Author Archive
Posted on April 14, 2010 - by James
Haiti: Microfinance and Recovery
As the Haitian government and international donors work to put into place their post-earthquake recovery plans, creating economic hubs outside of Port-au-Prince will be key. This is part of Haiti’s opportunity, as UN Secretary-General Ban Ki-moon said, to “build back better” — a priority also articulated by the Haitian government.
Expanding the rural poor’s access to microfinance is a critical building block of recovery. The majority of Haitians in rural areas are living in deep poverty, surviving on less than a dollar a day. After the earthquake, nearly 600,000 people have fled Port-au-Prince to the countryside, adding enormous economic and social stress on these already struggling communities. These same communities could become the spark for economic vitality, though, if we can get financial services into the hands of the working poor– Haiti’s women.
Posted on April 14, 2010 - by James
NY Times: Big Banks Draw Big Profits from Microloans to Poor
In recent years, the idea of giving small loans to poor people became the darling of the development world, hailed as the long elusive formula to propel even the most destitute into better lives. But the phenomenon has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100% or more.
“We created microcredit to fight the loan sharks; we did not create microcredit to encourage new loan sharks,” Yunus recently said at a gathering of financial officials at the United Nations. The fracas over preserving the field’s saintly aura centers on the question of how much interest and profit is acceptable, and what constitutes exploitation. The noisy interest rate fight has even attracted Congressional scrutiny, with the House Financial Services Committee holding hearings this year focused in part on whether some microcredit institutions are scamming the poor.
Posted on April 7, 2010 - by James
Yunus: US must reform welfare law
BusinessWeek – A Nobel prize winning expert in microfinance is expanding his operations to help poverty-stricken Americans but said Tuesday that reforms in U.S. welfare and banking law are urgently needed.
Muhammad Yunus won the Nobel prize in 2006 for setting up the Grameen Bank in his native Bangladesh. The bank now serves more than 8 million low income customers. Grameen America also has three branches in the U.S. — two in New York and one in Omaha, Nebraska — and around 4,000 American customers. It is opening a new branch in San Francisco next month.
Posted on April 7, 2010 - by James
Bangladesh: Gov’t to fix microcredit interest rates
Dhaka, Apr 05 (bdnews24.com) — The government will fix a reasonable interest rate for microcredit, said the finance minister on Monday.
AMA Muhith told the parliament that, in collaboration with Transparency International Bangladesh, the government would fix a new rate, responding to a query from Naogaon-2 Mp Sahiduzzaman Sarker.
The minister also said that the government had already asked microcredit organisations to limit their interest rate below 30 percent.
Answering to a written question from Chittagong-10 MP M Abdul Latif, Muhith said the National Bureau of Revenue was conducting special drives to prevent income tax evasion.
Posted on March 30, 2010 - by James
LeapFrog Poised to Invest $112 Million in Insurance…
LeapFrog Poised to Invest $112 Million in Insurance and Microfinance Companies, After Historic Commitments by IFC, KfW, Flagstone and Soros
FRANKFURT and WASHINGTON, March 29 – LeapFrog Investments, the world’s first microinsurance fund, announced today that it has surged past its $100 million target capitalization, months ahead of schedule. The fund invests in high-growth, high-impact insurance and financial services companies in countries including India, the Philippines, South Africa, Kenya, and Ghana. LeapFrog’s dual aims are to deliver strong returns for its investors and to bring affordable insurance to 25 million low-income and vulnerable people in Africa and Asia. For the 83 percent of Asians and 95 percent of Africans at the base of the economic pyramid, quality insurance is critical to permanently escaping the cycle of poverty and to catalyzing entrepreneurship. “Today we have achieved the synergy of profit and purpose,” said Dr. Andrew Kuper, President and Founder of LeapFrog. “We have opened the gates of the capital markets, ensuring that millions of vulnerable people, for the first time, will be able to build futures without fear.”
Posted on March 26, 2010 - by James
CGAP: How to Tell Good MFIs from Bad MFIs
Most of us working in microfinance want microloan clients to be paying interest rates that are as low as possible. While we have the same vision, there is disagreement about how to determine whether an interest rate is an appropriate one.
Some people, including Mohammed Yunus, are worried about the growing commercialization of microfinance, including the entry of profit-motivated owners and managers. They are concerned, reasonably enough, about possible “mission drift,” especially in the form of interest rates rising to (or staying at) excessive levels. In his book and in many presentations, Professor Yunus offers a straightforward formula for judging MFIs and their objectives:
• If you’re a real microlender who cares about the poor, then your interest margin (the difference between the rate you charge when lending to your clients and the rate you have to pay when you borrow from your funding sources) should be no more than 10%. That’s the “green zone” where true microlenders operate.
