Posts Tagged ‘mfis’

Posted on November 26, 2009 - by boris

India: Microfinance institutions wary of housing loans over default fears…

Concerns of defaults are holding back microfinance institutions, or MFIs, from a full-fledged expansion into home loans even as they seek to turn their clientele of poor borrowers into consumers and compete with commercial banks.

MFIs, established mainly to lend small sums to the unbanked poor to help them earn a living, say there’s potentially a huge demand for home loans among their customers. “This is unsecured lending. Risks are too many,” said a senior official at SKS Microfinance Ltd, India’s largest MFI, who didn’t want to be named. “It’s a different and a difficult ball game. We do not know yet how to price it.”

Home loans would be an extension of the consumer finance business of MFIs, who have already gone beyond their traditional role by financing the purchase of mobile phones, water purifiers and even refrigerators and are seeking to expand their product offerings to compete with commercial lenders.

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Source: http://www.livemint.com/2009/11/23212808/MFIs-wary-of-housing-loans-ove.html

Posted on November 23, 2009 - by boris

India: Microfinance Institutions hope for level playing field in new Bill…

The microfinance institutions (MFIs) are awaiting the microfinance legislation based on the Rangarajan committee recommendations which is expected to give them a ‘level playing field’ and recognition as a separate group of non-banking financial institutions.

The Bill on microfinance is expected to incorporate some of the key recommendations of the Rangarajan committee on financial inclusion such as different status for microfinance institutions as ‘Microfinance NBFCs’, with easier norms and access to foreign funds and tax concessions similar to housing finance and infrastructure firms.

S Dilli Raj, CFO of the Hyderabad-based SKS Microfinance Ltd, said that the MFIs were not asking for any subsidy or concession but a level playing field. The MFIs have reached millions of households which the banking sector had shunned and have been transforming lives and communities.

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Source: http://www.financialexpress.com/news/Microfinance-institutions-hope-for-level-playing-field-in-new-Bill/544265/

Posted on June 22, 2009 - by Gavin

MFIs in Africa face collapse as financial crisis bites…

Microfinance institutions in Africa have very little chance of
surviving the current financial crisis as loan repayment default
soars. Most of their low-income debtors will be too busy
concentrating on personal survival to think of repaying their
loans. This is despite a show of resilience by the global
microfinance sector in a new survey conducted by CGAP, an
independent policy and research centre dedicated to advancing
financial access for the world’s poor. “There have been few
failures among microfinance institutions since the onset of the
current financial crisis. However, the more than 400 respondents to
the March survey reported significantly tougher market conditions,”
reads the report, released recently. In East Africa, microfinance
institutions have been pivotal in spurring growth and development
for the majority of rural dwellers. They also support a thriving
small and medium scale enterprise sector that today account for
about 30 per cent of the gross domestic product of countries like
Kenya. However, the full impact of the financial crisis is likely
to be felt in the second half of this year. Accordingly, many MFIs
are taking steps to cope, such as taking a more conservative
lending approach and in some cases, even cutting staff. “Many poor
households are struggling with the many consequences of the global
food, financial and employment crises,” said Elizabeth Littlefield,
CGAP’s chief executive. She added, “Their income sources like
revenue from small businesses or from money sent from families
working abroad, have become more erratic. At the same time, many
expenses like food, are still far higher than before. Savings are
thus being withdrawn and loan repayment rates to MFIs are
worsening.” According to the survey, as opposed to their
counterparts in emerging economies, leading MFIs in the West are
well positioned to adjust their operations to weather the financial
storm. Many are investing more in client communications and
tightening credit and collection policies. Source:
http://www.theeastafrican.co.ke/business/-/2560/613414/-/5jyrrxz/-/

Posted on June 5, 2009 - by Gavin

Can Microfinance Help the Poor?…

The Stanford Progressive

For many of the 3 billion poor in the world, poverty does not just mean a limited access to financial resources; extreme poverty implies malnutrition and starvation, exposure to disease, an impediment to education, a reduction of rights and privileges, and possibly death. However, microlending can ease the extent of poverty. It is estimated that microlending organizations have helped over 67.6 million poor people. This level of success is what has excited so many to advocate microfinance as a means of reducing poverty: today, it is estimated that over 7,000 unique microfinance institutions exist. Even so, critics of microfinance are very vocal in their attacks on its efficacy and success. Globalisation Institute economist Tom Clougherty writes, “There are a number of criticisms leveled at microfinance and chief among them is that microfinance is just a ‘band-aid’, that it simply covers up the real problems without actually addressing them.”

