Microfinance Focus, November 30, 2011: More than 1,000 businesspeople and government officials took part today in the Invest in Haiti Forum, one of the largest meetings of its kind ever held in the Caribbean, underscoring the strong private sector interest in the country’s economic potential. This the second Invest in Haiti Forum, held at the Karibe Hotel in Port-au-Prince, Haiti on November 29 and 30, 2011.

This Forum is geared towards highlighting profitable business opportunities readily available in the country, especially in the apparel manufacturing, tourism, agribusiness and infrastructure sectors. The objective is to invite highly ranked representatives of international companies to learn about investment opportunities in Haiti, meet Haitian partners, clients and suppliers in the country, discuss with public officials key regulatory aspects, and work towards closing business deals. The IDB will act as a facilitator for one-on-one business matchmaking meetings.

During the conference organized by the Inter-American Development Bank (IDB), the Government of Haiti and the Clinton Foundation, several announcements were made regarding investments in hotels, furniture and cable manufacturing. Haitian President Michele Martelly, President Bill Clinton, and IDB President Luis Alberto Moreno launched the event at the Karibe Hotel Convention Center.

On the eve of the forum, Marriott International and Digicel Group announced an agreement to build and operate a new hotel in Port-au-Prince. The Bethesda, Maryland-based hotel company will manage the 168-room, $45 million property, which will be owned by a subsidiary of Digicel Group, a leading telecommunications provider in the Caribbean, Central America and the Pacific Region.

Earlier that same day, Presidents Martelly, Clinton and Moreno participated in a groundbreaking ceremony for the construction of the Caracol Industrial Park, a 250-hectare manufacturing facility on Haiti’s northern shore. The park’s first tenant, South Korean company Sae-A, plans to invest $78 million in an apparel and textile manufacturing plant and hire as many as 20,000 workers at that location.

On November 29, LS Cable & Systems, one of the world’s largest manufacturers of energy and telecommunications cables, is to sign an agreement with the government of Haiti to promote infrastructure development. LS Cable, part of the South Korean industrial conglomerate LG Group, is considering an investment in a manufacturing facility in the Caribbean nation.

Another agreement saw the The IDB and Colombia’s National Coffee Federation announce a partnership to work on transferring agricultural, reforestation and cooperative organization best practices to Haitian coffee growers. The government of Colombia and Nestlé, the world’s largest foods company, also plan to support the project, which is being prepared by the IDB’s Multilateral Investment Fund (MIF).

The IDB also announced its intentions to join the Global Alliance for Clean Cook Stoves. The MIF is already working on issues related to the alliance in the Latin America and Caribbean region. In collaboration with the Clinton-Bush Haiti Fund, Arc Finance and FoodExpress, the MIF is helping establish a platform to enable Diaspora members to buy and send cleaner-burning cook stoves and other energy efficient devices for their relatives in Haiti.

Microfinance Focus, November 30, 2011: The International Finance Corporation (IFC), a member of the World Bank group, is working with other institutions to promote global standards for corporate governance. 30 development finance institutions (DFIs) have agreed to adopt a set of standards based in part of IFC’s Corporate Governance Methodology.

IFC’s Corporate Governance Methodology is a system for evaluating corporate governance risks and opportunities that is recognized as the most advanced of its kind. DFIs plan to use these guidelines to assess the quality of corporate governance at companies they invest in. They also will urge global financial institutions to consider these guidelines for their own investments in developing countries.

The benefits of this is that well-run companies are better able to attract capital, respond to competitive challenges, and build conditions necessary for long-term success. Also they safeguard themselves, through sound corporate governance, against the perils of mismanagement and corruption. In doing so, they also help bolster national economies.

The working group representing the 30 DFIs included IFC, the Black Sea Trade & Development Bank, the Latin American development bank CAF, CDC of the U.K., the European Bank for Reconstruction and Development, the Islamic Development Bank, the Dutch development bank FMO, and the German development bank DEG. Some of the banks, such as FMO, have already begun to implement the new guidelines. Others are expected to adopt them later in 2011.

