www.microfinancefocus.com April 2009
An Exclusive Interview With Dr. Yunus
Nobel laureate 2006
Social Performance MANAGEMENT The World's top experts on SPM...share their opinions Frances Sinha | Katherine Knotts | Anita Campion Chuck Waterfield |Koenraad Verhagen
Role of Technology in Social Policy Creating a Sense of Trust
Special Coverage Sa-Dhan`s National Microfinance Conference 2009 I-Focus
Misconceptions may endanger
Consumer Protection initiative Best Practices
www.microfinancefocus.com [ April 2009Analytical ] 1 Skills Challenges for MFIs in Rural AreasMicrofinance FocusBuilding
Cover Story : Transparency and Social performance Management
33.. An Exclusive Interview with 21...Social Performance: increasing accountability and transparency in microfiDr. Mohammad Yunus, Noble Laureate 2006, Founder –Grameen nance - Frances Sinha Bank 22...We Can’t Afford to be Social…!
30..Committing the Microfinance
23...The Complexity of social performance Management Anita Campion
Industry to Proactive Consumer 25...The time for Pricing Transparency in Microfinance Protection Chuck Waterfield
Best Practices 32... Building Analytical Skills: A New Product from Anita Campion
Special Coverage 37... Sa-Dhan`s National Microfinance Conference 2009
41… News 06… Editorial—The US Desk 05... Editorial-India Desk
27...A Special Interaction on Social Performance Management with Koenraad Verhagen Koenraad Verhagen
Horizon 13...The financial crisis shows that Better Performance metrics are Critical By, Peter Burgess 16...Challenging Task for MFIs in Rural Areas: Need for Developing Products & Product Marketing Strategy By, Dr. Amrit Patel
Reflection 07...Should Technology Inform Social Policy, or Social Policy Guide Technology? 09...Creating a Sense of Trust By, Bruce Meraviglia
Disclaimer Views expressed in the article/s are auPerspective thor’s own views. It does not necessarily represent those of Microfinance Focus . 11...Some misconceptions widely Held May endanger The Future of Micro Microfinance Focus does not take any re- financing institutions sponsibility of correctness of those data. By, Dr. Souren Ghosal Reproduction in whole or in part without written permission is prohibited .
Microfinance Focus [ April 2009 ] 2
BOARD OF ADVISORS
Team India Managing Editor
Mrs. Frances Sinha Mr. Sitaram Rao Dr G. Gandhi
EDITORIAL BOARD Head—Knowledge Management Dr. Souren Ghosal Associate Editor Christina Weichselbaumer Marketing and Outreach Manager Romain Testard
The US Managing Editor—US Jerome Peloquin Associate Editor Pamela Faulkner Associate –Knowledge Management Raghunand Makonahalli
Dr. N Jeyaseelan Dr. Amrit Patel
GOVERNING BOARD Mr. Suresh K Krishna , Chairman Mr. Ashish Gupta , Member Mr. M. V. Raman, Member Vikash Kumar , Executive Director
Head Office Microfinance Focus—India Avalahalli, Anjanpura Post , Bangalore( India)-62 P: +91.80.28436237 |f: +91.80.28436577 Email: firstname.lastname@example.org Web: www.microfinancefocus.com
Correspondent : New York Peter Burgess
Branch office Microfinance Focus— The US
Marketing & Technology Editor Bruce Meraviglia
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Correspondent : Nairobi [ Africa ] Jastus Suchi Obadiah
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Microfinance Focus [ April 2009 ] 3 www.microfinancefocus.com
Microfinance Focus [ April 2009 ] 4
From India Desk
Social Performance Commitment..., It is for your benefit!!! Most MFIs might not have consciously evolved SPM as their key objective to measure their performance but none of them could evade their responsibility to do good to the society as their sole objective is to fund the poor who are denied access to fund from other financial institutions and that itself leads to transformation of the society by empowering poor people to earn their livelihood by pursuing some business. or farming. However it is true most of the MFIs in their vision statements emphatically brought out that they primarily aim to alleviate poverty and empower poor people to become self dependent, “sustainability” mantra, by an emphatic group of stakeholders, or such as” increasing efficiency” or “providing a good return to private equity investors of-late, with all positive connotations that it is good for MFIs , however it caused a stiff challenge and apprehension to strike the balance between two bottom-lines. And of-late it drives to create strategies for their commercial success rather than to achieve much desired social objective of poverty alleviation. It has therefore become imperative to highlight the SPM as a measure of success of MFIs rather than solely depending upon their vision and mission statements, as most of them have emphatically highlighted this objective in their mission and vision statements.
Vikash Kumar Managing Editor—India Write to the Editor email@example.com
It is obvious therefore to highlight the need to give stress on SPM and accordingly to enhance efficiency, reducing charges including interest rate and helping poor to be engaged in a sustainable business or farming. No doubt it is a stiff challenge but it also provides healthy competitive edge to serve the poor. In this regard I would like to quote Katherine (Institute of Development Studies), in her emails to some of the popular list -serve, she said “The data reveals that in poorer regions, branch operating costs per client are not necessarily higher...” Similarly another Asian MFI has gathered informal feedback that those branches that do not consistently implement “social development” training tend to have a higher portfolio at risk than those branches that did.” In view of these it is obvious that more and more MFIs should strategies for social development in their economic activities. In fact it has to be clearly understood that need not pursue social activities separately as their economic activities itself if appropriately strategies would yield social benefits by ameliorating poverty. In this context, it would be necessary to develop tools to measure SPM and keeping this growing need in view it has been decided that this journal should bring out more vividly the concept of SPM and also the various types of measures developed to assess the progress in this regard. However one should not take it amiss as we acknowledge that many of our MFIs have already pursuing much more than what we would highlight in our magazine or in general a discussion going on. In fact we would be drawing heavily from their experiences. In fact an attempt would be made to make it universal and constantly improving compared to an agreed standard measurement. We also recognize that all other important stakeholders in Microfinance have a major role to create an enabling environment.
I am sure our readers would welcome this coverage and also provide their own inputs in this regard to make it more rich and acceptable to all MFIs not only www.microfinancefocus.com Microfinance Focus [ April 2009 ] in5 India but globally. - Vikash
From The US Desk
Editorial No Social Mission? No Microfinance! Let’s stop providing grants, subsidies, and regulatory relief to those MFI’s who have abandoned or fail to live up to their social mission agenda.
The need for “Social Performance Management,” is a clear indicator of substantial mission drift within the Microfinance sector. Presently, Microfinance is engaged in an ongoing debate over the morality and ethics of the micro credit movement. Our magazine believes there is a pressing need to establish a shared understanding, of the vision, role, and function of global microfinance. We also believe the time for studying the problem is long past. It is time for ACTION! Is the Microfinance Institution (MFI) a social mission organization with banking and financial component, or is it a micro credit bank with a social agenda? Or are some, as Jonathan Lewis states in his paper published by The Stanford Social Innovation Review, Summer 2008, merely, “Microloan Sharks.” Microfinance Focus Magazine firmly believes that the role of Microfinance is to function as an instrument of economic and social justice If an MFI can maintain its social mission while achieving sustainability and even profit, then we are total supporters. But, if in order to achieve economic goals the social mission is abandoned – if, and when the profit motive replaces the social mission, as its institutional purpose, then line has been crossed. Social Performance processes Jerome Peloquin and methods along with open and transparent reporting are the first defense against economic exploitation of the poor. Managing Editor- US Why is this necessary? It is necessary because the MFI is the lender of last resort for impov erished populations, those whose very survival depends upon their ability to eke out a meager Write to the Editor living for themselves and their families. The Economist Jeffrey Sachs of The Earth Institute in his book, The End of Poverty, flatly states that Eight million people die every year because they managingedicannot afford to stay alive. Economic exploitation of at this level is an offense against all hu firstname.lastname@example.org manity. There are those who will say that the MFI lending, no matter the interest rates improves the lot of the poor. The burden of proof is upon them. Let them prove it. Exploitation is never justified. The fact is that the reporting methods used by many MFI’s seem intentionally opaque so as to render an objective analysis of lending practices and profit difficult to impossible. There is a general consensus in the sector that existing financial reporting is less than accurate … Lacking an effective and enforceable set of either financial, or social performance reporting standards. It is impossible to tell which MFI’s are treating fairly and which are seeking to maximize their profits at the expense of their poor clients. Fee structures, lending policies and, upon occasion, intentionally misleading statements about how interest is charged are far too common. The sector is understandably sensitive to such charges. The frequency and specifics of ques tionable practices seem to be growing in the media, the internet, and in a host of books cur rently under development. What then, is the answer? Studies too numerous to mention here have been performed Should Technology Inform Social Policy, or Social Policy Guide Technology? Koenraad whose interview appears on page 26 and The Argidius Foundation provide funding for a series of reports on the subject. What is necessary is resolve. For any process to be successful it will need to have the full and unqualified backing of the entire range of funding and philanthropic organizations who currently support the sector. This is our opinion. Enough studying theMicrofinance problem. We believe time2009 has come www.microfinancefocus.com Focus the [ April ] 6 to act.
Should Technology Inform Social Policy, or Social Policy Guide Technology? - Bruce Meraviglia , Technology & Marketing Editor [ Microfinance Focus ]
he answer to the questions above is “Yes!” Since the beginning of mankind’s invention of new technologies, and new ways of using those technologies, the debate as to whether social policy should guide (or constrain) the development of technology, or whether technology should be created independently of social policy, with the outcome then informing those who create social policy as to what is possible, has raged back and forth. With the movement to create a Social Performance Management (SPM) standard gaining momentum, the issue of technology once again comes into play. While the creation of an industry standard set of SPM reports and criteria is both worthwhile and highly desirable, a key question becomes what will be the role of technology in this new set of processes? Any reporting standard, such as SPM, creates new processes that start with data collection, then analysis, reporting, and, finally, feedback for corrective actions or strategies. As the amount of data for any reporting standard such as SPM will only increase over time, shouldn’t proper consideration be given at the beginning as to how this data will be collected, analyzed, and reported? Shouldn’t there be considerations of how the data, and summarized information, is communicated to other organizations, and generally made available to those who have an interest in it? The use of spreadsheet software (most notably Microsoft’s Excel spreadsheet application) is widely used in virtually every banking institution with any computer support for data analysis and reporting. However, spreadsheets are not always the appropriate application for consolidating data from multiple organizations, providing suitable mechanisms for that data to be summarized, or making that data accessible to others. Although the spreadsheet may be appropriate for local use within each MFI (and cost effective for use within the MFI), if we are going to focus not just on the performance of a single MFI, in the absence of any industry benchmarks, but rather the performance of a single MFI taken in context of how the entire industry is performing, either within a specific country, region, or globally, then we need to discuss a different type of applica-
Microfinance Focus [ April 2009 ] 7
Reflection: Should Technology Inform Social Policy... ` tion for this level of data organization, manipulation, and reporting. In the traditional world of corporate-level computing, either for businesses or large banks, the standard approach to managing this type and quantity of information is the database application, in general, and the creation of a “data warehouse” construct within the database software. The use of a data warehouse approach allows for the collection of large amounts of data, provides for tools and methodologies for analyzing the data, carving out subsets of the data into smaller “data marts” (e.g., the creation of a mini data warehouse specifically for those MFIs in India, while maintaining the ability to consider the same information from those MFIs in a global analysis of the larger MFI community), the ability to summarize or selectively report aspects of the information, and the ability to allow multiple users to work on the collected data. The problem with discussing a generally accepted approach such as creating a data warehouse for SPM data breaks down into several areas that I have not heard discussed at any of the meetings I have attended here in the Washington, DC, area that have been jointly hosted by CGAP and the Imp-Act Consortium. The questions that need to be addressed, from a technical perspective, are: (1) Who will pay for the development of the necessary database software to manage the collected SPM data? (2) Who will take the lead role in providing a “home” for the collected data (in terms of computer hardware, software, and global access), and making it available to those analysts who are interested in it? (3) Who will pay for the ongoing salaries of the computer programmers needed to maintain and enhance the data warehouse application?
the integrity of the data is maintained? (7) What is the cycle time from when data is entered into the data warehouse before it is either available for analysis or reports are made available? (8) How will the information gleaned from the collected data be used to improve the performance of the individual MFI? (9) Who will “own” the collected data, and, potentially, profit from the reports and analyses created from it? (10) What is the role of major technology companies such as Microsoft or IBM, or a an intermediary’s applications development group, such as the Grameen Foundation USA’s technology center in Seattle, Washington (USA), in this collection and analysis process? While I’m in general agreement with the need for the creation of Social Performance Management-type of assessment, analysis, and reporting criteria, based upon the meetings that I’ve attended here in Washington, DC, I wonder if we aren’t moving a bit to fast to agree that this should be done without a careful consideration of how it can be accomplished, who will pay for it, and who will own it. While we already have the MIX reporting some aspects of MFI performance data (but not of the proposed SPM type), and both the Imp-Act Consortium and CGAP cooperating in bringing these proposed standards about, I wonder, still, as to the “who” and “how” details necessary to bring SPM from theory to a tangibly beneficial system that will be worth using, and participating, in. I look forward to your feedback on our blog at www.microfinancefocus.com/blog . *****************
(4) How will the information be safeguarded against criminal attempts to access the data (if any) or potentially fraudulent modification of the data (such as occasionally happens on the publicly accessible Wikipedia application on the Internet)? (5) Who will decide which individuals or organizations have valid access to the data, or will it be made available in both raw and summarized form to all? (6) What form will the data be collected at the MFIlevel, such as a spreadsheet, and how will that data be entered into the data warehouse so that
Bruce is an expert and commentator on both technology and marketing. He is former Marketing Director for several high Tec start ups. Bruce currently serves as CTO (Chief Technology Officer) for a well known NGO. Currently He associated with Microfinance Focus as an “Technology & Marketing Editor” . He may be reached at email@example.com
Microfinance Focus [ April 2009 ] 8
Creating a Sense of Trust
Bruce Meraviglia , Technology & Marketing Editor [ Microfinance Focus ]
theme for this month’s issue is Social Performance Management (SPM), as highlighted in several of our articles. In our first Marketing Reflections column (February 2009), I mentioned that one of the primary roles of the marketing department was the creation of a brand image for its organization; in our context, the MFI it is a part of. A key to the creation of any brand, especially one that you would like to have enduring value, is the sense of being able to trust the company the brand represents. In the creation of that sense of trust, the marketing department should play a central role – the role being to communicate to those who are involved with the MFI (e.g., customers, employees, management, funds lending organizations, and regulators) that the MFI is credible, trustworthy, and transparent in the performance of its mission to lend to those individuals who are at the “Bottom of the Pyramid” (BoP) – the BoP represents the approximately 1 billion+ people who are the poorest of the poor, and usually unable to open accounts or receive loans from conventional banks.
