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- European Dialogue “Investing in Tomorrow” Presents Best Practice from Around the World on Microfi...
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
- Housing microfinance: An opportunity for vast impact
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
- Why 2017 is our Year of Housing
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
- Microfinance Funds as catalysts for foreign private investments in emerging microfinance markets:...
<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
- Digital finance, housing and education dominate discussion at European Microfinance Week 2016
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
- Preventing client over-indebtedness in Cambodia
From its beginnings as a hotbed of NGO activity to one of the world’s most active microfinance markets today, Cambodia has always traced its own path in the sector. A decade ago, access to finance in Cambodia was minimal. Today, the Cambodia Microfinance Association counts 2 million loans outstanding for a population of 15 million, along with a growing number of deposit accounts, remittances, and other financial products. The Symbiotics MIV 2016 survey reports Cambodia receiving nearly 10% of microfinance investments in the world, second only to India – a country whose population is nearly 100 times larger. What happens in Cambodia affects across the entire microfinance sector. And on that front, Cambodia is once again tracing its own path. In the face of mounting concerns about client overindebtedness, the country’s MFIs are coming together to hammer out a set of lender guidelines that will provide a self-regulatory framework to avoid the types of practices most likely to lead to overindebtedness. (Disclosure: I am part of the team working on this project). On its own, this isn’t new. Perhaps most famously, back in 2009, MFIs in India had formulated a set of Code of Ethics to accomplish the same task – an effort that ended in spectacular failure less than a year later, with the Andhra Pradesh microfinance crisis. Mindful of the difficulties, Cambodian MFIs are taking a different approach. First, they’re enlisting the Credit Bureau of Cambodia (CBC) to ensure that their commitments are independently monitored. And because they recognize the importance of independent monitoring, the emphasis of the lender guidelines is on indicators that facilitate outside monitoring and that are also difficult to subvert. The effort is also actively supported by a consortium of social and developmental investors, five of whom – ADA, BIO, FMO, Incofin, and Proparco – signed up to provide financial support to the project. These outside institutions are looking to make sure that the commitments made by the MFIs are not only verifiable, but that the overall effort is self-reinforcing and financially sustainable. The guidelines themselves are also unusually broad-ranging, covering not only typical areas such as limits on multiple lending, but also less common ones, such as on loan refinancing – the practice of growing loan sizes by refinancing recently disbursed loans with ever-larger ones. A major portion of the guidelines includes a commitment to report detailed data on each loan and borrower – significantly more than is done currently and in a manner that is again, verifiable. This data will help support more effective monitoring of the sector as a whole, and can become the foundation for further lending guidelines, should those prove necessary. The process has just begun and many of the details will change, but the level of engagement and support from Cambodia’s MFIs, its association, and the many funders and social investors involved are an important sign that the sector can implement an effective and sustainable response to the risk of overindebtedness. Perhaps in time, the path being traced by Cambodian MFIs will become a roadmap for the sector in other countries. In the meantime, we’re rolling up our sleeves and getting to work. Photo: Erin Hale author: Daniel Rozas
- Housing Microfinance - contributing to the SDGs
9th Convergences Forum, e-MFP organised a session on housing microfinance, a topic that, though not new (there are more than 20 years of practice in the sector), it is still rarely addressed within the financial inclusion community and the numbers are quite small, it only accounts for just 2% of MFI portfolios! This little attention together with the fact that finance is strongly needed to support housing needs in developing countries, were the two very first things highlighted by the moderator, Daniel Rozas, e-MFP Senior Microfinance Expert, before giving the floor to the three panellists: Patrick McAllister, Senior Consultant at Habitat for Humanity & Representative of Habitat for Humanity's Center for Innovation in Shelter and