housing is being applied in the Global South by our 2016 World Habitat Awards winner: A Roof, A Skill, A Market, delivered by the Nubian Vault Association in several countries in West Africa. A Roof, A Skill, A Market provides environmentally sustainable housing using locally sourced materials to revive the ancient Egyptian architectural approach of using sun-dried mud bricks to create vaulted roofs. These replace the problem of unsuitable materials often used for houses in the Sahel. The Nubian Vault Association works through pan-African collaborations and knowledge exchanges between a wide range of actors. This approach to housing supports economic and social sustainability, providing training to transfer knowledge and skills between communities, as well as benefitting their health through improved housing. Although the World Habitat Awards only scratch the surface of all the effort being made to make a difference through housing, we hope they help provide an inspiring reminder that change is possible, wherever you are in the world. We’ll be staying up to date with the European Microfinance Awards, eager to discover more great examples of sustainable approaches to housing made possible with microfinance. See more World Habitat Awards winners and finalists on the BSHF website: https://www.bshf.org/world-habitat-awards/winners-and-finalists Photo on homepage: Julius Mwelu/UN-Habitat author: Jenny Line - Building and Social Housing Foundation

In Sub-Saharan Africa, the shortage of financing for housing is even more acute. As a result, poor and even middle-class households in pursuit of better shelter are often driven into the informal financial sector. Banks generally fail or ignore the financing of low-cost shelter, as the perceived risks and costs outweigh benefits. This problem is further accentuated by ambiguous property rights and legal precedents that constrain conventional ways of financing shelter. Thus, mortgage markets in the region remain small, providing access to only a small, elite segment of the population. Research commissioned by the FinMark Trust into housing finance sectors in various African countries has found that, at best, 15% of local populations are eligible for mortgage finance – and this is before housing affordability is considered. Some staggeringly low penetration rates for mortgage markets prevail in Africa – 2% of households in Angola, 1% in Uganda, 4% in Ethiopia, and a mere .02% of households in Rwanda. On the other hand, microfinance continues to grow between 10-15%, globally. According to MIX, the number of borrowers worldwide grew by 16% to 130 million in 2014-2015. Microfinance markets in Sub-Saharan Africa are on average expected to register growth of 15–20 % in the upcoming years. However, despite the evident need for dedicated housing microfinance products, and the fact that the portfolio quality for housing microfinance is better than the overall portfolio of financial institutions offering it as a differentiated product, a small number of financial institutions have ventured into it, with very small portfolios, representing less than 1% of overall MFI portfolios in the region (MixMarket.org). Some of the reasons include: lack of technical expertise in developing housing microfinance products, which includes not only the loan appraisal but understanding the nature of the loan and its conditions that should be accounted within the processes and procedures to originate the loan, so it doesn’t become just a consumption loan. This market failure was at the core of the partnership between Habitat for Humanity and The MasterCard Foundation to implement a six-year project “Building Assets, Unlocking Access” to provide technical assistance to six leading financial institutions in Uganda and Kenya to develop housing microfinance products and non-financial support services for people living on less than US$5 per day. This project started in 2012 and, as of today, over 37,000 low-income customers accessed the housing microfinance loans, total value USD 30 million, impacting over 150 000 individuals since the inception of the project. This is already a huge success for housing microfinance market in Sub-Saharan Africa if we take into consideration that over the last decade the housing mortgage market, in Kenya, has issued approximately 23,000 loans. Microfinance organizations are looking at ways to diversify portfolio by offering new products to the existing client base. New home improvement loans are issued for land purchase, fencing, processing of land documentation, repair and, in less cases, incremental construction. In a few instances, loans fund: installation of power, home solar systems, water tanks, and biogas digesters. After new loans are introduced and tested, microfinance organizations are encouraged to roll them out to other clients at the lower segment of the market. When products become popular with clients, organizations bring them into the core portfolio. This outcome largely depends on a combination of factors, including market assessment to identify the clients’ needs and development of the product itself. As part of the project, a number of research studies and feasibility assessments were carried out prior to developing housing microfinance products. But access to affordable housing financing is only one part of the housing value chain. The project also seeks to improve the housing quality and construction methods by advancing the training of local artisans and masons, supported by local colleges and technology platforms. It also encourages partners to develop non-financial housing products and services, to aid low-income families and households to better plan and execute the construction of their homes. Strategic partnerships such as the one between The MasterCard Foundation and Habitat for Humanity, where the former provided the funding for technical assistance and financial inclusion expertise to assist financial institutions in developing differentiated products for the base of the pyramid, and the latter provided expertise in housing and design of housing microfinance products, are pivotal to bring products and services to the low-income segment of the market. We need to find a way to scale this work and help more families make affordable improvements to their homes and meet the demand that exists for these products. Then we can ease the challenges of rapid urbanization for populations in Sub-Saharan Africa and make a dent in the housing need on the continent. To learn more about the partnership and the lessons emerging from the “Building Assets, Unlocking Access” project visit this website. Photos: Habitat for Humanity author: Habitat for Humanity Europe Middle East and Africa