IFC believes that in this initiative, their expertise as providers of financing and advisory services allows them to play an important role in improving corporate governance. Adoption of a common approach by DFIs sets a standard for due diligence and helps establish common expectations among our clients, raising the bar for corporate governance in emerging markets.

Microfinance Focus, November 30, 2011: Caterpillar Foundation, the philanthrophic arm of manufacturing company Caterpillar Inc, and Water.org, a non-profit organization providing safe water and sanitation, announced a $3 million partnership to reach more than 218, 000 people with clean water and sanitation over three years. The program will support a significant expansion of Water.org’s WaterCredit activities in India, and also fund a market assessment to explore the launch of WaterCredit in Indonesia for the first time.

WaterCredit is an initiative of Water.org that puts microfinance tools to use in the water and sanitation sector. WaterCredit facilitates small loans for water and sanitation access for people living in poverty without access to these most basic necessities. A successful, market-based solution, WaterCredit is accelerating large-scale, sustainable progress against the water and sanitation crisis.

The Caterpillar Foundation grant will support two WaterCredit programs in India. This includes the expansion of a Revolving Loan Fund managed by one of Water.org’s local partners in Bangalore to provide an additional 8,000 households (about 38,400 people) with access to micro-loans for clean water and sanitation. Through this financial model, once a loan is repaid, it is then re-lent to the next person in need.

The Caterpillar grant will also support Water.org’s work with its existing microfinance partners in Bangalore and Tamil Nadu, India. It will facilitate WaterCredit loans for sanitation purposes, enabling more than 180,000 residents to gain access to hygienic sanitation facilities such as household toilets.

Finally, the Caterpillar Foundation grant will fund an initial market assessment in Indonesia by the Water.org team to assess and lay the groundwork for the launch of WaterCredit in Indonesia.

Microfinance Focus, November 30, 2011: Fonkoze Financial Services is Haiti’s largest microfinance institution and a founding partner of the Microinsurance Catastrophe Risk Organization (MiCRO).

Founded in 1995, it is serving more than 55,000 women borrowers most of whom live and work in the countryside of Haiti, and more than 255,000 savers.

Fonkoze offers not just loans but a host of financial products for people who don’t usually have access to such tools. One of those is protection from disasters like floods, hurricanes, and earthquakes.

Fonkoze realized the extent of the need for disaster insurance for its clients after Haiti’s Jan. 12, 2010 earthquake. In response to heavy rains this spring, Fonkoze reimbursed more than $1 million in damages and loan reimbursements for 3,800 borrowers in the first ever payout of its natural disaster insurance for poor Haitian clients.

In conversation with Fonkoze’s CEO, Anne Hastings

Microfinance Focus: Tell us how Fonkoze’s clients were affected post earthquake.

Anne Hastings: Fonkoze operates all across the country. Today we have 47 branches and 58, 000 borrowers. After the earthquake, when we identified all the victims there were about 19, 000 of them. At that time we had about 40, 000 clients. So, close to half of our members were victims.

There are only two things which our clients have. First, they have houses, which are nothing more than shacks. There are no government housing programs in Haiti unlike other developing countries. People are living in houses which if you blew hard, they will fall over. Second, most of our clients sell in the marketplaces in Haiti. They buy their good in one place and take them to long distances to sell. So, they can lose either their merchandise or their home or both.

After the earthquake, anyone who was in the hardest hit area of the earthquake had a tendency of losing their home completely. Those who were in the market place at that time, lost their merchandize. Some had deposited the money to purchase merchandize in the bank but after the earthquake, the supplier no longer existed and there was no way for them to go back and prove that they have deposited their money so they never got anything back from that.

And of course, there were many lives lost. There is hardly anyone in Haiti who didn’t know many people who lost their lives. Fonkoze lost five of its employees and 11 of its buildings.

Microfinance Focus: Tell us more about MiCRO.

Anne Hastings: At the time of the earthquake we didn’t have the insurance and MiCRO was not established. However, we were planning to offer the insurance and hoped that we would have it ready by March 2010 and the earthquake came in January. We used donor funding to pilot test whether we could implement this product that we had in mind. Then we discovered that it did work very well and our clients learnt a lot from that experience.

