Comments for Microfinance News

Comment on Recent Microfinance crises, not because of financial crisis but rapid growth: CGAP Report by Asifur Rahman

Asifur Rahman — Wed, 10 Mar 2010 02:03:45 +0000

I also agree with the comments above, “It is not a very simple”. In this regard I would put the example of Bangladesh. In 2005 there were overlapping among the MFI clients: total number of clients were more than the number of families eligible for MF. Still in 2006, 2007 huge fund was allocated to MFIs for disbursement from different funding agencies.

As an obvious result, the borrowers became over ambitious (May be termed as greedy). At a point of time it was believed by the MFI leaders that 80% of the people had multiple loans from different MFIs. In an unpublished survey showed that about 30% of the people are overburdened with loans. The large MFIs started responding to the crisis from late 2008 but still the crisis is not in control.

Similar thing I have seen in Cambodia. The MFIs increased their loan size and overlapping put an extra pressure.

Last of all I would like to say the information system in MFIs are not well in placed. It is very difficult to deploy traditional information systems in MFIs. But we need to find a workable solution for them (now we are doing a research in Kyushu University Japan in this regard). Because of absence of such system, the management cannot response at an appropriate time and they cannot be proactive in responding the crisis.

Regards
Asifur Rahman
Research Fellow, SLRC, Kyushu University, Japan

Comment on Live Debate –I: Microfinance industry experts debate over Inflated Interest Rates by Fehmeen

Fehmeen — Tue, 09 Mar 2010 20:12:19 +0000

I know someone who works in a microfinance bank. They recently said MFIs are in this for the money. I was partially shocked but them remembered that MFIs in Mexico charge interest rates that are around 100% and they yield returns of around half that value. It’s bizarre to justify high rates with soaring costs if the return offered is this high.

Comment on Microfinance equity investments boom, despite unprecedented rise in delinquencies: CGAP-JP Morgan Report by Fehmeen

Fehmeen — Tue, 09 Mar 2010 20:03:49 +0000

Another report by CGAP mentioned the reason for the rise in delinquencies was the rapid growth of the sector. Keeping that in mind, equity investors continue to hold on to the high returns microfinance investments offer them

Comment on IFC, African Central Banks to promote credit reporting, financial access in Ethiopia, Mozambique, Tanzania by Fehmeen

Fehmeen — Tue, 09 Mar 2010 20:00:54 +0000

It is shocking these countries do not have solid credit-reporting mechanisms in place because they are central to every financial system. While formal credit agencies are likely to benefit borrowers in the middle and upper class, there is also a solution that can target the poor. A while back, I came across a case study titled, Mobile Banking – The Key to Building Credit History for the Poor? by Liu and Mithika. The title is self-explanatory. The idea is revolutionary

Comment on Spl article: A Pragmatic business model for Microfinance Institutions to finance SMEs by Fehmeen

Fehmeen — Tue, 09 Mar 2010 19:54:02 +0000

A good read. I’d like to add that some MFIs are beginning to share their marketing resources with their clients in order to maximize the leverage of existing resources. As for the unwillingness of MFIs to partner with their clients, if solutions based on islamic finance are introduced, the issue would be resolved instantaneously.

Comment on Avoiding a Microfinance Bubble in India: Is Self-Regulation the Answer? by Amit Bhushan

Amit Bhushan — Tue, 09 Mar 2010 06:14:12 +0000

While the industry is worried about the extent of overfinancing that it may have landed into, however much of its sales depends on a single product i.e. Loans. Though some of the microfinance entities have embraced other sources of revenues likes sales of Insurance (Life/General/Health), however much reliance is on client addition including portfolio growth of Loans which gives growth in income while there exists no model to measure RAROC when a client is overbanked/has more loans than payment capacity justifies.
Thankfully, the opportunity thrown by Budget announcement of adding new banks can be one of the good opportunities for MFIs. They should try teaming up with telecom companies to explore cheap transaction banking opportunities for their customers for which they shall be required to convert to banks. The telecom services based banking model has the capability to bring down transaction costs for payments substantially as has been the experience in Mexico & some of the African countries & provide opportunity to deepen & stabilise client relationships for MFIs. Thus, it could be a win-win opportunity for both the telecom company which have been exploring ways to enhance revenues through Value Added Services & MFIs which want other products to sell to overbanked customers (which is a strong need because if an MFI starts tightening, it becomes first choice for default). The model allows MFIs to remain in business without taking enhanced loan exposure in overbanked client.

Comment on BRAC founder Fazle Hasan Abed to be Knighted by sarwar

sarwar — Mon, 08 Mar 2010 16:21:17 +0000

i feel proud of sir FAZLE HASAN ABED…and also for my born in Baniyachong…becouse this is also the villege of this great person…

Comment on Indonesia’s MBK Ventura tops MIX 2009 ranking of 100 microfinance institutions by Liz Muggeridge

Liz Muggeridge — Mon, 08 Mar 2010 13:57:03 +0000

Congratulations! please come and do the same in southern Africa!

Comment on Indonesia’s MBK Ventura tops MIX 2009 ranking of 100 microfinance institutions by Frans Purnama

Frans Purnama — Mon, 08 Mar 2010 11:16:06 +0000

Congratulations for Shafique Dhanani and his team for the achievement, we proud with you !

Comment on BASEL releases guidance for effective Banking Supervision to microfinance activities by Graziosi Ascanio

Graziosi Ascanio — Mon, 08 Mar 2010 10:52:47 +0000

We welcome the initiative of the Bank International Settlement’s aiming at providing guidelines for regulating the microfinance industry: Microfinance activities and the Core Principles for Effective Banking Supervision. All of us witnessed the exponential trend of microfinance industry over the past three decades. Recently, mainly because of that uncontrolled growth somebody talked about the death of the microfinance. In our recent contribution to the debate we expressed our view on the matter and concluded that the industry now needs a “break for refocusing” and allow the insiders to answer to a simply question: where now?
The Consultative document produced by Basle Committee on Banking Supervision should be taken as a great opportunity to provide a suitable answer to our question.

The document under review recognized the difficulties of providing rules for a business line that can be carried out by a wide range of institutions providing a range of financial services, such as lending, deposit taking, insurance, payments and funds transfers.

In our understanding of current trend, Microfinance has became the NAME OF A MULTIPURPOSE GAME played in different tables: poverty alleviation, entrepreneurship promotion, social enterprise, financial linkages with big financial providers and political instrument to fight the world crisis, besides their initial goal as a grass roots organisations lifting people from poverty. So, a guidance is necessary, but we do need more room for a necessary detail.
Ascanio