#tbt: Top 10 Reasons That Fewer Loans Are Going to the Poorest

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1. Myopic focus — For many years, the indicators used to measure microfinance performance have focused on numbers of clients and the sustainability or profitability of the institutions that reach them. These indicators tell us little about whether we are achieving the real aim of microfinance — helping people lift themselves out of poverty. Without tools to measure our ultimate ends, we satisfy ourselves by measuring our means instead.

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in Vulnerability: The State of the Microcredit Summit Campaign Report, 2013. For two years in a row, we have reported a decrease in the total number of extreme poor (those living on less than $1.25 a day) that had received a loan. Our “Top 10 Reasons” chapter in the 2013 Report are still very relevant.


What has caused a reduction in microfinance clients worldwide? And why have all of those reductions been from the poorest clients? Here are our top 10 reasons.

10. Andhra Pradesh crisis in India — Our reports show that India accounts for almost all of the reduction in clients worldwide. Most of these reductions come from Andhra Pradesh, where fast growth led to overlending, cases of harsh collection practices, and heavy regulation from the state government. Many MFIs and banks stopped lending to microfinance clients and self-help groups as a result.

9. Maturing markets — Some of the fastest growing markets in the world, including Bangladesh and parts of Latin America, have reached a point where a large proportion of the people most easily reached have become clients, and MFIs’ growth is slowing as they seek ways to lower costs and reach more remote and more difficult markets.

8. Global economic crisis — Microentrepreneurs and the financial institutions that serve them could not remain insulated from the worldwide economic crisis. Less economic activity in the developed world meant less tax revenue and greater focus on domestic spending by Western governments. It also led to a drop in donations to international charities. Remittance flows dwindled, which negatively affected economic activities in towns and villages dependent on income from family members in other countries.

7. Investor wariness — Banks and other investors in India and other countries curtailed their investments in microfinance, while international microfinance investment vehicles continued to invest almost three-quarters of their funds in Eastern Europe and Latin America, regions with less outreach to the poorest.[1]

Villager in Nangolkot, Noakhali, Bangladesh
Photo credit: Shamimur Rahman and Giorgia Bonaga

6. Donor fatigue — Many bilateral donors have reacted to growing commercialization and negative press by reducing their support for microfinance. This means less funding is coming in for groups that may need subsidies to build sustainable programs to reach poorer and more remote clients.

5. Herd mentality — MFIs find it easier to operate in locations where other MFIs have already developed the market. Investors find it easier to invest in MFIs where other investors have already done the due diligence. The result is a piling-on effect that eventually leads to bad debts and a retreat from the microfinance market.

4. Patchy information — Global reporting on microfinance activity (including our own in this report) shows data by country. This disguises the fact that, within a country, some locations may have more than enough microfinance services available while others have very little. Without accurate and timely maps that localize activity, it can be hard to see which markets are overheating until it is too late.

3. Better measurement — In the past few years, many MFIs have more widely adapted poverty measurement tools, such as the Progress out of Poverty Index®, Poverty Assessment Tool, and the Food Security Survey. The MFIs that employ these tools often find that the number of the poorest that they are serving is less than they originally estimated. This means that some of the reduction in numbers of the poorest being served reported to us is due to more accurate reporting on the number of poorest clients.

2. Misaligned incentives — he market provides few rewards to those MFIs that reach poorer and more remote clients because reaching these clients usually entails higher costs and smaller margins. Without ways of recognizing those that reach the poorest, MFIs will have few incentives to extend to this market and will find it difficult to attract funding to do so.

1. Myopic focus — For many years, the indicators used to measure microfinance performance have focused on numbers of clients and the sustainability or profitability of the institutions that reach them. These indicators tell us little about whether we are achieving the real aim of microfinance — helping people lift themselves out of poverty. Without tools to measure our ultimate ends, we satisfy ourselves by measuring our means instead.

Farmers (credit - Andrés Quinche)_comp

Photo credit: Andrés Quinche


[1] Symbiotics, 2012, “2012 Symbiotics MIV Survey: Market Data & Peer Group Analysis,” (Geneva, Switzerland: Symbiotics), http://bit.ly/MIV_survey.

#tbt: Excerpts from “Microfinance in India: A Way Forward”

CRECER clients

Photo credit: CRECER Bolivia

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in Vulnerability: The State of the Microcredit Summit Campaign Report, 2013. It is particularly relevant with yesterday’s announcement of a Campaign Commitment launched by CRECER Bolivia. Learn more.


Read the full report here.

Grameen Foundation president and CEO Alex Counts has reflected on the recent crises affecting microfinance by thinking, reading, writing and interviewing people. He presented some of the findings in a talk given at the Sa-Dhan/FICCA Annual Conference in New Delhi in August 2012. These edited excerpts highlight the experiences of two institutions working in challenging, saturated environments, and how they overcame the difficulties.

First, let’s turn to Bolivia. If India’s microfinance sector was at its heyday in 2009, Bolivia’s was at a similar place 10 years earlier, in 1999. Well, within months of this moment in time, things went badly. A political movement against microfinance that included some dissatisfied clients, opportunistic politicians, and professional organizers accused MFIs of exploiting the poor by charging high interest rates and using coercive collection practices. Blockades were set up in front of MFIs’ offices, repayments plunged, and there was a general loss of support for microfinance in civil society.