We began to develop the partnership with Mercy Corp, Swiss Re, DIFID and all of the other stakeholders that are involved in getting MiCRO set up. The first time we were actually able to offer this product was in January 2011.

In May this year we had very heavy rains. Swiss Re who is the reinsurer on this product paid out over one million dollars for that disaster. Now we just had another period of heavy rains and they will be paying out about another quarter of a million dollars this time.

Microfinance Focus: What are some of the challenges of delivering catastrophe microinsurance product?

Anne Hastings: There are a lot of problems in delivering such a product. First is education, to make the client understand what the product is, what it means for them and why they should be interested in it. This is the biggest concern at the outset. The second thing is to convince them that they should pay for it. Not only they should have it but they should be paying for it as well. We had credit life insurance since 2007 but we had never asked our clients to pay for that. We gave that to them without them paying anything in order to teach them about insurance, what insurance could do for them and they did love it. We had really been introducing them to the concept of insurance since 2007 and they learnt through that product what it was.

Then we offered it by using the donor money after the earthquake. When they got their new loans, we asked them to pay retroactively for the insurance that we assumed they had on January 12. We did that to make them understand that they are not going to get this kind of insurance for free. They would have to pay for it. We asked them to pay 2% of their loan value. They had already received the benefit of their insurance. We were not insuring them moving forward, we were only making them understand that they have to pay something for what they got after the earthquake.

When we actually offered the product in January 2011, they began paying 3% of their loan value and we are still subsidizing another 2%.

The bigger problem is when we have to assess who is really a victim and who is not a victim after a disaster. We use a creative way for doing that. We use Grameen style methodology of lending. Our clients are organized into solidarity groups of five and between six-ten groups form a center. Those centers are long term associations of women who have dedicated themselves to bringing their families out of poverty by strengthening their businesses and educating themselves. They elect a person to head each of their solidarity groups and the center as a whole elects a center chief.

On the day after the disaster, it is up to the center chief to go around and make an inventory of all of the clients in that center that have had losses. We have to train the center chiefs to do that. We have 15 facilitators and they go out to the next center meeting with that list and they try to get the center to reach consensus on who should actually receive the payout.

There are always degrees and we want the clients themselves to reach a consensus on who should receive the payout. All we are trying to do is to make them understand that if everyone is trying to get a payout we will never be able to continue with this kind of insurance.

Microfinance Focus: Is MiCRO developing any new products?

Anne Hastings: We made a commitment at the Clinton Global Initiative for a product on cholera. After the earthquake we had a huge problem of cholera epidemic for the first time in its history. We are going to try to use a similar type of insurance to assists those people when their families get sick from cholera and they can’t keep their businesses going

Microfinance Focus: What are some of the other issues in Haiti that Fonkoze is addressing?

Anne Hastings: We have a website called Zafèn. In Creole it means ‘It is our business’. We set up this website in order to profile on the website enterprises in Haiti that are not micro but small and medium in our definition. We encourage the Haitian’s Diaspora and other friends of Haiti to invest in these enterprises. We do the due intelligence on these enterprises and the money from the investors goes directly to the enterprises.

After the first year of its operation, we realized that Haitians living abroad have been asked to do so much to keep Haiti alive since the earthquake that they kept sending money to their families in Haiti and in the process they lost their businesses, they overspent on their credit cards and their homes have gone into defaults.

So we were not getting enough money coming through the Zafèn website. We then decided to set up an investment fund because we realized that there all kinds of international NGOs in Haiti who have budget lines for supporting SMEs or for creating jobs. But they really don’t know Haiti at all. They have been here only since the earthquake. They don’t have any way to assess these enterprises. The idea is that we will get these NGOs to come together to build a fund that we can continually cycle through Zafèn enterprises. It is just a second way to bring investment capital to enterprises in Haiti. Zafèn will still be operational for Haitians and other people living abroad but there will an extra source of investment capital that can be cycled through. Many NGOs are excited about it because of the fact that they don’t know how to spend the money they have in Haiti

Microfinance Focus: Fonkoze is one of the industry leaders in social performance management. How does it benefit Fonkoze?