• If your interest margin is 10-15%, a big warning sign is flashing because you’re in the yellow zone.
• Anything above 15% is the red zone, where you’ve left true microcredit behind and joined the loan sharks.
Posted on March 24, 2010 - by James
NY Microfinance Conference Urges Savings from Poor…
(Reuters) – Microfinance institutions should work to convince the poor to put their meager savings in bank deposits rather than under the mattress, so banks can become more profitable and make more loans, experts say.
As the industry created by charities — led by Nobel Peace Prize winner Muhammad Yunus’ Grameen Bank — moves toward more regulation and profitability, it needs to develop sustainable ways to take deposits, experts told a New York conference.
“There’s a huge untapped pool of savings in poor households that’s desperate to be taken out from under the bed,” Elizabeth Littlefield, chief executive of Consultative Group to Assist the Poor, told the World Women’s World Banking Microfinance and Capital Markets conference on Tuesday.
Posted on March 24, 2010 - by James
Microfinance: Dream vs. Reality
Microfinance started as a simple idea: to provide loans to poor entrepreneurs. Today it is a much more diverse and dynamic sector, and includes institutions that provide savings and remittance services, sell insurance, and offer loans for a wide range of purposes. The idea now is to focus on bringing a range of financial services to the underserved. The institutions that focus on this mission vary in the income levels of the customers they serve, their use of subsidies, and the breadth and quality of services offered. This diversity also presents microfinance providers new opportunities as well as trade-offs.
When Muhammad Yunus and Grameen Bank won the Nobel Peace Prize in 2006, the world community celebrated the ways that expanding financial access can improve the lives of the poor. Many microfinance “insiders” have been working toward a second goal as well: to find ways to provide microfinance on a commercial basis, without long-term subsidies. The argument that microfinance institutions should seek profits has an appealing “win-win” resonance, admitting little trade-off between social and commercial objectives. Should institutions move up-market to provide larger loans and improve financial performance? Is deposit-taking feasible at such scales? Can socially-minded institutions survive commercial competition and regulation without re-defining their mission?
Posted on March 24, 2010 - by James
Ex-Morgan Stanley, UBS Execs join Unitus Capital
Strategic additions to leadership team bring deep expertise in finance, emerging market investing and philanthropic services to expand financial service offerings to microfinance institutions and social enterprises.
BANGALORE, INDIA – March 23, 2010 – Unitus Capital, a financial services firm specializing in arranging capital for microfinance institutions and social enterprises, is very pleased to announce the addition of Narayan Ramachandran and Terry Alan Farris to its leadership team. Mr. Ramachandran will join the Unitus Capital Board of Directors and serve as Co-Chairman along with Geoffrey Woolley. Terry Alan Farris joins the senior management team as Chief Executive Officer.
Unitus Capital has already established itself as a market leader in delivering capital markets solutions to the Indian microfinance industry. In line with the Company’s growth strategy, Mr. Ramachandran and Mr. Farris will lead the Company’s expansion into new product and service areas to benefit the underprivileged in Asia-Pacific.
“The combined experience of Narayan and Terry will help Unitus Capital expand its service and product offerings to increase participation of social impact investors in businesses that are driving social change in the region.” said Kylie Charlton, Managing Director of Unitus Capital.
“We are very fortunate to have Narayan join Unitus Capital as Co-Chairman, given his incredible global emerging markets experience,” adds Eric Savage, President of Unitus Capital. “Not only has Narayan played a leading role in developing the capital markets for emerging economies around the world, but he has also been active in social impact investing for many years. We have already benefited from his strategic advice in refining Unitus Capital’s strategy.”
Mr. Ramachandran has been actively involved as an investor in Emerging Markets for over 20 years. Mr. Ramachandran recently stepped down as Chief Executive Officer and Country Head of Morgan Stanley India. Previously, Mr. Ramachandran held senior global positions with Morgan Stanley Investment Management, notably as Head of Morgan Stanley’s Global Emerging Markets and Asset Allocation businesses. Mr. Ramachandran has a keen interest in using market-based mechanisms to alleviate poverty, in areas such as micro-finance, social venture capital, micro-insurance and affordable housing. Mr. Ramachandran, a Chartered Financial Analyst, received a BTech from the Indian Institute of Technology, Bombay and an M.B.A. from the University of Michigan.
“We are very excited that Terry has joined Unitus Capital as our CEO,” remarks Savage. “Throughout his career Terry has demonstrated a strong commitment to making a large social impact. Importantly, he has an amazing network of relationships across Asia, experience building teams and a passion for Unitus Capital’s mission.”