Finance; Malkhaz Dzadzua, Chief Executive Officer, JSC MFO Crystal Georgia; and Sothany Chun, Chief Executive Officer, First Finance Cambodia. McAllister set the context for the discussion stressing some important figures: by 2030 the population needing shelter will have more than doubled, from 1.2 billion today to 3 billion, 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. The panel then followed with a discussion that presented the housing finance needs of the bottom of the pyramid (BoP) and the key challenges that the financial inclusion sector needs to address to be able to respond to those needs: clients’ literacy, currency exchange risk and long term funding for both the MFI and its clients. Habitat for Humanity, a worldwide NGO whose vision is “a world where everyone has a decent place to live”, has realised that for people in developing countries a house is more a process of incremental improvement that takes on average 7 years, than a product that they buy in one go, so traditional housing finance (i.e.: mortgages) is not enough to address the housing finance needs of lower income households. Moreover, to have access to mortgages, financial institutions request both having formal income and formal property titles, something that among the poor is not that common and which makes just a few eligible for this financial product. On the other hand, talking to MFIs, Habitat for Humanity also realised that 20% to 30% of microenterprise loans are already being used for incremental housing. The business opportunity is therefore there for MFIs providing finance to the BoP. As example, Patrick referred to an IFC study in India that reported that 82 % of the households (close to 130 million families) although they wouldn’t be able to access a traditional housing loan, have the needed income to repay a housing microfinance loan. And what is more important, for the sector as a whole if the portfolio invested in housing increases to 10%, we would help improve the houses of 15 million families and benefit their lives. To showcase how the microfinance sector can address the BOP housing needs and exploit this business opportunity, the two MFIs represented in the panel, presented two different and complementary approaches: Dzadzua explained that JSC MFO Crystal in Georgia offers mainly home improvement loans since 2008; by 2016 their housing loans represent almost 16% of their portfolio (four times the share of 2012) and 75% of them are granted without collateral. According to Chun, First Finance, on the other hand, is the only licensed, specialist mortgage provider granting access to long-term housing finance to underserved Cambodians. Besides mortgages, their main housing product, they also offer home improvement loans and land loans. All three sector representatives agreed on the two main challenges MFIs need to deal with in order to increase the provision on housing finance: client literacy and lack of affordable long term funding in local currency. Client literacy involves not only financial education, but also capacity to plan and develop long-term projects such as building a house in environments where usually qualifications of craftsmen and material quality are low and where there are no guarantees and follow up services. As McAllister pointed out, the big challenge is to provide the right support to the clients without increasing the costs either for them or for the MFI. In order to solve this, Habitat for Humanity has taken a dual approach. On one side, they support the MFI in the provision of “BDS” for housing clients, advice on issues such as pricing, planning, materials, environmental issues, eco-building, etc., as well as helping the MFI develop housing loan products adapted to the clients’ needs. Both Crystal and First Finance have partnered with Habitat for Humanity in this regard in order to provide value added services as well as to improve the overall quality of housing stock. On the other side, Habitat also works with the sector value chain in order to help the industry understand the needs of the low income clients and also realise the market opportunity. The lack of affordable long term funding in local currency is a real bottleneck for the development of housing finance. On the one hand, foreign exchange risk is in particular a risk for MFIs like Crystal, which has 75% of their loans issued in local currency while the MFI is funded in dollars. As housing loans have a longer term than usual microfinance loans, the currency risk is higher and MIVs are not that keen in taking it and only do it for a higher cost. In order to address this, Habitat for Humanity has set up the MicroBuild fund, the only housing finance specialised fund, and they are hedging against their own basket of currencies to expand their portfolio. On the other hand, the maturity gap was