One Bolivian organization was able to navigate the 1999–2001 crisis better than most: a non-governmental organization (NGO) called Crecer. During the crisis, their portfolio-at-risk rose, but not by much. Their staff and clients were often allowed to pass the blockades that were set up. The question is, why? My research has so far focused on four aspects of Crecer’s approach that enabled it to weather the crisis relatively unscathed:

  1. Once Crecer was consistently profitable, it began progressively reducing its interest rates and providing free life and accident insurance to its clients.
  2. Crecer promoted a client-centric culture that [ranged from] providing free nutrition and health education to calling its borrowers “members.”
  3. Crecer’s leaders resisted the encouragement of many to convert into a for-profit finance company because they did not feel it was consistent with their organizational purpose.
  4. They were active in FINRURAL, the [national] association of NGO-MFIs, and its work advocating for supportive policies. Crecer’s CEO often chaired FINRURAL’s board.
Crecer_DSC_2179_cr_comp

Photo credit: CRECER Bolivia

Let us now turn to Bangladesh. How was Grameen [Bank] able to thrive for decades in the face of stiff competition, unstable governments, and periodic bursts of religious fundamentalism? I see seven basic reasons that are relevant to the context in India:

  1. Constant tinkering with its products to create more value for clients
  2. Including active roles for clients in ownership and governance
  3. Promoting savings from its inception
  4. Placing strict limits on [compensation] for its executives
  5. Customiz[ing] credit products to fit the cash flow needs of clients (This was done despite the fact that it created major problems for the bank’s IT systems, as well as the need to retrain its staff.)
  6. Rather than “zero tolerance” [for missed loan payments], practicing what you might call “infinite tolerance” for legitimate cases of clients unable to pay according to the original schedule
  7. Creating a “balanced scorecard” for evaluating staff and branches, in the form of a five-star system, that included three measures of financial performance and two of social performance

[These are my reflections on] what might guide us from experiences abroad and what I think we should do going forward.

To read Alex Counts’ full speech, please visit http://bit.ly/U7T2Ug.

To learn more about Grameen Foundation, visit http://www.grameenfoundation.org.

Accessible and affordable microinsurance with Afua Donkor

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in Resilience: The State of the Microcredit Summit Campaign Report, 2014. Afua Boahemaa Donkor, executive director of Star Microinsurance in Ghana, explains how they have developed microinsurance products that are simple and affordable for the poor.


>>Authored by Ana Hecton, former intern, and Sabina Rogers, Communications and Relationships Manager

SOCR 2014_front-cover_EN_270x348

You can read a transcript of her interview here.
Read the full report here.

The 2014 State of the Campaign Report features various actors in the microfinance sector that are taking steps to help their clients lift themselves out of poverty. In this interview Afua Boahemaa Donkor, executive director of Star Microinsurance in Ghana, talks to DSK Rao from the Microcredit Summit Campaign about how microinsurance works and how it can benefit the poorest. Ms. Donkor also discusses the challenges in providing coverage for the poorest.

Star Microinsurance in Ghana started in 2008 as a specialized microinsurance subsidiary of the Star Insurance Group. Star Microinsurance works to design microinsurance products, looks for distribution channels, and provides the back office administration of the products.

“Microinsurance is supposed to be suave. When I say that, it means that it has to be simple, accessible, understandable, fundable, and efficient.”

— Afua Boahemaa Donkor

Star Microinsurance aims to make their insurance accessible to all people, those living in the city and those living in remote areas. The microinsurance products that are offered by Star Microinsurance are “made very simple, the premiums are set to be very cheap, affordable, so that the informal person, in the rural sector, can afford to have insurance products.”

Star Microinsurance collaborates with rural banks, MFIs, and post offices where the product is located. The rural banks and post offices are spread all throughout Ghana, therefore being highly accessible to all people no matter their location.

The challenges that face microinsurance

When talking about microinsurance and selling it to those living in poverty, Ms. Donkor says that it is hard for people to grasp the concept that they are paying for a possibility that may or may not occur. For those living in extreme poverty, possibilities of the future or what could happen is not a high priority. The demand is for what they need right here, right now. Thus, trying to sell microinsurance to people whose concern is focused solely on getting through that day is very difficult. In fact, “insurance in general is a very difficult thing to sell whether to an educated person or an uneducated person because it is an intangible good we are selling.”

What we know of the impact of microinsurance

ei76 infographic en

A systematic review of the impact of microinsurance (2013) produced by the ILO’s Microinsurance Innovation Facility. Source: http://www.impactinsurance.org/emerging-insights/ei76

#tbt: Interview with Sir Fazle Abed of BRAC

Photo courtesy of BRAC

Photo courtesy of BRAC

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Pathway

Ultra-poor graduation programs


We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2011. It documents an interview conducted with Sir Fazle Abed, founder and chair of BRAC in Bangladesh.


Interview with Sir Fazle Abed of BRAC

What excites you about microfinance today?

Microfinance is the most exciting thing that has happened to poor people over the last 30 years. We have worked with the poor in a way that honors their dignity, and we have shown that poverty alleviation is not a give-away thing.

What concerns you about microfinance today?

BRAC Chair Fazle Abed to Attend Africa-Middle East Regional Microcredit Summit

Sir Fazle Abed, founder and chair of BRAC in Bangladesh

There is a lot of greed coming into microfinance. A lot of people wish to make a lot of money out of it, and that worries me a little bit. I also [understand] the other side of it – when return on investment is high, more money will flow into the sector … I just don’t think that people should make money out of poverty.

I think we still have a long way to go in reaching people, particularly poor people in remote areas, rural areas, and so on. That remains a great challenge.

You came into microfinance as a poverty alleviation tool …

[Yes], we came to microfinance by looking first at integrated rural development, looking at people for their health, education, employment [and] savings. We actually started a savings program before we started giving credit.

I have always felt that poor people have very short time horizons to think about – daily bread, daily needs. They can’t think more than 24 hours at a time. I thought the thing to do was to start savings because that would give a person a longer time frame to think about, not just one day.

What about the randomized control trials (RCTs) that have been done to measure the impact of microfinance? Largely they have shown very limited impact, sort of mixed results, and yet in BRAC you have millions of people coming back for loans year after year. How do you reconcile your experience with the results of these studies?

I understand that RCTs may be scientifically quite good to have, but microfinance works best when you have done it for a number of years. With the first microcredit taken by a woman, she has immediate consumption needs, so she buys those things which she needs most [but] doesn’t show a great deal of improvement in either nutrition or health or welfare. But we found in a longitudinal impact study [from] 1999 to 2005 that you can see significant results in somebody’s income and welfare if somebody has taken three loans and the quantum of the loans is more than US$400.

Does microfinance help a poor person lift herself out of poverty, or is it microfinance combined with other things that does that?

Microfinance has to be combined with other things like health and education. When going into a new area, [get] microfinance … working right and then you can provide education and health care and other things.The unique thing about microfinance is that it creates…capital that can be leveraged to supply other development services. We have eight million women meeting together every week in 300,000 Village Organizations. They know how to invest money, pay it back and save for the future. They know how to work together. Because of their work with us, they now know how to interact with formal institutions. So that forms the base for addressing the other constraints that they [face], and it also provides the scale you need to develop [viable] programs.