What accounts for this discrepancy among economists?

David Hulme, Professor of Development Studies at the University of Manchester claims, “MFIs [microfinance institutions] virtually never work with the poorest – the mentally and physically disabled, the elderly, street children, the destitute and refugees – and many MFIs […] have high proportions of clients who are non-poor.” Hugh Allen, a faculty member of the Boulder Microfinance Training Program, adds that many smaller MFIs are unable to work with the very poor because “roads are bad, qualified staff may be expensive and hard to find, markets may be scattered, and the legal system dysfunctional.” (more…)

Posted on May 28, 2009 - by Gavin

Share Microfin To Raise $50 Million From IFC, Others…

VC Circle

(more…)

Posted on May 27, 2009 - by Gavin

SBP adds incentive to Micro Credit Guarantee Facility…

Daily Times

KARACHI: The State Bank of Pakistan has told the banks that they might provide funding to microfinance banks/institutions with 25 percent First Loss Guarantee to cover up to 25 percent of the first loss on the principal amount under the Micro Credit Guarantee Facility.

The MCGF was introduced by the central bank in December last year to use microfinance effectively in Pakistan for poverty alleviation. It was designed to help in enhancing the outreach of the microfinance to poor and marginalized segment of the society. Through this facility, the central bank had tried to encourage banks/DFIs to increasing lending to microfinance sector.

However, the commercial banks and DFIs did not respond enthusiastically to the facility. According to reports, only one loan was granted under the MCGF. Now the central bank has further incentivized commercial banks to provide wholesale funds to eligible Microfinance Banks/ Institutions under the MCGF. Besides the existing 40 percent Partial (pari-passu) Guarantee to cover the principal amount in default, they may now provide funding to microfinance bank/institution with 25 percent First Loss Guarantee to cover up to 25 percent of the first loss on the principal amount. (more…)

Posted on May 25, 2009 - by Gavin

MICROCAPITAL STORY: Sahara Mutual Fund of India Launches Systematic Investment Plan (SIP) as a Microfinance Saving Scheme…

Microcapital

Sahara Mutual Fund (SMF), an asset management company, has lodged a draft offer document with the Securities and Exchange Board of India (SEBI) to create the Sahara Daily Fund (SDF). The SDF will be a daily systematic investment plan (SIP) where people can invest with a minimum of 10 Indian Rupees (Rs.) (USD 0.20). The SDF is aimed at providing daily wage earners with a microfinance saving scheme. Units are purchased and can be traded on any business day. There will be a dividend option (payout or reinvestment) and a growth option. Dividends will be distributed, subject to profits being available, based on the units held by the account holder.

The SDF will invest in debt and debt related instruments to generate returns with low levels of risk. No more than 10 percent of its net assets will be in foreign securities. The collection of cash will be made using mobile technology through authorized collection agents. The fund will charge an entry load of 2.25 percent and 1 percent exit load if redeemed within one year. This will reduce to 0.5 percent if redeemed after one year but before two years and there will be no exit load if redeemed after two years.

Naresh Garg, chief executive officer of Sahara Mutual Fund said, “There are several micro-credit schemes available in the country for the poor, but there are hardly any micro-savings schemes available.”  In India self help groups (SHGs) are the predominant method of microfinance savings and loans. (more…)

Posted on May 18, 2009 - by Gavin

MFIs need SBP approval before withdrawing shares…

The International News

KARACHI: The State Bank of Pakistan (SBP) has directed sponsor members of Microfinance Institutions (MFIs) to deposit their holdings in blocked account of Central Depository Company of Pakistan Ltd (CDC) and take prior written approval of it before withdrawing shares from the CDC.

