To be read with your Friday Happy Hour cocktail.
Below is a round up of this week’s microfinance news. We thank our colleagues for the wonderful work they do in advancing our knowledge of best practices and innovations, as well as challenging us all to remain true to our social mission.
Lea en español (traducido por Google) *** Lisez en français (traduit par Google)
Financial Engineering for Low-Income Households
June 17, 2013, Center for Financial Inclusion (@CFI_ACCION)
Q&A with Bindu Ananth and Amit Shah, president of IFMR Trust and head of business intelligence at IFMR Rural Finance (@cmfindia)
For someone unfamiliar with the field, how would you describe financial engineering, and to what extent do you see financial engineering being applied by retail providers serving low-income households today?
In the Foreword to the book, Dr. Nachiket Mor, a mentor to us at IFMR Trust, observes that the retail finance industry the world over has gone in the direction of standardized products and transferring the burden of decision-making away from bankers and to the consumer. This is also true of providers serving low-income households. This, we think, misses the power of finance…
Does financial capability play into financial engineering product design or marketing? Some studies have shown that even extremely well-designed products can have very low adoption among low-income households if they don’t understand the features of the products or the intended benefits.
Agreed, this is where the role of the provider is so crucial. In Chapter 1, we argue that instead of passing the buck to the client in the name of literacy and capability, there must be a greater onus on the provider to assess and provide suitable financial services…If staff in these institutions understand these ideas better, they can impact adoption rates among clients.
>>The Microcredit Summit Campaign is looking for a good workshop proposal on financial capability for the 2013 Partnerships against Poverty Summit (October in the Philippines). Learn how to submit your proposal here.
Summary provided by the Microfinance Gateway
This paper traces the evolution of the concept and practice of microfinance. It seeks to examine whether microfinance is worthy of continued support from donors. It advocates a rethinking of microfinance from being a source of credit to small businesses into a full suite of financial services that helps poor people make the most of what they have, pay for big purchases over time, and lead secure lives.
…Microfinance spiked in popularity during the 2000s, hailed by leading development economists and world leaders alike, as a powerful tool that could help eliminate poverty…Having women responsible for loan repayments improved their status and in some communities has even lead to declining levels of violence against women.
However since 2010 there has been growing criticism for micro finance institutions (MFI)…Currently data is inconclusive, as only a small amount of information has been gathered on people who qualify for micro-loans but are not recipients. Without this comparison group it is difficult to draw conclusions on the effects of microfinance, but there are now larger scale studies being carried out using randomised controlled trial techniques…
Match Return Expectations to the Market You’re Serving
June 18, 2013, NextBillion.net (@NextBillion)
By Paula Goldman (@pdgoldman), Director of Knowledge and Advocacy, Omidyar Network
There is a considerable split in the impact investing world between so-called “returns first” investors and “impact first” investors, who disagree on whether it’s ever necessary to expect returns that are below market rate. At Omidyar Network, we believe that the answer to this question depends on the market you are serving.