That sounds complicated. Shouldn’t a microfinance organization focus on what it does best, financial services, and let others focus on the other needs?

I think that is too limited a way to think about what we do best. The basic spirit of microfinance is to search for possibilities based on knowledge, understanding and perspectives that start at the ground level. We understand our clients and their needs. We know how to select clients, enforce contracts, manage money, develop systems and deploy people and resources on a very large scale. There is no reason why we cannot use those same skills to address the other constraints our clients face.

In BRAC, we saw that many women were stuck in low-return activities. We saw that many were involved in poultry but were not making much money because of diseases, so we trained a person in each Village Organization to do vaccinations, treat basic diseases, and train in proper feed and hygiene. These people get paid for the services they provide to the women who raise chickens. Between the growers, advisers and sellers, they have created almost two million poultry jobs.

We did something similar with basic health care. We trained a person from each Village Organization … to provide basic health information and advice. They each cover 300 households and sell nonprescription medication, bring pregnant mothers in for check-ups and help mothers bring their children in for immunization. We have 80,000 volunteers covering 64 districts and a population of 92 million.

We’ve added other things, too. Economic development for adolescents, training in legal rights, programs for commercial sex workers, primary schools that have trained four million students, and programs aimed at those too poor to make good use of our financial services.

How can someone be too poor for microfinance?

Our Research Division looked at those who dropped out of our program and found that most of them were among the poorest. This group tended to borrow far smaller amounts, do so less frequently and have more problems with repayments. We worked with donors to develop a program that targeted the ultra-poor.

It starts with a ration card for food, plus training in business skills and money management. Over time, we provide them with a small loan and then seek to graduate them to our microfinance program. So far, about three quarters of them have graduated. CGAP did a study on this program and found that the average subsidy per woman was US$135. As more and more of these women graduate into the microfinance program, we hope to recoup these subsidies.

What is BRAC doing with small and medium businesses?

You need to create jobs for poor people [in addition to making] them social entrepreneurs. [For this reason], I asked a group of donors [for] money to start a small and medium enterprise lending program, and this has been very successful in creating new jobs for people. We set up a bank in Bangladesh and it is creating jobs on a fairly large scale, $1.2 billion now for small enterprises.

Are you able to use technology in a way that lowers your costs and helps you get out to more rural areas?

This is my hope. In the next three to five years in Bangladesh, almost everybody, including our poorest clients, will have access to a cell phone. BRAC has already got a license from the Central Bank to set up a mobile cash management system. In other words, all these 30 million Bangladeshi microfinance borrowers will have access to mobile payments, and then we will be able to cut down the costs of delivering financial services to the poorest people in the remotest areas.

Do you think this will create a push to more individual lending, or will the group programs continue?

The group programs will still continue, but face-to-face time with people will diminish a bit and we will have to find another way of meeting them. Right now, 8.2 million people in Bangladesh meet BRAC staff every week. That is too costly. I would rather meet these 8.2 million people once a month and cut down [their] travel. We can collect their money and stay connected to them through cell phones. They will be able to transact business among themselves through their cell phones. I think tremendous efficiency comes out of this, on their side as well as our side.

It sounds like you are looking forward to what comes next.

I just hope I live long enough to see this happen. It is wonderful to see all the changes that are happening and in the right direction. Some people have said that as you grow older you get more and more pessimistic, but I get more optimistic the older I get.

#tbt: The Need for Pricing Transparency in Microfinance

Muhammad Yunus signs onto the MicroFinance Transparency. With Chuck Waterfield

Muhammad Yunus endorsese the MicroFinance Transparency (MFT). With Chuck Waterfield, MFT founder, at the 2008 Microcredit Summit in Bali.

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report, 2009. This particular Box is especially relevant given the news about MFT closing down and the stakeholder meeting hosted by the Microfinance CEOs Working Group on April 21st.


>> Authored by Chuck Waterfield, the developer of Microfin, a business planning tool used by microfinance institutions worldwide, and MicroFinance Transparency (MFTransparency), which was launched at our 2008 Microcredit Summit in Bali, Indonesia.

Microfinance has long been a highly transparent industry, and rightly proud of it. Unfortunately however, the true price of microfinance loan products has never been accurately measured nor reported. 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.

Many countries require commercial lenders to state true product pricing using standards such as the APR (Annual Percentage Rate) formula mandated forty years ago in the US Truth-in-Lending Act. Such laws were enacted to help consumers make informed decisions regarding choosing loan products with different pricing. Currently, the same disparity that existed prior to Truth-in-Lending laws can be found in the microfinance industry. For example, a quoted interest rate of 3% per month can, depending on how this rate is applied, result in an APR between 36% and 96%, and beyond. Unfortunately, such misleading claims are commonplace in microfinance today. Why should the same principles of transparent pricing applied within the commercial finance industry not be applied to the microfinance industry?

The widely practiced non-transparent pricing in microfinance has evolved and perpetuated for two reasons. Firstly, there is no single market interest rate for micro-loans. The industry recognizes that interest rates on micro-loans must be higher than interest rates on larger commercial loans, but it is seldom recognized that there is no single “market rate” for micro-loans. In a market where all MFIs deal with the same 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. Due to the challenges of explaining why MFIs need to charge higher interest rates than the commercial sector, and to charge the highest interest rates to the poorest clients, the easiest alternative has been to use non-transparent pricing, where a quoted price is generally significantly lower than the actual price.

Secondly, once the industry began widely employing confusing product pricing, it became very difficult for MFIs to convert to transparent pricing. To do so, the MFI would 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.

In recent years the industry is shifting from the goal of “sustainable microfinance” to the goal of “high-profit microfinance.” 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 exists the opportunity for MFIs to charge a price that results in very high profit levels. High profits generated off of the poor by charging non-transparent prices can create a bad public image for the microfinance industry and result in a strong backlash.

Given this reality, the industry has been in intensive dialogue and several initiatives are underway to address non-transparent pricing. One initiative is the “Campaign for Client Protection” that began after an April 2008 conference that produced the “Pocantico Declaration.” Transparent and fair pricing is one of the six core principles advocated in the campaign.