Anne Hastings: In today’s environment there are many benefits. First of all, you have to start with your mission. There are two types of microfinance institutions. There are those which try to maximize access to everyone. The other type wants to use microfinance as a tool for people making their way out of poverty. If you take the second type, which is what we are, then you need to measure whether you are achieving your goals or not. If you do not know whether you are succeeding in getting people out of poverty, you cannot continue.

Specially in today’s environment where there are so many challenges like claims that microfinance is just over indebting people and making them worse off than they were before, you really need to know whether you are having a positive impact on their lives or not.

We are continuously monitoring information and using it at management levels to make changes in our program. We have three different ways of collecting information. One is using the PPI (Progress out of Poverty Index) and we verify it on our samples of clients coming into the program and every year we go back to the same client and re-measure and see if they are doing better than the year before or if they are doing worse. We are always running focus groups around the country with clients where we actually try to get information from them on what is working well for them and what is not working so well. That is the way we can really get their understanding of what new products we might need or what programs they don’t see as being particularly useful to them.

The third tool that we use is that we do interviews with the clients who exit the program to know what made them join the program in the first place and what made them fall out of the program. The two principal reasons for them to exit the program are unexpected health issues and the fact that their businesses failed. These two things are linked. If they have bad health, their businesses will fail. That also suggests to us that we need to be increasingly involved in strengthening their businesses. You can’t just give poor women a loan and then send her on her way. We need to accompany her and help her decide what business she should be in and how she should be manage it better so that she remains competitive.

So increasingly we are moving towards more involvement in our clients’ businesses, especially those that are just starting out and are among very poorest people

Microfinance Focus: Your view about the Indian microfinance crisis?

Anne Hastings: It can happen to anyone of us and the best protection against it is that you have a strong social performance management function within your organization. I strongly feel that social performance management does two things, it gives you the information that you need to make better decisions and it allows you to have evidence to show the world when they begin to attack you, whether you are helping or hurting.

The second major initiative is the client protection campaign. We all need to get on board with the Smart Campaign. I am a member of that steering committee. We all need to be transparent about what we are charging our clients for everything they are getting from us. We have to respect their privacy. We have to make sure that we have products that are truly tailored to what they need and we are not using a cookie cutter methodology where we have the same product regardless of where our clients are in their struggle out of poverty.

Our campaign is to protect and educate clients, so that clients can come to our defense if and when the politicians begin their attack. Moreover, it is important to always know whether in fact you are helping your clients to better their lives or you are over indebting them. We need to be vigilant towards over-indebtedness because none of us wants to push our clients backwards instead of forward. The worst thing that can happen to them is that they take on more debt than they can manage.

Microfinance Focus: What are some of the new initiatives Fonkoze is working on?

Anne Hastings: Right now we have to make sure that we work with other countries, MFIs and NGOs, who are interested in working with MiCRO. We didn’t do this just for Fonkoze or just for Haiti. We    did it for the world, and we believe that we have something really important to share on how it can be helpful.

There is an MFI in the Jamaica that is interested in MiCRO, and we also have interest from some of the big international NGOs like Mercy Corps, which is an investor in MiCRO. We really want to expand MiCRO. We think it is very important for microfinance institutions around the world.

 

Microfinance Focus, November 30, 2011: Karnatak based Samrudhi Microfin Society, a non profit microfinance institution has launched an online Peer-to-Peer (P2P) lending portal that connects social investors to its clients, replacing field partners.

The portal is hosted at wecareindia.org where investors can directly lend to low income women entrepreneurs in India.

Initially the loans will be focused on micro-credit, education, healthcare and agriculture and lenders will be given a return on their social investment (principal and interest) according to the repayment schedule of the borrower.

Samrudhi claims that the return on investment for social investors is between 6-10 percent, at par with the nationalize banks in India. Cost of funds to borrowers is between 12-18 percent.

Microfinance Focus, November 29, 2011: SKS Microfinance today hit a new low on BSE and was trading at Rs. 97.85, down by 4.95 percent. The company’s performance has been declining since the exit of its Founder and Executive Chairman Vikram Akula.