<1> of the year took place in London on Monday 10th April, in partnership with the UK’s Financial Inclusion Forum – the leading British financial inclusion network. The session was entitled The Role of MFIs in improving access to and quality of education: Perspectives on the 7th European Microfinance Award and the European Dialogue and was timed to coincide both with the launch of Investing in Tomorrow (e-MFP’s latest Dialogue) and last week’s launch of the call for applications for the upcoming Award on Housing. The event brought together a panel including Arc Finance’s Sam Mendelson (who was the lead author of the paper, as well as a member of the Award Selection Committee), Kaspar Wansleben from Luxembourg Microfinance and Development Fund (a supporter of two of the 2016 Award finalists and key investor in education finance) and Nathan Byrd from Opportunity International’s Education Finance team, along with e-MFP’s Daniel Rozas (who has supported the management of the Award for the past three years). Katy Jones from Big Issue Invest and the Financial Inclusion Forum chaired the packed out event, generously hosted by Allen & Overy. Daniel opened the session by outlining the importance of education – its primary importance to households at all income levels and in all places, and the obstacles to universal access in low-income countries. The failure or inability of governments to provide free or affordable quality education to its people is a key reason for the emergence of low-cost private schools in many countries (and the channel for several of the Award semi-finalists’ initiatives). The role of microfinance in expanding beyond core enterprise credit to include education support can be a broad one; Daniel laid out a matrix of potential initiatives by MFIs that was included in the Dialogue: from the supply side financial and non-financial support to schools to the demand side support to families who may need to borrow or save to afford tuition and the associated costs, or have that education insured in the event of a family shock. The Award started with 30 applications from 19 countries and was whittled down over two assessment stages to 10 semi-finalists and three finalists. Sam presented a brief summary of each of the semi-finalists’ initiatives, divided into three broad categories: organisations that work with schools for children; those that focus on families and communities; and those that work primarily with and for young adults. While the semi-finalists represent a broad array of interventions to address different aspects of education access in varied context, there are commonalities among the best initiatives, which Sam outlined as: combining both financial and non-financial services; combining both demand- and supply-side interventions; client-centricity; high levels of embeddedness and institutional commitment; and extensive use of partnerships. Opportunity International is the parent organisation of Opportunity Bank Uganda Limited – one of the Award finalists. Nathan described Opportunity’s desire to demonstrate the immense demand for education finance in the bottom strata of the economic pyramid, having already invested US$83 million in education loans to 160,000 beneficiaries in 14 countries, with a current active portfolio of US$22.2 million which had created over 275,000 new seats in schools. Big Data credit modeling provides live decision tools across all aspects of the program, and equally important is the Monitoring and Evaluation of target schools. Nathan invoked a Maslow-style Hierarchy of Needs among schools in which poor schools provide only the most basic needs, and higher-order educational services are achieved by better schools. Opportunity’s Education Finance team is extremely bullish on the prospects for this market, with Nathan describing a market of over 300 million households. For this reason, its efforts have been highly focused on demonstrating both the financial and social value propositions of its edufinance program in a broad range of microfinance institutions, the majority of these coming from outside Opportunity’s network. Kaspar then gave the investor perspective, with a particular focus on higher education finance in Latin American through the Higher Education Finance Fund, in which LMDF invests. Why does this matter at this stage of development of the microfinance market and where do investors see the promising avenues between education and microfinance and which role can they play in developing the space? With demand for microcredit loans reaching its logical limits in many established markets, the need to diversify to serving the financial needs of others, including non-microentrepreneurs is becoming increasingly important. New areas, such as education finance, are thus a key element into meeting the commitments of social investors to expanding financial inclusion. But this also requires new types of financial vehicles, including longer-term and lower-cost funding. An engaged, informed and largely socially-focused audience had several questions for the panel, including on affordability of credit products, the consequences of expanding finance to low-cost private schools, on the role of government in education; the threshold or definition – if any – for what ‘low cost’ means, whether savings rather than credit should be the primary encouraged channel for educational finance, and how the impact of any initiatives can be independently measured. The event wound up with networking over drinks but not before Daniel announced this week’s launch of the Call for Applications for the upcoming Award, on Microfinance for Housing. Plans are in place for another offsite event a year from now, at which the semi-finalists of this next Award can be presented and discussion stimulated on how MFIs can finally work to make quality housing safe and affordable for hundreds of millions of low-income families. <1> Offsite Sessions are a new activity developed under our Strategic Plan 2017-2021 which take place in different e-MFP members’ countries and provide e-MFP with opportunities for more frequent touchpoints with its members and external stakeholders besides the European Microfinance Week. author: e-MFP

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). And like previous years with their focus on agriculture, social performance management, the environment, post-disaster and crisis contexts, or last year’s edition on Education, this year’s Award is looking for 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. Housing is a great example of how to do this. After the health and safety of children, there’s probably nothing more important to people everywhere than adequate housing. It is a core human need and a top investment priority for families anywhere. But 1.6 billion people live without adequate shelter. By 2030 this will have doubled and the need will be mostly in urban areas, where more than half of the world population lives today and where it is estimated that 2 billion people will be living in slums, where, almost by definition, substandard and unsafe housing is the norm. Addressing this is about more than just poverty (although poverty is strongly correlated with inadequate housing). Low quality housing affects a host of factors that hold back development: exposure to the elements, poor ventilation, and insufficient hygiene and sanitation facilities are all causes of poor health; poor building structures undermine safety and vastly increase vulnerability to disaster; lack of lighting and sufficient space limit children’s educational opportunities; insufficient privacy and lack of toilet facilities can contribute to sexual assault and constrain opportunities for women and girls. And lack of clear property rights are major contributors to crime and social injustice, while limiting families’ ability to invest in better housing. This doesn’t just help families. A healthy, vibrant housing finance market can be a major economic engine, generating local employment and drawing mainly on local inputs. Meanwhile, communities enjoying secure property rights are also more likely to give rise to active citizens, less tolerant of corruption and more demanding of their political leaders. Housing markets usually involve private actors – a bit different to previous Award subjects like education or crisis response, which are usually the province of public bodies or NGOs. In developing economies, housing finance is woefully underdeveloped, limited to upper income households usually with formal (often government) jobs. For many MFIs serving low-income families, housing is often relegated to a niche product targeting a small number of clients, with housing loans accounting an estimated 2% of combined microfinance portfolios worldwide. For the microfinance sector, housing finance presents an opportunity to branch out not only into new lending, but to reach new