The second initiative is MicroFinance Transparency, a non-profit agency that will address 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 to better understand the concept and function of interest rates and product pricing.

It can be argued that an industry-wide effort towards transparent pricing is essential to the long-term survival of the microfinance industry. 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 institutions. What non-transparent pricing has kept hidden for years is no longer hidden. A forum for the industry must be built in order to report – in a clear, consistent and fair fashion – what actual interest rates are and why interest rates in competitive microfinance markets need to be higher than in commercial finance.

By practicing pricing transparency, a healthy and vibrant market for microcredit products can be built, providing a valuable component necessary in free markets and currently absent in microfinance – transparent, open communication about the true cost of products.

Over 100 microfinance industry stakeholders have endorsed MFTransparency. You may view the list and choose to sign up and endorse at the website.
Chuck Waterfield, Founder, MFTransparency, http://www.mftransparency.org/endorsements.

Can tablets and apps fight poverty?

Kids learning_LISTA_599x450

Kids use the financial literacy app developed by Fundacíon Capital called LISTA
Photo credit: Fundacíon Capital

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>>Authored by Julieta Bossi, Communications Officer, Fundación Capital

MoMF

April is the Month of Microfinance

We can talk about innovation and we can talk about technology, but when we work on poverty reduction, the most important thing we need to talk about is community.

It is only when we understand what capabilities and tools already exist and are being used within a community that we can develop and explore new technologies and solutions for that community. And it is only by working together with the social innovation community that we can ensure that these new tools can reach millions and have a lasting impact.

At Fundación Capital we work to eliminate poverty by fostering economic, financial, and social inclusion. Without economic opportunities and financial abilities, one cannot obtain full citizenship, including all of the rights and responsibilities that it entails. Therefore, our main goal is to promote financial inclusion and create economic citizenship. We do this by strengthening the productive, financial, human, and social assets of people living in conditions of poverty and extreme poverty, empowering them to find their own way out of poverty. Throughout this process, we rely on innovation and technology that we created in partnership with the community to provide sustainable and effective solutions.

Fundación Capital works with public and private institutions, helping government entities to create more innovative and efficient public policies and helping the private sector to develop products and services that fulfill needs at the base of the pyramid.

Working with communities, we identify needs and preferences that guide the design of new solutions we dream up and develop. Existing knowledge, capabilities, and social capital become the springboard for innovation and represent valuable tools that can be combined with digital solutions to generate real and effective change with the potential to reach millions, including those living in the most remote and rural regions.

A client of Fundacíon Capital wiht her daughter Photo credit: Fundacíon Capital

A client of Fundacíon Capital wiht her daughter

Photo credit: Fundacíon Capital

Through this process of innovation and co-creation, we have developed a number of digital solutions. One of them is LISTA, an initiative that was born out of the need to provide financial education to millions of conditional cash transfer recipients in a cost-effective way. LISTA offers interactive and relevant content delivered via a tablet computer provided to the families. The app called “Produciendo por mi futuro” provides tips for financial planning, familiarizes users with ATMs and mobile money through simulators, and seeks to break barriers between low-income communities and the formal financial system. This tool is brought into families’ homes, providing users with the opportunity to study on their own time, concentrate on topics most relevant to their needs, and include all family members in the learning process.

Another way we transfer knowledge to less advantaged communities living in remote areas is through government, this app teaches them how to run a business, manage and invest the capital into productive activities. It ensures that these injections of capital will be invested and provide a foundation to build on and eventually graduate out of poverty. Once they’ve built up their businesses, communities can access additional funding through LittleBigMoney, Latin America’s first crowdfunding platform for projects or businesses led by bottom of the pyramid entrepreneurs or whose impact benefits vulnerable communities.

Another challenge encountered in poverty alleviation programs is training field workers and ensuring the quality of the financial education they deliver. Since they engage with the community on a daily basis, it is important that they are properly trained, so we have created an e-learning course for fieldworkers working with our graduation program.

We also provide fieldworkers with the “Produciendo por mi futuro” app  to increase their productivity. The fieldworkers leave the tablets with participating families, who study the material over the course of the week, so that when they meet with their fieldworker “coach”, they can have more productive and personalized conversations with real outcomes. The app empowers families living in extreme poverty, by offering them financial education and business training.

After years of working on designing, developing, and implementing these kinds of solutions, we have come to understand that the most important input for our work and innovation is the constant feedback we receive from communities. They are our inspiration and a great source of ideas for constant improvement and adjustment. While we can’t expect that any one of these digital solutions will provide a “magic bullet” tool for poverty alleviation, these tools support communities as they work to improve their lives and reach their goals.

A Fundacíon Capital family in their shop Photo credit: Fundacíon Capital

A Fundacíon Capital family in their shop
Photo credit: Fundacíon Capital

The only way to ensure that innovation and technology works is by both designing and testing it with the community and then learning from failures and making the necessary adaptations. For us, it is also important to learn from and share ideas with the social innovation community, so we look forward to working in partnership with other members of the community.

Fundación Capital made a Campaign Commitment to end extreme poverty, watch this video to know more about it:

 

#tbt: Microfinance Revolution at the Very Bottom

#Tbt_6

Keynote speakers of the 2004 Microcredit Summit in Bangladesh. Begum Khaleda Zia, then Prime Minister of Bangladesh, was the “chief guest.”

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2007. We hope this will encourage you to reflect on both how long we have been fighting to convince the policy makers (and other doubters) that microfinance can reach the extreme poor as well as be inspired by our early revolutionaries.


Microfinance Revolution at the Very Bottom: A Radical Departure

The following is an excerpt from an interview Campaign Director Sam Daley-Harris conducted with Jamii Bora founder Ingrid Munro in October 2007.

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

Microcredit Summit Campaign: RESULTS volunteers in the United States and in other countries have been working for four years to get half of World Bank microfinance funds to those living on less than a dollar a day. The arguments that come from the World Bank and others is that you cannot reach the very poor with microfinance, they need safety nets first. The president of the World Bank said this in an October 2007 meeting with 29 members of the U.S. Congress. Do you agree with this position?