Microfinance Focus [ April 2009 ] 9
Reflection: Creating a Sense of Trust ... `
Due to the lack of consistent reporting requirements to date within the MFI industry, and the lack of any widely accepted audit firms or criteria, each MFI is more often than not able to report only the information that will make it appear to be successful as a lending institution, if it reports anything at all. Furthermore, what it reports to regulators in the country in which it operates may be very different from what it publicizes to its customers or the intermediary institutions that arrange for funding to be made available to it. Given that many MFIs have loose reporting standards, or no reporting at all (especially in the areas of social performance), and that some MFIs have managed to tarnish the industry with their performance, the need to provide a means of measuring the MFI to determine who is performing well, not just in financial terms but also in terms of meeting the social obligations of the original MFI concept, is increasingly important to the intermediary institutions who provide funds (or funds guarantees) to the MFIs – a need that is moving from desirable to critical as the world economic crisis reduces the amount of funding available for microfinance.
and the marketing department, specifically, is to present the information gained in a way that generates a sense of accuracy, honesty, and trustworthiness. This means that the MFI may have to report information that reflects negatively on its performance – an example of this may be that the financial performance of the MFI is commendable while the social criteria have not been adequately achieved. The willingness to report that some aspects of the MFI have not achieved the stated goal or mission of the MFI, or to communicate management’s strategy for improving in those areas, such as SPM, going forward, will be a key test in the market as to how well the MFI is able to create that sense of trust with those who use its services, regulate it activities, or fund its operations. I look forward to hearing from our readers as to how the marketing department in your organization, whether you’re an MFI or intermediary, communicates such messages about performance and trustworthiness, as well as to what extent your marketing departments are even aware of the emerging SPM standards. Our blog is always open for your comments . ******************
In this aspect, the primary responsibility for presenting the MFIs record of performance in a manner that is understandable should fall to the marketing department; I do not believe that the marketing department should be responsible for collecting or analyzing the data, only for reporting it in a way that makes it understandable. It is, after all, the marketing department’s responsibility to craft the type and style of the information to be communicated to others that are outside the MFI.
Bruce is an expert and commentator on both technology and marketing. He is former Marketing Director for several high Tec start ups. Bruce currently serves as CTO (Chief Technology Officer) for a well known NGO. Currently He associated with Microfinance Focus as an “Technology & Marketing Editor” . He may be reached at firstname.lastname@example.org
The challenge for the MFI’s management, in general,
Visit our Blog to Read many more interesting reflections and Editorials … Visit Us : www.microfinancefocus.com/blog www.microfinancefocus.com
Microfinance Focus [ April 2009 ] 10
Some misconceptions widely Held May endanger
The Future of Micro financing institutions Dr. Souren Ghosal , Headâ€“ Knowledge Management , Microfinance Focus
t is unfortunate that even among tallest and pioneers of micro- financing, an unfortunate sense of overconfidence could be seen with regard to the immunity of micro financing institutions from the present looming financial crisis. This is really a sad phenomenon especially when highly respected pioneers like Mohammad Yunus could recently in Japan state that these institutions have not been affected by the recent financial crisis as because these institutions are rooted to real economy and operate not on papers but on live products like chicken and cattle. It is true financial papers as such are more vulnerable to risk but it would be fatal to assume that live products do not encounter market risk beside their inherent risk of mortality and sickness. Boost up Confidence
of financial institutions have completely shaken the confidence of common people of almost all over the world. Fate of Opaque Transactions In fact the confidentiality which was once sine-a-qua-non for all financial operations and as such avidly followed by all financial institutions till recent years but now looked down by most people almost all over the world. In fact this has become one of the most criticized operational strategies of banks and other financial institutions. It is evident from the recent pressure exercised on Swedish banks, which have been practicing opaque banking till date. to disclose the details of their clients despite their openly declared policy to hold and operate accounts of their clients spread out all over the world, through numbers and not in names and if in names that would be fictitious and not real. This age old practice is now seriously questioned by the regulators of almost all developed and emerging countries of the world for obvious reasons. In fact this is one of the impacts of present financial turmoil. Transparency has become almost a necessity to conclude any financial deal by the financial institutions.
It is true that at times such statements might be necessary to boost up morale of these institutions particularly when the economy is sagging and its lifting up by all means have become imperative. But one would not be able to keep people in dark and disillusioned for long particularly when people are fast getting enlightened due to the spread of education and information technology in emerging economies www.microfinancefocus.com like India and more so the recent opaque transactions Microfinance Focus [ April 2009 ]
Perspective : Some Misconceptions widely Held May endanger ... ` The Expected Impact The impact of the present financial crisis on micro financing is visible in two areas- funding and repayment records of these institutions. It is true that foreign funds availability to these institutions almost tripled during the period starting from 2004 to 2006 as has been brought out in a study made by CGAP. But the same study has revealed that very fast declining trend has already started and now the borrowing cost also has started rising. Beside this it has also been observed that some global banks have started withdrawing funds from these institutions and even local banks have become lukewarm in funding these institutions. Indeed these are ominous signs notifying the emerging slump slowly brewing up in these institutions. One should not however be dismayed as flow of funds from international finance corporation-one of the arm of world bank has been growing each year by no less than 55% each year. But as brought out by Elizabeth Littlefield, some global banks are pulling out and the cost of fund has been constantly rising due to liquidity crisis and constant exchange rate fluctuations. In fact most of the MFIs are finding difficulties in borrowing from their local banks. As one of the recent IFC studies has revealed that there would be potential gap of over $1.8 billion this would obviously reduce the resource raising capacity of MFIs and ultimately affect the growth of these institutions. Impact on growth and health of loans Moreover such constraints would further affect these institutions as these mostly provide short term consumption and business loans and therefore do not generate growth of the economy. It has been rightly observed by Justin Oliver of Centre for Microfinance of Chennai that borrowers are utilizing new loans from one MFI to pay off their debts to other. In a recent study made by IFC that top 150 MFIs have shown that their delinquency rate for 30 days have risen from 1.2% to 3%. This rise is obviously bad sign for future growth of MFIs as these institutions have been enjoying the reputation for a long time of very high level of repayment record-almost 99 per cent. Strategy to encounter the impact It would be necessary for these institutions to develop appropriate strategy to emerge as a growing institution for poverty alleviation and creating economic and social institutions to generate economic activities and social amenities for the poor so that they could have financially and physically healthy life. In this regard the first priority would be to create additional source of funding like taking deposits and equities from people and institutions like banks and insurance companies including private equity funds from
venture capital funding institutions. This strategy itself would compel these institutions to change the pattern of financing short term requirements of borrowers to a comprehensive project financing model. This model would help these institutions to tap large number of funding institutions and also to avail re-financing of their loans from central banks and specialized institutions like NABARD and SIDBI in India. It would obviously bring these institutions under the regulatory institutions of the country and that would help them to develop better management skill and operation policies and processes as these would have the benefit of offsite supervision of regulatory authorities of the country. Conclusion Such transformation and adoption of above strategy need detail preparation and obviously change in the mindset of promoters and executives of these organizations. It has been observed that most people like to jump on immediately accessible opportunity where least efforts and resources are needed. It is therefore not very surprising to observe that most of the micro financing institutions have taken the easy course where least competition exist and perhaps where opportunity exist to exploit, of course much less than money lenders, and charge high rate of interest without creating any resistance from the borrowers. But the objective of micro financing institutions is not exploitation and just to become less repressive than moneylenders and occupy the place so vacated by moneylenders without any revolt or resistance. Its objective is much more than this narrow path often pursued by these institutions. Its origin is with a very noble objective to generate inclusive growth and alleviate the poverty of neglected sector of the society by generating economic and social activities and facilities for them. This could be possible only when strategy of amalgam of public and private institutions is created both for funding, managing and sharing risks. This model is called public private partnership model and worth trying during the present critical period. *********************** About the Author: Dr. Sourendra Nath Ghosal holds a PhD in Finance and holds Master degrees in both commerce and Economics. He has experience taught for 18 years in colleges and university of Jodhpur Rajasthan; Worked as principal cooperative training college for about 2 years at kalyani w. b. He worked with United Bank of India FOR 22 years and retired AS G.M. credit. He has also authored several books and Papers published in several national and International journals & newspaper. You may reached him at email@example.com
Microfinance Focus [ April 2009 ] 12
Peter Burgess, New York Bureau Chief (Microfinance Focus )
The financial crisis shows that Better Performance metrics are Critical www.microfinancefocus.com
Performance metrics need to move beyond the financial
performance focus; and, the perspective of the organization and its clients ... and start to look at impact on the broader society ... and over a longer time. Dr. Yunus talks about the accomplishments of the children of Grameen's early clients. Ingrid Munro who started the Jamii Bora (JB) microfinance organization in Kenya talks about her early clients who were beggars who now are respected managers of the JB organization. Peter Ryan talks about the training that MicroLoan Foundation does in Malawi before a client gets a loan ... and then succeeds not only in repaying a small loan, but in building a growing little business and giving the family opportunity.”
ew York is at the center of the global financial crisis, not because the housing stock in New York plummeted in value, but because Wall Street in New York built a multistory financial house of cards on top of everyone else's house values. The “financial engineering” that this represents is not very sophisticated ... the financial institutions have earned fees for arranging the financing, and then put lots and lots of leverage in place so that a small improvement in revenue stream resulted in a way bigger improvement in the derivative revenue stream. This works when there are improved revenue streams ... but creates disaster very quickly when revenue streams deteriorate. Leverage is just as powerful on the downside as it is on the upside. Layer after layer of leverage and slicing and dicing makes it almost impossible to untangle. The fact that this mess seems to have taken highly paid sophisticated financial experts by surprise is difficult to comprehend. Clearly something very fundamental was wrong ... and it seems that there has been a complete disconnect between the score-keeping and the game ... a terrible misunderstanding of what role financial services play in an efficient market economy ... and a terrible lack of appropriate performance metrics. For a long time, Professor Muhammad Yunus has drawn attention to the inadequate system of performance metrics in modern society and called for Social Business Accounting that would take into consideration more than merely the financial profit that is derived from a business. He has operated Grameen Bank with a social benefit goal for more than 30 years and has been “successful”, whatever that means in terms of the financial metrics that are the prevailing norm. Grameen Bank, together with an interesting portfolio of nonfinancial activities, is growing rapidly ... is financially sustainable ... clients of the bank have progressed in socio-economic terms ... and Dr. Yunus and the Grameen Bank shared a Nobel Peace prize!
Microfinance Focus [ April 2009 ] 13
Horizon: That Financial Crisis shows that... ` The story of Compartamos in Mexico is more evidence of the need for a broader framework of performance metrics. The Compartamos organization has had rapid growth while also earning high margins ... a performance pattern that capital market analysts instantly translate into spectacular market valuations. When Compartamos chose to do IPO (Initial Public Offering) investors massively oversubscribed the offering. There is good news and bad news. The good news is that investors can be attracted to microfinance ... the bad news is that they might be only interested in the purely financial metrics. Compartamos has been valued on purely financial metrics and these will most likely conflict Compartamos in the future as it has to face the choice of social good or financial performance. The problem here is that the prevailing metrics used for the analysis of MFIs (microfinance institutions) are almost totally related to financial performance ... with the same short time horizon that has failed for every other sector. Activities that cost today but produce value tomorrow are of little interest to people looking only at financial returns.
pects of mainstream or capital market banking now also have microbanking on the radar ... and might well help to improve capital access for microfinance.
