West Bengal,Business/Economy, Tue, 19 Feb 2013IANS
Kolkata, Feb 19 (IANS) While microfinance institutions in Andhra Pradesh continue to be at a standstill, the industry has witnessed decent growth in the rest of the country, a report said Tuesday.
During the third quarter of this fiscal, banks exhibited confidence in MFIs, a report released by Microfinance Institutions Network (MFIN) said.
The report is based on data collected from 41 members of the MFIN, a self-regulatory group of MFIs. The members constitute about 85 percent of the microfinance sector in India.
The report said outstanding Gross Loan Portfolio (GLP) for the industry during the period under review has shown a significant upward movement.
“About 75 percent of MFIN members showed an increase in GLP this quarter over GLP in the same period last fiscal and also second quarter of this financial year. The industry has grown in states such as West Bengal, Tamil Nadu, Kerala, Bihar and Uttar Pradesh,” a release said here.
“For the first time since the Andha Pradesh crisis in October 2010, there has been a growth in GLP and disbursements for AP-based MFIs,” it further said.
Alok Prasad, CEO of MFIN, said the data signals a positive outlook for MFIs .
“The pan-India trends reveal that microfinance institutions continue to grow in states other than Andhra Pradesh. With banks continuing to exhibit confidence in NBFC-MFIs, I feel certain of MFIs’ ability to reach a wider cross-section of the unbanked/under-banked segment,” Prasad added.
The country’s microfinance sector took a major setback in the microfinance crisis in Andhra Pradesh in 2010, involving high rates of default and subsequent reduction in lending.
As part of our continuing series on the Universal Standards for Social Performance, Grameen Koota presents their organization’s efforts to listen and respond to client needs. At Grameen Koota, this often goes beyond traditional loan products.
|Street Money Changer by Mohammad Moniruzzaman 2009 CGAP Photo Contest.|
At Grameen Koota in India, efforts to meet customers’ needs go beyond the boundaries of a typical financial institution. The reason is that when this institution creates new products and services, it considers the entire lifecycle and life activities of their clients—from birth to old age, from the household to the business.
That’s why, when customers requested it, Grameen Koota focused on the water and sanitation needs of their clients, including…toilets.
The foundation for these efforts, as explained by Selma Jahic, Partner’s executive director of credit operations, is Partner’s simple but powerful in-house mantra: A risk for the client means a risk for the institution.
“That degree of customer response may seem unusual for a microfinance institution, but it’s not surprising. In a nation with some of the worst poverty on earth, one latrine is typically shared by more than 200 people. And among India’s 1.2 billion citizens, 58% use the outdoors. “Sanitation is a young subject,” UNICEF official Aidan Cronin acknowledged, of the government’s fledgling efforts to address the problem.
Grameen Koota, a Bangalore-based MFI with 314,000 active borrowers, 1,270 employees, and about 150 branches in Southern India, is addressing the problem—because clients asked them to. The MFI’s own surveys showed that over 90% of customers would be interested in toilet construction if Grameen Koota extended credit. And that data point became an organizational mandate, as explained by senior manager for new initiatives, Sameera B., during a recent Social Performance Task Force (SPTF) webinar.
The webinar, devoted to implementation of Section 4 of the SPTF Universal Standards for Social Performance Management, looked at how MFIs can design products, services, delivery models and channels that meet clients’ needs and preferences.
To promote hygiene, Grameen Koota created an NGO, the Navya Disha Trust, and initiated the Watsan project for water and sanitation. The Watson project helps the MFI’s clients understand toilet technology and infrastructure, the materials needed, and procedures for procuring parts, labor, and government approvals. Because of Watsan, over 5,200 Indian homes obtained water connections and sanitation in 2011–2012.
Grameen Koota follows just this kind of “client-driven” philosophy as it develops products and services across the company, Sameera B. said. GK’s wide product diversity covers not only microenterprise, but also household needs, agriculture, and client and livestock insurance. Its nonfinancial services include business skills development, financial literacy promotion, health and nutritional education, special medical services for women and children, gender rights education, and even “health camps.”
