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MCCM Panel 1 (from left to right): Aditya Bhandari, Sandeep Farias, Ravi Kapoor, Avnish Bajaj, James Kaddaras.
MCCM Panel 2 (from left to right): S. Viswanatha Prasad, Alok Mittal, Royston Braganza, Padmaja Reddy, Christian Banno.
MCCM Panel 4 (from left to right): Vikram Gopalakrishnan, Jaydeep Chakraborty, Jean-Pierre Klumpp, Kaushik Modak, Ajit Jain
Day 1 Closing Conversation (from left to right): Ashish Lakhanpal, Mohit Bhatnagar, Paul Beckett, Monica Brand
Microfinance Focus , June 23, 2010 ( New Delhi) : ‘Microfinance Cracking the Capital Markets, South Asia 2010’, The conference on Microfinance Investments kicked start today at the Taj Mahal Hotel, New Delhi, India. Gathering over 300 industry experts, investors and microfinance institutions the two day conference begins with the theme of exploring the opportunities and the risks of Capital Market investments in South Asian Microfinance. The backdrop to the conference is the unprecedented surge in the commercial capital investments which the industry has witnessed in the recent past.
Organized by ACCION International in collaboration with EDA Rural Systems and Citi Foundation, the conference comes in response to the rising capital requirements of a bullish microfinance sector and an equally growing interest of mainstream investors in this social industry. The event has thrown open an investment marketplace for the stakeholders who have flocked from across the globe to evaluate different funding options and their associated risks. Giving them a timely opportunity of information sharing and networking, the conference aims to enhance the sector’s attractiveness and boost investments.
Victoria White, Vice President & Director, India Programs, ACCION International delivered the theme address, saying, “We are thrilled to organize this event. There is no question that microfinance is being considered as a good quality asset class by investors worldwide. MCCM will reflect the changing landscape and we are here to discuss the future the industry holds. However, problems have resulted from the growth that the sector has experienced, and this conference will address the concerns that are pertaining to investments and equities.”
Addressing the conference, Mr. Sanjay Sinha, Managing Director M-CRIL and co-founder of EDA Rural Systems said, “The microfinance industry has done extremely well but growth brings with it challenges. There needs to be innovation at the client level. Some of the bad press that we have been getting will improve. MCCM will also promote financial inclusion and we will be talking about responsible finance as well as fundraising potential”.
Reviewing the current investment scene, Robert Annibale, Global Head of Microfinance, Citi Foundation said, “Microfinance sees itself continue to growth but we see a very varied experience. Capital will always be a challenge for growing MFIs and that’s why they became NBFC. How to achieve growth with more security in balance sheet is one of the concerns and we look to address it”.
MCCM Opening Plenary
Victoria White, Vice President & Director, India Programs, ACCION International
Mr. Sanjay Sinha, Managing Director M-CRIL
Mr. Sanjay Sinha ( Left) and Robert Annibale (Right)
As you are aware, “Microfinance Cracking the Capital Markets South Asia 2010″ Conference to be held in New Delhi on June 23-24, 2010, Organized by ACCION International, Citi Foundation and EDA Rural Systems, and supported by BlueOrchard Finance and Grameen Capital India, the two day conference will focus on the opportunities and challenges of the booming capital markets in South Asian microfinance sector. Microfinance Focus realizes, however, that due to scheduling demands, , not everyone who is interested will be able to attend the programme.
Microfinance Focus, leading niche media in the microfinance sector, will serve as the official microfinance media partner of the conference. In order to provide real time updates on the conference to all, Microfinance Focus has initiated a web-based Live Blog to cover the conference. Live Blog has multi-touch interface, specially enabled for I-phone/smart phone. All the visitors can share write ups with their friends and on their social networks as well.
I take this opportunity to invite you to log on to the following link on from June 23 to 24, 2010 between 09:30 hrs and 20:00 hrs to get live updates on the proceedings and related discussions at the conference. Similarly, all can read the news articles, exclusive interviews & opinions from conference floor and respond to them.
New Deals, New Capital, New Challenges
& Plenty of Opportunity
June 23-24, 2010
The Taj Mahal Hotel
New Delhi, India
Conference Highlights:
MCCM South Asia brings together a wide range of finance professionals for an in-depth exploration of the players, deals, risks and opportunities of capital markets investment in South Asian microfinance, with a strong focus on India.
Attendees will meet the new players, explore recent deals, look at new tools for accessing capital markets and assess the future pipeline in an engaging, “nuts and bolts” two-day program that takes a deep dive into the issues and opportunities of microfinance investment.
