Archive for the ‘News’ Category
Russia’s Microfinance Sector Doubles Growth to 32% in 2011, Default Rate Stands at 7%
MICROCAPITAL BRIEF:
Microfinance institutions (MFIs) in Russia reportedly disbursed loans of approximately RUR 29 billion (USD 1 billion) to individual borrowers in 2011, representing a 32.2-percent increase from 2010 [1]. In 2010, loans increased by 15.3 percent from 2009 [1]. The 2011 increase is attributed to easier access to funds through MFIs compared with traditional banks, which are currently “tightening their credit policy” [1]. Microborrowers that produce a passport can obtain a loan in approximately 30 minutes, while traditional banks require more documents and a waiting period of up to two days [1]. Common sizes of microloans in 2011 varied from RUR 15,000 (USD 509) to RUR 23,000 (USD 781) [1].
The average interest rate is approximately 27 percent, which is 7 percentage points higher than that offered by Sberbank, a major bank in Russia [1]. This is reportedly due to a higher default rate; 7 percent of microloans are not paid back and “Russian collection agencies marked almost an eightfold increase of applications from micro financing institutions to recover bad debt in 2011” [1].
For the year 2010, 21 MFIs in Russia reported to the US-based nonprofit Microfinance Information Exchange (MIX) an aggregate gross loan portfolio of USD 156 million outstanding to approximately 53,700 borrowers and total deposits of USD 103 million.
By Brendan Millan, Research Associate
About Sberbank: Established in 1841, Sberbank is a commercial bank based in Russia that also operates in Eastern Europe. The bank offers a range of savings, investment and lending services. Sberbank reported total assets of USD 319 billion in 2011.
Asian Development Bank (ADB) to Lend $20m to Chinese Banks to Support Microfinance Institutions in Rural China
MICROCAPITAL BRIEF:
The Asian Development Bank (ADB), a multilateral institution based in the Philippines, will provide a loan facility of CNY 130 million (USD 20.6 million) to unspecified partner banks to “help them build their wholesale lending capacity to microcredit companies” in central and western China [1]. The loan facility will be available for four years [1]. ADB is also working with the Chinese government to provide technical assistance and “build monitoring frameworks, ratings systems, and analytic capacity for these markets” [1].
As of 2010, the 14 microfinance institutions (MFIs) in China that report to the US-based nonprofit Microfinance Information Exchange (MIX) have aggregate deposits of USD 17.5 million, a gross loan portfolio of USD 14.1 billion with 2.4 million active borrowers.
By Brendan Millan, Research Associate
About Asian Development Bank (ADB): Established in 1966 and headquartered in Manila, the Philippines, ADB is a development finance institution that consists of sixty-seven members, of which forty-eight are located in the region. ADB has three strategic priorities: to foster inclusive growth, to facilitate regional integration and to ensure environmentally sustainable growth. To accomplish these objectives, ADB uses loans, technical assistance programs, grants, equity investments and guarantees to private companies in member countries. ADB reported a total capitalization of USD 64 billion as of December 31, 2010.
IFC mobile services program reaching underserved LAC regions
Microfinance Focus, March 27, 2012: International Finance Corporation (IFC), a member of World Bank Group is working with three partner organizations to bring mobile financial services to the remote and underserved population of Latin America and Caribbean countries.
IFC’s Mobile Financial Services programme is providing financial institutions and service providers with customized solutions for their agent networks to benefit the underserved users.
Spanish Fund for Latin America and the Caribbean and Netherlands-IFC Partnership programme along with the Government of Luxembourg are the IFC’s partners in this initiative.
Since its launch in December 2010, Mobile Financial Services has assessed the potential for mobile financial services in five different countries in Latin America and Caribbean region. Research has also been conducted which studied the demand and characteristics of the end users and also worked out to give better product design, business plan and agent-network development.
“This program is aligned with our strategy in the region to develop innovative, commercially viable business models that achieve significant scale and reach the underserved sectors of the population.” said, Ghada Teima, IFC Access to Finance Manager for Latin America and the Caribbean region.