mentioned by both MFI representatives as a key challenge. First Finance funding term is five years, while they lend to their clients loans up to 15 years. In order to match this, clients repay interest and principal from the beginning so that by the time the MFI needs to repay their loans, most of the housing loan principal is already repaid. Again, Habitat for Humanity fund MicroBuild is offering longer-term loans to MFIs to reduce this gap; however McAllister recognised that it is quite challenging to commit investors in the long-term, but he is confident that, as the scale of housing finance grows, the investor community will get more confident. Other challenge that was mentioned is how to evaluate client repayment capacity for 10-15 years, in particular if they are working in the informal sector with no income documentation. Chun explained that to address this, loan officers assess both individual and family income, additional income sources and potential income capacity (i.e. employability of the client and his family). And finally there is also the issue of the property titles, that according to Chun they are really expensive in Cambodia, however, there is a second type of title less expensive and this is what’s is used by First Finance to grant their loans. In the debate with the audience, securitisation was mentioned as a potential solution to reduce the cost of the loans. The three speakers agreed that, unfortunately, it is not feasible for several reasons: MFIs are not usual housing finance providers, usually there are no official property titles and the sector is not big enough. Actually, First Finance had been exploring this option and realised that without scale it’s far too expensive. To sum up, even if housing loans are usually considered less expensive because they are larger and longer, when serving the BoP we find ourselves in a kind of vicious cycle that makes these loans almost unaffordable for the clients: longer-term funding for the MFI is needed, but this longer funding is almost unavailable and, when available, it’s much more expensive due to the foreign exchange risk. At the same time, assessing the client’s repayment capability is also more difficult as well as the fact as the long-term planning might also lead to higher costs in the environments described above. SDG 11 reads “Make cities and human settlements inclusive, safe, resilient and sustainable” and its first goal is “By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums”. If the financial inclusion sector wants to play its role in achieving it seems clear that we need to devote some time and resources to ensure that housing finance is widely available for the BoP. Initiatives like the ones presented during the session are great examples that show that it is possible if there is the will to make it happen. Photo source: Habitat for Humanity, Steffan Hacker author: Gabriela Erice
- Fake deposits faking microfinance outreach
Wells Fargo, one of the leading US banks, had falsely created some 2 million accounts for customers who never asked for them and were largely unaware of their existence. The other was about banks in India secretly depositing 1 rupee (0.015 euro) into their customer’s accounts. What’s remarkable is the sheer silliness of the scandals – for the most part, this was not a case of money being stolen or fraudulently taken from customers. Instead, the scandals were being driven by the need to meet targets. In the case of Wells Fargo, staff were under pressure to meet sales goals. In the case of India, the banks needed to comply with government targets aimed at expanding savings accounts to financially excluded populations. In both cases staff managed to meet the targets, while completely missing the objectives the targets were meant to achieve. The financial writer Matt Levine put this brilliantly: “Measurement is sort of an evil genie: It grants your wishes, but it takes them just a bit too literally.” Naturally, in our line of work, it’s the India scandal that’s most relevant. And frankly, we at e-MFP are not one bit surprised. The levels of dormancy in these no-frills accounts that the India Government pushed the banks to open were remarkably low – often less than 30% of accounts had zero-balances, a figure that’s been trending downward for some time. By contrast, our research on zero-balance accounts have found dormancy levels of 50-75% in most countries and MFIs we studied. That the India government was reporting such high success rates through mandates was thus exceptional, and in hindsight, apparently too good to be true. The problem with dormant accounts is that they falsify financial outreach data in two critical ways: first, they overstate the number of active savers, and second, they understate the average account balance, making it appear that the savers are poorer