Products offered have cultural names like the Arogya loan (for cashless, in-patient medical treatment) and a Festival consumption loan (to help with costs for Diwali and India’s many other cultural celebrations).
|Photo by Kaushik Majumder|
Throughout, customer feedback about these products and services is key, Sameera B. said. So clients are interviewed face-to-face monthly by area managers, and by phone—from a call center—daily. Yes, daily. That’s a change from the past when interviews were conducted just once monthly, the manager said. The call center segments clients into six different subsets to tailor questions for them.
When GK saw that clients were struggling with short-term cash flow constraints and were resorting to informal, expensive sources of funds, the MFI responded with an emergency loan program. When clients repeatedly asked about savings and pensions, GK became an aggregator to the Government of India’s Pension Scheme, through which it now facilitates and processes its clients’ enrollment.
When customers again expressed concerns, this time about sanitation, Grameen Koota paid attention. There are deeply embedded cultural concerns here—like the stigma many Indians attach to cleaning toilets. So, awareness had to come first. “GK was aware of the fact that merely providing credit [for household sanitation] would not solve the problem,” Sameera B. wrote to SPTF during a pre-webinar interview. “Efforts toward creating awareness were critical.” That’s how Navya Disha came about—because GK’s focus is financial projects.
A grievance redress system has also helped Grameen Koota capture feedback. The point, said Sameera B., is to gauge client understanding of the MFI’s products and procedures and ascertain client perspective. Customer surveys and market research go out as frequently as once a month; and a “grievance team” proactively collects feedback from different sets of clients on a continuous basis.
These surveys have done their job, Sameera B. said, citing several examples:
• The surveys repeatedly showed that half of Grameen Koota’s clients were demanding home loans; accordingly, the organization now offers home loans via a pilot program at a limited number of branches.
• Emergency loans used to be capped at two per local client group. Due to feedback, that number has jumped to 50% of each microenterprise group.
• Festival loans used to be given only at the branch itself. Now, due to feedback about client constraints from traveling to branches, these loans are disbursed in the groups.
By 2020 Grameen Koota’s mission is to enable economic assistance and social change for over 2 million households in the areas it serves. Getting there will rely on listening carefully and responing to client feedback, Sameera B. said.
“If getting client feedback, analyzing it, and taking decisions is one thing, the implementation of ideas is another,” he said. “The process has to be carefully thought through, and in each step there are multiple aspects that have to be borne in mind, like the regulatory framework, external environment, partnerships, client protection, mission drift, human resources, technology requirements, [and] product and service delivery.
“One has to take a very holistic view of these things…The process of getting feedback from clients has to be continuous and not [be] a one-time activity.”
– Joan Oleck, Freelance writer
FEBRUARY 21, 2013
But, after years of explosive growth, the world’s microfinance sector is in trouble.
According to a recent report by the Microcredit Summit Campaign, the number of clients served by microfinance institutions has declined from 205 million to 195 million. That’s the first drop since the group started keeping track in 1998.
Most of the decline can be attributed to one place: Andhra Pradesh, India, where the rapid commercialization of microloans led to abusive practices. At first, most microloans came from nonprofits dedicated to helping the poor. But as the sector grew at a rate of 200 percent per year, other institutions got into the business. Some of them lent more than the clients could afford to repay and used harsh practices to collect. Negative press and a rash of debtor suicides spurred a government crackdown on the sector that severely restricted microlending.
A backlash against microfinance has cropped up in other parts of the world including Bolivia, where opportunistic politicians and disgruntled clients blockaded the offices of microfinance institutions, causing repayment rates to plunge.
These are cautionary tales about what can happen when institutions appear to be more interested in their own growth than the financial well-being of their clients. For-profit groups that charge high interest rates and pay high salaries to their own executives give microfinance a bad name. They are making money off the backs of the poor, not giving the poor a leg-up. The good guys in this industry should do their best to sound the alarm against such practices. Microcredit is a crucial tool against poverty, and its reputation must be preserved.