Moreover, IFC is hosting a one-day workshop for mobile financial services providers. The workshop will feature expert speakers from Latin America and other regions, giving participants the opportunity to learn about current mobile money deployments and their challenges.
The workshop will showcase the different agent models being used around the world and highlight the key steps to a successful agent network roll-out.
Eko named to FastCompany World’s 50 Most Innovative Companies
Eko India Financial Services has been named as one of FastCompany’s World’s 50 Most Innovative Companies, and #4 in India.
Amazon, Apple, Facebook, and Google are transformational firms, obsessions of the business world and deservedly so. But if you had to pick, which one would you say is the most innovative–literally, the most innovative company in the world? (And then who’s No. 2, No. 3, and No. 4?) The four we chose were featured on our cover last November (“The Great Tech Wars”). Since then, they have jostled for the No. 1 title–with Amazon’s Kindle Fire tablet, Apple’s Siri voice assistant, Facebook’s Timeline interface, and Google’s reinvention of YouTube as a niche-programming powerhouse. Yet each company has fallen victim to hubris, causing public-relations firestorms and some sloppy products.
The top slot can go to only one company, but why should we have all the fun deciding? Click the arrow to find quizzes, games, and brainteasers that can help you rate the Fab Four–measured from their wildest new ideas to their cultural cachet. Then see if your opinion matches ours. If it doesn’t, worry not. In a month or so, one of these firms will surely disrupt everything again.
http://www.fastcompany.com/most-innovative-companies/2012/industry/india
Microfinance industry optimistic about its future
Microfinance Focus, March 10, 2012: Mint conclave conference was held recently in New Delhi, India to discuss and debate about current situation and prospect of microfinance business. The event was organized by MINT, a leading Print Media with a joint collaboration between International Finance Corporation (IFC) and Microfinance Institutions Network (MFIN).
The conference panelists included Dr. K.P. Krishnan, Member, Secretary, Economic Advisory Council to the Prime Minister, J.K. Sinha, Chief General Manager, SBI, Samit Ghosh, MD, Ujjvan Microfinance, Jennifer Isern, Manager, Access Finance Advisory, South Asia (IFC), P.D. Rai MP and member of Financial Standing Committee along with Alok Prasad CEO of MFIN. The Session is moderated by Tamal Bandyopadhyay, Deputy Managing Editor of Mint.
During the conference, P.D. Rai, MP and Member of Financial Standing Committee said, “I am on the side of MFI”, and indicated that because of some bad apples the sector landed into crisis.
Dr. K.P. Krishnan, Secretary to the Economic Advisory Council to the Prime minister of India, said “The tendency of public policy and regulation is restrictive.” Further he said, “MFIs were a clear example. They were beginning to make a difference but I think the core ideological India hits back, it says ‘No’, There is only one model, we will decide what is good and hence you can see Andhra Pradesh ordinance.”
He further added, “You see the Malegam Committee recommendations, which variably talked off, I don’t have visionary control of growth therefore, and I am going to curb the growth”, He added. I think, “There has been a fundamental clash to handle development. There are more solutions there are possible what we tried out, in the past. Entire sector, to be hanged because there are some bad apples, “obviously it should not.” We need to figure out smartfully.”
Jayanth Sinha, Chief General Manager, SBI noted that earlier MFI was meant for social intention and later on it has turned into profit orientation. MFI should follow a responsible lending’.
Samit Ghosh, MD, Ujjvan, a Bangalore based Microfinance Company stated, “The role of microcredit has been oversimplified. That it will alleviate the poverty. But I think microfinance is a vehicle for the financial inclusion.”
Karnataka, India is a state where MFI is functioning really well and is a role model to the entire nation. MFIs in Karnataka have shown a best example to show coordinated work among the stakeholders and co-exist together, he added.
Jennifer Isern, Manager, Access Finance Advisory, South Asia (IFC) said, “IFC is very much optimistic about Microfinance. So much went right, lots of good work has been done, and it demonstrated way to do sustainable business.”