Vikram Akula resigned from SKS’s Board last week. The company however did not disclose the reason for his exit. SKS Microfinance has now informed BSE that the Company and Dr. Akula have subsequently entered into an agreement for their respective future obligations such as consultancy services by Dr. Akula to the Company, non-compete and non-solicitation obligations etc.

Mr. P. H. Ravi Kumar, Independent Director of the Company has been appointed as the Non-executive Chairman – Interim of the Company.

SKS reported a net loss of Rs. 384 crore ($ 78.4 million) for the second quarter ended September 30, 2011 on account of lower income and higher provisioning. Its total income declined to Rs 122.99 crore from Rs 366.5 crore last year.

SKS CFO Dilli Raj has recently announced the company’s plan to raise Rs 900 crore via sale of shares to private institutional investors.

 

Microfinance Focus, November 29, 2011: The National Bank for Agriculture and Rural Development (NABARD) presented a cheque of Rs. 1.64 crore to Ellaquai Dehati Bank (EDB) that operates in Jammu and Kashmir.  The purpose for this is financial assistance for orienting its branches to Core Banking platform.

The cheque was presented by D D Gupta, Assistant General Manager NABARD to A K Razdan, Chiarman E D Bank in presence of Board of Directors of the Bank which include Mustaq Sidiqi, Special Secretary Finance, J&K Government, P K Abrol, Regional Manager, Region III, State Bank of India, Baldev Raj, AGM Reserve Bank of India and Abdul Majid Shah, Advocate, Government of India nominee, at a simple but impressive function held at the head office of EDB.

While presenting the cheque, Gupta said NABARD is all out to help Rural Banks in implementing the modern technology for day to day operations so that the people living in far flung areas can get all the facilities of an urban modern commercial bank at their door steps.

Gupta added that he appreciated the role played by EDB in providing banking facilities to the rural people at an affordable cost. Speaking at the occasion Razdan said: “Our Bank has a target to cover all the 35 unbanked allotted villages under financial inclusion.” He said the Bank has recently opened five more branches in its area of operation so as to cover the un-banked villages. He thanked NABARD for providing financial assistance for putting the bank on core banking platform and expressed his confidence in providing all the financial services to its rural clientele at their doorsteps.

The State Bank of India (SBI), India’s largest bank, is sponsoring EDB. It was created in 1979 through the Regional Rural Banks (RRB) Act 1976 passed by the Indian Parliament. With the solemn objective to reach out to the poorest of the poor in the country, in 1976 Prime Minister Indira Gandhi facilitated the creation of rural banks across the country. Today, this bank has 109 branches spread across the State of Jammu and Kashmir covering 12 districts.

Microfinance Focus, November 29, 2011: Key stakeholders representing insurance companies, commercial banks, donors, NGOs and the Reserve Bank gathered at Tanoa Plaza in Suva, Fiji for the presentation of findings from the Microinsurance Demand Research. The discussion centered on the problems faced by low-income households in Fiji and the rising demand for insurance to insulate themselves from emergencies.

The half-day workshop highlighted the way that low-income families in Fiji cope with emergencies and their demand for insurance or other methods to protect themselves against risk. Tebbutt Research conducted the study with financial and technical support from the Asian Development Bank (ADB), Pacific Financial Inclusion Program (PFIP) and Australian Agency for International Development (AusAID) Fiji.

Micro insurance is more than selling smaller insurance policies.  It is insurance designed to be accessible to vulnerable populations- people with low and irregular incomes that are far from any bank, and have little if any experience, with insurance.

In opening the workshop, Chairman of Fiji’s National Financial Inclusion Taskforce, Mr. Robin Yarrow, indicated that, “With a focus on building community resilience, micro insurance development builds upon our resources and capacities on top of alleviating weaknesses and gaps. Such a strategy will celebrate the Fijian tradition of helping members of the “vuvale” or nuclear family and extended members of our “mataqali” or clan.  Similar concerns are shared in other communities where while protecting our brothers and sisters, we are mindful about protecting members of the wider community from hardship in a sustainable way.”