than they actually are. To its credit, the Indian government was aware of these issues and specifically set out to track dormancy – by collecting data on zero-balance accounts. Unfortunately, this monitoring system proved easily tricked. Staff simply had to deposit 1 rupee of their own money in each fake account, so they no longer met the metric of “zero-balance” – even if the 1-rupee balance is trivial for all but the very poorest of Indians. There is a better way. The paper we published two years ago proposed an algorithm that could fairly easily discover similar attempts at cheating the system. The only thing required is that the regulator collect data on a stratified basis – how many accounts are below 100 Rs, 100-1000 Rs, 1000-5000 Rs and so on, along with the total balance at each level. From that, the algorithm could quite easily discover if there’s an anomaly. We even provided the calculations and detailed explanations in a downloadable excel file. It seems to have gone almost completely unremarked; in the two years since, we received exactly zero inquiries on how one might use such a system to monitor REAL savings outreach, as opposed to figures juiced-up by dormant accounts. Perhaps this scandal will help spur change. It’s time we start treating savings outreach with a bit more care than the current blind reporting of misleading averages. The techniques aren’t that difficult. Call us – we’re ready to support the effort. author: Daniel Rozas
- Access to Finance for Cocoa Farmers in Indonesia
Swisscontact’s Sustainable Cocoa Production Program (SCPP) in Indonesia, aiming to assist 130,000 cocoa farmers by 2020, tackles those two topics through training financial institutions about the cocoa sector and cocoa financials and shedding light on the financial situation and perception of cocoa farmers. Through an advanced program management database, SCPP is able to identify critical and interesting data relations. Baseline data of 17,429 farmers and first conclusions were compiled into a baseline report. This blog post highlights some findings from the report. One of the most important outcomes of our data analysis is the categorization of farmers into professional, progressing and unprofessional categories,<1> and subcategorizing them into small, medium and large in terms of farm size. This leads to different approaches in targeting farmers, especially in the sense of formal Access to Finance (A2F). Unprofessional farmers produce less than 500 kg of dry cocoa beans per hectare in a year, equivalent to a monthly income of USD 80-100/month. They could increase production by two thirds through proper pruning, sanitation and denser planting, with strict replacement of old trees. There would be no need for heavy agri-input investments at this stage of development. Cash flow wise, it would be more advantageous for these farmers to go to the farm daily for regular maintenance. For progressing (500-1000 kg/ha/year) and professional (>1,000 kg/ha/year) farmers, the situation looks different. These farmers could achieve much higher production through better planting material and/or better farm inputs as their yields prove that basic agriculture practices are applied. For that segment, A2F is crucial. A2F in this regards includes both savings and loans. The majority of farmers have a medium sized farm (1-2 ha, 44.59%), while many have small farms (<1 ha, 41.79%) and only 13.62% are considered large farmers (>2 ha). 12.29% of the farmers are considered professional and 31.43% as progressing. Categorization of Farmers by Professionalism and Farm size Professional farmers have higher production per hectare than unprofessional farmers. Therefore, they have a higher cash flow per hectare and would obviously be preferred over unprofessional farmers for business loans. Industry interest focuses on the 43.72% of professional and progressing farmers, considering training cost and production potential. That is a trade-off to stakeholders from the development-cooperation side, which view farmers with a low production as a target group to improve the livelihoods of poor farmers. Yields and Tree of different Farmer Categories Professional Cocoa Farmers have 17.97% more trees per hectare (860 vs. 729) and a 4.05 times higher yield per tree (1.50 kg/tree vs. 0.37 kg/tree) compared to unprofessional farmers, leading to 4.8 times higher production per hectare (1,293 kg/ha vs. 267 kg/ha). Yield differences between best and worst farmers It also can be seen that the top 10% of the farmers have on average 1,177 kg/ha, a much higher farm yield than the bottom 10% with just 205 kg/ha. Access to formal loans for cocoa farmers is low. Only 1.91% of the farmers have outstanding loans with banks, whereas overall 17% of the Indonesian population borrows formally.