Mr. Farris has over 20 years of diverse experience managing and advising privately held companies, multinationals, family offices and individual entrepreneurs globally on their philanthropic strategy, initiatives and governance. His core expertise lies in philanthropy and fundraising in Asia, totaling several billion dollars over the course of his career. Formerly, Mr. Farris was the Head of Philanthropy Services for the Asia Pacific region at UBS, based in Singapore, where he advised over 225 family-owned companies and 150 non-profit clients in 12 countries. Earlier, Mr. Farris was Head of Philanthropy Services for Asia Pacific at MeesPierson (presently Fortis MeesPierson). He has been instrumental in establishing associations, organizations, and resource programs that help build community capacity throughout the Asia Pacific region. Mr. Farris has a Bachelors degree in Business Administration from Pacific Union College in California.
About Unitus Capital
Unitus Capital is a financial services firm specializing in arranging capital for social enterprises benefiting those at the bottom of the economic pyramid. With operations in Bangalore, Hong Kong, London and Sydney, Unitus Capital delivers a range of financial advisory and capital market services principally to clients in Asia.
Posted on March 22, 2010 - by James
Chairman of Nestle: Water consumption concerns are worse than Climate Change
Monday is World Water Day, but I suspect relatively few will have noticed.
While the world is rightly moving to address the challenges presented by climate change and depleting supplies of fossil fuels, the same awareness and consensus does not exist when it comes to addressing our usage of water. Yet the harsh fact is that we will probably run out of water long before we run out of fuel.
We need to act fast, now.
Posted on March 22, 2010 - by James
Yunus calls for standardized interest rate…
Nobel Laureate Prof Muhammad Yunus yesterday called on the microcredit regulator to come up with standardised interest rates for microfinance institutions to clear suspicion and establish transparency.
“It’s a sensitive point in Bangladesh and everywhere else. I think it will be a great service by the Microcredit Regulatory Authority if they can fix the interest rate,” he said at the closing of an international conference on microcredit organised by MRA at Sonargaon Hotel.
Prime Minister’s Adviser on Economic Affairs Mashiur Rahman and founder and Chairperson of BRAC Sir Fazle Hasan Abed also spoke at the programme attended by about 50 participants from 20 countries.
Yunus, the campaigner of microcredit, made the call as different quarters including policymakers, questioned transparency in interest rates charged by the microfinance institutions.
Posted on March 19, 2010 - by James
India: MFI Funds Widen Focus to Cover New Social Sectors…
Noida, Uttar Pradesh, India, March, 16 2010 – Micro-insurance, micro housing finance, remittances and services in education & healthcare are coming under their radar.
India’s microfinance-focused private equity fund managers are now diversifying their investment base into newer areas of social investing as they raise new vehicles. These funds are investing in areas from healthcare services to rural supply chains to even rural business process outsourcing plays. With microfinance coming to the portfolio of mainstream investors with the impending public offering of SKS Microfinance, the search for the next emerging game-changer for these fund managers has already begun.
Fund managers like Aavishkaar Venture Management Services Pvt Ltd, Caspian Advisors Pvt Ltd, Elevar Equity Advisors Pvt Ltd and Lok Advisory Services Pvt Ltd have raised or are looking to raise new funds which will have a broader focus beyond credit. While the focus of these funds continues to be microfinance, they will also look at broad spectrum of areas such as micro-insurance, micro housing finance, remittances, mobile payments and services in education and healthcare.
Posted on March 19, 2010 - by James
SBP credit guarantee scheme for SMEs…
KARACHI: SBP governor Salim Raza would launch a credit guarantee scheme for small and rural enterprises under the financial inclusion program at a ceremony on March 19.
He will also announce a refinance scheme for small and medium enterprises in NWFP, FATA and Gilgit-Baltistan to enhance flow of credit to SME and agriculture sectors with greater emphasis on revitalization of business activities in the troubled areas of NWFP, FATA and Gilgit-Baltistan.
Posted on March 18, 2010 - by James
Right time for Self Regulation in microfinance: Naina Lal Kidwai
Microfinance Focus, March 17, 2010: “When growth occurs in a sector, the importance of self regulation turns out to be important”, Said Ms. Ms. Naina Lal Kidwai, CEO, HSBC India, while delivering her speech first day of SA-DHAN -FICCI organized two days (17-18th March) National Level Microfinance conference at hotel Ashoka, New Delhi.