On Day Two an Investment Marketplace will bring together MFIs with debt and equity investors to facilitate introductions and deal-making in a booth setting.
Download the Final Agenda: Final Agenda MCCM (185)
Microfinance institutions should continue to focus on providing quality microfinance services rather than attempting to offer livelihoods services, said Graham A.N. Wright, Programme Director of MicroSave India, in an exclusive interview with Microfinance Focus.
He pointed out that majority of institutions are focusing only on microfinance which he said was a sensible decision. “There are very few organisations that can credibly do both. I think strategic alliances with high-quality livelihoods support agencies is a good idea, but I think there are very few high quality livelihoods support agencies. Livelihoods segment has been struggling for many decades and it is just re-inventing itself around Value Chain Analysis which is a much more powerful paradigm,” he noted.
“To be very honest, most MFIs are struggling with the basics of providing credit services. Each product they introduce merely complicates their front and back offices and processes. They will have plenty of products to keep themselves occupied without getting into a whole new vertical like livelihoods. I have seen this when I worked in Bangladesh and East Africa, and very rarely you come across microfinance organisations which can offer livelihoods services effectively,” he explained.
Recalling from his experience on product development, he said the key is that products be designed and delivered to meet clearly defined client needs. Unlike the traditional approach, where in a typical “bathtub product development”, a CEO gets out of the bath one day and says ‘we need to be doing this.’ “Then the product is foisted on the client and often they don’t like it,” he explained and added, “You have to really get down to the dust and see what the clients really need, and that involves qualitative research to understand the complexity of human financial behaviour. Then you can build products and delivery systems around that.”
Microfinance Focus, Nov. 4, 2009: Wherever Women’s World Banking CEO Mary Elen goes, she faces one obvious question from the audience or the media. That is the microfinance sector’s focus on women. But she is happy to answer, as ever with a smile on her face, that she is glad that the microfinance sector has not deviated from its prime focus on women as borrowers, come what may, whether credit crunch or recession.
So did she when Microfinance Focus team caught up with her on the sidelines of Microfinance India Summit 2009 that was held last week in New Delhi.
Move over from the obvious, she recollects host of programmes the WWB is channelizing to build future women leaders apart from the entrepreneurial courses they have
on the offer. The latest one, funded by Master Card and the Gates Foundation, will soon see workshops hosted in many parts of the world and the first one will be held in Bangalore, India in cooperation with Ujjivan. “We need to build a talent pool from within to take up future challenges,” she asserts.
Did women’s position become better after the microfinance movement? She is emphatic in her reply that it was. The pace of their growth may have remained slow but certainly their financial and social elevation is there to see, she said. She quickly attributes the slow pace to women’s family responsibilities which limit their time. “But women are great savers and financially they know how to balance their needs and run family as well as businesses,” she asserted.
On transparency in the microfinance sector, Mary Elen is quite clear. She explained that the WWB is already giving awards to encourage transparency in the sector and hoped that one day the borrower would be in a position to know exactly what she is getting and how much she has to repay.
WWB is keen to sensitize society on the gender issue and recently the Melinda and Bill Gates Foundation has come forward to fund it, she explained. Some Women Leadership Training Programmes have already been taken up in Pakistan, Colombia and Kenya, she noted.
She is clear in her message to the microfinance sector that it should not deviate its focus from women and strive to strike a balance in its commercial and social goals.
Mr. U.C. Sarangi, Chairman, NABARD
Microfinance Focus, Nov. 3, 2009: Though major MFIs are against the Microfinance Bill, it is still required to address the needs of small and start-up MFIs, especailly in the NGO segment, said Mr. U.C. Sarangi, Chairman, National Bank for Agriculture & Rural Development (NABARD), on the sidelines of Microfinance India Summit in New Delhi last week.
Speaking to Microfinance Focus, Mr. Sarangi said the Bill would benefit those who do not come under the ambit of RBI or NABARD. Since major MFIs are under RBI purview as non-banking financial companies (NBFCs) and the self-help group (SHG) or cooperative model MFIs come under the NABARD, the Bill would cover the MFIs left out of these two categories, he explained.
The Bill would regulate the financial compliance by SHGs/NGO-MFIs in order to provide transparency and enhance their creditworthiness, Mr Sarangi added.
On the role of public sector banks which recently began providing loans to microfinance institutions, he sounded caution by banks on heavy funding of MFIs merely for expansion of portfolios. “Faster expansion of MFIs may not be good and their quality in providing services would suffer. Banks will have to be guarded against lending heavily for such expansion,” he said. A good governance and management would go a long way to motivate banks provide more lending to MFIs, he pointed out.