The Rise of Mexico’s Middle Class – WSJ.com
A stable peso and freer trade have allowed the majority of the population to escape poverty.
-
By MARY ANASTASIA O’GRADY
Tales of beheadings, bloody shootouts and execution-style murders in this country have overshadowed another story that, in the long view of history, is undoubtedly more significant. It is the rise of a Mexican middle class.
This little-noticed development is thanks not to government welfare or foreign aid but mainly to the opening of markets and to the end of the central bank’s practice of financing the government. Growth in the last decade has been nothing to brag about and key reforms are still needed if Mexico is to become a developed country. But as Banco de Mexico Governor Agustin Carstens told me over breakfast at the central bank here last month, institutional changes on the fiscal, financial and monetary fronts since the 1995 peso crisis have all contributed to increased price stability, a key factor in wealth accumulation.
One thing Mr. Carstens did not mention—since he is as diplomatically skillful as he is mindful of the high cost of inflation on Mexican households—is that Mexico has avoided running up huge fiscal deficits in recent years, despite a U.S. Treasury push for stimulus spending by the G-20. Mexico had been there and done that. When government goes hog-wild, markets worry that the debt will be monetized by the central bank. Mexican President Felipe Calderón of the National Action Party (PAN) wisely resisted.
ReutersA sale day at a Wal-Mart in Mexico City.
It was as much a political decision as it was economic. In a recently released book “Mexico: A Middle Class Society,” Mexican economist Luis de la Calle and Mexican political scientist Luis Rubio describe a nation where many politicians still think of the electorate as rural and poor but where consumption patterns reveal a trend toward urbanization and upward mobility. Judging by family incomes but also by things like housing rental and ownership, appliance purchases, Internet access and trips to the cinema, they argue that today “the middle-class population is the majority in Mexico.”
This has occurred, the authors say, “by combining the income of various family members [including remittances from abroad] rather than through the increased income of an individual or couple.” In other words, Mexico has not achieved the wage gains generally associated with a rising middle class.
So what’s different? For one thing, the North American Free Trade Agreement has meant an opening of the retail sector, giving Mexicans access to quality products at competitive prices. Second, family incomes are no longer being destroyed by successive devaluations and bouts of inflation triggered by fiscal crises.
The gains from this fiscal and monetary restraint are likely to have major implications for North American stability because, as Messrs. de la Calle and Rubio write, “In Mexico, the middle class has felt the consequences of the financial crises more than any other social group. It’s no coincidence that their political inclination is to be conservative and to reject any alternative that could destabilize their security.”
Mr. Carstens describes the process of “keeping a lid on inflation” as a “balancing act” because rising international commodity costs “generate upward pressure” on prices and so can peso weakness. The bank, he says, has tried “to keep [interest] rates as low as possible given [these constraints] in order to support as much as possible the economy.” It hasn’t been easy. Federal Reserve Chairman Ben Bernanke’s decision to flood the world with dollars has pushed food prices higher while financial scares around the globe—subprime and Europe—invariably send investors rushing out of currencies like the peso and into the dollar.
The Americas in the News
Get the latest information in Spanish from The Wall Street Journal’s Americas page.
Mr. Carstens likes the “flexible” exchange rate-regime—in place since 1995—and credits it with allowing Mexico to adjust to shocks beyond its control while maintaining stability. But of course there are plenty of examples of flexible currency regimes that generate inflation. The real secret to Mexico’s inflation success, despite global financial turmoil, is an institutional commitment to fiscal discipline and transparency.
The central bank can now boast, as Mr. Carstens did to me, that it “adheres to all the best practices,” including publishing central bank minutes with a two-week delay. But it has also received help from the Mexican Treasury. Mexico now has a fiscal deficit of just over 2%, making it among the most fiscally restrained members of the Organization for Economic Cooperation and Development. Mexico’s ability to sell long-term bonds is a testimony to greater investor confidence.