clients as well. This new segment is both capital-hungry and still largely unserved, providing vast opportunities for growth. And opportunities for creating social value are just as real, with investments in housing generating not only stability and comfort for families, but also better health and improved standards of living. So in every way, improving access to adequate housing has positive knock-on effects across the spectrum of development outcomes. For this reason, the 2017 Award looks to recognise institutions that provide a broad range of financial services – from helping households to build out and improve their own homes through housing microfinance and housing savings to supplying micro-mortgages that allow young, working poor families buy decent apartments. Property insurance can be crucial in helping clients get back on their feet quickly following a natural disaster. Even remittance products can play a role, for example, enabling long-term overseas workers direct their remittances not only for current family needs, but also to accumulate the large sums needed to build or buy a home when they return. As this Award will illustrate, successful MFIs are partnering with NGOs and local governments to help clients secure tenure and gain protection against eviction. Others collaborate with housing specialists to enhance local construction markets with supplies and building techniques that result in homes more resilient to earthquakes or hurricanes. And MFIs may offer non-financial services linked to financial products as well, such as educational materials related to house construction or renovation; trainings on home improvement plans and budgets; professional advice on planned construction or renovation; or legal advice on land ownership execution; or Technical Assistance – providing the capacities to renovate or construct a house. This is a broad and fascinating range of potential interventions by MFIs and e-MFP is excited to receive applications that offer different and innovative ways to improve housing conditions, from home purchase or expansion of existing living space, to providing access to clean water, sanitation, electricity, and other core housing needs, to raising the quality of those homes being lived in, to mitigating against the risks of natural disasters using the latest designs and materials. Besides the cash prize, the press exposure and investment opportunities that come from being a semi-finalist, finalist or winner of the Award can be enormous, as organisations who have done well in previous years can attest. The call for applications from institutions working in this area is now open and all the details of eligibility and more about the scope of the award can be found in the Explanatory Note on the Award website. We look forward to seeing you at the Award ceremony at the EIB where the winner will be announced and the €100,000 prize presented on November 30th! Watch our video Why the European Microfinance Award? author: e-MFP

As in previous years, all the semi-finalists’ outstanding interventions have been profiled in a European Dialogue publication, entitled Investing in Tomorrow, written by Sam Mendelson, with support from Micol Guarneri, Francesca Agnello – the consultants who oversaw the Award application and analysis – and Gabriela Erice and Daniel Rozas from e-MFP. It can be read online here and downloaded as a PDF here. The European Microfinance Award is one of e-MFP’s most prominent activities. A prestigious annual €100,000 Award which attracts applications from financial institutions around the world, it serves two parallel goals: rewarding excellence, and collecting and disseminating the most relevant practices for replication by others. This second goal is where Investing in Tomorrow comes in – describing the challenges facing MFIs, the types of interventions that can increase access to education, practical case study examples of the finalists and semi-finalists – organisations which put these models into practice – and what these excellent initiatives have in common. Investing in Tomorrow opens by summarising the obstacles to access to education in low-income countries and outlines how microfinance institutions can work on either the supply or demand side to address these obstacles, with both financial and non-financial services. Financial services – loans, savings, insurance, payments – to families can enable them to pay for the costs of education, from kids going to primary school to youth seeking to build their future through further or tertiary education or by mastering the vocational skills needed to becoming productive adults. Support to schools, such as capacity-building to the ubiquitous low cost private schools catering to millions of poor families in developing countries around the world, can substantially improve both the availability and quality of education. Vocational training or entrepreneurship programs for young adults can also address the skills gap that is widespread in many markets. Investing in Tomorrow illustrates the broad range of interventions that MFIs are implementing to improve education access, and the absence of a one-size-fits-all solution. But while there is no single approach emerging, there is an emerging Best Practice – a collection of commonalities among all the best initiatives, which is the subject of the concluding section of the Dialogue. The Award semi-finalists and finalists did not all demonstrate a standardised model but rather a range of different approaches, responsive to contexts that are particular to their countries, local markets, and clients. However, there were identifiable commonalities among those initiatives strong enough to have reached the semi-finalist stage or beyond. First, almost all the education initiatives, rather than just offering financial or non-financial services, in fact offer both. There is a clear recognition that a holistic approach is by far the best. Credit is useful, but it is best combined with training, capacity building, counselling or community organising. Second, several of the semi-finalists’ initiatives involved both demand- and supply-side interventions. This reflects a consensus that obstacles to quality education access seldom result just from families’ poverty, or schools’ poor infrastructure or teaching. The answer, as with many policy challenges, is complex, context-dependent, and requires an attack on multiple fronts. Thirdly, it is clear that the best education initiatives, like the best microfinance products, are client-centric. The most successful responses to a challenge require a starting point of “what do the prospective beneficiaries of this initiative actually need?” Fourth, the strongest initiatives all have a high level of embeddedness and institutional commitment. Education initiatives cannot be CSR budget line items. The semi-finalists all have strong buy-in from their management and governance teams, and high motivation to see the initiatives succeed. Finally, almost all the semi-finalists recognise the importance of partnerships – whether with central or local government, education specialists, tertiary or technical institutions, NGOs, or funders. Education is never the core specialty of an MFI, and improving education access will require leveraging partnerships with those who specialise in education or are responsible for its provision. We’re very pleased to once again publish a European Dialogue that can shine a bit more light on the phenomenal work that many MFIs are doing, and the ways that the focus of this industry continues to evolve beyond microcredit in innovative and exciting ways. Read and download Investing in Tomorrow here. author: e-MFP