Mr Sarangi said he was happy with the functioning of SHGs and they were provided Rs. 12,000 crore last year to give a push especially in the northeastern region and other backward states. NABARD is keen to enhance livelihoods and watershed programs in these regions, he said.
On challenges facing the microfinance sector, he said improving quality of finance, especially scale of finance, sustainability and training personnel should be taken up on priority basis. He also said private sector should consider entering the microfinance lending sphere.
Though major MFIs are against the Microfinance Bill, it is still required to address the needs of small and start-up MFIs, especailly in the NGO segment, said Mr. U.C. Sarangi, Chairman, National Bank for Agriculture & Rural Development (NABARD), on the sidelines of Microfinance India Summit in New Delhi last week.
Speaking to Microfinance Focus, Mr. Sarangi said the Bill would benefit those who do not come under the ambit of RBI or NABARD. Since major MFIs are under RBI purview as non-banking financial companies (NBFCs) and the self-help group (SHG) or cooperative model MFIs come under the NABARD, the Bill would cover the MFIs left out of these two categories, he explained.
The Bill would regulate the financial compliance by SHGs/NGO-MFIs in order to provide transparency and enhance their creditworthiness, Mr Sarangi added.
On the role of public sector banks which recently began providing loans to microfinance institutions, he sounded caution by banks on heavy funding of MFIs merely for expansion of portfolios. “Faster expansion of MFIs may not be good and their quality in providing services would suffer. Banks will have to be guarded against lending heavily for such expansion,” he said. A good governance and management would go a long way to motivate banks provide more lending to MFIs, he pointed out.
Mr Sarangi said he was happy with the functioning of SHGs and they were provided Rs. 12,000 crore last year to give a push especially in the northeastern region and other backward states. NABARD is keen to enhance livelihoods and watershed programs in these regions, he said.
On challenges facing the microfinance sector, he said improving quality of finance, especially scale of finance, sustainability and training personnel should be taken up on priority basis. He also said private sector should consider entering the microfinance lending sphere.
Naina Lal Kidwai
Naina Lal Kidwai, CEO of HSBC India, has more praise for the creditworthiness of microfinance institutions when she talks about lending to the sector.
The Chief Executive Officer of The Hongkong and Shanghai Banking Corporation, (HSBC) India, who is also the first Indian woman to head the operations of a foreign bank in India, has pointed out that despite the global credit crisis, microfinance sector has withstood its record in repayments and creditworthiness.
In an exclusive interview with Microfinance Focus in New Delhi after the inaugural session of the Microfinance India Summit last week, she said, “What makes the microfinance sector different is its capability to honour all the debts when other financial sectors like credit cards and other small loans failed miserably.”
Though funds to the sector declined in the last one year, it was an effect of the overall impact on financial services and not merely the microfinance sector, she said and quickly added that the pie of microfinance was certainly growing. “Unless we damage the creditworthiness of the sector by irresponsible multiple lending, microfinance is bound to get a biger pie in fund inflows,” said Ms. Kidwai.
Citing the example of Mexico where credit history of every small individual is available, she said there is a need for credit rating institutions and credit bureaux in India to mitigate the effect of irresponsible lending or multiple borrowing that is affecting the sector in many areas of the country. Community lending and self-help groups have an advantage in terms of tracking individual lending which will help the sector, she said.
There were concerns like subprime, then real estate crisis and now microfinance bubble, she remarked. Justifying the fear among the lending agencies, she said it was caused since everybody is chasing one borrower but flagging about the crisis makes lenders aware of the problem and look for safety measures, she pointed out. At macro level, penetration of lending among the microfinance borrowers is still less and there is a huge potential in this sector, she added.
With increased cost-effective measures, the rates of interest can be brought down, said Ms. Kidwai on the issue of higher interest rates in microfinance. It requires rotation of funds and effective management.
On succession of top level management in the microfinance sector, she said the issue is equally important for all financial institutions, whether banks or family-run companies. The top man who has brought the company to its peak level also requires to draw a clear line of succession and in this regard big corporates have shown the way, she said.
Microfinance Focus, official Media Partner of “Microfinance India Summit 2009”, thanks all the participants in our opinion poll. This is a true reflection of the sector on the most debated issues. Your opinion provides a significant clue to gauge the trends in India`s Microfinance Sector.