“The story of Compartamos in Mexico is more evidence of the need for a broader framework of performance metrics.”
One of the things that is striking about microfinance events is that there is a solid core of people who have been associated with the microfinance sector for a long time and appreciate that it has proven to be a very effective way of improving opportunity” for people who have been marginalized forever and helping them to be a little step up the socioeconomic ladder. Many want to retain the good aspects of microfinance while at the same time attracting more capital into the sector. This is a balancing act that presently depends on the goodwill ... or professionalism ... of people involved.
------------------ // -----------------In the last few weeks there have been Microfinance events almost every day within easy reach of New York. This is very encouraging, because five years ago microfinance was practically unknown and similar events attracted few attendees. University Microfinance Clubs have been established and the level of sophistication and knowledge of the club organizers and members is improving. Students are getting more and more opportunities to “intern” with microfinance organizations. But again ... there is good news and bad news. The good news is that more and more people are learning about microfinance, and the bad news is that a little knowledge can be a dangerous thing. Because the “quant” oriented accounting and MBA students are learning financial metrics without much of the social metrics, their orientation may well help push microfinance in the profit maximizing direction ... and at the moment those students who have an appreciation of non-quant values have very inadequate metrics to help them. This needs to change. In addition to the clubs that are driven by student groups at Universities, there are other clubs that are organized by professionals ... mainly young ... and usually with some affinity. Some of the big mainstream banks have microfinance clubs and their staffs are getting an opportunity to learn something of microfinance. This is an important development because people with exposure to various as-
However, there needs to be something more than goodwill and professionalism that secures the future of microfinance so that the populations at the bottom of the pyramid (BOP) are served. There needs to be performance metrics and independent score-keeping. These events are interesting ... but there is a lot missing. Most notably there is little that really communicates the huge social value of microfinance. Dr. Yunus tells that story of using $27 to get microfinance started and helping many women with this very small amount ... he tells stories of very poor people whose children are able to get educated and become doctors. Everyone who has worked at a microfinance branch in a village ... or who has spent time trying to understand the socio-economics of a village (as I have done) understands that money used in the way it is used in microfinance has the potential to do incredible good. An emergency microfinance loan of $10 ... that gets paid back in two weeks in the amount of $20 is a ridiculously high rate of interest ... but if the money was used to keep a child from dying, then the return on this money is way more than the interest. ------------------ // -----------------There are some interesting possibilities for paradigm change in accounting and broader performance metrics. Several different approaches may come together. There are new technologies that make it possible to collect and
Microfinance Focus [ April 2009 ] 14
Horizon: That Financial Crisis shows that ... ` aggregate data in cost effective innovative ways. Using computer technology for loan administration and accounting has been evolving for a long time, but its potential is only now being achieved because the user interface is now fully distributed. Better yet Internet and mobile technology is now opening a whole range of new possibilities. In some places these technologies can be used to report data ... the technology can be used as a part of the banking and money transfer infrastructure.
crofinance sector providing credit and other services. The “quality” of these MFIs is generally unknown ... but in aggregate they are likely to be important service providers into poor communities. Maybe this is a critical strength of the sector. Perhaps they as important as the Tier 1 MFIs that are well known around the world. Maybe the microfinance sector is strong when there are many different ways of delivering microfinance to the market. Maybe there is not one best way ... but merely many ways that are good.
Performance metrics need to move beyond (1) the financial performance focus; and, (2) the perspective of the organization and its clients ... and start to look at impact on the broader society ... and over a longer time. Dr. Yunus talks about the accomplishments of the children of Grameen's early clients. Ingrid Munro who started the Jamii Bora (JB) microfinance organization in Kenya talks about her early clients who were beggars who now are respected managers of the JB organization. Peter Ryan talks about the training that MicroLoan Foundation does in Malawi before a client gets a loan ... and then succeeds not only in repaying a small loan, but in building a growing little business and giving the family opportunity.
Sadly, investment money will migrate to the investment that has the best numbers ... and that means that Tier 1 MFIs and profitable MFIs may get access to capital markets, and the so called Tier 2,3 and 4 MFIs will not. Which brings us back once again to the need for performance metrics that address not only the financial metrics, but also the social value metrics ... and also metrics that are as efficient about Tier 4 MFI performance as they are about Tier 1 performance?
------------------ // -----------------The microfinance sector now has far more of the structure needed to link from the village to the capital markets than it did some years ago. There are people and intermediary organizations that have knowledge and experience. There are concerns however, that companies with large “names” but no microfinance experience will become involved and then “get it wrong”. Microfinance is not much like modern big banking ... it has a perverse characteristic of being best when it is really client centric ... and the clients are small ... something that is not easily reflected in prevailing financial performance metrics. Work is being done to improve performance metrics ... but it is not yet clear whether this work will deliver the needed paradigm shift. What seems to be happening is that improvement will be translated as more ... of what is essentially the same ... and as this happens there will be more overhead burden ... more cost ... and less performance!
There are grounds for optimism. Some of the people in the middle of mainstream banking understand the issues. They helped to pioneer getting investment into the microfinance space when most people would have argued it was impossible ... they have created a workable structure ... not perfect, but it has performed well, even during the turmoil of the past year. Missing, however, is a widely accepted system of performance metrics that embraces social benefit from microfinance as well as the financial metrics. ****************************
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------------------ // -----------------What went wrong and gave us this terrible financial sector meltdown? It seems there has been the perfect storm with many things all going wrong at the same time, and each element aggravating something else. As it turns out, it appears that “big” has been a part of the problem! Big has proved dangerous and fragile ... so it is good to know that there are hundreds of thousands of small MFIs in the mi-
Visit our website: www.microfinancefocus.com
Microfinance Focus [ April 2009 ] 15
Challenging Task for MFIs in Rural Areas Need for Developing Products & Product Marketing Strategy Dr Amrit Patel, Member â€“Editorial Board , Microfinance Focus
ndia has a century old Cooperative Credit Institutions having 106,400 Primary Agricultural Credit Societies at the village level with a total membership of over 125 million rural people. On an average one PACS serves six villages. Besides, there have been 47,468 branches of public sector and regional rural banks in rural & semi-urban centers providing banking facilities. However, while 45.9 million farmer households neither accessed credit from institutional agencies nor from non-institutional agencies, as many as 22.9 million were indebted to non-institutional agencies for loans, which are normally not provided by formal financial institutions. It is, therefore, a challenging task for banks, MFIs & Government to create enabling environment so as to bring 45.9 million farmer households within banking fold as a part of financial inclusion and facilitate 22.9 million households to redeem debt from the non-institutional agencies for which banks/MFIs should develop innovative credit products [including debt swapping] and formulate strategic marketing policy. Existing Rural Credit Scenario According to the National Sample Survey Organization data, 45.9 million [51.4%] farmer households out of a total of 89.3 million households in the country did not access credit, either from institutional or non-institutional sources and according to All India Debt and Investment Survey, as on end -June 2002 out of 39.2 million indebted households in rural areas as many as 22.9 million [58.4%] were indebted to non-institutional agencies. Of these, while 10.2 million [44.5%] were indebted to professional moneylenders, 4.9 million [21.4%] had sourced debt from agricultural moneylenders, followed by 0.6 million from landlords. It may be noted that between 1991 and 2002, number of indebted households in rural areas significantly increased from 27.2 million to 39.2 million [144.1%]. However, number of indebted households to non-institutional agencies sharply shot up from 11.4 million to 22.9 million [200.9%] during the decade as compared with from 18.2 million to 19.8 million [108.8%] indebted to institutional agencies during 1981-91.
Microfinance Focus [ April 2009 ] 16
Horizon: Challenging Task for MFIs in Rural Areas ` Table 1 Purpose of Lon
Number of House Holds in million* 15.1 [38.5%]
1. Farm business
Outstanding debt Rs.crore
1.1. Current expenditure 1.2. Capital expenditure
45,702 [41.0%] 15,828
2. Non-farm business
13,376 [12.0%] 3,121
3. Household expenditure 4. Unspecified
52,390 [47.0%] --
* Indicates multiple borrowing
plot, construction, addition/alteration of building for residential purposes, purchase of durable household assets, clothes etc. and expenditure for medical treatment, education, marriage, ceremonies etc.] in rural areas [Table No.1]. The Invest India Incomes & Savings Survey for the recent period [IIMS 2007] also revealed that rural households took a large portion of loan to meet financial & medical emergency and social obligations. These three purposes accounted for about 60 % of the loans availed of by indebted earners [persons in the age group of 18-59 years and earning some cash incomes] [Table No.2] The pattern of indebtedness of the households across different Asset Holding Classes [AHCs], representing the income levels, showed that the recourse to non-institutional sources was relatively high by lower income groups. In other words, as the income levels rise, the proportion of households borrowing from non-institutional sources tends to decline. [Table No.3 ]. This is supported by Invest India Incomes and Savings Survey  conducted by IIMS, which revealed that the earners at higher income level borrow from institutional sources than non-institutional sources. The data indicated that 70% earners in the annual income bracket of more than Rs.400,000 borrowed from institutional sources as compared with only 27.5% in the case of earners in the income bracket of less than Rs.50,000.