Much more needs to be done. Politicians have rejected attempts to switch to countercyclical budgeting, which would imply saving for a rainy day some of the oil-bonanza proceeds generated by Mr. Bernanke’s easy money policy. How the Treasury will perform under future Mexican governments is far from clear. What is more certain is that the growing middle class won’t take kindly to the party or politician who next messes with their hard-earned gains.
Global poverty: A fall to cheer – The Economist
For the first time ever, the number of poor people is declining everywhere
Mar 3rd 2012 | from the print edition
THE past four years have seen the worst economic crisis since the 1930s and the biggest food-price increases since the 1970s. That must surely have swollen the ranks of the poor.
Wrong. The best estimates for global poverty come from the World Bank’s Development Research Group, which has just updated from 2005 its figures for those living in absolute poverty (not be confused with the relative measure commonly used in rich countries). The new estimates show that in 2008, the first year of the finance-and-food crisis, both the number and share of the population living on less than $1.25 a day (at 2005 prices, the most commonly accepted poverty line) was falling in every part of the world. This was the first instance of declines across the board since the bank started collecting the figures in 1981 (see chart).
The estimates for 2010 are partial but, says the bank, they show global poverty that year was half its 1990 level. The world reached the UN’s “millennium development goal” of halving world poverty between 1990 and 2015 five years early. This implies that the long-term rate of poverty reduction—slightly over one percentage point a year—continued unabated in 2008-10, despite the dual crisis.
A lot of the credit goes to China. Half the long-term rate of decline is attributable to that country alone, which has taken 660m people out of poverty since 1981. China also accounts for most of the extraordinary progress in East Asia, which in the early 1980s had the highest incidence of poverty in the world, with 77% of the population below $1.25 a day. In 2008 the share was just 14%. If you exclude China, the numbers are less impressive. Of the roughly 1.3 billion people living on less than $1.25 a day in 2008, 1.1 billion of them were outside China. That number barely budged between 1981 and 2008, an outcome that Martin Ravallion, the director of the bank’s Development Research Group, calls “sobering”.
If China accounts for the largest share of the long-term improvement, Africa has seen the largest recent turnaround. Its poverty headcount rose at every three-year interval between 1981 and 2005, the only continent where this happened. The number almost doubled from 205m in 1981 to 395m in 2005. But in 2008 it fell by 12m, or five percentage points, to 47%—the first time less than half of Africans have been below the poverty line. The number of poor people had also been rising (from much lower levels) in Latin America and in eastern Europe and Central Asia. These regions have reversed the trend since 2000.
All this is good news. It reflects the long-run success of China, the impact of social programmes in Latin America and recent economic growth in Africa. It is also a result of the counter-cyclical fiscal expansions that many developing countries, notably China, embarked on in response to the 2007-08 crisis. Many economists (including some at the World Bank itself) were sceptical about these programmes, fearing they would prove inflationary, inefficient and ill-timed. In fact, the programmes helped make poor and middle-income countries more resilient.
The poverty data chime with other evidence. Estimates by the Food and Agriculture Organisation that the number of hungry people soared from 875m in 2005 to 1 billion in 2009 turned out to be wrong, and were quietly dropped. Derek Headey of the International Food Policy Research Institute has shown that despite the world food-price spike, people’s assessment of their own food situation in most poor and middle-income countries was better in 2008 than it had been in 2006.
Most of the progress has been concentrated among the poorest of the poor—those who make less than $1.25 a day. The bank’s figures show only a small drop in the number of those who make less than $2 a day, from 2.59 billion in 1981 to 2.44 billion in 2008 (though the fall from a peak of 2.92 billion in 1999 has been more impressive). According to Mr Ravallion, poverty-reduction policies seem to help most at the very bottom. In 1981, 645m people lived on between $1.25 and $2 a day. By 2008 that number had almost doubled to 1.16 billion. Even if many of these middling poor move up, their places are often taken by those who have just escaped from absolute poverty; population growth does the rest. The poorest of the poor seem to have escaped the worst of the post-2007 downturn. But the growth in the middling poor shows there is much to be done.