Ms. Kidwai emphasis on self regulation could be an endorsement of the importance of Microfinance Institutions Network (MFIN), a self-regulatory organization of 35 Indian NBFC – microfinance institutions code of conducts and sharing information and borrower`s credit history among MFIs.
Posted on March 18, 2010 - by James
Kenya: Insurance Regulatory Authority commissions survey of MF sector…
IRA said at the weekend that findings from the research which commences today under the stewardship of a South African consulting firm will be presented to insurance stakeholders next month for debate, to inform amendments to the Insurance Act so as to facilitate a rapid penetration of micro insurance in the country.
Speaking during a workshop called by the Association of Kenya Insurers (AKI) at a Nairobi Hotel, IRA Chief Executive Officer, Mr Sammy Makove said the results of the study would also help insurance stakeholders to decide whether to adopt the Indian-like model where a separate regulation was put in place to cover micro insurance or to pursue further amendments to the Insurance Act.
Posted on March 16, 2010 - by James
Elevar raises $70 million to invest in microfinance
An equity fund focused on poverty? Sounds odd, I know. But Chris Brookfield, who managed funds for Unitus, and his partners at Elevar said today they have raised $70 million to invest in companies providing services to people at the bottom of the economic ladder. Elevar told me a bit about the fund last June.
Seattle-based Elevar will invest in companies involved in microfinance and other services targeted at the working poor in countries such as India, Mexico, the Philippines and Peru.
Posted on March 16, 2010 - by James
Microinsurance.. with a mobile phone
THE ECONOMIST: ONE of the things holding back agriculture in developing countries is the unwillingness of farmers with small plots of land to invest in better seed and fertiliser. Only half of Kenyan farmers buy improved seed or spend money on other inputs. Many use poor-quality seed kept from previous harvests. That is understandable when drought or deluge can destroy their crop, but it has the effect of reducing yields. A new microinsurance scheme promises to help.
Kilimo Salama, which in Kiswahili means “safe farming”, uses a combination of mobile phones and 30 automated solar-powered weather stations to provide crop insurance. It has been set up by UAP Insurance of Kenya, Safaricom, Kenya’s biggest mobile-network operator, and the Syngenta Foundation for Sustainable Agriculture, part of a big Swiss agribusiness group. After a successful trial with 200 farmers last year, Kilimo Salama has just been expanded in the hope of attracting 5,000 farmers in western and central Kenya this year.
Posted on March 15, 2010 - by James
“SKS Microfinance may hit Street with Rs 1,000-cr IPO “
NEW DELHI: Hyderabad-based SKS Microfinance is looking to raise Rs 1,000 crore from its upcoming public flotation , whose progress is being
keenly watched as it is the first share issue by a company in the fledgling microfinance sector.
“We plan to sell around 10-15 % stake. The quantum of stake sale will depend on the valuation of the company,” said a senior executive with a private equity investor in SKS, founded by Vikram Akula, one of the pioneers of the industry.
The firm, which specialises in offering small loans to poor borrowers, is expected to file its draft red herring prospectus (DRHP) by end of this month and is looking for a valuation between Rs 5,000 crore and Rs 7,000 crore, he said, requesting anonymity.
Posted on March 14, 2010 - by James
Sequoia may pick up 9.4% stake in CARE…
NEW DELHI: Private equity firm Sequoia Capital is looking to pick up 9.4% stake in rating agency Credit Analysis and Research Ltd (CARE) for Rs 73.5 crore, people close to the development said. CARE, a non-banking financial institution (NBFC) and rating firm, is controlled by IDBI Bank, SBI and Canara Bank. Currently, it has no foreign shareholding. IDBI bank, with more than 26% stake, is the largest shareholder in the rating firm, which was set up in 1993.
Canara Bank holds 23.67% in the company, while SBI has 9.97% stake. Other shareholders in CARE are Federal Bank, IL&FS and ING Vysya Bank.
Posted on March 10, 2010 - by James
India: SKS to file for IPO in 3-4 weeks…
MUMBAI, March 8 (Reuters) – SKS Microfinance, an Indian firm that makes small loans to poor borrowers, plans to file application papers for an IPO in 3-4 weeks, three sources with knowledge of the deal said. The exact size and structure of the fundraising was not yet determined, with one source putting the figure at roughly $200 million, some of which might be raised through a pre-IPO placement. Another source said the company could raise $250-$350 million.
The sources did not wish to be named as they were not authorised to speak with the media. SKS founder Vikram Akula declined to comment. The for-profit company is India’s largest microfinance institution and is backed by private-equity firms such as Sequoia Capital, Kismet Capital and Sandstone Capital.
The MiFi Report
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