A major reason for increase in the overall household debt and Table No.2 : Purpose of Loans Taken by Earners from non-institutional sources in Rural increase in the share of house- Areas holds indebted to nonNumber Purpose of loan Number institutional sources between Purpose of loan Million million 1991 and 2002 was a significant 4.1 Farm/crop loan 4.6 increase in the current farm Purchase of house/land/real estate expenditure [comprising the Purchase of vehicle 0.8 Social obligation 5.8 current expenditure in the farm business for purchase of seeds, Purchase of consumer durable 2.1 Other consumption needs 2.6 manure, fodder, payment of wages, rent, land revenue etc. Meeting financial emergency 15.4 Education loan 1.3 and that for normal repairs and maintenance of buildings, ma- Meeting business needs 3.9 Others 1.1 chinery and equipment includ10.5 Total 52.4 ing transport equipment, furni- Medical emergency ture and fixtures and household durables meant for the farm business] and household exGovernmentâ€™s Role penditure [incurred on account of purchase of residential Social services such as health, education, water & sanitation
Table No.3 Distribution of Indebted Households to Non-institutional Agencies in Rural Areas, 2002 Asset holding
% in total
% in total
% in total
> 800,000 All
Microfinance Focus [ April 2009 ] 17
Horizon: Challenging Task for MFIs in Rural Areas ` and physical infrastructure such as roads, electricity, public transport, communication & marketing facilities have significantly a positive impact to substantially enhance credit absorptive capacity of rural households. The Government has an important role in creating appropriate policy environment and building adequate infrastructure & supply chains. This would facilitate efficient use of micro-credit to increase production and marketing of output by the people residing in rural and remote areas. Since low-income households borrow for medical, education and other emergencies from non-institutional sources health care, education and other services need to be provided to rural households at reasonable cost and on time, including appropriate medical/health insurance services at a reasonable premium and hassle free claim settlement procedure. Product development:. Product development is an essential activity for market-responsive banks/MFIs. As clients and their needs change, so the market-driven, demand-led banks/MFIs must refine their existing products or develop new ones. Product development is a complex, resourceconsuming activity that should be taken seriously. More client-responsive products will reduce dropouts, attract increasing numbers of new clients and contribute substantially to the long -term sustainability of the MFIs. Cost effectiveness and profitability should be the guiding factor. Key issue involved is increasing profitability by cutting costs and/or increasing income. The MFIs should, therefore, conduct a thorough institutional analysis reviewing strategy, financial viability, organizational structure and philosophy, human resources, marketing and systems. Public sector banks, since their nationalization in 1969 and 1980, have been providing credit for several purposes related to farm & non-farm business. These credit products, however, need to be refined and innovative to meet changing needs of farmers, especially small and marginal farmers. Very rarely Banks/MFIs provide credit products to meet household expenditure in rural areas, though they have plenty of for urban clients. Thus, there is more urgent need now than before to develop tailor-made credit products in the light of findings of several studies, surveys and reports. The NSSO data have sharply brought out the crucial need for banks/MFIs to design new credit products, that can meet specific requirements of rural households, such as [i] current expenditure in non-farm business [expenditure for raw materials, fuel and lubricants, payment of rent, salaries and wages, hire charge of machinery and equipment etc. and normal repairs and maintenance of buildings, machinery and equipment including transport equipment, furniture and fixtures and household durables meant for non-farm business], [ii]capital expenditure in non-farm business [purchase, construction, additions, alterations, major repairs and improvements of buildings, and machinery and equipment including transport equipment, furniture and fixture
etc.] and [iii] household expenditure [expenditure incurred for medical treatment, education, marriages, religious ceremonies etc, purchase of plot and durable household assets, clothes etc, construction, addition/alteration of residential buildings etc. Similarly, Invest India Market Solutions, 2007 has, also, identified clearly the need for specific products by earners in rural areas, such as purchase of house, land, real estate, vehicle, consumer durables; meeting financial & medical emergencies, business requirements & social obligations, other consumption needs, education loan etc. This, therefore, sharply focuses the most urgent need for banks/MFIs to develop new/additional credit products through scientifically conducted research, pilot testing and further refining process. To be competitive, the MFI must offer new products in a timely manner relative to the development of market demand. Quick reaction and pro-active product development will ensure competitive advantages. Marketing activity in expanding and maturing markets is becoming increasingly complex and broader in scope as more MFIs operate in domestic markets. New customers with diverse demand structures must be attended to accordingly. It is, thus, necessary that banks/MFIs should on a continuing basis understand cash patterns of borrowers and the profitability of their businesses that helps match the loan product to their business cycles. The loan term and repayment frequency are possibly the most significant variables in micro-credit and should be suited to the borrowersâ€™ needs. The effect of an increased interest rate on the borrower is relatively less significant than increases in other costs. The method of calculating the interest rate and fees significantly influences the price of the loan. While designing new credit products, detailed studies need to be carried out with regard to cash patterns, loan term, loan utilization, loan purpose, interest rate, fees & service charges etc. Apart from savings and loan products, poor people also need insurance products. Health related expenditure at times far exceeds the income levels of many households, which leads them to a situation of debt trap. The insurance companies, also need to design low cost health insurance products for the rural poor. The need is also for weather insurance products to provide relief to farmers in cases of losses due to excess/deficient rainfall. The key to enhanced financial inclusion is reduction in transaction costs. The experience of some institutions in the country as well as in other countries, however, suggests that an appropriate use of technology could significantly reduce the operating cost of financial inclusion and make it a viable and sustainable activity. The availability of new information technology, expansion of credit information services, innovations in micro-finance and the non-conventional modes of delivery of financial products offer further opportunities for reducing transaction costs in dealing with small savers and
Microfinance Focus [ April 2009 ] 18
Horizon: Challenging Task for MFIs in Rural Areas ` borrowers. Apart from savings and loan products, poor people also need insurance products. Health related expenditure at times far exceeds the income levels of many households, which leads them to a situation of debt trap. The insurance companies, also need to design low cost health insurance products for the rural poor. The need is also for weather insurance products to provide relief to farmers in cases of losses due to excess/deficient rainfall. The key to enhanced financial inclusion is reduction in transaction costs. The experience of some institutions in the country as well as in other countries, however, suggests that an appropriate use of technology could significantly reduce the operating cost of financial inclusion and make it a viable and sustainable activity. The availability of new information technology, expansion of credit information services, innovations in micro-finance and the non-conventional modes of delivery of financial products offer further opportunities for reducing transaction costs in dealing with small savers and borrowers. Product Marketing Strategy: Product marketing should be perfected during the pilot test. Success factors include the effectiveness of internal marketing; the level of pre-existing marketing competencies, adequate marketing plans and budgets; and the degree of focus on customers services. During the test period, the effectiveness of marketing should be closely monitored. Marketing concepts focuses MFIâ€™s approach to offer products to its current and potential clientele. Marketing is not only a means of selling more products more effectively or of developing new and more customer-oriented financial products, but also it seeks the involvement of the entire management and staff of the MFI. Marketing collects information from internal and external sources to answer questions, such as [i] which products and services are needed and will be bought?[ii] what price is acceptable to clients?[iii] how can products and services be sold in the most effective and efficient manner?[iv] which information channel is best able to reach clients to make the product known, valued and demanded? Clients and markets often change over time. Therefore, client-oriented MFIs need to continuously adjust, improve and innovate in order to offer customer services that are demanded, valued and useful. Marketing management is the key to the long-term sustainability of the MFI. It is a continuous process that includes [i] planning i.e setting of clear goals and the design of strategies to achieve those goals [ii] implementation i.e forming and staffing the marketing team and directing the actual operation of the team according to plan and [iii] evaluating performance i.e analyzing perform-
ance in relation to the organizational goals in order to effect necessary changes and adjustmentsâ€Ś The product marketing strategy emphasizes the development and differentiation of products. It is a process of continually and systematically assessing needs of the market and its different segments to support product development and innovation that caters for those needs in the most feasible and profitable manner. Among others, following are critical areas of marketing strategy. Trust: financial service provision involves an intimate relationship between the producer and the consumer. Thus, financial relationships are often built over a long period of time and are very sensitive to changes in mutual trust. Growth balanced with risk: Selling financial products, particularly loan products, involve risk. Accordingly, organizational growth must be well balanced with the risk capacity of the MFI to manage risk. Market segmentation: It is the process of dividing the market into distinct target groups that share specific characteristics. Determining target market segments helps the MFI identify opportunities to improve and expand its current products and services. Each segment targeted should be large enough to be easily accessible and profitable Marketing mix: The marketing mix combines determining which products to offer; and how they will be priced, distributed and promoted?
About the Author Dr Amrit Patel is PhD in Banking & Finance, has 25 years experience in Bank of Baroda & since 1995 has been senior consultant Rural/MF with projects funded by World Bank, ADB, IFAD in Azerbaijan, Tajikistan, Kazakhstan, Bangladesh, Uganda. He has contributed over 600 articles/papers in leading financial dailies, journals, Microfinance Gateway.
Microfinance Focus [ April 2009 ] 19
Transparency & Social Performance Management Features Stories ...The World's top experts on SPM. share their opinions Frances Sinha | Managing Director –EDA Rural System Social Performance: increasing accountability and transparency in microfinance
Katherine Knotts Director Communications, Imp-Act Consortium We Can’t Afford to be Social…!
Anita Campion , President , AZMJ The Complexity of social performance Management
Chuck Waterfield, Founder –MicroFinance transparency The time for Pricing Transparency in Microfinance
Koenraad Verhagen,Argidius Foundation A Special Interaction on Social Performance Management with Koenraad Verhagen
Microfinance Focus [ April 2009 ] 20
Social Performance: increasing accountability and transparency in microfinance Frances Sinha, EDA Rural Systems There has been tremendous progress in the microfinance industry over the past decade, especially in India, in working towards financial sustainability, reducing costs of delivery and attracting investment funds. This is an important measure of success – in terms of growth. The numbers are impressive, and reported against industry standards of profitability, efficiency, portfolio quality and capital adequacy. However, relatively transparent reporting on growth and financials has not been matched by clear reporting on effectiveness. The numbers tell us something about growth of outreach, including women and relatively small (‘micro’) loan sizes. But increasingly – and since 2006 when Mohd Yunus and the Grameen Bank received the Nobel Peace Prize in the name of poverty reduction – there have been questions around:
Who is microfinance serving (are clients poor? who is meant by ‘poor’? are target clients getting left out? Microfinance institutions – and programmes – may actually serve a range of market segments);
The utility of standard loan products (easy for the MFI to implement, but do they cater effectively to different market segments? Do they really serve the needs of poorer people? of women in particular?);
Exit – or dropout (how many clients drop out? Is this an indicator of dissatisfaction? Who are the clients that leave and why do they leave?); and
Client protection: what is a reasonable level of transaction costs for clients (given costs of funds, type of operations, small product size)? is there clear communication to clients on costs and procedures? what is the approach to default (‘zero tolerance of delinquency’ is no longer acceptable)? Are there mechanisms for client feedback or complaint – and their redressal? Are there safeguards against pushing clients into excessive debt, as competition between MFIs increases with overlapping operations?
These questions reflect a growing interest in ‘social performance’ and a concern to build standards in the industry
for addressing such issues as part of microfinance management, and reporting on them systematically.
Whatever the ‘mission’ or model of an MFI, there are certain common themes that are common across the sector. A number of initiatives globally – and in India - highlight the steps for enhancing accountability and transparency, including:
Have a balanced Board: make sure they are up to date on and committed to social performance as well as financial issues
Clarify and define intent more clearly – in terms of target outreach (including different types of area, and market segments), specific services and intended results
Track client profile on entry – in relation to intended outreach, and as a basis for product development, and tracking change over time (the Progress out of Poverty Index developed for India and other countries is a practical tool to benchmark poverty levels that can be integrated with membership or loan application details)
Adjust the MIS to track clients – not just loans – so as to integrate social profile/market data, and be able to track client retention and exit
Develop routine systems for market feedback (including client satisfaction, exit surveys) and apply results for product development and adaptation
Integrate social goals and values into HR systems (training, performance appraisal and incentives)
Have a clear policy on client protection which is reflected in operational guidelines and monitored as part of internal audit.
These are practical – and rigorous – steps. ‘Social’ – is not just soft and qualitative, or a sort of side project; nor need it be seen as just too complex. These are steps that mirror the process of financial management, and involve as systematic
Microfinance Focus [ April 2009 ] 21
Cover Story : Social Performance: increasing accountability and transparency ` an approach as financial reporting and management – in terms of defining objectives, aligning systems, developing an appropriate MIS with attention to detail and accuracy, for regular monitoring and concise reporting.
Frances is closely involved with current initiatives around social performance in microfinance, including: social performance management – training and research (as a member of the Imp-Act consortium); pioneering the development of a social rating meth-
These steps are reflected in the social rating tool now recognised as a tool to complement financial rating; and in the social reporting indicators introduced by the MiX this year.
odology to complement financial rating, with the M-CRIL team;
Indian MFIs have gradually emerged as global leaders in terms of growth and financial efficiency. Will they also be the future leaders for social performance? —————————————————————————-
of social reporting indicators (on the MiX Market; and leading the
About the Author:
dex (PPI) with the Grameen Foundation (US).
coordinating global pilots for social reporting (Ford Foundation, Social Performance Task Force) and contributing to development EDA team in working with social investors and their MFI partners in India and Afghanistan to develop practical systems of SPM and social reporting, and introducing the Progress out of Poverty In-
Frances Sinha is co-founder director of
EDA Rural Systems, and director of EDA’s associate company M-
CRIL. With 25 years of experience in development based in India,
We Can’t Afford to be Social…! Katherine Knotts Director Communications, Imp-Act Consortium
I received a call from the BBC the other day, asking me about the effects of the global economic crisis on microfinance. One also sees that the lecture circuit is starting to bloom with panel discussions on how to save microfinance from a “sub-sub-sub-prime crisis”. Elsewhere, I am hearing the refrain of “well, we’d love to focus on social performance management, but our MFI is just trying to stay afloat right now!” While I’m not dismissing the very real and pressing financial issues of the day, I wonder whether we can, in this context, re-visit the issue of how a social performance focus affects the financial bottom line. Seems like the knee-jerk reaction is to assume that it’s a win-lose situation: “being social” is unsustainable. But does the evidence bear up? A brief glance at some examples:
In a competitive Asian market, one MFI is sensitive to cost management. However, their strong poverty focus takes them deep into remote rural areas. Does this introduce inefficiency? The data reveals that in poorer regions, branch operating costs per client are not necessarily higher (often due to larger loan sizes), and branches tend to grow faster given lower competition.
Another Asian MFI has gathered informal feedback that those branches that do not consistently implement “social development” training tend to have a higher portfolio at risk that those branches that did.
A South African MFI has two microfinance programmes, one poverty-focused, another non-targeted. While the poverty-focused programme implies higher costs (for impact monitoring), it benefits from higher retention rates and a lower PAR than the non-targeted programme.
Given these examples, it seems the trade-off issue is a bit more nuanced that we thought. In that case, the key questions for me are:
How can we increase efficiency without sacrificing on quality of services? Where does cross-subsidisation fit in to MFI outreach strategies? Does data about actual social performance results distinguish MFIs in the race for ever-more-scarce funds? How can MFIs turn trade-offs into synergies? What are the quick wins, and what takes more time?
**************** Editor’s Note: reprinted with permission of the author
Microfinance Focus [ April 2009 ] 22
Cover Story : The Complexity of social performance Management `
The Complexity of Social Performance Management Anita Campion is the President of AZMJ
s I have worked on researching and documenting a broad range of issues, guidelines and policies related to Social Performance Management (SPM), I have come to understand how complex the issues are, which makes it hard to achieve consensus across the stakeholders in the microfinance sector. For example, the Phnom Penh Post recently cited examples of how microfinance institutions (MFIs) had contributed to the impoverishment of rural farmers in Cambodia. Supposedly, many farmers were unable to repay their loans because of falling crop prices and were at risk of losing the land they had pledged as an asset upon which the loans had been made. The article mostly chastises the MFIs for failing to show up for a meeting with the National Assembly to discuss what should be done to mitigate the farmers’ plight. While it is obvious to me that the MFIs have a social obligation to at least discuss the situation, it isn’t as clear to what extent MFIs should be held responsible when investments don’t pay off. In fact, when it comes to agricultural lending, a whole bunch of SPM-related questions arise, including: To what extent should we empower clients to decide
what level of risk and indebtedness they are willing to take on? And to what extent do MFIs or the government need to protect individuals from borrowing too much?
