To be read with your 3 o’clock coffee.
Below is a round up of last 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.
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Gabriel Davel Proposes Tests for Credit Bubbles
May 16, 2013
by Elisabeth Rhyne, managing director of the Center for Financial Inclusion.
Gabriel Davel knows what he’s talking about, and so should you.
Davel is the veteran bank regulator who helped create and lead South Africa’s National Credit Regulator, one of the most capable financial consumer protection agencies in the world. In CGAP’s new Focus Note, “Regulatory Options to Curb Debt Stress,” Davel draws on the experience of a number of debt crises in microfinance and consumer credit and distills his own hard-won experience into practical guidance aimed mainly at regulators, but also highly relevant for financial institutions.
A Challenge to Flat Earth Thinking in Microfinance
By Sanjay Sinha
Summary below provided by the Microfinance Gateway
This note challenges the relevance in today’s world of some of the rules of good microfinance practice propagated until now.
The intensive promotion of microfinance worldwide as a palliative if not a panacea for poverty started in the mid-1990s. A strong message on the principles of good microfinance practice was propagated worldwide. These principles included (but were not limited to):
- MFIs must adopt the principle of “zero tolerance of delinquency” in order to minimize default;
- There must be a continuous effort to limit operating costs in order to deliver microfinance at the lowest possible price to low income clients;
- Microfinance services must be offered by specialist MFIs in order to ensure that there are no conflicts of interest that confuse MFI managements, staff, or borrowers;
- MFIs should focus on growth in order to maximize outreach to the vast numbers of financially excluded families across the globe.
Housing, education and banking, increasingly through mobile technology, are three of the fastest growing areas for private companies doing business with the Base of the Pyramid. Thanks to creative and also profitable new business models, low-income Colombians living outside the formal banking system are buying homes and appliances like fridges and washing machines on credit, and Brazilians with few early education options are giving their preschoolers a head start with targeted educational materials.
…Preschools are rare in low-income neighborhoods in Brazil and many young children start their formal education at a disadvantage. PUPA is the first company in Brazil to offer an installment delivery and payment plan so parents can buy educational toys and books specifically targeted to growing and developing young children and caregivers without much education. (See a NextBillion interview with PUPA’s CEO).
EPM’s General Manager Juan Esteban Calle, Credifamilia’s CEO Juan Sebastian Pardo, and PUPA’s founder and CEO Mary Anne Amorim will discuss the nuts and bolts of successfully reaching these large and largely untapped markets. The three top executives will be among many other BoP experts discussing their companies’ successful models at the Inter-American Development Bank’s II BASE Forum International set for June 6-7, 2013 in Medellin, Colombia.
Alleviating Poverty: Mobile Communications, Microfinance and Small Business Development Around the World
May 16, 2013
By Darrell M. West, Vice President and Director, Governance Studies; Founding Director, Center for Technology Innovation
Editor’s Note: The Center for Technology Innovation at Brookings releases this paper in conjunction with the May 16 forum at Brookings, “Mobile Technology’s Role in Combating Global Poverty and Enabling Entrepreneurship.” Both are part of the wider Mobile Economy Project which examines how the rapid expansion of mobile technology around the world is transforming economic opportunity for millions.
…with the growth of mobile technology, there are new opportunities for individuals and small businesses to lift themselves up. People can use handheld devices to make monetary transfers, arrange for microfinance loans, establish small enterprises, and improve their economic circumstances. This helps them alleviate poverty and create a better situation for themselves and their families.
Jeffrey Sachs, director of Columbia University’s Earth Institute, said that wireless communication is a breakthrough technology that helps to solve the worst problems associated with health care, poverty, and educational access. “Now in every village where I go, someone’s got a cell phone, somebody can make an emergency call, someone can find out the price on the market, someone can start a business empowered by the fact that they can reach a customer or a supplier, someone can drive a taxi or a truck for that reason as well. Everything is changing,” said Sachs.[ii]
[ii] Kyla Yeoman, “Can Mobile Phones End Extreme Poverty?”, Global Envision, March 16, 2012.