from the print edition | Finance and economics
Using Microfinance to Bring Clean Water to India’s Poor
Written By: Tom Murphy; Posted: 03/ 8/2012 3:09 pm
Original - http://www.aviewfromthecave.com/2012/03/using-microfinance-to-bring-clean-water.html
The term ‘microfinance’ elicits the image of groups of women who take loans, share the liability with the group members and use the money to expand a small business. This idea grew out of Nobel laureate Mohammad Yunus’s Grameen Bank which has operated in Bangladesh for four decades and reached a wider audience thanks to organizations like Kiva that allow any person to provide a microfinance loan to a woman anywhere in the world. Today, a shopper at Whole Foods can round up to the nearest dollar at the register to support the company’s microfinance institution of choice.
Microfinance is just about everywhere these days.
The truth is that microfinance is a complicated term that covers many ways people access financial services around the world. Payday loans in the United States are a form of microfinance — as is rainfall insurance for farmers in Ghana. It would be similar to calling every financial service that I can access in the United States ‘finance.’ It does not come close to adequately capturing the services I use.
In India, the most common avenue of accessing financial services by the poor is through self-help groups (SHGs). On the face they look similar to Yunus’s group lending scheme, but there are important differences that allow for a shift from building business to supporting social goods like health and education.
 |
SHGs are formed by women with the help of an NGO. For a period of time, the women only save money. They deposit a small sum of 50 rupees ($1) each month. After six months, the women are eligible to take small loans. These loans can either come from the group savings account or through the bank. The group helps determine if the loan is appropriate for each member and serve as a check for the bank. Because the liability of the loan is shared among the group, it is in their interest to ensure that each member is capable of paying back a loan on time.
NGOs run Bank Linkage Programs to serve as an organizing mechanism and a bridge between the women and the banks. Having never been to a bank themselves, this bridge allows access, and provides an easy way of becoming familiar with banking. Additionally, the mission of the NGO is to ensure financial access for families so they can weather the peaks and valleys of poverty. The livelihoods of clients are at the forefront of NGOs like IVDP.
This small change in structure impacts how outcomes are then measured. For IVDP, success is measured by the health of children and their ability to go to succeed at school. To achieve this mission, IVDP partners with corporations like Unilever.
Unilever’s PureIt water filter is a significant innovation in terms of bringing safe water to homes in India. The device filters water to meet the US EPA standards for clean drinking water. It is simple to use and the most cost effective filter available.
IVDP partners with Unilever to provide women the ability to purchase a PureIt using an interest-free loan. She can pay for the 2000-rupee filter over time and has the ability to access future loans, still without interest, to pay for a new filter when it needs to be replaced. When I asked Mr. Francis why he would forgo the interest earned on the product he scoffed at the thought of collecting interest, “We do not take interest on anything that improves children’s health.”
 |
I visited one SHG in Krishnagiri that is associated with IVDP. Of the 15 members in the group, 10 said they already owned a PureIt and two indicated that they are interested in purchasing one in the near future. The group leader bought the first PureIt about a year ago. A worker in a garment factory, she said that she used to do nothing to treat her water. When a family member fell ill, she would boil the water for them until they got better.
She understood that boiling water had a connection with illness, but did not do it as a precautionary measure. Since owning the PureIt, she says her children have been less sick and in school more often. In my time visiting both urban and rural users of PureIt, this change was observed by every mother. Their children were sick fewer days since drinking water from the PureIt and had improved attendance at school.
In another home, the PureIt was decorated with stickers. I remarked that it looked like the children liked the filter. She nodded saying, “The children maintain the PureIt and insist it is always clean”. She explained that her three sons and one daughter learned about clean water while at school and demanded that they have access to clean water. The mother, having learned about PureIt from her SHG and hearing the praise from the group leader, spoke with her husband and decided they would take out a loan to buy the filter.
Now, her children take a bottle of clean water with them to school each day. She did not know that germs were in her water and that they were making her family sick. She too was happy with the PureIt because it provided her good tasting water and her children were less sick. Only by seeing the product demonstration and learning about clean water from her children did she understand the importance of water safety.