The SBP took this decision under Section 10(2) of Microfinance Institutions Ordinance 2001 which states “not less than 51 per cent of the paid-up capital of a microfinance institution shall be subscribed by the promoters or sponsor members and the shares subscribed to by the promoters or sponsor members shall remain in the custody of the SBP and shall neither be transferable nor encumbrance of any kind shall be created thereon without prior permission, in writing, of the State Bank.”

According to a circular of the central bank issued on Saturday, it has been decided that the sponsor shares and subsequent bonus and/or right shares issued to the sponsors of Microfinance Banks (MFB) shall be deposited in CDC. (more…)

Posted on April 29, 2009 - by Gavin

Banks think small to achieve big; focussing on microfinance…

The Hindu News

Mumbai (PTI): Betting big on the fast-growing micro-finance sector, leading private and foreign banks are all set to scale up their MFI operations in the country.

Apart from providing financial support to fund-starved microfinance institutions (MFIs), banks are also active in launching schemes to support the growth of tiny units by providing training in management skills.

Foreign lender Royal Bank of Scotland (RBS) has chalked out a plan to increase its microfinance portfolio, which is currently at Rs 300 crore, to Rs 450 crore by the end of this fiscal.

The UK-based lender currently provides direct financing to around 30 MFIs across the country and has partnered another 41 MFI units to train them build up the administrative skills and strong business model.

“Despite the financial crisis, MFIs have been the least affected as they have managed to maintain the quality of the business. RBS will continue to expand its MFI portfolio and expects to grow the size to Rs 450 crore by the fiscal-end,” RBS Vice-President Moumita Sen Sarma said.

The lender did not expect any deterioration in the asset quality of MFI units in 2009-10, she said.

(more…)

Posted on April 16, 2009 - by Gavin

Microfinance integral to poverty reduction strategy: Gilani…

Daily Times

ISLAMABAD: Prime Minister Syed Yousaf Raza Gilani has said that microfinance is an important pillar and integral part of Pakistan’s poverty reduction strategy and the government is making all out efforts to expand its coverage through microfinance banking, microfinance institutions and rural support programme.

The Prime Minister expressed these views while chairing a high level meeting on Microfinance Network at the Prime Minister House here this afternoon.

“Micro-credit is the best way of reaching out to the marginalized and the forgotten and can change the destinies of the have nots of the country,” the Prime Minister said.

The Prime Minister said the government is making multiple interventions to cause a dent in poverty. As part of our lasting and sustainable poverty reduction strategy, the Prime Minister said, “we are focusing on creating income generating avenues for the poor and disenfranchised and specially the women through micro-credit institutions.” (more…)

Posted on April 15, 2009 - by Gavin

Global Recession and Bangladesh…

Energy Bangla

The various outlooks released thus far by multilateral agencies, think-tanks and experts have been wide off the mark in predicting the evolvement of the crisis; hence, rather than looking at ‘forecasts’, one may profitably look at observed patterns. Although GDP is a poor indicator due to lag/revisions, fourth quarter 2008 results showed that in the United States and Japan, GDP losses were of 6.2 per cent and 12.1 per cent respectively and Thai GDP fell by 4.3 per cent (all annualised rates). Both China and India appear to be growing at about 300-400 basis points below rates posted 12 months earlier.

A better indicator of the output decline to evolve in the coming quarters is the unemployment rate. Since January 2008, the US unemployment rate has risen from 4.9 per cent to 8.1 per cent in February 2009, i.e. by 3.2 percentage points (or, by 5.1 million), of which the most severe decline occurred since November 2008. Worse news comes with trade, where advanced country import growth has turned negative in 2009. Major export losses are being recorded all across Asia.