Should MFIs even use land as collateral for agribusiness loans, when it means potentially stripping someone of their livelihood in the case of non-payment?
Should MFIs only lend to business owners to the extent that they can be ensured of repayment, perhaps by covering risk through crop insurance or weatherrelated index-based insurance?
When whole sectors are negatively impacted, what is the appropriate response of the MFIs and of the government? What will these responses mean for future lending to that sector? Given these complex issues and how politically charged they are, it is not surprising that many MFIs stay away from agricultural lending all together. Is that what we really want for the future of microfinance – to only lend where there are no political risks involved? But this is just one example. Let me give you another. An MFI decides to target the poorest of the poor in rural
Microfinance Focus [ April 2009 ] 23
Cover Story : The Complexity of social performance Management ` areas, rather than beginning with the low hanging fruit (i.e. urban clients) that most MFIs target first. Since there is little competition there and a large number of needy clients, the MFI charges high interest rates (over 100% annualized), most of which is used to fuel growth and expansion to new areas. So, this case might be starting to sound a bit familiar, but here are the tricky questions:
What interest rate is okay to charge before being considered usurious?
we can (within our means and without creating unrealistic future expectations or market distortions) to correct any negative consequences. As many of these situations are complex, we all need to think deeply and avoid jumping on the bandwagon of bashing specific MFIs. Instead, I hope that we will all start to be a bit more thoughtful about our actions and convictions to make sure that we are making decisions and judgments based on sound information and a true under-
Perhaps the most important guideline is for all of us to continue to work
toward improving the lives of microfinance clients and when our actions cause the opposite effect, regardless of our intention, we should do whatever we can (within our means and without creating unrealistic future expectations or market distortions) to correct any negative consequences.” If clients are accepting the interest rates and terms, does that make it okay? To what degree should existing clients be expected to pay for an MFI’s growth or expansion into new markets?
When an MFI transforms from an NGO into a formal financial institution, who is entitled to the accumulated reserves? Is the fact that management ownership is considered good for microfinance governance enough to justify transfers of large amounts of equity to them upon transformation? What amount is considered acceptable and what amount is too much? Is it worse for an MFI to report excessive return on equity or excessive administrative costs? It might be apparent when the principles of social performance management have been grossly violated, but it is often difficult to determine the specific threshold or exactly what should be the overarching norms MFIs should live by as a whole. Perhaps the most important guideline is for all of us to continue to work toward improving the lives of microfinance clients and when our actions cause the opposite effect, regardless of our intention, we should do whatever
standing of the local environments, the clients and the complexity of each situation. As we study SPM cases, we need to look more behind why things did happen the way they did and what needs to be fixed or changed in the system to avoid repeating negative events, such as overindebted clients or unscrupulous investors entering microfinance. Only through thoughtful analysis and meaningful dialogue can we begin to reach consensus on some of these tough SPM issues. ***************************************
Anita Campion is the President of AZMJ, an international development consulting firm with a mission to provide high quality consulting and investment services in support of financial service and enterprise development. She is also the co-author of “Putting the Social into Performance Management: A Practice-Based Guide for Microfinance.”
Microfinance Focus [ April 2009 ] 24
The time for Pricing
Transparency in Microfinance Chuck Waterfield , MicroFinance Transparency has long been a highly transMicrofinance parent industry, and rightly About the Author : Mr. Waterfield has 25 years experience in microfinance, starting MFIs in both Haiti and Bolivia in the 1980’s. During a portion of that time, he served as microenterprise direc tor for MEDA and for CARE International. Chuck Waterfield is the principal author and developer of Microfin, the most popular financial planning software in the microfinance industry. He is a global authority on Microfinance business operations and analysis. His courses and analysis tools are used by 3,000 microfinance professionals. In addition to Microfin, he has a broad range of products and publications including the SEEP FRAME Tool, the CARE Credit and Savings Sourcebook, and CGAP Handbook on Management Information Systems. Currently on faculty of Columbia University School of International and Public Af fairs, he was formerly on the faculty of the Boulder Microfinance Training Program for ten years and Southern New Hampshire University’s Microenterprise Development Institute for eight years. His most recent creation is MicroFinance Transparency, a global agency to publish the true prices (APR) of microfinance loans offered by all microfinance institutions around the world.
proud of it. We share a wide variety of financial indicators about our MFIs. Unfortunately however, the true price of microfinance loan products has never been accurately measured nor reported. In fact, few people in microfinance even know the actual prices many MFIs are charging. For an industry born to “displace the moneylenders” by providing low-cost credit to the working poor, this is hard to imagine and even harder to explain.
Non-transparent pricing is certainly not unique to microfinance. Many countries require commercial lenders to state true product pricing using standards such as the Effective Interest Rate (EIR) formula mandated in European countries and the Annual Percentage Rate (APR) formula used in the US (and which has been considered the standard measure for the microfinance industry). Such laws were enacted over the past forty years because many financial institutions were using inconsistent and misleading ways to price financial product, ways that make the product look less expensive than it really is. The same problem can be found regularly in the microfinance industry. For example, a quoted interest rate of 36% per year can result in an EIR as high as 90% and beyond. An important question for us to consider is: Should we not apply the same principles of transparent pricing within the microfinance industry that are used broadly in the commercial finance industry?
To Know more about his initiative :Visit
Non-transparent pricing has evolved and perpetuated for two reasons. Firstly, there is no single market interest rate for microloans. We recognize that microcredit interest rates must be higher than commercial loans, but it is seldom recognized that there is no
Microfinance Focus [ April 2009 ] 25
Cover Story : The Time for Transparency in Microfinance ` single “market rate” for micro-loans. Given rather “flat” cost structures, the smaller the micro-loan, the higher the interest rate necessary for that MFI to cover the costs of that loan and achieve sustainability. In other words, costs are primarily fixed (not correlated to loan size), and income is entirely variable on loan size. That creates challenges, and that requires prices that vary by loan size for those MFIs choosing to reach financial sustainability. Due to the irony that we very often charge the highest interest rates to the poorest clients, the easiest alternative has been to hide this reality by using non-transparent pricing. Secondly, once some MFIs in a market began nontransparent pricing, it became very difficult for other MFIs in that same market to continue using transparent pricing. To do so, would cause the MFI to advertise what appeared to be the highest price in the market, even though their true price could actually be the lowest. As a result, the vast majority of MFIs practice non-transparent pricing even though many would prefer to do otherwise. When MFIs are operating in a very opaque pricing environment – where nobody knows how the price of one product compares to the price of another product – there is no “market price”. With no market price, nobody really knows the true prices of the products for sale, and comparison of products on the market is extremely difficult. Thus, there exists the opportunity for some MFIs to charge a price that results in very high profit levels, and in recent years, an increasing number of MFIs are doing so. High profits generated off of the poor by charging nontransparent prices creates a bad public image for the microfinance industry and can results in a strong public and political backlash. In fact, the need for responsible, ethical management when selling financial products should be obvious to all – the current global economic crisis affecting all of us is primarily caused by a small number of companies choosing to finance homes in the US through manipulative financial products with deceptive pricing. Short-term profit seeking by a few creates serious problems for all when things go wrong. Microfinance was created to be ethical finance, and we should lead the way in practicing ethical behavior. Two years of intense discussions in the industry have led us to the conclusion that an industry-wide effort towards transparent pricing is essential to the long-term survival of the microfinance industry. We need to practice what formal finance practices in many countries – we need to publish honest prices. This will correct the current market imperfection that impedes efficiency, sound management decisions, and healthy consumer choice, and allows some
companies to make extremely high profits. Sound decision -making – by all stakeholders in microfinance – requires accurate information. As the true price of the product has not been available to us, we find a serious limitation in making sound decisions. We in the industry are determined that that will now change. Thus, one outgrowth of this dialogue has been the establishment of MicroFinance Transparency, a non-profit agency that is addressing pricing transparency through two joint activities. First, MFTransparency will collect product prices on all micro-loan products around the world and report those prices by a common, objective measurement system. Second, MFTransparency will undertake the equally important role of developing and disseminating straightforward educational material to enable microfinance stakeholders at a broad range of levels – from analysts, to donors and investors, to MFI managers, to micro entrepreneurs themselves – to better understand the concept and function of interest rates and product pricing. Since its launch at the Bali Microcredit Summit last year, over 150 people have endorsed the transparency principles of MFTransparency. The full list can be found at our website (www.mftransparency.org). We encourage you to study our principles and, if you are in agreement with our mission, to add your name to our list. MFTransparency has secured initial start-up funding, from Oikocredit, Hope International, DOEN Foundation, Hivos, ICCO, and Oxfam Novib. In addition, data collection has been started in Peru and Bosnia through a pilot testing of the MFTransparency methodology funded by CGAP. The industry needs to act, and we need to act soon. The mainstream public media is already reporting the interest rates typically charged in microfinance, but there is little explanation or understanding of why microfinance interest rates are higher than previously believed, nor why there is significant variation in interest rates among different loan products. What non-transparent pricing has kept hidden for years is no longer hidden – and it should never have been hidden! We should recognize that we actually are at a point where we have the opportunity to correct a serious flaw in the way that we have been practicing microfinance for years. Pricing transparency is essential to building a healthy and vibrant market for microcredit products. It provides a valuable component necessary in free markets and currently absent in microfinance – transparent, open communication about the true cost of products. *****************************************
Microfinance Focus [ April 2009 ] 26
A Special Interaction on Social Performance Management
With Koenraad Verhagen, Argidius
By, Jerome Peloquin, Managing Editor, US
Dr. Verhaagan is a global expert and pioneer in the filed of Social Performance. Born in 1940 in the Netherlands, Koenraad Verhagen is a promoter of SPM is necessary, to increase microfinance and small enterprise development. He is the Africa specialist of the Investment Committee of Argidius, a foundation which belongs to the the likelihood of positive impact COFRA group, a holding located in Zug, Switzerland. (www.argidius.com). He holds office in the Netherlands. In 2006/2007 he has acted as a consultant to of financial services we have learned, that you have know well the Dutch Microfinance Platform, especially for the organisation of a series of Workshops on Social Performance Management, Rating and Reporting. which categories of the poor, or Occasionally, he also acts as an advisor to the Swiss Ministry for Development moderately poor, you are Cooperation on Microfinance and Enterprise Development, and the Paristargeting, and to design and test based organisation SIDI ( Société Internationale pour le Développement et l’Investissement). He is known as one of the founders of the international your products carefully. Only Social Performance Task Force, and animator of the CGAP Social Performance then you can expect use of Working Group. He is the former Secretary General of CIDSE, the international services to improve quality of life alliance of Catholic Development Organizations(1990-1997), and for 5 years or offer new opportunities. You ‘Consultor’ of the Pontifical Council Cor Unum. As an action-researcher he has will also have to team up with written extensively on issues of people’s participation and co-operative development in Asia and African countries. He holds a PhD in Social Sciences other social entrepreneurs that can offer non-financial services.” (non-Western Sociology) from the University of Leiden (the Netherlands), and a doctorate in Economy from the University of Amsterdam... -Dr. Verhaagan Next page
Microfinance Focus [ April 2009 ] 27
Cover Story : A Special Interaction on Social Performance Management With Koenraad Verhagen ` 2. Why do you think SPM is necessary ? Editor’s Note: I submitted this series of questions to Mr. Verhaagen who, although engaged in a heavy travel schedule, took the time to provide this thoughtfull and provocative interview. We thank him for his insight, candor, and years of service to the poor. – Jerome Peloquin, Managing Editor, US ———————————-
1 When did you first engage with the SPM idea ? Especially during a field trip in Uganda in 2001, when visiting a ‘Village Banking’ program, I became aware that Social Performance is a process that has to be carefully measured, managed and demonstrated, and that the expression of social commitment in mission statement and brochures of the supporting international network is insufficient to guarantee effective implementation. The ‘Village Banking’ program I visited was almost absent in villages and urbanfocused, it was not ‘banking’ in the sense of acting as an intermediary between depositors and borrowers but focused on credit delivery; it said it was serving the ‘poorest of the poor; which it did not; it said to promote microenterprise development and employment creation which could not be demonstrated, etc. ; in short, there was a tremendous gap between official social goals and reality. The ‘image’ of a program, marketed to social investors and donors for purposes of fund raising, can be misleading. To come to such a conclusion you do not need expensive ‘impact’ studies, even if some of them have been helpful in demystifying the view that access to ‘microcredit’ is a sufficient remedy for the poor ‘to work themselves out of poverty’. This myth has been spread effectively by the industry , in particular the ‘Microcredit Campaign’. Political leaders, like Fujimori, the former president of Peru, have tried to take political advantage out of it. Acting as the ‘cochair’ of the first Microcredit Summit Meeting held in New York City in June 1998, he embraced the idea of Microcredit as a driving force, allowing men and women in developing countries to create survival strategies and fostering self employment. But also allowing his government to pay less on basic social services which the poor need and cannot pay for. Coming back to my Uganda trip, just talking to loan officers and some group leaders, and a honest director, is sufficient to become aware how important well adapted financial services are for the quality of life of the poor, and but at the same time how much more has to be done to attack the structural causes of persistent poverty. This visit, and visits to MFIs in other countries, made me engage with the idea of SPM in Microfinance. What you want to achieve in social terms has to be clearly stated in the local context, measured and managed.