Key Findings:-
Poll 1, Result :
Are Indian Microfinance Institutions (MFIs) honest enough to promote transparency?
| Respondent | % | |
| Yes | 57 | 24 |
| No | 134 | 57 |
| Can`t Say | 44 | 19 |
| Total | 235 | 100 |
Poll 1 : Result in % age
Poll 2 , Result :
Do you think the Indian Microfinance industry requires a uniform regulation ?
| Respondent | %age | |
| Yes | 143 | 87 |
| No | 15 | 9 |
| Can`t Say | 7 | 4 |
| Total | 165 | 100 |
Poll 2 : Result in %age
Poll 3, Result :
Is commercialization pushing mission drift in Indian MFIs?
| Respondent | %age | |
| Yes | 111 | 67 |
| No | 33 | 20 |
| Can`t Say | 21 | 13 |
| Total | 165 | 100 |
Poll 3: Result in %age
Poll 4, Result :
Should the government put a cap on interest rates charged by MFIs?
| Respondent | %age | |
| Yes | 64 | 39 |
| No | 84 | 51 |
| Can`t Say | 17 | 10 |
| Total | 165 | 100 |
Poll 4: Result in Percentage
Poll 5, Result :
Should Indian MFIs expand into providing livelihoods services, not merely microcredit?
| Number | %age | |
| Yes | 137 | 83 |
| No | 22 | 13 |
| Can`t Say | 6 | 4 |
| Total | 165 | 100 |
Poll 5: Result in %age
Microfinance Focus, Oct. 28, 2009: L&T Finance Ltd, the financial services subsidiary of Larsen and Toubro, is bullish on the microfinance sector. Having forayed into microfinance in 2008, the company plans to promote its microfinance initiatives across India. L&T Finance has a large equity base and raises debt on an on-going basis from banks and financial institutions. It recently closed a non-convertible debenture issue.
L&T Finance Vice-president Dinanath Dubhashi spoke to Priyanka Jayashankar on the sidelines of Microfinance India Summit 2009 in New Delhi. Here are some excerpts.
MF Focus: What is your perspective on L&T Microfinance’s growth and expansion strategy across India?
Dinanath DUbhashi: L&T Finance, which has grown from a Rs 700-crore to a Rs 5000-crore company, provides a range of financial services such as tractor and construction equipment financing across rural areas. We entered the microfinance sector in 2008 and currently, we are adding 70,000 to 75,000 clients each month. Our gross loan portfolio has grown to Rs 450 crore.
MF Focus: L&T Microfinance has primarily focused on the South Indian markets since it was established in 2008. Is the MFI foraying into Orissa and Gujarat due to the saturation of the microfinance market in South India?
DD: The saturation of microfinance markets in South India is much hyped. Many districts in coastal Andhra Pradesh and Tamil Nadu do not have a high concentration of MFIs. The concentration of MFIs is higher urban areas – take for instance, the outskirts of Chennai.
Rural financing remains our core competency and there’s much scope for growth in the villages of South India. L&T Microfinance has gained prominence in Andhra Pradesh and Tamil Nadu, and it has also made in-roads into Maharashtra and Karnataka. We are foraying into states such as Orissa in order to establish a pan-India presence.
MF Focus: The Indian microfinance sector, according to industry experts, is entering a consolidation mode. Are you planning to acquire regional MFIs to establish a pan-India presence?
DD: L&T Finance is part of a nationally reputed conglomerate. We will continue to adopt an organic growth strategy to enter new markets and there are no plans for takeovers.
MF Focus:Are you exploring the possibilities of tapping private equity?
DD: We have the financial backing of our parent company and private equity funding is not needed. However, we may scout for opportunities in the future to enhance technical expertise through private equity investment.
MF Focus:. Are you providing business development services for micro-entrepreneurs?
DD: We are doing a pilot study on livelihood models to foster micro-entrepreneurship. L&T Microfinance needs a critical mass of clients before rolling out business development services.
MF Focus:. Is L&T Microfinance also reaching out to micro-entrepreneurs who are graduating into the SME category?
DD: The Gram Bandhu scheme has been developed for joint liability groups. Micro-entrepreneurs who can graduate into the SME category may avail of the Udyog Bandhu scheme. However, it will take at least a few years to make a substantial number of Gram Bandhu clients graduate into Udyog Bandhu scheme.
MF Focus: Are you having a social performance management system in place?
DD: A critical mass of clients is needed before we implement a SPM system. We are still concentrating on establishing our presence across the country.
MF Focus:. The debate on mission drift in the microfinance sector has intensified in recent times. How does L&T Microfinance strike a balance between its social mission and financial targets?
DD: As a publicly listed company, Larsen and Toubro has contributed to nation building. L&T Microfinance’s mission statement has a strong thrust on socio-economic empowerment.