As a microfinance specialist for the last 21 years—and the last 9 exclusively dedicated to microfinance products for housing—I have witnessed the growth potential of this sub-sector of microfinance, as well as the constraints and limitations to the expansion of housing finance portfolios, amongst which the most important include lack of adequate capital and insufficient knowledge on how to develop differentiated housing finance products. When we hear that: * at least 1.6 billion of the global population lives in substandard housing, * at least half of the global population—3.5 billion people—currently lives in cities, and * 828 million people live in slums (according to the United Nations’ Sustainable Development Goals), both funders and financial institutions alike should take note and pay close attention. Within these concerning figures, which only seem to move upward, an opportunity is evidenced. A good portion of the individuals denoted by these statistics have been or are served by traditional microfinance loans, which are frequently diverted towards efforts to improve housing conditions. There are many shelter challenges facing low-income households, and, probably, the biggest one remains access to finance. Traditional housing financing methods, such as mortgages and developer financing, are not designed to meet the needs of low-income populations in emerging markets. These households typically have undocumented and volatile incomes and lack the collateral or guarantee for a typical mortgage loan. Indeed, World Bank data demon­strates that fewer individuals in developing countries have outstanding loans directed toward formal house purchases with more loans directed toward housing construction. The microfinance sector, which responded to the challenge of serving the financially excluded, has now an opportunity to respond to the vast demand for housing loans that can serve low-income groups, who remain unserved by the traditional financial sector. Microfinance institutions that take up this opportunity can achieve a double bottom line: increasing financial revenues by adding such housing finance products and helping to reduce the housing deficit among low-income households by unlocking a door that is tailored to their needs and capacities. Efforts in this area demonstrate that housing microfinance presents a new, vibrant market opportunity for the financial and microfinance sector at large. In fact, every day we see more institutions adding differentiated housing microfinance products to their portfolios. Housing microfinance is gaining popularity and earning legitimacy as part of microfinance institutions’ business, helped in part by the desire of institutions’ to not only serve the needs of micro-entrepreneurs but to also further access to health, education and housing—the three big priorities of low-income households around the world. However, the supply of such services still lags far below the natural client demand. The uniqueness of housing microfinance is that though it utilizes the same principles applied to other microfinance products, it applies them to the progressive, or incremental, housing improvement process that the majority of the developing world uses to build, expand and repair their houses. Essentially it uses small, non-mortgage-backed loans offered in succession to support the existing incremental building practices of low-income populations. This can include a range of financial services that support informal shelter improvements such as home repairs, expansions, the addition of water and sanitation services, and energy efficiency upgrades. In 2009, with a housing deficit of more than 1.8 million homes, Peru was grappling with a serious housing shortage that disproportionately affected low-income households. Habitat for Humanity partnered with Edyficar (now known as Mibanco) to develop a dedicated housing microfinance product that complemented their existing housing product which was reaching predominately middle income populations. Habitat’s desire to combat inadequate shelter aligned with the financial institution’s desire to develop a product that could reach a lower-income segment of the population. The resulting partnership produced one of the most successful stories in the sector and paved the way for the work Habitat for Humanity now does through the Terwilliger Center for Innovation in Shelter to support financial institutions in the design and/or refinement of housing microfinance products. During the 2010 pilot of the housing microfinance product, the institution disbursed 504 loans. The total portfolio value was US$323,579, with an average loan size of US$1,840 and a product delinquency of 2.3 percent. Sixty-two percent of the clients were new. At present, Mibanco disburses around 15,000 loans per month, representing around US$3.7 million each month. With a PAR30 ratio lower than that of the institution’s overall loan portfolio, the housing microfinance products have proven to be more profitable than its other loan products. Now as the institution experiences steady growth and success, it intends to expand its housing microfinance portfolio by extending the product to new demographics and regions. Despite successful examples such as that of Edyficar/Mibanco or the evidence from a 2015-16 housing microfinance sector survey conducted by the Terwilliger Center for Innovation in Shelter that microfinance practitioners are finding housing microfinance useful to retain loyal clients, to diversify their portfolios, to grow in response to client’s demand, and to achieve social impact, there are several challenges facing financial institutions, funders, and clients that are prohibitive to full realization of the market opportunity these portfolios represent. Some of the most pressing challenges are regulatory complexity, market saturation and competition, political risk and currency volatility, and tenure security. Of the 83 financial institutions that participated in the housing microfinance sector survey at least 40% reported capital con­straints as the number one issue preventing them from scaling the housing microfinance product, with at least one institution reporting that it was forced to discontinue its housing microfinance product due to lack of funding despite stating a continuing, “huge demand for housing loan.” Similarly, 30% reported unavailability of land or title and 25.6% stated a desire to focus on other products constrained development of housing microfinance products. In response to one of these challenges, in 2012, Habitat for Humanity launched the MicroBuild Fund, a US$100 million investment fund for housing microfinance. The fund is the first microfinance investment vehicle to demonstrate the viability of housing microfinance by offering financial institutions longer-term capital to grow housing microfinance portfolios for low-income households. In addition, MicroBuild investees receive technical assistance from Habitat’s Terwilliger Center for Innovation in Shelter to help them refine and expand those products. There is, however, a continued need for additional funding of this type and the further support in the design of the products. The European Microfinance Platform’s focus on housing during 2017 represents a crucial opportunity to advance the conversation around the most pressing challenges facing this emerging, yet nascent sector, and to unlock markets in a way that will support funders, institutions, and clients with one end in mind: reducing the alarming deficit of affordable, safe housing around the globe. UN-HABITAT. “Up for Slum Dwellers — Transforming a Billion Lives Campaign Unveiled in Europe.” UNHabitat.org. July 2, 2016. unhabitat.org/up-for-slum-dwellers-transforming-a-billion-lives-campaign-unveiled-in-europe/ United Nations, “Goal 11: Make Cities Inclusive, Safe, Resilient and Sustainable.” U.N. Sustainable Development Goals. Aug. 11, 2016. www.un.org/sustainabledevelopment/cities/ The Terwilliger Center for Innovation in Shelter. “The 2015-16 State of Housing Microfinance: A review of the Housing Microfinance Practice Around the Globe.” 2016. www.habitat.org/tcis Jan Maes and Larry Reed. “State of the Microcredit Summit Campaign Report.” Microcredit Summit Campaign, 2012. The Terwilliger Center for Innovation in Shelter. “The 2015-16 State of Housing Microfinance: A review of the Housing Microfinance Practice Around the Globe.” 2016. www.habitat.org/tcis author: Sandra Prieto - Terwilliger Center for Innovation in Shelter