The research findings were generally positive about the potential for micro insurance, although challenges remain.  In terms of willingness to pay, it found that respondents valued products enough to pay a premium that could satisfy insurers, which was a positive sign.  There was much discussion around building partnerships that would help insurers build distribution and service channels.  As premiums tend to be low in micro insurance, a key challenge is selling enough policies to cover high set up costs and making sure that premiums are paid regularly with little collection cost.

Microfinance Focus, November 29, 2011: The eighth annual Citi-Financial Times Financial Inclusion Summit, the leading international forum on financial literacy and capability, is held in Jakarta, Indonesia from 28-29 November. The 2011 Summit will showcase innovative financial education programs that support key segments, such as micro entrepreneurs, migrant workers, low-income youth, Islamic communities and people in disaster-prone areas.

The theme of the 2011 Summit is ‘‘Empowering the Disadvantaged: Inclusive and Innovative Approaches to Financial Capability’. The two-day international conference will share experiences in developing, implementing and measuring some of the most progressive and effective financial education initiatives in Asia Pacific and beyond.

The Citi-FT Financial Education Summit 2011, organized by the Citi Foundation, the Pearson Foundation and the Financial Times and co-sponsored by IFC, Prudential and Visa, will convene more than 270 representatives of non-profit organizations, financial institutions, government agencies and regulators, multilateral institutions, microfinance institutions, consumer advocacy groups, educational organizations and private business from 33 countries.

Speakers of the conference include senior representatives of Bank Indonesia, China Banking Regulatory Commission, International Labor Organization (ILO), IFC, World Bank, ACCION International, Microfinance Opportunities, Women’s World Banking, BTPN, UKM Center FEUI, ASKI Global, ERA Consumer Malaysia, Habitat for Humanity International, Monitor Inclusive Markets, Plan Indonesia, Prudential and Visa.

“Citi Indonesia is honored to host the eighth annual Citi-FT Financial Education Summit 2011. Citi is a long-term supporter of financial inclusion in Indonesia through both microfinance and financial education. We see this summit as a great opportunity to highlight how financial education can help people who are disadvantaged, especially those who are excluded from the formal financial sector. This summit also presents the opportunity for various stakeholders to come up with actions on how financial education efforts should be expanded in different regions,” said Tigor M. Siahaan, Citi Country Officer, Citi Indonesia.

The topics discussed are also in line with Citi’s commitment to support the microfinance sector in Indonesia, philanthropically and commercially. Through the Citi Microentrepreneurship Awards (CMA) program, which has been run annually since 2005, Citi and the Faculty of Economics at the University of Indonesia have reached more than 3.800 Indonesian micro entrepreneurs and provided more than IDR 4 Billion (US$442,233) in funds to support entrepreneurs with the greatest potential.

Citi has been a pioneer in financial education in Indonesia by supporting programs for the disadvantaged, youth and the general public. All these programs come under Citi Peka – Citi Indonesia’s long-term corporate citizenship campaign. Since 2009, Citi Peka has committed close to US$2 million in Citi Foundation funding for programs focusing on microfinance, financial capability and asset building, enterprise development, and youth education and livelihoods.

Microfinance Focus, November 29, 2011: Social entrepreneur and founder of Microinsurance Academy, Dr. David Dror receives the “Global Citizen Lifetime Achievement Karmaveer Puraskaar-2011-12” awarded by the iCONGO (Indian Confederation of NGOs).

Dr. Dror developed a community based health insurance model to deliver to the poor, a demand-driven, context-relevant, nonprofit, mutual-aid microinsurance. Community members participate in their own risk assessment and design a suitable product to meet their specific needs. The community based health insurance (CBHI) model has been implemented in six sites in the states of Orissa, Bihar, Uttar Pradesh and Nepal.

Dr Dror had been instrumental in starting CBHI pilot project in the Banke district, Nepal, with the technical support from Micro Insurance Academy.

Microinsurance Academy (MIA) specializes in providing systematic technical support to resource-poor communities. The training tools MIA has developed are an important part of the microinsurance implementation process

The iCONGO is a coalition of NGOs, which brings together a wide cross-section of various charities, corporate and media companies, trusts & foundations, government bodies, individual citizens and thought leaders from all sectors.