Socio-economic change cannot be brought about by merely providing loans to women micro-entrepreneurs. L&T Microfinance implements CSR projects in the villages in which it is operating. We have provided education and sanitation facilities to empower rural communities.
Microfinance Focus, Oct. 28, 2009: Agatha Sangma, Indian Minister of State for Rural Development, said on Wednesday that NREGA would soon transform from its current wage-based program to facilitate self-employment among the rural population.
Releasing the “State of India’s Livelihoods (SOIL) Report 2009″, the second in series prepared by ACCESS Development Services, the minister underscore the need for sustainable progress in rural sector.
Ms Sangma, the youngest member of the Indian council of ministers, also pointed out the need for providing market access to the rural population and sought the private sector to take lead in it.
Keeping aside her prepared speech, Ms Sangma said the government’s popular rural employment guarantee program NREGA has seen increasing criticism but assured to make it more effective and transparent soon. Further, she said NREGA will eventually be transformed from its current wage-based employment program to self-employment program for the rural people.
To achieve this objective, the government has been holding Saras Melas every year providing platform to rural artisans and farmers to exhibit and sell their articles or produce. But these are short term programs and invited the private sector, especially practioners in the field to facilitate rural employment on sustainable basis.
The SOIL report weighed both positive and negative trends in the sector especially from the NREGA program last year and noted major concerns in the light of global crisis as well.
The report said the NREGA with sufficient cash inflow succeeded to cap migration of rural population but nonetheless, it was beset with reports of corrpution and transparency during implementation.
Microfinance Focus, Oct. 27, 2009: Will the business correspondent model work to bring the poor in remote areas of the country into the ambit of financial inclusion?
First, the experiment with the no-frills accounts which the country’s central bank RBI has pushed ahead faced failure.
Now the BC model, which has the ability to serve the poor in rural and remote areas, has no inherent demerits but the implementation mechanism requires openness, according to speakers at the microfinance India Summit 2009 being held in New Delhi.
“There is no fundamental problem per se but operating and upgrading IT infrastructure is more important,” said Manohara Raj, head of Microfinance at HDFC Bank.
Bankers have expressed concerns over legal requirements which may slow down the pace while telecom representatives were confident to implement the model with less legal requirements like opening banks and then carry out cashless transactions.
Finally, the shot came from Vikram Akula, SKS Microfinance chairman, who was clearly against the RBI’s restrictive policies. “Allow MFI/NBFCs to be BC agents. If RBI is intellectually honest, it should allow us to be business correspondent agents. It will reduce risks involved in cash transactions in rural areas,” he added.
Microfinance Focus, Oct. 26, 2009: India’s microfinance icon Vijay Mahajan, who had just finished an arduous moderation of heated discussion at a session of the Microfinance India Summit 209 on Monday was in for a surprise when he entered the other room where the awards were to be announced. He was selected for the award for his lifetime contribution to the microfinance sector. The jury has also given a special award to late mentor Sitaram Rao for his contribution to the sector.
The institutional category award was given to Bandhan which has created history in less than a decade since its birth. Bandhan CEO Chandra Shekhar Ghosh received the award on behalf of Bandhan.
VIJAY MAHAJAN, AN ICON
Born on Oct.1, 1954, Vijay Mahajan graduated from the Indian Institute of Technology, Delhi and joined Philips as a marketing executive. After a four-year stint, he joined the Indian Institute of Management, Ahmedabad. After graduating from IIM-A in 1981, he started working in the rural development field in Bihar, the poorest state of eastern India. In 1983, he established an NGO, PRADAN which works with over 120,000 poor households, promoting livelihoods and community institutions.
In 1996, Mr Mahajan set up BASIX as a “new generation livelihood promotion institution”. Till March 2008, BASIX had helped support the livelihoods of over a million poor households in the agriculture, allied and non-farm sectors by extending micro-credit worth over Rs 1,200 crore (US$300 million). BASIX goes well beyond micro-credit to offer a “triad” of livelihood promotion services including savings and insurance services, agricultural/business development services and institutional development services to rural producers and their
groups.
Mr Mahajan was a member of the Raghuram Rajan Committee on Financial Sector Reforms and the Rangarajan Committee on Financial Inclusion. He is a member of the Insurance Regulatory and Development Authority (IRDA) and the Rajasthan Mission on Livelihoods. He serves on the Boards of ASSEFA, Gram Vikas, ARAVALI, DSC and the Institute of Rural Management, Anand (IRMA), and on the Executive Committee of the
Consultative Group to Assist the Poor (CGAP), a global microfinance body.