How often have you seen the two concepts appear together? If you think rarely – you’re not alone. Housing finance is that mysterious niche that crops up from time to time, but rarely makes headlines in our sector. And that’s both a conundrum and a shame. Housing is a core human need and a top investment priority for families anywhere. Whether rich or poor, housing is often the single largest capital investment these families will ever make, that is to say, it cries out for effective products to help finance it. Unsurprisingly, housing finance is a core of financial services in wealthy nations. Indeed, if you’re over 40, chances are that a home mortgage is the single largest loan that you, dear reader, ever held. And yet in the financial inclusion and microfinance sector, housing gets notoriously short shrift. Habitat for Humanity, the world’s leading NGO dedicated to housing, estimates that while 1.2 billion people need improved shelter, just 2% of microfinance portfolios are dedicated to housing. Why the seeming discrepancy? A big reason hearkens back to the roots of microfinance and its focus on funding microenterprise development. Although many in the sector have moved beyond this relatively narrow niche and now speak of financial inclusion more broadly, housing continues to languish in the “household spending” category. Within the traditional view of microfinance, it’s not income generating, so it’s somehow less deserving. Second, well-intentioned practitioners diving into housing finance often find the path more challenging than expected. Housing demands larger loans, at longer terms, and at lower interest rates than the typical microenterprise loans. It requires specially-trained staff. And on top of that, financing housing requires dealing with land titles, building assessments, and many other issues in which MFIs have little expertise. Meanwhile, for many funders and investors, thinking about housing finance brings bad memories. After all, just two short years separated the announcement of Mohammed Yunus’ Nobel and the collapse of Lehman Brothers. Investors around the world were fleeing housing just as microfinance was taking off. However, the times are a-changin’. The 2007 housing crash in the US (and Spain, Ireland, and elsewhere) is now a full decade behind us. Meanwhile, the rapid growth in traditional microfinance has been slowing, and many major markets – including Peru, Cambodia, and elsewhere – have been slowing. The type of rapid expansion seen back in 2007 is a rarity, and often avoided by practitioners and investors alike. Housing finance presents an opportunity to branch out not only into new lending, but to reach new clients. The opportunities for growth in this new segment, still largely unserved, are real. And opportunities for creating social value are just as real, with investments in housing generating not only stability and comfort for families, but also better health and improved standards of living. The methodologies to extend housing microfinance to traditional MFI clients has been honed over decades of practice, going back to at least the 1980s. And more recent efforts to extend micro-mortgages to families on the next rung of the income ladder – the bottom of developing countries’ middle class – are now also in their second decade of practice. Both approaches have been shown to be financially self-sustainable and viable over the long term. What’s missing is the institutional focus needed to put housing as an intrinsic part of the mission of financial inclusion, and not just a side-benefit offered to a handful of MFI customers. On the investment side, even as funding in financial inclusion grew to $34 billion, according to the 2016 CGAP funder survey, there has been surprisingly little innovation by funders to provide the type of long-term, reasonably priced capital needed to bring housing finance up to a scale that can make a meaningful difference to the world’s poor. Out of the more than 100 active microfinance investment vehicles, just one – MicroBuild – is specifically devoted to housing finance. With effort and focus, much more can be done. If 20% of the crossborder funding currently deployed towards financial inclusion were to be steadily steered towards housing, it would have a meaningful impact in the housing needs for some 100 million people. The scale of such an undertaking would also have large knock-on effects, from greater emphasis on the legal foundations needed for healthy housing markets, such as stronger property rights and land registries, to large-scale changes in building practices, including improved energy efficiency and disaster resilience. And finally, such housing investment would likely have large positive impacts on local economic growth. These are impacts that are worth working towards. That is why we at e-MFP are making 2017 the Year of Housing. In addition to the European Microfinance Award on “Microfinance for Housing” launching in April, we’ll be featuring additional events and publications on the topic throughout the year. Will you join us? author: Daniel Rozas

<1>, has gained prominence from development-minded investors over the past decades. Initially, international funding into microfinance was generated largely from donor organizations, including public development agencies and private foundations. As the market gained traction, the role of private capital grew in importance as not only a means for microfinance institutions (MFIs) to reach scale, but also to increase their social outreach beyond what was possible with donor money. Private investors and donor agencies thus joined efforts in creating microfinance investment vehicles, better known in the industry jargon as “MIVs” or more simply “microfinance funds”. MIVs act as the main link between MFIs and the capital markets and usually provide debt financing, equity financing or a combination of both to MFIs located in emerging and frontier markets. The Consultative Group to Assist the Poor (CGAP) began to take interest in MIVs in 2003, a time where several of these vehicles saw the light, and before the investment boom which was witnessed by the sector with the announcement of the United Nations “2005 International Year of Microcredit.” However, the industry was still lacking common definitions, terminology and performance standards. In order to bring forward improved transparency on MIVs’ financial and social performances, a first market report on microfinance funds was produced in 2007 by CGAP, in collaboration with Symbiotics. The inaugural MIV benchmarking tool was thus born - based on a market survey containing a common set of definitions and reporting standards - a landmark that set the stage for regular, annual surveys carried out every year since then. Fast forward ten years, Symbiotics and CGAP have yet again partnered to develop a new extensive report (white paper) reflecting back on a decade of MIV operations, shedding light on their progress during the period 2006-2015. The recently released white paper co-authored by both organizations and entitled “Microfinance Funds: 10 Years of Research & Practice” carefully details major market trends. In light of the 2016 European Microfinance Week in Luxembourg, participants