While global FDI flows have slowed down markedly, unlike many developing countries, Bangladesh is well-shielded due to its relative insignificance. Advanced country credit markets (especially in the US) continue to remain substantially clogged and the interest rate spread remains near the peak in many countries (particularly the US). Even though the US federal funds rate has been lowered to near zero, the prime rate is 3.25 per cent, and the 30-year fixed mortgage rate about 5.25 per cent with the fund approval criteria and processes becoming tighter. Most other advanced countries also have not passed along the full extent of the official overnight rate cuts to consumers in the form of prime or mortgage lending rates, signalling a continued tight credit situation. Further, since January 2008, advanced country stock indices have lost about 50 per cent of their value, which jeopardises the recovery prospects in the market for household durables and other large expenditure items. (more…)

Posted on April 8, 2009 - by Gavin

MICROCAPITAL STORY: Uganda Government to Set up Regulatory Body to Monitor Work of Savings and Credit Co-operative Organizations (SACCOs)…

Microcapital

The Government of Uganda is to set up a body to license and regulate the work of the Savings and Credit Co-operative Organizations (SACCOs) of Uganda, according to a press release on the Ugandan newspaper Monitor. The announcement was made by Ms.Ruth Nankabirwa, the state minister for Micro Finance, at a rural financial service sensitization program in the Kiboga District of Uganda. Ms. Nankabirwa stated that the new regulatory body was a move to protect the Ugandan public from conmen and also to stop embezzlement of savers’ money collected by SACCOs.

Elaborating on the need for the new monitoring body, Ms. Nankabirwa brought to focus the fact that several Ugandan MFIs tend to operate for a few months in a particular region and then relocate to another region thereby causing many Ugandans to lose money. She mentioned that the new board would identify and follow-up on all MFIs involved in such questionable activities and ‘bring to book all unscrupulous financial managers’. This announcement on the establishment of the new body follows an initial announcement back in July 2008 by Mr.Henry Mbaguta, the assistant commissioner in-charge of microfinance in the Ministry of Finance, Planning and Economic Development. (more…)

Posted on April 1, 2009 - by Gavin

New Microfinance Ecosystem unveiled at Sa-Dhan’s National Microfinance Conference 2009…

India PR Wire

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Posted on March 31, 2009 - by Gavin

MFIs introduce home loans for rural India…

Rupee Times

The RBI’s move that prompted banks to lower lending rates is not only beneficial for the borrowers residing in the urban places but also for the people living in rural India. The micro finance institutions (MFIs) have come forward to help the poor by introducing home loan products.

The MFIs are launching home loans because majority of the people in the villages own plots in which they construct a low-cost model house with indigenous materials. It is the low cost model that is inducing MFIs to start home loans, says Chairman of Madura Micro Finance, Tara Thiagarajan.

The home loans designed for rural India are almost same as the home loan products for the urban individuals. The only difference is the average loan amount. MFIs are disbursing home loans in the range of Rs 50,000 and Rs 2 lakh. The repayment for the loan is allowed through the equated monthly instalments (EMIs). In fact some MFIs like Madura Micro Finance are also providing a payment holiday of four months for the construction purpose.

The main purpose of extending rural home loans is to enable credit for home improvements and extension like converting the thatched roof into a tiled one, adding washrooms and rooms for better living. (more…)

Posted on March 30, 2009 - by Gavin

MICROCAPITAL STORY: International Finance Corporation (IFC) To Lend USD 450 Million and Increase Its Support of Microfinance Institutions (MFIs) in Colombia, Peru, Ecuador…

Microcapital

The International Finance Corporation (IFC), a member of the World Bank Group, plans to lend USD 450 million to Peru, Colombia, and Ecuador over a 12-month period through to June 2009; however, in light of the global financial crisis that that amount may increase. The IFC is also increasing its support of microfinance institutions (MFIs) because they have been deemed an efficient way to lift people from poverty.

Created in 1956, the IFC aims to foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. According to the organization’s 2008 Annual Report, IFC made investments of USD 16.2 billion in the 2008 fiscal year.

Although Roberto Albisetti, the IFC’s chief for the three countries, declined to give an estimate of how much more the IFC would increase its disbursements to the three countries, he did state that the IFC is “readying additional funds during this crisis to respond to an unmet demand by the international financial market.”

The IFC along with governments and other multilateral lenders have raised funds for the purpose of helping developing countries around the world weather the economic crisis for the next three years. Currently, the fund stands at a total of USD 31 billion. The IFC plans to draw from this fund to finance the increase in the loan to Peru, Colombia, and Ecuador. (more…)