Microfinance Focus, April 30, 2012: Financiera Independencia, a Mexican microfinance lender of personal loans to lower income segment individuals and working capital loans through group lending microfinance, recently announced results for the three month period ended March 31, 2012. Independencia’ s net income for the first quarter of 2012 declined 62.0% year over year, but increased 69.6 per cent  on a sequential basis to Ps.34.2 million.

Here are the highlights 1Q12:

• Total loan portfolio reached Ps.7,367.8 million, a 12.3% year-over-year increase, driven by growth across all business units

• Independencia’s individual new loan origination increased to Ps.1,241.3 million, up 43.1% YoY and 2.8% QoQ

• Non-performing loans ratio increased to 9.8% in 1Q12 from 9.4% in 4Q11 and 8.2% in 1Q11

• NIM after provisions including fees increased to 43.9% in 1Q12 from 43.7% in 1Q11

• Provisions for loan losses rose to 42.7% of financial margin in 1Q12, from 42.3% in 4Q11 and 29.6% in 1Q11

• Funding cost decreased to 10.90% in 1Q12 from 11.63% in 1Q11 and 10.98% in 4Q11

• Net income was down 62.0% YoY, and up 69.6% on a sequential basis

• Equity to total assets of 28.6% compared to 30.0% in 1Q11 and 27.7% in 4Q11

• ROE in 1Q12 decreased to 4.4% from 12.1% in 1Q11.

Commenting on the results, Noel Gonzalez, Chief Executive Officer, said, “We are enthusiastic that our efforts to implement a series of strategies designed to further strengthen our operations are showing positive results. This is evident in the pick-up in loan growth at Independencia, our traditional business, and the main growth driver this quarter. Loan origination in our traditional business was up 43% this quarter, the highest rate in the last four years, reaching historical levels. These figures confirm the reversal of the deceleration trend in loan portfolio that began at the end of 2009.”

Microfinance Focus, April 30, 2012: Luxembourg Fund Labelling Agency (LuxFLAG) has announced that the first US domiciled Microfinance Investment Vehicle Access Africa Fund, has been granted the LuxFLAG Microfinance label.

LuxFLAG provides clarity for investors by awarding its international Labels to eligible Microfinance Investment Vehicles (MIVs) and Environment-related Investment Vehicles (EIVs). Its objective is to reassure investors that the labelled investment fund invests most of its assets, directly or indirectly, in the microfinance or environment sectors.

This label granted to Access Africa Fund is valid for one year. As of April 2012 LuxFLAG has granted 24 MIVs the microfinance label, representing approximately USD 3.48 billion in Assets under Management.

Access Africa Fund, a Delaware company, was formed by CARE USA. It is managed by MicroVest Capital Management and invests in microfinance projects in sub-Saharan Africa.

Microfinance Focus, April 30, 2012: A national consultation on “lnterest Free Microfinance through Cooperatives: Challenges and opportunities” will be conducted by the Sahulat Microfinance Society, a National NGO working for the financial inclusion through cooperative based microfinance. This consultation will be held at 5 PM in the India International Centre, New Delhi on 08th May 2012.

Prof. Dr M S Swaminathan, popularly known as the ‘Father of Green Revolution’ will grace the occasion as the keynote speaker.  Dr. (Ms.) Syeda Saiyedain llameed, Member Planning Commission will be the Chief Guest.

The Consultation aims to focus on steps to overcome the practical hurdles in registration process of interest-free Microfinance Cooperative societies all over the country.

The consultation will comprise persons from cooperative microfinance, academics working on poverty alleviation and organization and agencies working on livelihood. The Consultation is aimed at receiving the valuable pearls of experiences from the distinguished personalities who share our concern for human development and poverty alleviation.

Sahulat Micro Finance Society established in 2010 is a voluntary non-political, non-profit social service organization.

Microfinance Focus, April 30, 2012: Accion a microfinance organization has released a report providing the financial industry with important recommendations for creating and improving services to rural residents in Latin America.  This study is based on market research conducted in Colombia, Dominican Republic, Ecuador, Nicaragua and Peru and provides a detailed portrait of access, use and attitudes towards financial services by rural residents, both farmers and micro entrepreneurs.

The study try to understand the financial choices rural residents make and the attitudes they bring when they interact with banks and microfinance institutions.

The study findings were as follows: working capital credit and savings are the best known and most used formal financial services. However, while 80 per cent of respondents say they know about these products, only 40 per cent use them.

Debit cards, consumer credit and life insurance are rarely used. Relatively few people save in financial form. Surpluses are used primarily for investment. Many respondents consider that storing idle or “non-working” funds is a poor use of their money.