got a glimpse of the new white paper’s key findings as part of the conference’s stream on “investors, donors and funders.” These results served as an anchor point for the panelists who shared their expertise on the developments of microfinance funds, identified their challenges and provided an outlook on innovation and impact, all during a session moderated by Sachin S. Vankalas from LuxFlag. The panel was composed of Roland Dominicé, CEO of Symbiotics, Matthew Soursourian, Financial Sector Analyst at CGAP, and Frank Streppel, Head of Investments at Triodos Investment Management BV. M. Soursourian, one of the authors of the white paper, started the conference session by previewing CGAP’s annual Funder Survey results about the current level of international funding for financial inclusion – an introduction which set the stage for R. Dominicé to delve into a deeper layer of financial inclusion: microfinance off-shore investments. Some of the key findings presented by R. Dominicé revolved around the size, concentration, geography, investors, returns and social performance of MIVs over the last decade. Overall, since 2006, the MIV industry has witnessed steady and stable growth, benefitting from capital inflows of USD 1.1 billion per year. The market size amounted to USD 11 billion at the end of 2015, up over fivefold from the initial assessment of USD 2.1 billion in 2006. The industry remains highly concentrated around large MIVs (those with assets above USD 250 million) being the drivers of growth and Fixed-Income MIVs (those investing 85% of their non-cash assets in debt instruments) being the prime strategy observable in the market. Large MIVs have a 62% market share today compared to 38% a decade ago, but they are still small in numbers though, pointing to the existence of very large vehicles, a couple of them having even reached the USD 1 billion mark. In terms of investor type, the white paper puts forward the importance of institutional money as a lead contributor to market growth. By the end of 2015, institutional investors (pension funds, insurance companies, banks and foundations) funded nearly 50% of MIVs’ capital, followed by retail & high-net worth investors (28%) and public funders (25%). Most importantly, the involvement of private institutional investors has grown rapidly since the first MIV benchmarking report (27% per year), a testament to the success of MIVs to crowd-in private capital. Looking at returns and cost levels of MIVs, R. Dominicé pointed to a gradual decline of MIVs’ portfolio yields from 9% to 7% over the past couple of years, in-line with declining money market rates. With both portfolio quality and total expense ratios exhibiting a flat trend across the years (on average: under 2% loan loss provisioning and 2% total expense ratio), net return for the investors have averaged 3.3% over the past ten years for Fixed-Income MIVs. white paper in terms of number of end-clients reached. Continuous capital injection into microfinance by MIVs is reaching more and more active borrowers, i.e. the clients of MFIs on the ground. Back in 2008, one vehicle used to finance less than 20,000 estimated active borrowers whereas currently this figure stands at over 300,000, equivalent in absolute number to 24 million end-clients benefitting from capital market financing. Gender analysis tells us that MIVs continue to reach a largely female clientele (around 65%) and that investments are channeled equally between an urban and a rural population. The data also tells us that the average MFI financed by MIVs has evolved on its non-credit products by increasingly offering savings, payment, insurance, technology and advisory offerings. All these figures and trend lines from the past 10 years of industry data have shown positive signals in terms of MIVs’ financial and social performances. Microfinance remains a tool to serve market segments that remain under funded and MIVs have proven with their sustainable business model that it is possible to approach financial inclusion from an investment perspective. Challenges do remain of course, both on the markets’ as well as the investors’ side. However, as discussions on solving development challenges revolve today around the role of private capital, MIVs remain at the forefront as the main catalysts for foreign private investments in emerging microfinance markets. This article was also published on ACCION’s Center for Financial Inclusion website <1> GIIN & JP Morgan : Annual Impact Investor Survey, 2016 author: Ramkumar Narayanan - Symbiotics

The conference, held over 16th-18th November, took a different approach than previous editions. Rather than a single overarching theme, the conference provided equal focus to six main streams: green microfinance; investors, donors and funders; rural finance; social performance; and digital innovations and the 2016 European Microfinance Award topic of Access to Education. 24 workshops within these streams complemented three plenary sessions: ‘Microfinance and Access to Education’; ‘Microfinance and Housing, One Brick at a Time’; and ‘Digital Finance: Full Inclusion or Empty Promise?’, as well as the Platform’s Action Groups, which met on Wednesday 16th November to present their work, and discuss what to do over the coming year. Publications and papers were presented, reflecting the core vision and mission of the platform: to build a memberships base that can leverage their actions and networks to increase impact and foster responsible financial inclusion. The plenaries are always the backbone of the conference, bringing together all the members and guests under a single roof. The opening plenary of the conference was on "Microfinance and Access to Education", presenting the three finalists of the European Microfinance Award to discuss the education programs they submitted. Moderated by Sam Mendelson, who outlined the context, topic, and evaluation process of the Award, the introduction included a moving video speech by Aryslady Cottes, a student from the Dominican Republic, who recounted what it was like to think she would be unable to afford to pursue tertiary education, and what the finance to do so meant to her. She described how access to a dedicated loan enabled her to pay for tuition and a computer for her studies in Tourism Administration, and her aspirations to work for the Ministry of Tourism when she graduates. Representatives of the three finalists, Edgardo Pérez from Fundación Génesis Empresarial of Guatemala; Roshaneh Zafar of Kashf Foundation in Pakistan; and John Robert Okware from Opportunity Bank of Uganda Ltd were the three panelists, and took questions on their initiatives, challenges, sustainability, medium term plans, and the role of profitability and the private sector in addressing issues traditionally the role of governments – providing basic services to poor or vulnerable groups. Roshaneh described the indispensable role of private education in Pakistan, where public education is increasingly unfit for purpose. For girls from poor families, in particular, providing access to low cost private schools, with quality teaching and facilities is critical in addressing gender gaps and lack of opportunity among vulnerable and excluded families. Edgardo outlined the unaffordability of higher education in Guatemala, and the cycle of poor education this promulgates. Narrowing the affordability gap for further study leads to a positive feedback loop where this education – and its perceived value – is passed on to future generations, breaking cycles of poverty. John Robert described OBUL’s holistic approach of offering supply and demand-side, financial and non-financial products and services as, rather than a case of ‘jack of all trades, master of none’ but an integral part of access: you can’t offer loans