Many MFIs have been able to grow by selling debt to lowincome people while taking positive social impact for granted. SPM is necessary, firstly, to avoid negative impacts which explains the current international campaign for consumer protection and which has prompted MF leaders in April 2008 to formulate and, subscribe to, the Pocantico declaration, and express concern about the low standards of transparency in the sector. Secondly, to increase the likelihood of positive impact of financial services we have learned, that you have know well which categories of the poor, or moderately poor, you are targeting, and to design and test your products carefully. Only then you can expect use of services to improve quality of life or offer new opportunities. You will also have to team up with other social entrepreneurs that can offer non-financial services.
3. Do you favour self reporting and why ? Yes I do. I do favour double bottom line, or even better triple bottom line self-reporting. At the same time, I am strong partisan for social rating as a complement to financial rating. Self reporting stimulates internal discussion and reflection; external rating is necessary to validate the outcome of internal processes.
4. Are loan officers part of you SPM model ? Yes, I think we should no longer call them ‘loan’ officers. Most larger MFIs now offer savings, loan and insurance products, or have the intention to develop in that direction. They are ‘field officers’ who go to the MFI clients, meet them, talk to them, and collect basic data on their economic situation and conditions of life. They are the backbone of the management system and incentives should be given for them to fulfill these tasks effectively. Incentives just based on the amounts of loans taken by borrowers and repayment ratios corrupt the social service system by its one-sided focus on credit delivery. 5. Do you see a relationship between SPM and CSR The two concepts have not yet been systematically integrated with one another. Corporate Social Responsibility can be seen as the overarching concept that applies to each and every type of business undertaking. CSR behavior implies adherence to, and respect of, certain ethical standards and international norms in such areas as quality of employment, absence of child labor, avoidance of negative impacts on the environment and consumers. The respect of the earlier mentioned need for consumer protection, as expressed in the Pocantico declaration fits into the CRS concept, and can be seen as a minimum requirement for MFIs to avoid negative impact.
Microfinance Focus [ April 2009 ] 28
Cover Story : A Special Interaction on Social Performance Management With Koenraad Verhagen ` www.microfinancegateway.org/ files/49313_file_The_Pocantico_Declaration_Final0515b.pdf
8. What mechanisms would you recommend to gain compliance ?
Social Performance has been used in Microfinance much more as the deliberate promotion of positive impact by the delivery of high quality financial services to poor, or relatively poor people. It fits the overall concept of CRS, but is more specific, pro-active, goal- oriented in its contribution to the combat against poverty.
To ensure and promote compliance we ( Ford Foundation, Argidius and CGAP) have in 2005 set up the international Social Performance Task Force which has 350 members now: leading MFIs, networks, investors and donors. Since then Regional and national networks have taken up the promotion of SP concept, SP measurement and management. Tools and guidelines have been developed by international networks like CERISE (Paris-based), the ImpAct Consortium ( UK based), and US based networks like the Grameen Foundation. You cannot force compliance; you can promote acceptance.
6. What role does transparency play in your model ? When the Argidius Foundation was still a member of CGAP we have supported CGAP staff member Syed Hashemi in his lobbying to get ‘social transparency’ be included as one of the key principles of sustainable microfinance. That was in 2004. As to transparency it is convenient to distinguish different categories or stakeholders. Transparency to MFI clients about lending conditions is a minimum requirement. In MFIs , owned by its clients like co-operatives, transparency is statutory regulated. Being transparent towards clients is a moral obligation, creates loyalty, and make them choose the products that fit their situation best. Transparency of lending and savings conditions for clients is included in the framework for the assessment of Social Performance adopted by the international Task Force. SP Management implies the purposeful promotion of transparency to ensure MFI clients be well informed, and have them make responsible choices. To be truly transparent takes time and energy, and skills and tools for communication, in particular, when most of your clients are illiterate and poorly educated. At a national level social transparency about whom are you serving and at what conditions, will make you less vulnerable for intervention by politicians and regulators . At international level, it makes you more attractive for private and public social investors or donors. They also have, and wish, to act in socially responsible way. They have the right to know how well a MFI , or a network of MFIs, is performing socially. If private, most of them want to know that to be sure that financial return is supplemented by social return. If public, investors are accountable for the way they have used tax payers’ money.
9. Which of the may criteria sets would you use to measure SPM ? Argidius was the first foundation to invest by a small donation in the development of a tool to assess social performance. That was in 2003. It is now known as the SPI Audit Tool from CERISE designed an widely tested by over 100 MFIs to asses and promote Social Performance in Microfinance (SPI = Social Performance Indicators) (see www.cerise-microfinance.org/homeuk.htm for the English version). Main criteria sets relate to outreach to the poor and excluded; adaptation of services and products to target clients; economic and socio-political benefits for clients and their family, and the institution's social responsibility towards staff, the community and environment The other one, is the framework developed by the international Social Performance Task Force and has been adopted by different categories of industry stakeholders which constitute the TF m e m b e r sh i p . w w w . m i c r o f in a n c e g a t e wa y .o r g / resource_centers/socialperformance/article/28257/ The basic idea is that you have a model and a set of well defined core indicators that are widely accepted by the industry, but at the same time leaves space for indicators which are more country or MFI specific. It incorporates the lessons learned from applying social performance management, and provides the basis for social rating by the recognized rating agencies.
7. How would you ensure truthful reporting ?
10. What percentage of current MFIs, in your opinion, engage in sufficient SPM practice ?
By promoting (external) social auditing and rating as an accepted practice in the MF industry of each country. Further, by promoting reporting of basic social indicators at international level to the MIX ( 10 -20 indicators) . This will make that those MFIs who will not report truthfully on key issues and indicators in the next 3-5 years, will marginalise themselves and could put their image and creditworthiness if they need external support, at risk.
I am not in a position to give you precise information on this and the word ‘sufficient’ leaves room for wide interpretation. My guess is over 300 now, assuming that most of the MFIs which have participated in the testing of the models referred to earlier, and have undergone intensified training on SPM and use of tools, are indeed applying it. ***************************************
Microfinance Focus [ April 2009 ] 29
i-Focus Committing the Microfinance Industry to Proactive Consumer Protection Ms. Robin Ratcliffe, Director, Campaign for Client Protection in Microfinance
ll of us in the microfinance arena believe strongly that financial services have the power to help people improve their lives, sometimes dramatically so. However, if offered carelessly or used improperly, financial services — especially credit — can also cause great harm. The importance of good practice has been demonstrated only too clearly given the role that over-lending to vulnerable families has played in triggering the U.S. and global financial crisis. Yet microfinance institutions (MFIs) must balance fulfilling their mission, surviving competition and achieving profitability and growth. These competing forces may play a role in pushing financial institutions into practices that do not coincide with pro-consumer ideals, such as over-lending or lack of transparency. The endorsing institutions of the Campaign for Client Protection in Microfinance (www.campaignforclientprotection.org) believe that microfinance distinguish itself as strongly pro-consumer if it is to retain its positive reputation – and fulfill its mission. The issue of client protection in microfinance is not a new one. Over the years, a number of industry leaders have discussed the need for an industry-wide code of conduct and a proactive assertion of the brand of microfinance as a double bottom line industry. Over the past several years, consensus has emerged that providers of financial services to lowincome clients should adhere to six core principles. These principles, which guide the Campaign, are distilled from the path-breaking work by providers, international networks, and national microfinance associations to develop proconsumer codes of conduct and practices. 1.
Avoidance of Over-Indebtedness. Providers will take reasonable steps to ensure that credit will be extended only if borrowers have demonstrated an adequate ability to repay and loans will not put the borrowers at significant risk of over-indebtedness. Similarly, providers will take adequate care that non-credit financial products, such as insurance, extended to low-income clients are appropriate.
Transparent Pricing. The pricing, terms and conditions of financial products (including interest charges, insurance premiums, all fees, etc.) will be transparent and will be adequately disclosed in a form understandable to clients. Appropriate Collections Practices. Debt collection practices of providers will not be abusive or coercive. Ethical Staff Behavior. Staff of financial service providers will comply with high ethical standards in their interaction with microfinance clients and such providers will ensure that adequate safeguards are in place to detect and correct corruption or mistreatment of clients. Mechanisms for Redress of Grievances. Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients. Privacy of Client Data. The privacy of individual client data will be respected, and such data cannot be used for other purposes without the express permission of the client while recognizing that providers of financial services can play an important role in helping clients achieve the benefits of establishing credit histories.
The Six Principles are the foundation upon which The Center for Financial Inclusion at ACCION International, CGAP and many other industry players established the Campaign for Client Protection in Microfinance, now in its pre-launch phase. The Campaign is above all committed to protecting microfinance clients and ensuring that the financial services offered by MFIs do no harm. Through a variety of on-line activities, tools and outreach, the Campaign looks to:
Raise awareness and encourage dialogue throughout the microfinance industry about client protection.
Develop tools to facilitate the implementation of the client protection principles by financial institutions.
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Campaign Steering Committee ` Clara Serra de Akerman President, WWB Colombia Colombia David Baguma Executive Director, Association of Micro Finance Institutions of Uganda (AMFIU) Uganda Gabriel Davel CEO, National Credit Regulator South Africa Diana Dezso Program Director, Network Development, SEEP Network United States Henri Dommel Director, Inclusive Finance Practice Area, UNCDF United States Anne Hastings Executive Director, Fonkoze Haiti Francisco De Hoyos Executive Director, Prodesarrollo Mexico Shireen Farrag Executive Director, Sanabel Egypt
Grzegorz Galusek Executive Director, Microfinance Centre (MFC) Poland Samit Ghosh Managing Director, Ujjivan India
Beth Porter Special Advisor, Freedom from Hunger United States
Mathias Katamba CEO, Uganda Finance Trust Uganda
Pilar Ramirez General Manager, LOC Fund Bolivia
Anne-Françoise Lefèvre Head of WSBI Institutional Relations, World Savings Banks Institute (WSBI) Belgium
Hans Ramm Financial Sector Development, Swiss Development Corporation Switzerland
Paul Luchtenburg Managing Director, Angkor Microfinance Kampuchea Cambodia Asad Mahmood Managing Director, Global Social Investment Funds, Deutsche Bank United States Kate McKee Senior Advisor, CGAP United States
Generate industry-wide norms among microfinance practitioners concerning client protection.
Collaborate with microfinance providers, networks and associations worldwide to develop and implement standards for the appropriate treatment by financial institutions of low-income clients based on six principles of client protection.
Develop positive incentives for good client protection by MFIs, such as certification standards that set apart those institutions which have fully implemented pro-consumer practices.
Work with microfinance investors and donors to incorporate adherence to the client protection principles by MFIs into their due diligence, funding agreements and monitoring processes.
Nejira Nalic Board Chair, Mi Bospo Bosnia
Beth Rhyne Managing Director, Center for Financial Inclusion United States Daouda Sawadogo General Manager, Fédération des Caisses Populaires du Burkina (FCPB) Burkina Faso Vipin Sharma Managing Director, Access Development & Access Alliance India
The Campaign is guided by an International Steering Committee, made up of twenty-three recognized leaders in the microfinance industry from every region of the world. They ensure that the Campaign will be broad-based and capable of helping to shape the practice and principles of thousands of microfinance organizations currently serving tens of millions of the working and entrepreneurial poor. During this initial stage of the Campaign, the Steering Committee has set its sights on providing microfinance institutions worldwide with the tools they need to facilitate the implementation of the Six Principles. ************************ To date, more than 60 leading MFIs and other financial institutions, 50 of the largest microfinance investors, and 200+ individuals have endorsed the Campaign for Client Protection in Microfinance. To learn more about the Campaign or to officially endorse, please visit: www.campaignforclientprotection.org
Microfinance Focus [ April 2009 ] 31
Building Analytical Skills A New Product from Anita Campion Last year, Anita Campion and Chris Linder of AZMJ, an international development consulting firm based out of the Washington D.C. area, researched and published in collaboration with Imp-Act Consortium, a social performance management guide titled, Putting the ‘Social’ into Performance Management: A Practice Based Guide for Microfinance. During the course of their research, Microfinance Managers frequently brought up the need for better analytical skills in their staff, not just related to social performance, but all aspects of performance. A common refrain was, “we collect so much information, but we don’t know what to do with it.” And then the Global Financial Crisis hit. Microfinance Managers everywhere, who had long considered themselves immune to such global shocks, got nervous as liquidity dried up and accessing capital on the global capital markets became tough. With this scenario in mind, AZMJ designed a training of trainers on building analytical skills for microfinance decision making which will prepare our industry to face the challenges associated with the global financial crisis. More than ever, mangers will need to rapidly absorb and respond to changes within their markets, and this requires solid and flexible analytical skills for good decision making. Without seeking any donor funding, AZMJ launched the first batch of the training of trainers in January. Microfinance practitioners, network partners, and independent consultants came from Tunisia, Jordan, Jamaica and Washington, DC. The two-day training of trainers (TOT) dealt with analysis relating to all aspects of a microfinance institution’s operations and focused on applying deductive reasoning and www.microfinancefocus.com
thoughtful analysis to tackle common institutional problems. The TOT structured in four modules related to financial analysis, operational analysis, client needs assessment and market research analysis, and social performance management analysis. Emphasis was put on determining the validity and relevance of information prior to analysis, as well on how to use the information to make effective decisions post analysis. Through the participatory approach, participants learnt how to build analytical skills in others. During the TOT, participants repeatedly raised questions about the process behind analysis and it was agreed that conceptually it was very tough to grapple with because it involved bringing a person’s intuitive thinking in line with ‘analysis.’ Participants realized that this was best learned through continuous practice and came up with innovative models of structuring and delivering the training, such as by spreading the training over multiple weeks and doing a half-day long session each week. At the end of the training, participants discussed adaptations they would make while delivering the training to different levels of staff, and things to keep in mind while training others. -By Rashmi Ekka, Finance & Research Specialist, AZMJ Please contact Rashmi Ekka at firstname.lastname@example.org if you need more information about this training and would like to have it conducted for your staff.