One in two consumers saves in monetary form, and among those who save, there is diversity in the purpose and use of savings.  Some maintain a “static” savings amount as a reserve or back-up fund (e.g., for health emergencies), while others seek to grow their savings over time.

The most significant barriers to formal savings are lack of convenience in operating savings accounts, bank fees and the perception that amounts are too small to deposit. Although rural residents were not well aware of the potential value of insurance, 70 per cent had experienced a shock event in the past three years.

Rural residents often get financial-services information through media such as speakers in the main square, mobile ads in moto-taxis, and leaflets.  Key community individuals, such as shop owners, and social, economic and religious gatherings (fairs and parish meetings), are also sources of information exchange.

Elisabeth Rhyne, managing director of the Center for Financial Inclusion at Accion, said, “The results from this study will prove a valuable tool in designing and marketing appropriate financial products that meet the specific needs of rural residents.  The findings can assist in the creation or improvement of products such as new savings models, debit cards, cashless payments or insurance products.”

“Ultimately,” Rhyne added, “the lessons gleaned from this research will help any microfinance institution wishing to better serve the hardworking farmers and microentrepreneurs in rural Latin America.  We believe they also hold insights that are relevant to other rural clients worldwide.”

The research was supported by the Inter-American Development Bank and based on survey interviews with people living in rural areas within reach of selected microfinance institution branches.  It targeted heads of households who work in an independent activity, specifically entrepreneurs and small farmers.  The study describes the rural population according to socio economic and psychographic variables, social interactions and financial behavior, considering credit, savings, investment and risk management.  Financial education and awareness and use of formal financial services are discussed.

Accion is a global nonprofit that works at building a financially inclusive world with access to economic opportunity for all, by giving people the financial tools they need to improve their lives.

Microfinance Focus, April 26, 2012: Women’s World Banking, Diamond Bank and Enhancing Financial Innovation & Access (EFInA) announced that they are partnering to advance financial inclusion in Nigeria for underserved women. They intend to provide them with an opportunity to become economically and socially empowered through access to a savings account.

Nigeria has a good per cent of women who are financially underserved. Women are good savers, but they need safe and convenient way to save. With this partnership Visa and EFInA will provide philanthropic funding for Women’s World Banking to support Diamond Bank in developing a commercially viable savings product tailored to the needs of underserved women in the country. Both traditional bank branches and mobile phones will be included as channels to deliver savings accounts.

This project will be executed in three phases. First, Women’s World Banking will work with Diamond Bank to research and understand what type of savings services Nigerian women want and need to improve their financial lives. Second, the organizations will collaborate on designing and piloting a product that will be available at physical branches and on mobile phones. Finally, a savings product will be launched nationally after a successful pilot. In addition, financial education for women will be provided in partnership with local community organizations.

Mary Ellen Iskenderian, president and CEO, Women’s World Banking, said, “Without access to savings services, women are forced to keep cash at home or in informal savings mechanisms – both risky options that could result in theft or loss. Women in developing countries are usually responsible for managing household budgets; gaining access to a safe way to save is often a critical stepping stone out of the cycle of poverty for the whole family.”

Joe Saunders, Chairman and Chief Executive Officer, Visa Inc., noted, “Around the world, there is a growing recognition that cash-based economies are a major impediment to advancing financial inclusion. Helping the underserved women of Nigeria to move physical cash out from under mattresses and into formal savings accounts – combined with the potential of mobile phones to enable access to these accounts –will be a significant step toward financial inclusion in the market.”

Financial inclusion has been a priority for the government of Nigeria. Last year, the Central Bank of Nigeria announced a commitment to reduce Nigeria’s financial exclusion rate from 46.3 per cent to 20 per cent by 2020. In addition, the country’s Cashless Lagos Project aims to reduce the use of cash and increase electronic transactions.

“We believe this is an opportunity to prove that meeting the needs of women in developing countries can be sustainable. The partners involved in this project are poised to build that business case, while also contributing to a real and lasting impact for women,” added Iskenderian.

Women’s World Banking (WWB) is a global microfinance network focused on women and working to ensure that financial institutions provide services tailored to women’s needs.  Visa is a global payments technology company that connects consumers, businesses, financial institutions, and governments.

Enhancing Financial Innovation & Access (EFInA) is a financial sector development organization that promotes financial inclusion in Nigeria. Diamond Bank is one of the leading banks in Nigeria.

Microfinance Focus, April 26, 2012: The provision of regulated microinsurance to the vulnerable people who live below the poverty line in Timor Leste will be made available soon. National Insurance Timor-Leste (NITL) has partnered with Tuba Rei Metin and Moris Rasik, the two microfinance institutions currently operating in Timor-Leste, to introduce the first ever regulated microinsurance products in the country.  With this partnership NITL promises to provide protection to nearly six per cent of the economically active population by the end of 2012.