February 20, 2013, 7:21pm
The Philippines is a global leader in microfinance, having one of the best business environments for microenterprises. It ranked 4th out of 55 countries in the annual global survey “Global Microscope on the Microfinance Business Environment 2012,” released in 2012 by the London-based think-tank Economist Intelligence Unit (EIU). The Philippines posted a two-notch improvement from its 6th ranking in 2011. The report highlighted the country’s stable market and reforms initiated by public and private institutions to develop an enabling microfinance environment.
The EIU said the rankings recognized key efforts of the Bangko Sentral ng Pilipinas (BSP) such as raising the ceiling for “microfinance plus” that microenterprises and small businesses can avail of to fund their operations. Microfinance originally financed microenterprises or small livelihood activities but BSP expanded loan products to include microfinance housing, micro-agri loans, micro-insurance, and micro-deposits. There are 202 microfinance institutions operating in the Philippines.
In the 2nd quarter of 2012, the BSP, in Circular No. 748, eased its guidelines on microfinance lending to allow banks to disburse more funds in the countryside for agriculture and agrarian reform sectors. The BSP, in Circular No. 782 on January 21, 2013, raised the threshold of microfinance clients to allow low-income clients access to credit such as housing microfinance. Low-income are those with income below P17,000 a month or P206,000 per year.
Microfinance is a way of providing financial services to entrepreneurs and small businesses lacking access to conventional banking. In the Republic of the Philippines, microfinancing is an activity dominated by rural banks, non-government and people organizations, with support from international donors. Rural and cooperative banks provide financial services to over 85 percent of cities and towns, under the Micro-enterprise Access to Banking Services of the Rural Bankers Association of the Philippines, supported by the United States Agency for International Development.
We congratulate the Bangko Sentral ng Pilipinas, headed by Governor Amando M. Tetangco Jr., in its efforts to promote microfinance as one of the powerful programs of the Philippine economy.
WANT to get some cash at automated teller machines in Nairobi? Don’t be surprised by the guards with machine guns. ATMs attract plenty of muggers and pickpockets.
Unsurprisingly, cashless transactions have been catching on fast in Nairobi and elsewhere in Africa. Microfinance organisations were among the pioneers. In Kenya, for instance, they started using M-PESA, the popular mobile money service, to hand out loans to small-time businesspeople in 2008, soon after its launch.
Musoni, a Kenyan microfinance firm with more than 10,000 customers and over $6.3m in loans since its launch in May 2010, is now taking the idea even further: in an effort to bypass banks and make microfinance more efficient, it has gone completely cashless—a worldwide first, claims Cameron Goldie-Scot, the firm’s chief operating officer.
Cashless transactions are more secure: they are traceable and hard to redirect. Yet combining mobile money with brick-and-mortar banks adds costs. Using services such as M-PESA also does not do much to improve microfinance organisations. Most already enjoy high repayment rates, around 97% in some cases. Efficiency gains require a more radical approach.
Hence Musoni’s going all digital. Its loan officers are armed with tablet computers and a custom application for collecting loan-applicant data. They take their devices to the field, for instance to check with owners of portable toilets in Mukuru, a slum in Nairobi. These charge neighbours for a toilet’s use and sell the waste it collects to Sanergy, a partner of Musoni’s, which converts it into fertilizer and electricity.
Loan officers estimate how many people live in a toilet’s vicinity to calculate the business’s future revenue. They also interview potential borrowers. All the data are stored in their tablets and on Musoni’s servers. And if the firm’s employees approve a loan, it will arrive by text message—as credit on the applicants’ M-PESA account.
What is more, thanks to the tablets’ wireless connection, loan officers can pull up a borrower’s payment history on the spot, for instance during weekly group meetings with other borrowers. And loan officers can activate automatic payment reminders, holiday greetings and marketing messages. All this allows them to cultivate relationships with a greater number of borrowers than they could otherwise.