Microfinance Focus [ April 2009 ] 32
An Exclusive Interview with Dr. Muhammad Yunus, Nobel Laureate 2006
10 % of all bailout packages every where sho uld be earmarked for victims in the third world”
All these crises have their roots in the same thing. These are not separate
crisis. You have to adjust the root causes than you are adjusting all of them. The root causes are the wrong structure,Microfinance the capitalism structure www.microfinancefocus.com Focus [ April 2009 ] 33we have. We have to redesign the structure we are operating in.”
Interview: A n Exclusive Interview with Dr. Muhammad Yunus ` Dr. Yunus gave an exclusive interview to the “MICRO FINANCE FOCUS – a global magazine on micro finance and sustainable development” at the Reception Dinner on 30th March 2009 on the eve of the Sa-Dhan’s National Micro finance Conference 2009 being organized at New Delhi. Here are the excerpts from the interview: MF FOCUS: Microfinance is an established and recognized instrument for fighting poverty today. Many people are confident and it gives hope, poverty can be eliminated. Isn't it too simple just to rely on microfinance? Dr. Yunus: You don't have to. Nobody is forcing you to do that. If somebody wants to do Microcredit – fine. I wouldn't say this is something everybody should have. Nobody says it is the only solution. Human beings are very multidimensional. Microfinance is one of the many, many things. MF FOCUS: Social business is an additional way. Do you identify enough potential for social business to make a real difference, globally? Dr. Yunus: Yes of course. Definitely it is a global and not a local issue. There are two kind of businesses: One is business to make money, the other business is to change the world. The one with the intention of changing the world and not to have any personal gain from that. It is all dedicated to make a difference. It is addressing a social issue. Resolve it, you can do that. MF FOCUS: What are all the factors making social businesses successful? Dr. Yunus: A good business plan, good ideas and use the creativity in the most creative way. MF FOCUS: Microfinance as well as Social businesses have to be highly efficient. How is it possible to maintain or re-introduce the social mission back into microfinance? Dr. Yunus: Whenever something gets popular, actually
catches attention, there are people who take advantage of that and misuse it. It happens in everything. When Big brands are popular, it gets imitated by fake ones. Same thing happens with microcredit: People name it microcredit but in fact it is not microcredit. It is something completely different. People have to be made aware of what is microcredit and why it is important to stick to the real microcredit and not one which has a different motivation. But while you are looking at the microcredit itself, even good people may have wrong ideas, which makes them shift away from the whole idea, the mission. You have to be very carefully remind ourselves, what is our mission. That is why we have meetings like this, to rediscover your mission and then re-adjust your work to the mission. MF FOCUS: To build an enabling environment for social entrepreneurs, what governments should do and what regulations do you count as important? Dr. Yunus: It is very important. Very Important!! Regulation is very important but at the same time regulation can be stifling, destroy the whole business by over regulating and make it impossible to function. It is like a mother and a child. You know how you have to change your child to do the right things. At the same time you should not control your children so that it loses all its initiative. It is like becoming a prisoner in the hands of the mother. Regulation should be promotional, a Cheerleader. At the same time making sure you do the right thing that you don't drift away from the real principles. It is a tough job in the sense you have to balance both: How to encourage, and at the same time how to restrain. MF FOCUS: Due to the financial and economic crisis development funds were cut by the north. Where do you see the responsibility of rich countries in fighting poverty? Where should they act? Dr. Yunus: See...The southern countries didn't create the crisis, they are the victims of the crisis. It is only one country which created the crisis and it spread all over. Those who were involved in creating this crisis
Microfinance Focus [ April 2009 ] 34
Interview: A n Exclusive Interview with Dr. Muhammad Yunus ` also have a moral responsibility to make sure that the victims are supported . There are lot of people suffering, that has to be taken care of. Now they are busy of making bailout packages and all the support. And i am saying ...At least 10 % of all bailout packages every where should be earmarked for victims in the third world. Those things have to be built in the system.
“Those who were involved in creating this crisis also have a moral responsibility to make sure that the victims are supported”
“It is like traffic laws: You can't have a car and knock everybody off the road. There's a rule you have to drive safely, so that you don't harm anybody. Same thing is for living on this planet. We are sharing with each other.”
“People have to be made aware of
what is microcredit and why it is important to stick to the real microcredit and not one which has a different motivation.
“Regulation is very important but at the same time regulation can be stifling, destroy the whole business by over regulating and make it impossible to function. It is like a mother and a child. You know how you have to change your child to do the right things. At the same time you should not control your children so that it loses all its initiative.
“Microfinance Focus is a good initiative.
Communicate...... I mean..... Let the people know what is happening, what is right, what is wrong, so they can participate in debate, discuss, make more efficient, more cost effective and more friendly to take home.
MF FOCUS: Apart from poverty there are many topics, which can be solved or bargained only on an international level: Climate Change for example. Nicholas Stern is convinced, we have to solve both topics together: Poverty and Climate Change. Dr. Yunus: Well, financial crisis is the latest crisis. 2008 had the food crisis, which is still here. Simply front pages have been taken over by financial crisis and has pushed away all discussion about the food crisis. 2008 was also the year of energy crisis – the oil prices shot up to the sky. It didn't disappear, it is lying low for a while. And also this is a perpetuating environmental crisis. All these crises have their roots in the same thing. These are not separate crisis. You have to adjust the root causes than you are adjusting all of them. The root causes are the wrong structure, the capitalism structure we have. We have to redesign the structure we are operating in. Wrong, unsustainable lifestyle. We have to take the hard decision ! We and each one of us must take a decision on this planet. And also we should inculcate among our children a simple way of living. We should not live in a way, that it harms another person. Once you take this decision, everything will be solved. We have no right to live a life which is harming anybody else. It is like traffic laws: You can't have a car and knock everybody off the road. There's a rule you have to drive safely, so that you don't harm anybody. Same thing is for living on this planet. We are sharing with each other. MF FOCUS: Grameen Bank has moved to Grameen II methodology, still Grameen replicators in India follows the Grameen I model. Do you think they should explore such flexible
Microfinance Focus [ April 2009 ] 35
Interview: A n Exclusive Interview with Dr. Muhammad Yunus `
Microfinance Focus Team with Dr. Yunus , (Left to Right : Ms Ayesha, Mr. Vikash , Prof. Yunus, Mrs. Christina, Dr. N Jeyaseelan methodology?
of MFIs. What is your opinion?
Dr. Yunus: It is upto them, what they like..... I can not advise. We thought we can solve some of the problems. we see the opportunity that we have by relaxing our procedures and rules to make it more friendly.
Dr. Yunus: Savings product is very important. Change the law!!! Keep on insisting that the system is right.
MF FOCUS: What is the next level for Micro finance and how to take it forward? Dr. Yunus: Next level is to enter into Insurance, pension funds, second generation issues young children coming up.... growing up................. to make them into better citizen to deal with life. MF FOCUS: Savings product is much needed by the poor. Regulation is cautious not to allow collection of savings by certain category
MF FOCUS: With Micro finance focus, the monthly magazine, we are working on information exchange and promoting Best practices. How important are projects like Micro finance focus for the sector. Dr. Yunus: Yeah ! This is a good initiative. Communicate...... I mean..... Let the people know what is happening, what is right, what is wrong, so they can participate in debate, discuss, make more efficient, more cost effective and more friendly to take home. â€”â€”Thank you so much for your time .
Microfinance Focus [ April 2009 ] 36
Sa-Dhan`s National Microfinance Conference 2009 Mr. Achal Paul SA-DHAN, THE Association of Community Development Finance Institutions, (the national association of 220 community development finance institutions and other sector stakeholders), hosted National Microfinance Conference 2009, at New Delhi under the theme "Microfinance Ecosystem- Equilibrium between Growth and Effectiveness”. Nobel laureate and founder of Grameen Bank, Prof Muhammad Yunus delivered the inaugural address at Sa-Dhan National Microfinance Conference 2009, here in New Delhi. Prof Yunus called upon Indian MFIs to keep up the national and international lead in social business. At the conference Prof Yunus said, “The bottom is to operate without incurring losses while saving the people and the planet - and in particular those among us who are most disadvantaged - in the best possible manner.” Prof Yunus appreciated the example Indian Microfinance gives to the world, with some of the most innovative MFIs and the National Bank for Agriculture and Rural Development (NABARD) led SHG-bank-linkage programme, which is world’s largest microfinance programme with over four crore households reached since its inception. The conference, through its technical sessions, deliberated upon various aspects of microfinance and economic growth at the base of pyramid, growth in microfinance and gaps in practice, structural challenges of scale and the balancing act and unveiling the new microfinance ecosystem. Magsaysay laureate and chair emeritus, Sa-Dhan, Padma Bhusan Ela R Bhatt in her Key note address reminded to the august gathering of financial experts that “Effective microfinance is not to be measured in terms of the speed of growth, but in the creation of long term relationship between the MFI and the client and the community," she added "Basically, banking is relationship, not finance. Relationship, continued relationship, relationship of trust. It is through this relationship that the poor woman – like any other client, by the way – gains a sense of security and confidence to plan to take risk in her life and livelihood. And eventually develops a stable livelihood.” Bhatt is also the founder of Gujarat-based SEWA bank and
chair emeritus of Sa-Dhan. Bhatt, awardee of Ramon Magsaysay for public service, appreciated the "Raghuram-RajanCommission's" recommendations for broadening financial access, namely to create small regional banks and to expand scope of banking correspondents. Microfinance Institutions (MFIs) are playing a crucial role in the mission of financial inclusion in India. They provide small loans to over 141 lakh clients (2007-08), 80 per cent of them poor women and around 30 per cent from SC/ST background, to take up small enterprises that would get them a fair income and provide employment in both rural and urban areas. Moreover, MFIs also cover the risk of poor by providing financial services like life insurance, remittances and within the careful scope permissible by RBI micro-savings. As per the Bharat Microfinance Report 2008, published by Sa -Dhan, the MFI channel served about 141lakh clients with a portfolio outstanding of about Rs 5954 crores by 2007-08. The growth over the preceding financial year has been 53 per cent and 72 per cent for client outreach and loan portfolio respectively. The microfinance sector in India is growing despite a legal vacuum. The conference advocated for the implementation of the recommendations of high level commission on financial sector reform and a microfinance act that would integrate into an ecosystem to sustain effective growth for financial inclusion of India’s poor. Mathew Titus, executive director Sa-Dhan during his address at the conference said “Sa-Dhan continues to build a culture of transparency and fairness among various MFIs and their different models. Sa-dhan voluntary code of conduct and Bharat Microfinance reports contribute continuously to a steady development of the microfinance sector and ultimately of the well-being of the microfinance clients. H Bedi, chairperson Sa-Dhan delivered the welcome speech RM Malla, chairman-cum-managing director, SIDBI delivered a special address and the keynote address was delivered by Ela R Bhatt, founder SEWA bank. Further eminent panelist includes Mahajan, group chairman BASIX, A Fernandez, chairperson, Saghamitra Rural Financial Services, B P Vijayendra, CGM, RPCD, RBI, U C Sarangi, chairman, NABARD and Prof Subhasis Gangopadhaya, managing trustee, IDF. ***************************
Microfinance Focus [ April 2009 ] 37
Special Coverage : Sa-Dhan's National conference 2009 `
Unveiling the New Microfinance Ecosystem (Highlights)
Highlights of Inaugural Speeches
Rakesh Rewari (Deputy Managing Director, SIDBI)
Ela Bhat (Founder, SEWA Bank) The effectiveness of microfinance is not in growth, but in the long term relationship of microfinance with clients and the community. Banking, after all, is a relationship of trust and not mere finance. Banking with the poor is a resource mobilization
Reaching the Unreached is important. SIDBI’s microfinance services offer assistance packages to the under-reached areas (like the North East). Ela Bhatt (Founder, SEWA Bank)
opportunity for bankers. Bankers need to invest more in the Self employed women’s associations typically utilize
loans in3 phases: R. M. Malla (CMD, SIDBI) 1)Loans used to repay existing debts MFIs should have improved governance by inducting independent directors onto their boards. The rate of interest
2) Further credit used to purchase tools and material
(pricing) will be in the green light so long as it remains within
3) Third phase of loans for working capital
10% over commercial interest rates. SIDBI has started offering long term finds to MFIs apart from thee hitherto facilities of
Professor Mohammed Yunus (Nobel Laureate; Founder, Grameen Bank)
short term funds.