<2> This is in line with SCPP estimations that 16% to 18% of the farmers would be eligible for a loan. 5.31% of the cocoa farmers have experience with bank loans. 39.77% of the farmers don’t want a loan. 96.18% of the farmers consider a loan to be a big responsibility and 88.79% worry about how to repay a loan. Loan use (formal and informal loans) is not perfect with a significant share of clients using loans for school fees or daily needs. Farmers below the age of 25 are significantly underrepresented in access to formal loans, while they are heavily overrepresented in the overall loan experience. This could be due to multiple reasons. One reason could be the lack of collateral (as shown later on the data of land titles), or mistrust of young people. The data indicates that banks focus on farmers between 35 and 54 years of age. Formal Loan Experience by Age 97.24% of the farmers want to learn how to save and 85.75% trust banks to keep their money safe. 84.72% of the farmers own a mobile phone or at least have access to it. 40.24% of the farmers don’t save at all, while 44.41% save in-cash and 15.34% save in-kind or invest in another business. These latter two could be bricks, gold, chickens etc. The saving rate of key farmers<3> is 69.83%, compared to the average of 59.75%. 62.02% of all surveyed farmers think they are disciplined enough to save. However, 39.84% out of those do not have any savings at all (24.71% of total), while 60.16% do have some savings (37.31% of total). Out of the 37.98% who think they are not disciplined enough to save, 42.07% have savings (15.97% of total).<4> First indications on saving behavior show that farmers use their income from cocoa for daily needs, due to the relatively regular income throughout the year, while savings are built with income from other crops, which farmers receive once or twice a year in relatively larger amounts. Cocoa Farming Savings 69.15% of farmers don’t have a bank account. From the ones who have, 6.34% don’t use the account actively.<5> Farmers with accounts have them in Bank Rakyat Indonesia (BRI, 88.9%), Bank Negara Indonesia (BNI, 3.5%) and other institutions <7.6%, mainly cooperatives, bank danamon, bank central asia (bca), bank mandiri and bank muamalat>. 83.29% of the farmers don’t have any idea about interest rates and fees for their account. Bank Accounts Most interesting is that farmers with loan experience with traders get on average 9.06% higher prices than farmers with loan experience with banks. The average price difference between farmers with loans from traders and farmers without loan experience is 5.61%. This would indicate that the theory that the price of a loan is hidden in the purchase price is wrong. It is unclear as to why this is the case. It is possible that higher prices are paid to avoid side-selling and to ensure repayment of the loan, or a special relationship in the sense that only good friends/clients receive a loan (and higher prices). It is also noteworthy that farmers who stated that traders are rich get higher prices than farmers who don’t think so (difference 3.40%). Access and knowledge about agricultural insurance is low. Only 5 out of 17,429 farmers are aware of the existence of insurance to protect the crop and income. The data analysis led to a number of activities such as sharing data of progressing and professional farmers with banks to increase access to loan for eligible farmers. Pre-conditions include signed written consent of the farmer to share data, an expression of interest on a loan, and being based in a location within the operational area of a bank. In addition, farmers are supported in low-cost land registration so that they are certain about the land status, which might lead to higher investments, and have proper collateral. A (still ongoing) saving pilot with 3,000+ farmers was initiated, using behavioral science insights. The objective is to increase savings. The initial idea for the pilot program was built on two questions, where do farmers get money and where would they be able to save money? The answer would be at a cocoa trader’s place and thus cocoa traders were included in the pilot as branchless banking agents. Results are expected by the end of 2016. <1> Another option would be to categorize them into traditional, semi-intensive and intensive. <2> IFC: Mobile Banking in Indonesia, p.39 <3> Key farmers are group leaders of the farmer groups trained by SCPP. They get additional training to facilitate the Farmer Field Schools. <4> There is a very slight difference between the 40.24% and the (24.71%+15.97% =) 40.68% because some slightly different baselines, where farmers were excluded, if they didn’t answer the particular question. <5> Defined as at least one transaction within the last 12 months author: Dirk Lebe - Swisscontact
- Opportunity International and MyBucks: The Future of Digital Microfinance?