Ingrid Munro: I don’t agree with that at all, because in Jamii Bora we know that you can reach the very poor. Not just reach them, not just feel sorry for them, pat them on the head and say, we are going to help you to come above the poverty line…

Our experience is, first of all, the most desperate are the ones that need microfinance the most, and they can handle it, we have proven that. It’s not something that is a theory, it is a proven fact…The poorer they are, the more they need the microfinance. And, they don’t need charity because charity is a way to keep people down. If we keep saying, “I feel very sorry for you because you can’t manage this yourself,” you start thinking [to yourself], “I should feel sorry for [myself] because I can’t manage [on my own].”

But, if we say to you, “You can make it. You have talents. God has given you talents like He has given everybody talents, and He wants you to use them.” And [if] you see some of your friends who were begging beside you on the same street now walk around in nice dresses, their children are in school, they eat three meals a day, they live in a better house — then you also dare to dream that that is possible for [you too].

Microcredit Summit Campaign: You say that some groups have tried to do what you do in reaching the very poor, but they get their fingers burned. What are some of the principles that can allow microfinance to succeed when you work with beggars, landless laborers, and prostitutes?

Ingrid Munro: …You have to be very close. You see, the beggar is a professional, it is a profession in itself. So, if you come and give a beggar $100, and say, “You go and start a business,” they will run away with that money. You have to prepare everybody for what it is, and we think you have to start by getting them to save, because then they are in that habit of setting aside a bit of money every day. That makes it easy for them to pay back the loan.

You also have to be there and encourage them when the problems come. The city authorities chase you away from where you are doing your business. A police officer might even take your goods, or thieves break in to your little kiosk, or you have a fire that [burns] down everything. You can’t be like a normal bank and say, “Okay, we will still hunt you. You have to bring the money back.” [Instead] you come together and say, “Now how do we solve this situation?” And you help them get on their feet so they are helped to pay back the old loan, but also a new loan. It’s a matter of being there all the time and understanding.

If you are naïve and you just go up to somebody who you haven’t spoken to about a loan, who doesn’t know [your] group, who doesn’t trust you…and you say, “Here’s $100, go start a business,” then you will lose that money. And there are naïve people who do that, and I think those are the ones who are spreading this dangerous message that you can’t reach the very poor, because they’ve done it the wrong way themselves, not because you can’t reach the very poor. I invite anyone who doubts to come visit us…

In that sense I think we are a movement, a people’s own movement, more than we are an institution, a normal financial institution. But we’re still microfinance.

Microcredit Summit Campaign: There are so many different things that Jamii Bora does from housing to the “get sober” program. Please talk about another of your innovative offerings, health insurance. How did it come about, what does it costs, and what are the benefits?

Ingrid Munro: In early 2001 we were one year and a few months old. We realized we had some people who were…falling behind in their repayments. So we decided to make a hundred percent research. We would visit every single one of them with our staff and try to note down what are [their] problems. Why can you not pay?

It was such a shocking result. We found that 93 percent had the same problem, they had a patient in hospital…It means my son, my daughter, my baby, my grandchild, or my spouse, or my sister — somebody very close to [them] had to be admitted in hospital, otherwise they would die. Now, of course, you can’t expect that anyone will let their child die because they have to pay their loan to Jamii Bora. So, it was clear to us, this was something we could not compete with. This was something that we had to solve.

So we went to all the insurance companies and asked, “Could you develop an insurance product for us?” They said, “Oh yes, yes.”

We had 6,000 members in those days, and they thought that was a lot. But the cheapest they could come up with was 6,000 shillings, and 6,000 shillings is about US$80 per year. And, US$80 per year, if you are a single mother with five children, you see, you have to [multiply that] times six. That is a lot of money. That is way above what anyone could dream of.

We then decided we’ll start our own in-house product. Everyone told me, “Now Ingrid, you are killing this beautiful organization. This will pull you down. It will not work.” But we never did any research. We sat in a group of staff with a lot of knowledge about our members. We decided we could charge 1,000 shillings a year, which was US$12 at the time, on condition that the members could pay every week, a small amount (about 30 cents US), and they didn’t have to pay everything up front. And, we decided it would cover an adult member and a maximum of four dependent kids. If they had more than four kids, they would add an extra US$2 per child per year. We would cover in-patient, that is, treatment in hospital. If they came into hospital, we would cover everything.

We started by linking up with one of the big mission hospitals in Nairobi. We said, “We’ll give you a deposit of what we think it could cost per month,” because mission hospitals cannot afford to give you services on credit. So we paid them up front. Then our members would come with a letter from us saying, “This patient has health insurance from us and please treat her. If she has to be admitted, we will pay everything.”

There was not more research than that. The background was, “This is what our members can afford to pay and we have to get it to work.” Over time, this has become a most incredible part of our organization. We also decided weren’t going to ask for any donor funding, because then they would send a lot of consultants and they’d tell us it’s not possible to do what we had decided to do, and they would also say, “So and so should qualify and those clients should not qualify.”

We wanted it to be for everybody. We decided it would cover maternity, it would cover any kind of operations, it would cover any kind of in-patient treatment, and we would not exclude people with HIV and AIDS, because then it was a useless insurance for us. And today, [October 2007] it is soon going to be seven years that we have run this.

We have always covered all our costs. We have never had any donor subsidy, not even US$1, and we have never asked for it either. I am sure we would have got it if we had asked. It has saved so many lives. Right now 120,000 people [are covered by the health insurance], because [every member of Jamii Bora] doesn’t take out health insurance…

Relevant resources

#tbt: There is No “Silver Bullet” by Jake Kendall

Delegates from the 2000 Microcredit Summit in Zimbabwe

Lea en español *** Lisez en français


We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report, 2011. We hope this will encourage you to reflect on the idea that all new ideas are old.


>>Authored by Jake Kendall, Research Fellow, The Bill & Melinda Gates Foundation

The poor are diverse and so are their needs for financial tools

2011SOCR-cover

Download the full 2011 State of the Campaign Report in our Resource Library

The past few years have seen the release of an initial round of results from randomized field trials looking into the impacts of various savings, credit and insurance services on the livelihoods of poor clients. They have been somewhat disappointing to those in the financial inclusion field who expected that they would provide clear marching orders.