Mr. Francis offers additional products to his clients including nutrition packets by Heinz and solar lamps from d.light. Such partnerships help to achieve his goal of improved health and education opportunities for the children of Krishnagiri. The group leader of the SHG uses one of the solar lamps. She charges it in her courtyard and said it is helpful during frequent blackouts so she can get around the house and her children can do their studies.
Recent studies and a book by David Roodman make it clear that microfinance has not been the transformative poverty solution as proponents claim. Giving families the ability to access financial services is important itself and support from NGOs to provide loans, like the interest free loan offered by IVDP to buy a PureIt, can bring about access to more products and services for the poor.
IFC To Start $100M Microfinance Debt Fund
Wednesday, 07 March 2012 07:17
According to IFC, the MIFA Fund will be funded through 3 classes of shares. “Initially, the investors are expected to be IFC, KfW, and Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German Federal Ministry for Economic Cooperation and Development,” an IFC release stated.
The fund has a target size of $100 million, including up to $25 million in donor-funded concessional funding. IFC’s investment in the fund is proposed to be up to $20 million in mezzanine shares.
The Luxembourg-based fund will set up special purpose vehicles in Mauritius and India. The fund will make its debt investments across Asia, including East, South and Central Asia.
“The project is in line with the IFC microfinance strategy for increased outreach in South, East and Central Asia, especially in large countries like India and China, home to 40 per cent of the world’s population. Microfinance penetration rates in this region remain among the lowest, globally,” the release said.
By supporting the expansion and sustainability of well-performing MFIs, the project will improve access to finance for thousands of micro and small borrowers. This, in turn, will stimulate growth, employment generation and poverty alleviation in the region.
IFC claims that the fund will facilitate access of Asian emerging market MFIs to commercial funding that is better tailored to their needs. It will reduce the volatility of MFI loan portfolios, as currently most MFIs are unable to properly address the currency mismatch risk. The fund also aims to provide longer-tenor funding and subordinated debt products, a clear need for MFIs at present.
In India, the Rs 23,000 crore microfinance industry has been under stress after the Andhra Pradesh government banned the exorbitant interest rates the institutions charge to small borrowers. The MFIs normally charge higher interest rates due to the higher cost of capital and higher risks involved with repayments of smaller loans.
According to the latest RBI data, bank lending to micro-credit through self-help groups or through NBFCs was less than 1 per cent of the total bank credit, amounting to around Rs 21,000 crore.
MicroEnsure Ghana to Launch Credit Health Insurance for Microfinance Clients
» Posted by Charlotte Newman in Category: Africa,Microinsurance at 12:08 am
The Ghanaian branch of MicroEnsure, a UK-based subsidiary of nonprofit Opportunity International that serves as a microinsurance intermediary, has announced plans to offer credit health insurance to microfinance clients in Ghana. The product will enable MicroEnsure to cover weekly microcredit repayments in the event that the borrower is admitted to the hospital during the loan term. Clients will need to present proof of admission and discharge from a recognized inpatient hospital in order to file a claim. The cost of the coverage will start at USD 0.25 per month and will cover loan payments for any health condition for any amount of time.
According to Eugene Adogla, director of operations in Ghana, MicroEnsure expects to pay hundreds of claims that range between USD 30 and USD 60 each month. Fiona Laryea, general manager of MicroEnsure in Ghana, stated that MicroEnsure Ghana also hopes to extend coverage to clients’ families.
Two unnamed microfinance institution (MFI) partners of MicroEnsure Ghana have signed up for the new product, and more organizations have reportedly expressed interest.
MicroEnsure serves approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.
By Charlotte Newman, Research Associate
About MicroEnsure
MicroEnsure was founded in 2005 in the UK as a wholly-owned subsidiary of Opportunity International, a US-based nonprofit microfinance network created in 1974. MicroEnsure was known as the Micro Insurance Agency until 2008. As an insurance intermediary, it provides a range of products including health, life, property and weather index-based insurance to approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.