Many other microfinance institutions also would like to go cashless, but they lack the necessary technology, says Mr Goldie-Scot. So Musoni will soon offer to license its system to other microfinance organisations for a fee. If it catches on, it will help bring down the cost of credit for many of the world’s 2.5 billion unbanked poor, explains Mr Goldie-Scot.
For pickpockets, however, it would be bad news. Among some of them, cash is already out of fashion. They are now out to snatch mobile phones. In a crowded bar this correspondent batted intruding fingers away from the pocket containing his treasured mobile. In the crush a companion’s phone, alas, was stolen. In another pocket, though, your correspondent’s wallet sat untouched.
Reuters | Posted: 01/29/2013 11:01 am EST
By Manuela Badawy
NEW YORK, Jan 29 (Reuters) – University of Utah’s school of business has received $13 million from technology entrepreneur James Lee Sorenson to establish a center to advance investment to organizations that demonstrate a benefit to society, the university announced on Tuesday.
The new James Lee Sorenson Center for Global Impact Investing will focus on the very early stages of investments made into companies, organizations, and funds with the intention of generating measurable social and environmental impact alongside a financial return.
Universities such as Michigan, Duke, Oxford, and New York, among others, have centers whose main focus is on social entrepreneurship, while the University of Utah’s primary focus is on impact investing, said Lewis Hower, managing director of the Center.
A social entrepreneur is willing to look beyond conventional wisdom and experiment with market-based approaches – such as loans, not charity – to serve the social need, according to a definition by the Stanford Social Innovation Review.
The Center will address social issues such as healthcare, education, housing, sustainable and green energy, agriculture and entrepreneurial livelihood training and development.
“The students will be focusing on finding the most promising entrepreneurs and helping them develop their business plan,” said Sorenson, founder of Sorenson Communications, Utah’s largest tech company and one of the nation’s largest video relay service providers.
The Center will focus on research that fosters understanding of how free enterprise can be employed to create large-scale societal change; and curriculum development, including a proposed minor in Impact Investing to teach and train students.
“Instead of taking an exam and hoping that you do well on it, teams of students will be presenting investment opportunities to Jim and his foundation. There is no more real situation than that,” said Taylor Randall, dean of the Eccles School of Business at University of Utah.
Billionaires are known for not keeping a lot of spending green in their wallets. But that’s not why Bill Gates hates cash. He hates it because of its effect on people at the opposite end of the wealth spectrum—the world’s poor and unbanked. The Better Than Cash Alliance, which was founded last September and is partially financed by the Bill & Melinda Gates Foundation, hosted a breakfast today at the World Economic Forum in Davos, Switzerland. Speakers from the Philippines, Colombia, and the U.S., among other countries, made the case for why electronic transactions are better than cash payments.
Top five reasons, according to the alliance:
Transparency: Less corruption and theft when payments can be easily tracked. In Afghanistan, U.S. aid agencies use it so workers aren’t so vulnerable to robbery.
Security: The money gets where it’s supposed to go.
Financial inclusion: Electronic payment is a way for unbanked people to establish a record of on-time payment of their bills. This can be an “on-ramp” for them to get other services, such as loans, speakers said.
Cost savings: Moving physical cash around is costlier than zipping electrons. Many poor people, however, still find it cheaper to use cash, because some cashless networks charge high fees.
Access to new markets: This benefit is mainly for providers of financial services.
Kenya is a role model for the developing world when it comes to cashless payment. Its M-Pesa network, launched in 2007, has agents “on every block,” says Neal Keny-Guyer, chief executive of Mercy Corps, a nonprofit that’s a member of the alliance. Mauricio Cárdenas, Colombia’s minister of finance and public credit, said in an interview that he hopes within the year the national legislature will pass a law allowing nonbanks to take in cash and issue electronic vouchers.
The key is ensuring that the people who take in the cash are as well-supervised as bank tellers. “We see this as a first step,” Cárdenas said.