In 2002, he was selected as one of the 60 “Outstanding Social Entrepreneurs” at the World Economic Forum (WEF), Davos. In 2003, he was conferred the Distinguished Alumnus Award by the IIT, Delhi.
In 2008, Mr. Mahajan was elected as a Member of the Ashoka Fellowship, a global association of leading social entrepreneurs. Vijay was also selected in India’s 50 Most Powerful People 2009 by the Business Week.
Mr Mahajan has been an advisor to the Planning Commission, Government of India, the state governments of Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Sikkim, and to the RBI and NABARD. Vijay has co-authored a book “The Forgotten Sector” on rural, non-farm sector in India. He has published over 50 articles on rural livelihood, development and micro-finance in international journals.
Mr Mahajan was a member of the Raghuram Rajan Committee on Financial Sector Reforms, chaired by Raghuram Rajan and also of the Rangarajan Committee on Financial Inclusion.Vijay serves on the Insurance Regulatory and Development Authority, the Micro Finance Development and Equity Fund. He is the Principal Advisor to the Government of Rajasthan on Livelihoods. He serves on the Boards of Association for Sarva Seva Farms (ASSEFA), Gram Vikas, ARAVALI, Development Support Centre (DSC) and on the Executive Committee of the CGAP, a global consortium on microfinance.
BANDHAN MICROFINANCE
Kolkata-based microfinance institution Bandhan has many credits to its name. Apart from diversifying its microfinance loans into every possible stream, it hit headlines recently with its new product for the unemployed youth called “Employing the Unemployed”.
In less than eight years, Bandhan has emerged as one of the the largest microfinance institution in India and was ranked second in the world by Forbes magazine in its first ever listing of the world’s top 50 microfinance institutions (MFIs). Bandhan’s steep rise in volume and reach is often attributed to its variety of products within the microfinance sphere.
Last year, it launched free schools in villages for underprivileged children up to the age of 14 years, who couldn’t ever go to school or had to drop out because their parents couldn’t afford to educate them.
Bandhan – meaning “togetherness” – offers microfinance services to poor women in the state of West Bengal. Founded by Mr. Chandra Shekhar Ghosh in November 2000, Bandhan started operations in 2002 and is currently registered with the Reserve Bank of India (RBI) as a non-banking finance company (NBFC).
Microfinance Focus, Oct. 26, 2009: African workers send home more than $40 billion to the region each year but restrictive laws and costly fees hamper the power of remittances to lift people out of poverty, according to a new report by the UN’s rural development agency, the International Fund for Agricultural Development (IFAD), stated a press release.
Remittances are sources of income for poor families, particularly in Africa and the Latin American and Caribbean regions. With the majority of poor not having access to banking facilities the potential of microsavings facilities for increasing financial stability by enabling them to plan and save for their future. Microfinance institutions (MFIs) in some countries are offering these services, but legislation in many countries does not permit MFIs to collect savings. Collecting savings can also benefit MFIs by expanding their capital base and reducing their dependence on external sources for funding.
“Sending Money Home to Africa” report was presented at the Global Forum on Remittances 2009, organized by IFAD and the African Development Bank (AfDB) in Tunis, Tunisia, on Oct. 22-23.
Globally remittances top $300 billion per year, outstripping foreign direct investment and development assistance combined. But while transfer costs have declined significantly in Latin America and in Asia, sending money home to Africa is still expensive as it costs as much as 25% of the money sent.
Access is also limited, with the number of locations where remittances can be collected for the entire African continent are the same as Mexico, which has only a tenth of Africa’s population. Furthermore, Between 30 and 40 per cent of all remittances to Africa are sent to rural areas, often requiring recipients to travel long distances.
The report finds that simply by expanding the institutions for remittance services to include microfinance institutions and post offices, the number of payment points would more than double.
The IFAD report highlights how new technologies, such as cellphones, and existing infrastructure like post offices or small retail outlets could increase the reach of remittance services. Algeria, where 95% of remittances are paid through post offices, could be a model for other African countries.
“Supporting this people-to-people money flow to rural areas of Africa is especially vital now because of the recession” noted IFAD Assistant President, Kevin Cleaver. “The power of remittances can be catalysed by easing restrictions and making it less costly for African families to collect this money.”
Most money sent home by migrants is spent on daily consumption but research shows linking remittances to financial services for the unbanked – savings accounts, loans and insurance – allows even the very poor to save and potentially invest in the development of their community.
The Global Forum on Remittances 2009 is hosted by IFAD in partnership with the Africa Development Bank (AfDB) and in collaboration with the Inter-American Dialogue. The 2009 Forum has tried to asses trends in remittances to Africa, amid the financial crisis, and identify policy solutions.