Despite failure of many of these studies to find much of a poverty reduction impact on average, digging beneath the surface shows what appears to be a wide variation in both the rates of uptake of the products and in the impacts of the products on different segments of clients. This is not surprising. Financial services are primarily used to manage gaps in income or to generate lump sums for large purchases, investments or emergencies. Individuals will differ in their need to for these services. Thus, we would expect to see differences in uptake and impact. The early evidence seems to confirm that this is the case.

As examples, two recent studies of microfinance credit offerings — Banerjee, Duflo, Glennerster, and Kinnan (2009) studying Spandana in India and Karlan and Zinman (2009) studying First Macro Bank in Manila — do not show any improvement over 14-18 months in basic welfare indicators from providing credit to the general population. They do, however, show large changes in investment behavior or in other outcomes for specific subgroups — e.g. in the India study, entrepreneurs expanded their businesses and those who had similar traits to entrepreneurs launched new ones.

There have been a few studies of the impacts of savings accounts recently as well. Studying rural savings in Kenya, Dupas and Robinson (2009) found savings accounts had impacts when given to women. The study found that women who participated were investing 45 percent more, had 27 to 40 percent higher personal expenditures, and were less likely to take money out of their businesses to deal with health shocks than women who were not offered savings accounts. On the other hand, there were no impacts for the men. Studying Green Bank of Caraga in the Philippines, Ashraf, Karlan and Yin (2006, 2010), find that “commitment savings accounts” do increase average savings among women and increase feelings of empowerment relative to those with regular savings accounts. However, they also found that only 28 percent of those offered the accounts decided to accept them. Studying Opportunity International Bank of Malawi (OIBM) Brune, Gine, Goldberg, and Yang (2010) recently produced data showing that Malawian farmers with “commitment savings accounts” had significantly higher investments in farm inputs, but because the study group is only farmers, it is not at all clear how these impacts would play out in other livelihood groups offered similar accounts. Thus, in the savings studies as well there seem to be very different responses from different groups.

The conclusions we can draw from these studies are limited. It seems clear (and again, not very surprising) that demand for and impact of the different products is often correlated with differences in gender, education, wealth, livelihood segment, etc. That said, the studies to date do not give very fine-grained or particularly insightful segmentations of their study samples. It’s not always easy in academic studies to get sample sizes large enough to do this. There are fundamental limits as to what RCTs can tell us regarding how different individuals or groups respond to a single treatment. Nevertheless, it would appear that a rich direction for future research would be to frame the academic evaluations of financial products more along the lines of how marketers and practitioners would frame them, by focusing on distinct customer segments and assessing the uptake or impact among these different groups.

In a possible exception to the above trend, Jack and Suri (2010) document that, after its launch in 2007, the M-PESA money transfer and e-wallet product reached over 70 percent of all Kenyan households and over 50 percent of the poor, unbanked, and rural populations by 2009. New accounts have even grown by 40 percent since then. The researchers have preliminary results indicating that M-PESA users are better able to maintain the level of consumption expenditures, and in particular food consumption, in the face of negative income shocks. While it’s almost certainly true that, here again, different segments of clients have different uses for the product, clearly most Kenyan households have some financial need that M-PESA fulfills, and by connecting people with the ability to transfer funds, M-PESA may simply be allowing them to transact with a wider and more diverse set of counterparties who can help with whatever particular need they may have.

Is it April Fools’ Day, or ‘Groundhog Day’?

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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>>Authored by Larry Reed, Director, Microcredit Summit Campaign

MoMF

April is the Month of Microfinance

We are capitalizing on the occasion of the Month of Microfinance to bring you articles throughout April on our 100 Million Ideas blog that reflect the results of this year’s Listening Tour. We received written feedback from 151 people and conducted 27 interviews with thought leaders like Beth Porter (UNCDF), Syed Hashemi (BRAC University), Essma Ben Hamida (enda inter arabe), and William Derban (Fidelity Bank). This feedback from the industry forms the basis of the Campaign’s theme for 2015 of financial inclusion to end extreme poverty and the six pathways that we think show promise in getting us there:

  • Mobile money linked with agent networks in low-income communities;
  • Agricultural value chains that reach to small scale producers;
  • Savings groups (aka village savings and loans associations);
  • Conditional cash transfers linked with mobile delivery and asset building;
  • Ultra-poor graduation programs; and
  • Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery.

These six pathways will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments to be featured this year. From the start, the Microcredit Summit Campaign has advocated scaling up microcredit (and, by extension, “microfinance”) as just one part of a larger effort to end poverty. We have held up as paramount the continued innovation and client-focused development of financial tools, creative ideas for delivering these services to remote and hard-to-reach areas at affordable prices, and the promise that microfinance can help create positive and durable changes in the lives of those being served. These six pathways are a continuation of that promise.

Fazila Begum struggling Member of Grameen Bank Shakhaerchar branch

We met Fazila Begum in 2007. She was a struggling member of Grameen Bank, Shakhaerchar branch.

When will researchers catch up with microfinance leaders?

From the very first loan of $27 that Mohammad Yunus gave to 42 women in Bangladesh, the heart of microfinance has always been about getting to know the needs of people living in poverty and designing products and services that help them loose the bonds that keep them in poverty. The aim of Yunus and many other founders of the movement was not to build financial institutions, but to empower people women to create a better future for themselves and their children. To do this they had to get to know people living in poverty and their cash flows, needs and aspirations in order to develop combinations of helpful products and services.

So when our team listened to the presentations of academic researchers made at the World Bank covering six randomized control trials of microcredit programs, we came away more than a little underwhelmed. Their big conclusion, after spending several years and millions of dollars on research: “Understand clients.” (Watch a recording of the forum.)

Even more alarming was that many of the researchers and the audience seemed surprised by the news. We have been engaged with leading microfinance groups around the world and have seen how they have learned — on their own — the lessons that the researchers presented as well as how they adapted their programs to address them long ago.

Here are some examples of research findings presented at the World Bank gatherings and actions previously taken by leading MFIs:

“Credit alone, on average, has neither large positive or negative effects.”