There are more that 17,000 female clients across the 13 districts of Timor Leste. Tuba Rai Metin and Moris Rasik will distribute these microinsurance products to its clients while NITL underwrites the products. ‘Credit Life Plus’ and ‘Asuransi Protesaun ba Familia’, the two first products developed are mandatory as they are tied to the disbursement of new loans and provide coverage for the women and their spouses.

Pay-outs are linked to the size of the loan and product benefits have been tailored to meet the peculiar needs of the borrower in each organization. At a minimum, however, if a borrower dies, her outstanding loan balance will be cancelled and her family will receive $500. In the case of the borrower’s spouse dying, his family will receive, at a minimum, $250.

‘Credit Life Plus’ was launched by Tuba Rai Metin on 2nd April at their Dili branch. Moris Rasik will launch ‘Asuransi Protesaun ba Familia’ on 2nd May at their Ermera branch. These products are expected to cover more than 34,000 lives by the end of 2012.

“NITL is committed to develop the insurance and risk management industry in Timor-Leste that will in turn contribute to the positive long impact on Timor-Leste’s economic future, and we hope that this partnership with Tuba Rei Metin and Moris Rasik will enhance the quality of life for the widows, orphans and the needy. The provision of low cost insurance to thousands of Timor-Leste’s poor families constitutes a vast market potential. Microcredit is a rapidly expanding business in Timor-Leste and by offering insurance we are expanding the range of financial services available to families which previously had been excluded. The provision of microinsurance is thus in line with NITL’s social mission,” NITL Managing Director, Mr. Collin Yap, expressed.

Upon signing up for the product, Tuba Rei Metin clients felt that the price was fair and not too high. A client conveyed, “We like this product and think it can help us in the future.  After all, I don’t know my destiny, only God knows.”

The Inclusive Finance for the Under-served Economy (INFUSE) Programme facilitated the partnerships between the microfinance institutions and NITL through the provision of technical support and advice. The INFUSE Programme is funded by UN Capital Development Fund (UNCDF), United Nations Development Programme (UNDP) Timor-Leste, the Ministry of Economy and Development (MoED) and the Australian Agency for International Development (AusAID).

Microfinance Focus, April 25, 2012: Incofin Investment Management, Fairtrade International (FLO) and Grameen Foundation will establish a ‘First Fund’ to focus on the unmet demand of smallholder farmers for long-term loans.  Starbucks Coffee Company will also join as the fund’s first anchor private investor with a commitment of $ 1.3 Mn. The fund will offer investors both financial and demonstrable social results.

Long term loans will be provided to the farmers’ cooperatives and association as they will need to renew their farms and adopt new technologies and equipment. Smallholder farmers in developing countries have tremendous potential but are held back from growth because they cannot access the financing they need.

A survey conducted by Fairtrade International in 2010 revealed that Fairtrade farmers in Latin America alone say they need $500 million to cover their financing needs, more than half of this for long-term loans.

Unique offerings by the Fairtrade Access Fund include full range of loan types and technical assistance to enable farmers’ organizations to strengthen and secure their businesses, including a new facility that will allow farmers to receive timely information on Fairtrade certification practices, crop management and localized market information via their mobile phones.

The Fund will provide financing to farmer cooperatives and other producer organizations that are Fairtrade certified or are applying for certification. Through Fairtrade, farmers’ organizations will have improved access to international markets, a minimum price safety net and other economic benefits.

The first phase of the fund will include Latin America and the second phase will expand into Africa and Asia. The launch size will be $8-12 Mn and is projected to reach $25 Mn by the end of two years.

The three sponsors have committed the initial locked-up capital. Apart from a competitive financial target return with the possibility of a yearly dividend the fund has an open-ended structure that gives investors flexibility to redeem their shares.

The Fund represents a unique collaboration between a social investment firm and two global nonprofits that focus on helping people in developing countries improve their lives.

Loic De Canniere, Managing Director of Incofin Investment Management said, “The Fairtrade Access Fund is an effective way of promoting agricultural finance and achieving a high social impact for smallholder farmers. This new initiative is entirely in line with our social mission and underlines our commitment to supporting rural businesses in emerging economies.”

Tuulia Syvaenen, Executive Operating Officer of Fairtrade International, said, “In Fairtrade we’ve witnessed how farmers can transform their own lives if they just have the means. With the help of our partners and investors, the Fairtrade Access Fund will fill a critical gap so producers can drive change in their communities.”