In Bangladesh, microfinance has reached 80% of the poor. In
Professor Yunus (Nobel Laureate & Founder, Grameen Bank)
the coming years, it will be possible to reach the remainder. The recent financial crisis affects only the MFIs which depend
However, in India just 20% of the poor has been reached
on foreign money. Micro credit cannot go anywhere unless the
through microfinance. There will be several detractors and
money problem is solved. The solution is creating a separate
critics; as long as you know that you are in the right and that
microfinance bank. Microfinance banks should be owned by
this is good work, keep going and don’t hesitate. Social busi-
the borrowers themselves. Even the regulators can permit
ness has a different list of objectives without personal gain.
microfinance banks on an experimental basis; on achieving
It is focused on no loss and no dividend. However, costs are
certain performance standards, they may be approved. Micro
covered. Social business can make a profit, although it does
credit is not to gain personal money but to bring people out of
not go to the company or owners. Grameen Bank has been
poverty. Keep the mission alive. Many NGOs do not disclose
promoting social business to address water problems, mal-
the effective interest rate structure in full. 12.5% flat is close
nourishment of children and energy. Grameen Bank gives
to 25% on a reducing balance over one year. When the repay-
loans to children for the purpose of higher education.
ment is reduced to 40 weeks, the rate rises above 25%. MFIs need to disclose interest rates on an annualized standard rate. Change in Banking Law: The present banking law is not appro-
Amitabh Verma (Joint Secretary - Banking, Ministry of Fi-
priate for microfinance. It is like a super tanker, which can sail
Learn to work with government institutions. While fed-
only in the ocean, in deep waters. Microfinance is like a small
erating, it is important to learn lessons from the coop-
boat which can sail in shallow waters for short distances.
eratives so as not to run into the same obstacles.
Hence, we should have separate banking laws for microfi-
Microfinance Focus [ April 2009 ] 38
Special Coverage : Sa-Dhan's National conference 2009 `
Short Interviews and Opinions from the Conference Venue Crisis affects Start-Ups -Eric Savage | Managing Director, Unitus Capital Helping people raising capital to spread the system is our mission. Funding is the main constrain for almost every MFI. The economic crisis definitely affects us and it is a huge challenge to raise money, especially for start-ups and young organizations. Anyway, the MF-sector is doing much better than other sectors because the poor are more isolated from the system. At the conference I am here for meeting people. In fact Yunus’ session was the first I attended at these conferences. But it is an interesting opposition to meet, here are lots of useful people and of course friends
Showcase the Sector’s Competence -- Suresh Gurumani: CEO & MD , SKS Microfinance The initial discussion at the Sa-Dhan National Microfinance Conference 09 focused on the problems and issues requiring attention and remedy. In a short interview, Suresh Gurumani (Chief Executive Officer, SKS Microfinance) revealed that the competence of the microfinance sector should be showcased in such forums. “Here is a chance for us to show regulators, investors and others that we are a responsible, credible sector and ready for new laws. We have made investments in technology and governance. If we are to take microfinance to the next level, the successes of the sector must be discussed,” he explained.
Quality HR: It’s not Rocket Science -- Sankar Datta (Dean, The Livelihood School) Quality human resources is an area of concern among MFIs today. This morning, minutes ahead of the conference, Sankar Datta (Dean, The Livelihood School) took time to share his views exclusively with Microfinance Focus. “It’s not rocket science. With quality training, personnel will not only be able to identify livelihood opportunities for clients but will also develop far more compassion in dealing with these clients.” Microfinance can impact lives when the benefits from the sector extend beyond credit.
Make Sound Lending Decisions -- Alok Prasad (Country Director—Citi Microfinance ) ...reaffirmed the necessity of assessing a borrowers repayment capacity. “There are two things at work here - the ability of the borrower to repay the loan and the willingness of the borrower to repay the loan,” he explained. While also touching upon the changing needs of different client segments, he also expressed the need for MFIs to customize credit products.
Microfinance Focus [ April 2009 ] 39
Special Coverage : Sa-Dhan's National conference 2009 `
Short Interviews and Opinions from the Conference Venue Choose Investors Wisely- Veena Mankar (Managing Director, Swadhaar Finances) Veena Mankar (Managing Director, Swadhaar Finacess) endorses the social development aspect of microfinance, but offers a word of caution. â€œInvestors expect higher returns while MFIs want to spend on financial literacy or livelihood enhancement. Carefully pick investors,â€? she advises.
Now Chew on This - B. B. Mohanty (CGM, NABARD) The conference is going very well and the presence of distinguished practitioners of microfinance only adds to the quality of the discussions. Core issues have been focused on to give us food for thought.
Saving is the challenge, Haseena Vahanvaty , Director, Swadhaar Finacess) The main challenge we face with our work is get the women in the slums to save. We have modules for financial education, working on urban Microfinance. We want to get the women start to save, to get a saving account, use it and make the women regularly safe. We try to get them at our meetings once a week and make it fun for them. At the conference I am here for the sessions. And of course, having a look what other MFIs are working on.
Small MFI, big operational costs , Bachospati Chowdhury, Kalighat Society for Development FaciliOur organisation started with Microfinance only four years back and we have different loan products. The main challenges we face in the rural areas is the time it takes to recover from disasters like floods. In the urban sector it is our size: We have a lot of competitors and our operational costs are higher than those of the big ones. Yes, and then it is difficult to get along with the human resources. At the conference I attend the sessions, exchange views with colleagues about capabilities.
Find More at www.microfinancefocus.com/events
Microfinance Focus [ April 2009 ] 40
MIX Announces Release of Social Performance Indica- Source: The Christian Science Monitor tors Source: Microfinance Information Exchange (MIX) This week's G-20 summit is essentially an echo chamber for the worlds wealthy to talk macro-finance. The world The Microfinance Information Exchange (MIX) has sent economy might rebound more quickly if they listen to a questionnaire designed to evaluate social performwhat the poor have to say about microfinance. ance to over 1,300 MFIs. The questionnaire, available in English, Spanish, and French, consists of 22 core indica- Indeed, just as the global financial system is imploding, tors covering topics such as client poverty level, prothe microfinance sector is expanding. It is ironic that gress out of poverty, product design, and institutional the poor, who have been chronically ignored, or at policies and procedures. least underserved, seem more adept at keeping finanThe indicators result from collaboration between MIX cial institutions healthy at a time when global giants are and the Social Performance Task Force (SPTF). Last struggling to hold their ground even with billions in spring, MIX piloted an initial set of SPTF-designed social bailouts. Maybe the behemoths in the market (and performance indicators to a test group of more than those now wishing to save them) could learn a thing or 100 MFIs. Based on their feedback, the SPTF revised two from the "little people." the material into the 22 core indicators now receiving general distribution via MIX. To read full article http:// To read full article and view survey, please download www.csmonitor.com/2009/0401/p09s02-coop.html http://www.microfinancegateway.org/ files/56418_file_MIX_SPI.zip Blue Orchard reports continued growth for 2008 What the Poor Can Teach the Rich at G-20 Source: Blue Orchard
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Microfinance Focus [ April 2009 ] 41
News ` BlueOrchard, a global leader in commercial microfinance investment management, grew its assets by nearly one third in 2008, according to initial financial results for the year. As at 31 December 2008, BlueOrchard had USD 870 million total assets under management of which USD 670 million were invested with 130 microfinance institutions (MFIs) in 40 countries, up from investment portfolios of USD 580 million at the end of 2007 and USD 307 million at the end of 2006.* BlueOrchard estimates that in 2008 its partner MFIs reached roughly 9 million micro-entrepreneurs worldwide, more than half of them women.
CFO of SKS Microfinance said, ``with this transaction, a new asset class is born. For the first time in the Indian MFI history, a securitized pool is rated P1+ (SO) which is the best possible rating and showcases SKS`s structuring and financial innovation skills.`` Read more: http://myiris.com/newsCentre/ newsPopup.php? fileR=20090402191917203&dir=2009/04/02
Read More : http://www.blueorchard.com/jahia/ Jahia/newsArchive#3544
Leading international mobile money services provider Mi-Pay has announced that it will offer online and mobile international remittance solution in Sierra Leone. This will be Mi-Payâ€™s first entry in West Africa. The service will allow customers in the Sierra Leone corridor to use their mobile phone or the web to send/receive money payments to and from friends and relatives abroad. The announcement follows the launch of Mi-Payâ€™s domestic mobile money transfer solution in Sudan, which is undergoing roll out by agent-based Saraf Mobile across North Africa. It precedes the anticipated announcement of an East.
Microfinance Sector in Asia Gets Boost with Opening of New Office Source: Official Website of FDC The microfinance sector in Asia will receive a boost with the opening of The Foundation for Development Cooperation (Singapore) Ltd. FDC Singapore is an international development organisation focused on helping the poor in neighboring countries to improve standards of living through a range of development initiatives. FDC Singapore is excited about the prospects for its operational work in the years ahead and the contribution the Asia Regional Office can make to poverty reduction in developing countries in the region. Read More: http://www.fdc.org.au/files/news/2009/ March/Press-Release-Singapore-Opening.pdf SKS Microfinance concludes Rs 1 bn securitization deal with Yes Bank Source: myiris.com SKS Microfinance, India`s largest and world`s fastest growing microfinance institution, has recently completed a unique securitization deal worth Rs 1 billion with Yes Bank. The transaction the first securitization deal in India to get CRISIL`s highest safety rating - allows the bank to purchase 1, 48,950 micro loans extended to unbanked SC, ST and minorities families identified by the RBI as weaker sections and hence a priority. Announcing this landmark transaction, S. Dilli Raj, www.microfinancefocus.com
Mi-Pay Launches Mobile Remittance Service in Sierra Leone Source: finextra.com
.Read full article : http://www.finextra.com/ fullpr.asp?id=26810
Download Past Issue of Microfinance Focus www.microfinancefocus.com
Microfinance Focus [ April 2009 ] 42
Microfinance Focus Published From Bangalore
Process Management: The Number One Issue for MFI Leadership
Stop Managing Personalities and Start Managing “The Process.” Due to a growing number of requests… Microfinance Focus Magazine plans to provide access to the team of MFI management experts on our staff. Microfinance Focus Magazine is launching a new initiative designed to provide MFI management with key organizational skills. Principal among them is Business Process Management. (BPM) effective management of business processes enables a host of other essential components of organization management. All processes are cross-departmental. This is where many costly problems start. When a process (budgeting, Sales, Portfolio
Management) crosses between departments, the potential for delay, duplication, loss, and other mistakes are multiplied. Without wellprepared graphic processes, management has difficulty troubleshooting human problems … and introducing technology without effective process just makes it worse. The MF Focus Business Process Management is an integrated, interactive and performance based training process that produces a competent and certified internal process management team. Each MFI that is participates may be certified as a CMFPO demonstrating that all processes and procedures are documented and auditable on demand. Our program is designed by a team of key
managers and staff, all of whom have in-depth MFI experience including: Dr. Souren Ghosal, Knowledge Advisor, Mr. Jerome Peloquin, Managing Editor, US and Bruce Meraviglia, IT Engineer and Instructional Expert The Process Management Team - Through engagement of all Departmental Managers as The Process Management Team, both cooperation and communication are greatly enhanced. Managers’ need to work together to solve process bottlenecks. Every department manager knows that the problem being solved for another department today could be his problem tomorrow. Process Management promotes cooperation and reduces conflict and lost time. With ef-
fective business processes in place senior managers can readily track performance, analyze problems easier, understand the business better, and direct the application of technology so as to really improve operations and profit. Everyone who participates in the program will be able to create effective functional process models. We guarantee it, or you get your money back! Our performance based learning uses the Consult, Train, Mentor method. We work with each and every manager on the team so that they are fully confident and capable of creating, monitoring, and modifying their processes as change and performance improvement WE GUARANTTE IT!
Microfinance Focus [ April 2009 ] 43