Very few of the leading MFIs that have focused on reaching people in poverty and facilitating their movement out of poverty have ever offered only credit. Grameen, from the start, had group savings and the 16 Decisions. The Village Banks developed by FINCA offered group savings and a group insurance fund. Many also provide training in business, marketing, health, nutrition, and sanitation in their group meetings.

“When only credit is available, people may use it when what they really need is savings, or insurance or other financial products.”

Microfinance leader BRI in Indonesia has been offering individual voluntary savings accounts since the 1980s and now has over 35 million savings accounts and 8 million borrowers. While many of the group lending systems provided loans, savings, and insurance bundled into one package, many of the leading MFIs have begun unbundling those services in the last two decades.

Grameen II, instituted in 2001, provides a range of financial services to clients, including voluntary savings and micropensions, and it removed the group guarantee on loans. Opportunity International began providing microinsurance in 2002, expanding from life insurance to health, casualty, and crop insurance and then spinning off MicroEnsure as a subsidiary that now reaches over 10 million clients.

Nangolkot, Noakhali, Bangladesh

Villagers in Nangolkot, Noakhali, Bangladesh
Photo credit: ©Shamimur Rahman and Giorgia Bonaga

“For 5-10 percent of the clients, credit has a very large positive impact on business growth and income.”

Aris Alip, founder of the CARD network of mutually reinforcing development institutions, saw this happening in the villages where CARD provided group-based savings and lending services. He also saw that those 5-10 percent that grew benefited the community by providing stable employment to others. In 2008, CARD created an SME bank to work specifically with fast growing microbusinesses and to see if, by providing appropriate products and services to this group, they could increase the percentage of growing businesses to 15 or 20 percent.

“For the ultra-poor, a gift of an asset has significant positive impact.”

REST Client photo_427x569

A woman client of Relief Society of Tigray (REST) in Ethiopia harvests her mango tree.
Photo credit: REST

This learning came directly from the work of BRAC and its ultra-poor graduation program. BRAC found that those who live on less than $.50 per day face so much vulnerability in their lives that they do not want to take on more debt. They developed a system of regular stipends of food or cash, a gift of an asset like an animal or a sewing machine, business training, savings, and regular mentoring. This program has now been replicated in several countries, and studies of these programs show strong positive impact.

The Relief Society of Tigray (REST) has combined this programs with the government’s Productive Safety Net Program so that the government provides the stipends and the assets, REST provides training and mentoring, and Dedebit Bank provides savings and lending facilities.


We are glad that these studies have proven out the innovations implemented by many leading MFIs. But if researchers want to get ahead of the learning curve, they could start to engage with some of these leading institutions on the questions that they are asking now. Here are some suggestions we have for new areas of research:

Research question 1: Conditional cash transfers (CCTs) seem to play an important role in providing some regularity in lives that are filled with unpredictability and vulnerability. How can these be linked with other services, like savings and insurance, to help beneficiaries move from resilience to asset building?

Research question 2: Are there some financial services that consistently provide benefits and rarely cause harmful effects so that they should be recommended for all? It looks like savings could fit this category, provided the savings mechanism is safe and the account maintains its value over time.

Research question 3: How do we refine our understanding of the situations in which credit is most likely to be helpful? And, what role do other services, such as group meetings, access to health care, insurance, and savings, improve the likelihood that a person will benefit from credit?

Research question 4: Graduation programs that start with a donated asset, group meetings, mentoring, and community involvement and lead to other financial service like savings and credit have proven to have a positive impact. Can we start to determine under what circumstances a person will need all of these services — and which people might need only one or two — to start moving from extreme poverty?

Instead of taking more time and money to prove that we need to understand clients, we suggest that researchers work with microfinance institutions that already listen to their clients and develop with them research agendas based on that growing understanding.

The same family from the top of the article has gone through the Stoplight process and now their situation is much improved.

A Fundación Paraguaya family has gone through the Poverty Stoplight process and now their situation is much improved. Read our blog post about the Poverty Stoplight.
Photo credit: Fundación Paraguaya


Relevant Resources

2013 State of the Campaign Report:Know Your Client

Social protection: innovative programs deliver financial services at scale

How families are creating step-by-step plans for poverty elimination


 

A few key takeaways from the World Bank forum on microcredit (video)

The diagnosis of the six randomized evaluations that spanned six countries on four continents, in both urban and rural areas with different borrower, lender, and loan characteristics, was that they showed no significant impact on the poverty level or living standards of the clients.

In some studies, it was concluded that the top 5-10 percent of clients did have some significant impact on their income and assets. One study showed some positive impact on women’s empowerment while another showed that depression seemed to go down for clients who had taken a loan, but their stress levels went up. Basically, it was all rather inconclusive, yet it also opened a transformative dialogue about how we can learn from our mistakes and what we need to do better to meet the needs of our clients.

On learning from what we know does work

The results of the randomized evaluations suggest that microcredit alone doesn’t have a transformative effect on the poor. However, despite its shortcomings, it is recognized that microcredit enhances the range of choices available to the poor and allows them to manage their circumstances as they consider appropriate.

Furthermore, microcredit still serves, in many cases, an important role as a risk absorption tool, acting as an insurance product that allows the clients to react to shocks and emergencies. In these instances, credit provides stability and prevents the clients from falling deeper into poverty. It has long been recognized that credit is not suited for many people, so insurance products should not be built around a credit product. In fact, several panelists said that microinsurance may be more needed than microloans particularly in sub-Saharan Africa,

For his part, Alex Counts (Grameen Foundation) invited the audience to focus on the five percent of clients — equivalent to millions of families — who moved out of poverty with microcredit. We should do this because we should want to understand (isn’t it our job to understand?) what it was that helped them compared to those less successful (or unsuccessful).

More research is needed to stimulate this conversation around what is working and what is not and to promote models that can serve as examples for adaptation and replication.

On understanding your clients

The research presented at the World Bank forum showed us that we need further analysis on what poor people really want and in understanding the heterogeneity of needs. It is important to study the particular context of each country, region, and community. Different circumstances lead to heterogeneous needs, so we need to offer a variety of products and services that actually meet the specific needs of the clients.