Alex Counts, president and CEO of Grameen Foundation, said , “Grameen Foundation is pleased to be partnering with Incofin and Fairtrade on an innovative, holistic approach to solving the challenges that poor smallholder farmers face and ultimately help them reduce their risks and increase yields and income,” said

Ben Packard, vice president, Global Responsibility, Starbucks said, “Investing in smallholder farmers directly reflects our desire to strengthen coffee supply chains and improve the livelihood of farmers around the world. By working with the Fairtrade Access Fund, we come that much closer to our goal of establishing 20 Mn in farmer loans by 2015.”

Incofin Investment Management is a manager of investment funds that strive to achieve balanced social and financial returns. Fairtrade International (FLO) is an internationally recognized, non-profit organization that works to secure fairer trade terms so that farmers and workers in developing countries can invest in a better future for themselves and their communities. Grameen Foundation, a global non-profit organization, helps the world’s poorest people – especially women – lift them out of poverty by providing access to small loans and other financial services, life-changing information and unique business opportunities. Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest-quality arabica coffee in the world.

Microfinance Focus, April 23, 2012: For long-term sustainability MFIs must reduce their operational costs, said Anand Sinha, Deputy Governor of Reserve Bank of India (RBI). He was talking to reporters on the sidelines of a workshop on `Strengthening Microfinance Institutions’ (MFIs).

Sinha stressed that MFIs must strike a balance between financial and social objectives and have to maintain

appropriate corporate governance for customer protection. He further said that MFIs must reduce the operational costs for long-term sustainability. The MFIs must measure and disclose performance apart from changing the governance practices, he added.

He also said the Central Bank is not in favor of allowing MFIs to take small deposits. “After all, whatever legislation passes, we have to work with that. But, RBI’s position has been that deposit-taking should be limited to banks,” Sinha said.

Sinha told us that the Parliament is considering the draft Microfinance Institutions Bill, which allows MFIs to accept micro deposits. He also suggested that the MFIs will have to take care of the issues like concentration risk, reduction of operational costs and corporate governance to overcome problems of the fledgling industry.

“Southern region has seen major concentration of MFIs, both in terms of borrowing and number of clients. I think, they have to go to other regions of the country in order to diversify,” he said.

Sinha also informed that the bank earnings are expected to come under pressure due to the higher capital requirements for the implementation of Basel-III norms, Reserve Bank of India Deputy Governor Anand Sinha said in Mumbai.

He told that this pressure was not only for the bank’s earnings in India but also across the world. This is why the Basel-III implementation has been made longer, so that there will be least disruption. “However, if you have to do the same activity with significantly higher capital, there will be pressure on return on equity (RoE),” Sinha added.

Basel-III norms, proposed to be implemented from the beginning of 2013 till 2017, require the equity capital of a bank to be not less than 5.5 per cent of risk-weighted loans, as per the draft guidelines issued by RBI.

Anand Sinha also believed that the banks would have to increase productivity in order to protect their RoE.

Microfinance Focus, April 23, 2012: A strategic agreement that aims at helping develop small enterprises in Central and East Africa was signed between the Développement international Desjardins (DID) and the Belgian Investment Company for Developing Countries (BIO) recently. The agreement is specifically designed for investment in the entrepreneur financial centers (EFC) set up in that region by DID.

The agreement provides for a combination of investment and technical assistance for EFCs, with an initial investment going to an EFC established by DID in Uganda. This institution will meet the demand for financing of entrepreneurs in Uganda, where there has been lack of financing.

Claude Royer, DID Vice President for Investment and Management Contracts said, “We are extremely pleased with this new partnership designed to support a strategy that has already produced excellent results to date. In fact, the EFCs set up by DID in Zambia and Tanzania have helped maintain and create over 6000 jobs since their creation in the East African region. This is a major contribution to local social and economic development.”

Carole Maman, Manager Financial Sector at BIO noted, “We are convinced that this collaboration is an excellent way to implement the BIO mission. DID is, in fact, pursuing the same development goals and has demonstrated that it has solid experience in deploying effective and reliable microfinance institutions in difficult markets. Its expansion strategy covers countries that have established partnerships with the Belgian cooperation program such as the Democratic Republic of Congo, Uganda and Tanzania.”

This strategic agreement is fully aligned with BIO’s mandate. BIO will also look to maintain a balance between financial return and social performance while keeping a special focus on client protection, as it does for all its projects.

DID works with developing and emerging countries towards the goal of sharing the expertise and experience of Desjardins Group, the leading cooperative financial group in Canada. BIO is a Development Finance Institution (DFI) that works under the framework of Belgian Development Cooperation to support private sector growth in developing and emerging countries.