The International Fund for Agricultural Development (IFAD) is an international financial institution and a specialized UN agency based in Rome – the UN’s food and agricultural hub. It is a partnership of 165 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD). Since 1978, IFAD has invested $11 billion in grants and low-interest loans to developing countries, empowering some 340 million people to break out of poverty.
Microfinance Focus, Oct. 25, 2009: What spurred Kolar’s large-scale delinquency? The question dominated the evening session of Microfinance India Summit being held in New Delhi on Monday.
While the day began with a pomphlet distributed by Ramesh Bellamkonda, Managing Director of BSS Microfinance Pvt. Ltd.. Teh pmphlet has pointed out that the delinquency problem in Karnataka was triggered by religious considerations and urged immediate attention of the microfinance community and regulators. Apparently, the local religious leaders have issued a decree instructing the community borrowers not to repay loans to microfinance institutions citing religious norms against interest collection or payment.
While a delegate referred to AKMI (Association of Karnataka Microfinance Institutions) report, others wondered whether it should be examined more in depth to find the root cuase. It may be recalled that the defiance in Kolar has spread to four other districts in Karnataka including Mysore, Ramanagaram, Chikkaballapur and Tumkur.
More than ten from the audience raised the issue and the discussion was eventually stretched from high interest rates to multi-lending. One delegate has suggested to introduce Islamic Microfinance product to deal with such developments. Another sought to know if it is possible for MFIs to collect money without any sort of force.
Another suggestion was to provide incentives to borrowers to repay loans.
From Microfinance Focus in New Delhi
Oct. 26, 2009: Has the growing commercialization of microfinance institutions impacted the MFIs’ commitment to address alleviating poverty as their primary objective?
CS Ghosh: Irrespective of its impact, I believe that commercialization is necessary. An institution cannot become sustainable until it is commercialized. Subsidy can never give sustainability, it will only give dependence – all of us are aware of this, but tend to ignore this sometimes. In order to alleviate the large scale poverty in a big country like India, the institutions ought to scale up. We must remember that ‘Small is beautiful but big is necessary!’And if one scales up, commercialization is bound to happen. If a MFI is looking at making a significant contribution towards poverty alleviation, then it has to increase its volume. Cost effectiveness and efficiency is also taken care of when one increases its volume.
The commitment concern is being raised as some commercial minded people are entering the sector since they are allured by the immense scope of growth and success of the microfinance sector. I think I agree that the growing commercialization does have a hit on the commitment, for instance, the PE investors push for higher profits – and this does have an impact. But at the same time it may not be right for us to hold them responsible totally for this growing commercialization. There are other factors also that play behind this. But it all depends on the leader, I guess. His mindset and inclination to work for the poor has to be on the right track. If the leader is committed to alleviate poverty as its primary objective then the institution shall also be unswerving to its goal.
Microfinance Focus, Oct. 26, 2009: Releasing a study on Cooperative-owned or managed microfinance institutions in New Delhi on Monday, Princess Maxima,Special Advocate for Inclusive Finance for Development of UN Secretary-General Ban Ki-moon, sought to know the reasons behind the failure too, if any.
The study by sector specialists Girija Srinivasan and N. Srinivasan on six microfinance institutions has examined and recommended suggestions to make COMFIs more successful.
The study was based on six case studies of community owned institutions and the finding s included the best practices, challenges and made recommendations for future institutions that would come up in the sphere of community ownership of MFIs. The issues examined related to initial mobilisation, creation of suitable legal structure, leadership, management and governance, professionalising external linkages and sustainability.
Speaking on the occasion Pierre Hedel, Managing Director Rabobank Foundation said, “with a market share of 150 million farmers, the Indian microfinance sector is considerably more developed compared with other emerging countries. In the past couple of years, Rabobank Foundation and Rabo India Finance Limited have done considerable work in this sector.”
Rabobank Foundation, the knowledge partner of the Microfinance India Summit 2009 has commissioned the study, “Community-Owned Microfinance Institutions: Enabling double bottom-line impact”.
Vipin Sharma, CEO of ACCESS Development Services, said, ”community based microfinance organisations have a new meaning in the current sectoral context where’s there’s overdue emphasis on commercialization of the sector and rapid scale. “
Microfinance Focus, Oct. 26, 2009: Speaking at a round-table on community-owned microfinance institutions as part of the Microfinance India Summit 2009 in New Delhi, Princess Maxima of the Netherlands and UN secretary-general’s special advocate on microfinance, had one direct question for the leaders of microfinance sector in India. “Are the cooperatives of SHG model affected by over-politicization?”