if people can’t also save and be insured; and none of this has value if there isn’t quality education available to them. That evening saw the Award Ceremony at the European Investment Bank for the 7th Award, won by Kashf Foundation. The Award organised jointly by the Luxembourg Ministry of Foreign and European Affairs, e-MFP and the Inclusive Finance Network Luxembourg (InFiNe), showcases institutions pioneering Best Practice in areas of microfinance beyond enterprise credit. Kashf Foundation’s program involves loans to low-cost private schools, along with pedagogical training for teachers to improve teaching practices and specialised school management courses for school owners to improve the school infrastructure and their financial and operational administration. Since 2014, Kashf has worked with approximately 1000 schools, serving over 150,000 students. The Grand Jury reported a close decision, with the two other finalists, Fundación Génesis Empresarial of Guatemala and Opportunity Bank of Uganda Ltd., recognised respectively for their higher education finance program, and multi-pronged approach, helping schools and families with financial and non-financial services. Education was a particular focus of the whole Week, with a dedicated ‘stream’ including workshops on “Microfinance, education & child labour”; and “The many paths to financing education, Part I – Implementation, and Part II – Funding”. Child labour may be internationally defined, but countries have different approaches. Microfinance can be effective in mitigating all five causes of child labour: demand, social norms, costs & quality of education, vulnerability and income poverty. The National Rural Support Programme from Pakistan exemplifies how to reduce new child labour by adapting their current micro insurance product to include all members of a client’s household, and LAPO of Nigeria has increased access to education for children with a combination of an awareness programme and educational loans. Building on the Award process, the implementation session outlined how the private sector can overcome access difficulties. MFIs can help parents pay for schools by providing loans and private schools can provide a higher quality of education, which is often lacking in public schools. But MFIs need sustainable and innovative solutions to finance education. Opportunity International has developed solutions to prevent children from dropping out of school: a school fee loan plan and loans for institutions; ADG provides training to MFI staff in order to increase the scale of education loans and ensure high portfolio quality at the same time; Sinapi Aba Savings and Loans from Ghana gives youth that dropped out of school the opportunity to get informal education, master a trade and get start-up capital to start their business; and CGAP has developed digital finance solutions to improve access to education for children in developing countries. Investors, donors and funders benefitted from a dedicated ‘stream’ too, with workshops on "Myanmar, the new golden land for microfinance?"; "Investing in green inclusive finance: challenges, opportunities, strategies, the way forward"; "Securing the future through responsible exits; 10 years of MIV surveys, research and practice"; and "Long term debt for long term impact". Access to long term debt has the potential to improve an MFI’s institutional stability and development. It also helps it develop products with longer maturity for market segments such as agriculture, housing and education where traditional short-term credit products have less impact. But appetite for long-term debt remains limited, as many MFIs see little risk in continuously accessing lower-cost, short-term debt on highly liquid debt markets. Awareness is needed on the benefits of long-term debt in terms of partnership building, innovation and stabilising balance sheets. FX exchange risks need to be addressed, but different options are available for the funder and MFI to distribute risks and costs in an appropriate manner. A key challenge when impact investors exit from an MFI is to ensure continuity in the MFI’s mission. Investors need to plan ahead on how and when to responsibly exit: when market failures are solved, in case of changing strategies or legal contexts or when they face financial limitations. To guard against mission drift, investors should identify a partner which shares the investor’s values, with both parties benefiting from a continued focus on the mission; and fund managers should develop a structure answering to different exit scenarios, such as divestment, exits of investors or termination of the fund. Trust and understanding is vital to manage potential conflicts. Investing in green inclusive finance grows as more MFIs and investors take environmental sustainability policies into consideration and are developing specific products to cater to the segment as service provider or funder. But challenges to funders interested in green microfinance include the size of green microfinance portfolios suitable for investment, the lack of awareness and understanding among MFI management and investors, the lack of a track record to entice investors, and the lack of synergies between efforts which would enable the upscaling of best practices. As always, Social Performance is of great interest to delegates, and EMW is a rare opportunity to measure and compare progress across various SPM frameworks. In “Assessing and promoting social performance in Europe, exchanges and lessons learned from the South”, speakers argued that the European microfinance sector can use the tools and lessons learned from the ‘South’ as the debate has finally shifted from North versus South, to Western versus Eastern Europe. The larger availability of public funding and subsidies in Western Europe are creating different market approaches that are influencing the analysis and interpretation of the indicators used. This also means that regulators need to find a balance between protecting the financial sector and promoting social inclusion. The role of the regulators, but also of the various stakeholders in the sector, such as investors and funders, is crucial if we want to promote a more systematic assessment of social performance. And managing outcomes is more than just data collection, but the system of collection, analysis, and use of outcomes data. It enables stakeholders to be accountable, review strategies and systems, and improve outcomes. Asset owners, asset managers, and FSPs should contribute resources so that the outcomes management agenda can advance. Everybody has a role to play, to get involved, and act on the data. There are good examples of this being done. Oikocredit’s clients’ outcomes management is based on two pillars: building FSP’s capacity to measure and monitor client data, and conducting econometric research to better understand the changes in clients’ lives. Triple Jump has built an active approach to outcome management by setting outcome targets at fund level, integrating outcomes assessment into investment selection, collecting outcome results from investees, and monitoring and reporting outcomes at the fund level. Fundación Microfinanzas BBVA (BBVAMF) is managing a detailed client database with historical data, which is updated on a quarterly basis. BBVAMF classifies their clients into segments of economic vulnerability by comparing their monthly net income. According to the 2015 social performance report, the number of the 2011 client cohort living in poverty and extreme poverty has decreased from 55% to 27% in 2015. According to those findings, BBVAMF is having a large positive impact. Green microfinance has grown in importance with each European Microfinance Week. This year, "Financing sustainable energy: Traditional solar vs PayGo" made the business case for distributed renewable energy like Solar Home Systems over traditional equivalents. But there is a need for more blended finance and innovative finance mechanisms. More awareness raising and training is needed to get a better understanding that solar solution are a better cost efficient solution compared to traditional fuels. Financing solar solutions must involve building trust among consumers by providing high quality products and servicing. Microfinance can also be a lever for building sustainable cities and territories. 