First published on NextBillion press release briefly made the rounds, announcing that "Opportunity, Inc. . . . has entered into a share purchase agreement to sell six banks serving sub-Saharan Africa to the MyBucks Group, a Luxembourg-based financial technology (fintech) company." This generated some comments on LinkedIn and a blog by consultant Hannah Siedek, who recognized how unusual a deal this was and wondered if she should consider it "a good (or not so good) operation." But aside from this, reaction has been surprisingly muted. By all accounts, this should have been bigger news for the microfinance sector. One of the major microfinance networks selling six subsidiaries to a fintech startup, and doing so in sub-Saharan Africa – the global hub of innovation in mobile banking. At a time when technology and mobile money are the talk of the sector, how does a story like this pass under the radar? Were that not enough, the deal echoes another major topic for microfinance and impact investors: responsible exits, or how socially oriented investors can sell their equity stakes without undermining the social mission of their investees. As explored in the 2014 CGAP-CFI paper and debated at that year's European Microfinance Week, the concern is especially relevant when the buyer is not a traditional microfinance or impact investor. By any measure, this transaction warrants more attention than it has received. So we talked to the CEOs of both Opportunity International and MyBucks. And we did some digging. The opportunities generated by this deal are many, but the challenges are just as real. Here's the story in our retelling.... Read more on NextBillion Photo credit (homepage): Neil MacWilliams via Flickr. author: Daniel Rozas - Gabriela Erice García
- Opportunity International and MyBucks: The Future of Digital Microfinance?
First published on NextBillion press release briefly made the rounds, announcing that "Opportunity, Inc. . . . has entered into a share purchase agreement to sell six banks serving sub-Saharan Africa to the MyBucks Group, a Luxembourg-based financial technology (fintech) company." This generated some comments on LinkedIn and a blog by consultant Hannah Siedek, who recognized how unusual a deal this was and wondered if she should consider it "a good (or not so good) operation." But aside from this, reaction has been surprisingly muted. By all accounts, this should have been bigger news for the microfinance sector. One of the major microfinance networks selling six subsidiaries to a fintech startup, and doing so in sub-Saharan Africa – the global hub of innovation in mobile banking. At a time when technology and mobile money are the talk of the sector, how does a story like this pass under the radar? Were that not enough, the deal echoes another major topic for microfinance and impact investors: responsible exits, or how socially oriented investors can sell their equity stakes without undermining the social mission of their investees. As explored in the 2014 CGAP-CFI paper and debated at that year's European Microfinance Week, the concern is especially relevant when the buyer is not a traditional microfinance or impact investor. By any measure, this transaction warrants more attention than it has received. So we talked to the CEOs of both Opportunity International and MyBucks. And we did some digging. The opportunities generated by this deal are many, but the challenges are just as real. Here's the story in our retelling.... Read more on NextBillion Photo credit (homepage): Neil MacWilliams via Flickr. author: Daniel Rozas - Gabriela Erice García
- Opportunity International and MyBucks: The Future of Digital Microfinance?
First published on NextBillion press release briefly made the rounds, announcing that "Opportunity, Inc. . . . has entered into a share purchase agreement to sell six banks serving sub-Saharan Africa to the MyBucks Group, a Luxembourg-based financial technology (fintech) company." This generated some comments on LinkedIn and a blog by consultant Hannah Siedek, who recognized how unusual a deal this was and wondered if she should consider it "a good (or not so good) operation." But aside from this, reaction has been surprisingly muted. By all accounts, this should have been bigger news for the microfinance sector. One of the major microfinance networks selling six subsidiaries to a fintech startup, and doing so in sub-Saharan Africa – the global hub of innovation in mobile banking. At a time when technology and mobile money are the talk of the sector, how does a story like this pass under the radar? Were that not enough, the deal echoes another major topic for microfinance and impact investors: responsible exits, or how socially oriented investors can sell their equity stakes without undermining the social mission of their investees. As explored in the 2014 CGAP-CFI paper and debated at that year's European Microfinance Week, the concern is especially relevant when the buyer is not a traditional microfinance or impact investor. By any measure, this transaction warrants more attention than it has received. So we talked to the CEOs of both Opportunity International and MyBucks. And we did some digging. The opportunities generated by this deal are many, but the challenges are just as real. Here's the story in our retelling.... Read more on NextBillion Photo credit (homepage): Neil MacWilliams via Flickr. author: Daniel Rozas - Gabriela Erice García