The first response came from Mr U.C. Sarangi, Chairman of NABARD, who explained that large scale state participation necessitated by funding from the state may have led to the situation. Further, the subject recently moved to State List, whereby provincial governments exercise more control than the federal or central government, would have led to political interference since the state governments seek to have final control on all these cooperatives whom they are funding. Eventually, it has led to empowering of the state with an overriding authority in managing these institutions, he added.
Speaking to Microfinance Focus after the round-table session, Mr Aloysius Fernandez of Mysore-based MYRADA said it was essentially a two-folded structure in which these cooperatives operate. First, the government interference and secondly, the local power structure. “Money flows from the government,” he said categorically.
Poor people go to local secretaries of these cooperatives for money or help. While the secretaries immediately lend money after taking their share or cut, they also provide jobs to these rural poor who badly need them to repay their loans or to sustain, he explained the process and said the politicisation is an outcome of the local power structure.
Microfinance Focus, Oct. 26, 2009: India’s Microfinance institutions reached 76.6 million against last year’s 59 million, according to the “State of the Sector Report” released on Monday in New Delhi.
Compiled by N. Srinivasan, the report was released as part of the annual Microfinance India Summit 2009 at Hotel Taj on Monday morning.
Some quick highlights of the report are:
* MFI’s have recorded about 8.5 million clients during the year 2008-09, a growth of 60% over the previous year.
* More than 50 percent of low income households are covered by some form of microfinance product
* The total outstanding microfinance loans posted a growth rate of 30% or 359.39 billion over the last year’s level of Rs 229.54 billion.
* The overall coverage of the sector is estimated to have reached 76.6 million against 59 Million last year.
* The SHG loan outstanding has increased by Rs. 71.5 billion with an addition of 6.9 million clients.
* At the current growth rates, MFIs might outstrip the SBLP in portfolio volumes soon.
* Some parts in Karnataka faced entrenched default constituting a portfolio share of less than 0.5%.
* MFIs so far reached 234 of the 331 poorest districts identified by the government.
* SBLP regstered a decline of number of women SHGs from 82.5% in March 2007 to 80.4% in March 2008.
* The microfinance penetration index shows especially in Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh compared to extraordinary levels reached in Andhra Prades, Karnatana and Tamil Nadu.
While last year’s report focused on the increased risk in the sector, this years’ report takes stock of the uninterrupted growth rate of the sector despite several internal and external adversities.
STRAIGHT FROM THE FLOOR:
Sushil Kumar, Livelihood Specialist (North), V-Shesh
Indian microfinance is quite different from Bangladesh or any other country’s MF sector. We are different in various regards, i.e. culturally, politically, religious and so on. We need our model rather then then experimenting with non-idealist models and implementing models that are by and large failures of finance. But this will take a generation.
Better disclosure will create more faith in the sector
Shailendra S. Bisht, Assistant Professor, IBS (Hyderabad)
Improvement in disclosures is required to make the sector more accountable. Improved corporate governance would enable more a more transparent and regulated sector. It would also create more faith in customers, regulators and competitors.
MFI should be a Profit Making body and not as a Super profit making body. Super profit making is just an exploitation
Elias Ghosalkar, Head, Micro finance Development initiative, BNP Paribas India.
Annual interest rates have no meaning. Rate of interest has to be linked with rotation of money in the business i.e. How money is used by the clients – whether the rotation of money is 5 times or 10 times in a year.
Y.C .Nanda, Former Chairman, NABARD.
Micro finance portfolio constitutes 1.3% of total bank credit, which means that it is a Significant sector as it exceeds 1% of total bank credit. If the share of micro finance exceeds 4% of the total bank credit, then it will become the “Systematically Important sector”
N.Srinivasan, Author, Micro finance India-State of the sector report 2009.
NABARD’s goal is to make the SHG Bank linkage program reaches 100 million households by the year 2015
U.C.SARANGI, CHAIRMAN, NABARD.
Social Performance Management (SPM) Tools
Gomby Maramba (Research Director, NWTF)
Ben Simmes (Deputy Managing Director, Oikocredit)
Suresh Krishna (Managing Director, Grameen Koota)
Costs Associated with Integrating SPM tools;
Demonstrate ways of integrating SPM tools in current operations (information management)
Gomby
Ben Simmes
Suresh Krishn
Gomby
Introduction
Joez Deshmuk-Ranadive, Director, School of Microfinance for Women
Issues facing Women in Leadership positions:
Smita Premchander, Founder, Sampak