1.2 billion people are in need of improved shelter; by 2030 that number will have risen to 3 billion, stressing the need for 300 million new homes at least. By 2030 the majority of people in all continents will live in urban areas and 2 billion may live in slums. MFIs can do well and do good by designing smart, environment-friendly products for housing – a theme to be picked up in the morning plenary of the final day. Rural finance remains a holy grail of sorts, something everyone in the sector knows to be crucial, but which remains tantalisingly difficult to achieve. Value chain finance can be beneficial for developing a value chain, but sharing the benefits evenly is key to success. Financing smallholders is a challenge when corporates want to work with farmers. There is a need for finance but often a dearth of finance providers. Warehouse receipt lending can be a good alternative to corporates stepping into finance themselves, with collateral for smallholder farmers to access credit and to gain a better bargaining position. Social lenders can be an important support for smallholder farmers. CSAF, a network of nine social lenders, is growing. MFIs make up a relatively small share of smallholder finance, (probably 20%) and most smallholder farmers are in loose value chains. MFIs cannot cover all financial needs of smallholder farmers and most smallholders are non-commercial farmers, with cash flows outside of farming. A solution for these farmers would be to for lenders finance the commercial activities of a farmer, which would positively impact their non-commercial activities. Digital innovations and the emergence of Fintech companies as key microfinance service providers continue to grow in importance. Adaptation will be important, of course, with smartphone and biometric technologies opening possibilities for a ’cash-lite’ world enabling a range of services the poor. These developments are coming fast, so there is an urgent need to ‘anchor’ these developments well into MFIs’ systems. As moving away from decentralised to more integrated services becomes possible, so does consolidation and validation of data and systems, leveraging more benefits to customers. This includes new ways of encrypted data transfer like with Stellar - traceable and transparent. Clearly, solutions need to be well shared and learned from to ensure financial inclusion. Cyber security is growing in importance in inclusive finance as everywhere else. Digital financial services are key to improve financial inclusion but security is non-negotiable and entails more than just having the right IT infrastructure in place. Digital financial service providers can mitigate risks related to new technologies and cyber-attacks, with Senegal – the largest market for digital finance services in Western Africa – an example to emulate. Senegalese state agencies and digital financial service providers have been attacked in recent years with considerable financial and data losses and Denial of Services attacks, but these have been met with a coordinated and thoughtful response. But the speed of technology innovation means regulators can only do so much; digital financial services often operate in overlapping domains, requiring regulators on different areas to collaborate. The morning plenary on the final day of the conference was entitled "Microfinance & Housing: One Brick at a Time". As this is the subject of next year’s 8th European Microfinance Award - announced at the previous night’s ceremony, this area is ripe for innovation. But providing affordable housing, with appropriate finance, to the world’s poor is one of the hardest tasks in Inclusive Finance. As moderator Daniel Rozas outlined, 90% of the retail banking portfolio in the US and UK is mortgages, and two thirds of the audience themselves have one. But two thirds of the world’s population live in substandard housing (without adequate sewerage, electricity, heating or water). And while over 20% of microfinance loans are used for housing (either for building or home improvement), only 2% of MFIs’ portfolios are dedicated housing loans. Just increasing this to 20% would require US$20 billion in investment, but would benefit 100 million people. Of course, the challenges are many. Further down the pyramid you go, the more informal incomes become – making collateral and credit assessment difficult. Land titles become less reliable too, leaving the traditional mortgage market limited to those with formal incomes and land title. The ‘micromortgage’ sector is trying to reach the next tier now; with mixed success. But the Holy Grail is the new tier below that – the very poor. Habitat for Humanity, represented on the panel by Patrick McAllister, has been working on this for a while now, as has Triple Jump’s Microbuild Fund, represented by Mark van Doesburgh, but this is only $100m out of US$13 billion in MIV assets. Patrick argued that most MFIs are doing housing finance anyway, responding to a demand they see, knowing well that their clients are using ostensibly enterprise credit for housing anyway. But MFI officers don’t know how to assess a housing loan; they only know how to evaluate a business. Improving MFIs’ capacity analyse housing loans will be part of the diversification that is really needed. There is no ‘ideal’ for this diversification of products, however. Whatever products are designed need to involve better training of loan officers, helping clients’ with technical details, and helping management adapt to a quite different model. “The front end looks the same, but the back office is very different, with a longer loan term needed and interest rate risk factored in”, said Rozas. By contrast, Dave and Vicki advocated for the huge potential of digital finance, and the need for revolution and not incrementalism. “The electric light bulb didn’t come about by constant improvements in the candle”, said Vicki, with Dave adding that “digital financial services allow us to do is deliver the full suite of products…. We were asking poor people to run the marathon out of poverty on one leg, credit…. It’s not just about credit. It’s about transparency and customer experience…. It’s more than just a delivery channel; it’s a whole approach.” Despite the cautionary tale he had put forward, Graham finished by seeking a positive path ahead. “As smart phones penetrate, so grows the opportunity for effective, meaningful digital financial services…. But we’ve got five to ten years during which I think we need to be very careful about client protection.” Anne Contreras, e-MFP’s chairperson, then closed the conference with a look back and ahead. “In the past decade, the sector has changed in so many ways, from the products offered, to the way we monitor impact, to the technology available to increase access and lower costs. The Platform has changed too: it has expanded and diversified so much in the way it works, and who it reaches.” “Ten years from now, the Platform will be a very different entity from today – and that is a good thing. Innovation is the heart of what everyone here in this room is trying to do”, she concluded”. With thanks to the Blue Rhino team for note taking at all sessions European Microfinance Week presentations are available here author: e-MFP