In addition, we need much more work on tracking how the money is being used. Perhaps we should not only look at factors like change in profits, wages, or consumption to test the success of microcredit products. Clients sometimes use their loan for personal needs, like for health issues or for social obligations such as weddings and funerals, and in order to see the impact of microcredit on the overall quality of life for clients, we need to know where the money is going.

Knowing more about these two dimensions will enable better product design, promote innovation, and help microfinance evolve in a manner that is both sustainable and beneficial to the extreme poor. It comes back to what Dean Karlan said, “Understand your clients.”

On the implications of digital innovations

Innovations in financial technologies are increasing client outreach and reducing transaction costs (to nearly zero), but they are also creating new transparency challenges that could pose serious risks to the clients if they are not addressed.

The main concern is the lack of adequate regulation for digital financial services. Client protection measures need to be in place to raise awareness of the risks linked to loans and ensure that customers understand the terms and conditions of the loans they are taking out. This is particularly important when we consider the rapid pace of growth and expected outreach of the new digital services.

When looking at agent networks, serving 100,000 clients after five years was a big achievement; today, however, they are expected to reach 1,000,000 clients after only one year of implementing a digital service.

We need to carefully assess the risk of inflicting harm to a large number of people at the base of the pyramid to ensure that digital financial services are being provided in a responsible way that brings no harm to the clients. Keeping this in mind may inspire innovative ideas for consumer protection and improve the quality of existing products.

On their recommendations for further research

In the coming years, Abhijit Banerjee (J-PAL) stated that research should focus on answering the questions: Why is there a low demand for microcredit products? What do clients need? What are the right products to offer them and the right channels? Where does the money go if it doesn’t reduce poverty?

Esther Duflo talked specifically about the graduation pilot programs, which are targeting the ultra-poor and already show some positive results on poverty levels. The results of this research will buoy efforts to promote the adoption of graduation programs as a poverty alleviation tool and underscores the need to segment the poor for the purposes of understanding the impact of microcredit and designing adequate products.

Are we measuring the real story? Jaikishan Desai, one of the researchers of the RCTs, posed this question to the audience. This seemed to go beyond how do we interpret the data to what is the purpose of measuring the impact of microcredit? Is microcredit and microfinance supposed to be the cure of the world poor or should it be used as a tool to include ignored segments of the population and reduce risk to those most vulnerable? Are we looking for a change in poverty levels or should we be focusing on the impact credit has on maintaining stability?

Other questions that were not resolved included, was the length of the study a factor? Do we need more long-term or short-term assessments? What about the generational impact? Could it be that we won’t see the effects of microcredit on clients unless we track progress through the next generation?

What impact does an MFI’s staff incentives and governance have on its clients? Does this impact the type of loans they receive and the quality of the product?

Relevant resources


For those who are unfamiliar with the cultural references in the title

April Fools’ Day: April 1st is a day of pranks and practical jokes and has its roots in medieval Europe — or possibly even earlier — and is similar to (or may be related to) the Holi festival of India.

Groundhog Day: February 2nd is an American tradition brought over by our German ancestors and adopted by popular culture and the media; it consists of looking to a rodent (a groundhog) to find out if winter is over or not. However, our reference here refers to a fantastic movie of the same name where Bill Murray relives the same day over and over again to hilarious effect.

How deep is your outreach?

ENGLISH   ~   FRANÇAIS  ~  ESPAÑOL

We are still collecting the 2014 Institutional Action Plan (IAP) forms in preparation for The State of the Microcredit Summit Campaign Report, 2015.

Submit your IAP_193x92

Submit your Institutional Action Plan today!
DEADLINE FEBRUARY 15

By filling out an Institutional Action Plan (IAP), members of the Council of Microfinance Practitioners and Associations report on the progress they have made over the past year in providing financial and non-financial services to the most vulnerable and poorest populations.

Please complete the appropriate form below, and email it to info[at]microcrocreditsummit.org by February 15, 2015 to be included in the 2015 State of the Campaign Report.

If your institution operates in multiple countries and you would like to fill out a single IAP form, please contact us at info[at]microcreditsummit.org. Note that this year we are only asking for information on borrowers.

If you have any questions, please contact the Secretariat at info@microcrocreditsummit.org.


ENGLISH   ~ FRANÇAIS  ~  ESPAÑOL

Nous recueille toujours les formulaires de Plan d’Action Institutionnel (PAI) 2014 pour le Rapport de l’État de la Campagne du Sommet du Microcrédit, 2015.

Envoyer votre PAI_193x92

Envoyez votre Plan d’Action Institutionnel (PAI) dès aujourd’hui !
DATE LIMITE : LE 15 FÉVRIER

En remplissant un PAI, les membres du Conseil des Agents et des Associations rendrent compte du progrès qu’ils ont fait pendant la dernière année en occtroyant des services financières et non financiers aux populations les plus vulnerables et plus pauvres et le nombre de clients qui sont sortis de la pauvreté.

Veuillez remplir le formulaire approprié ci-dessous, et envoyer-le a info[à]microcreditsummit.org au plus tard le 15 de février 2015 afin d’être inclus dans le Rapport de l’état de la Campagne.

Si votre institution travaille dans plusieurs pays et vous voulez remplir un seul Plan d’Action, veuillez nous contacter à info[à]microcrocreditsummit.org. Notez bien que cette année nous demandons seulement des informations à propos des emprunteurs.

Si vous avez des questions, veuillez contacter le Sécrétariat en écrivant à info@microcrocreditsummit.org.


ENGLISH   ~   FRANÇAIS  ~  ESPAÑOL

La Campaña de la Cumbre de Microcrédito le complace anunciar que está recolectando los formularios del Plan de Acción Institucional para el 2014 (PAI) para el Informe del Estado de la Campaña de la Cumbre de Microcrédito, 2015.

¡Entregue su Plan de Acción Institucional hoy! FECHA LÍMITE: EL 12 DE DICIEMBRE

¡Entregue su Plan de Acción Institucional hoy!
FECHA LÍMITE: EL 15 DE FEBRERO

Al completar un Plan de Acción Institucional (PAI), los miembros del Consejo de Agentes y Asociaciones de Microfinanzas están reportando los progresos realizados durante el último año en el suministro de servicios financieros y no financieros a las poblaciones más vulnerables y pobres.

Por favor llene el formulario apropiado que se encuentra a continuación y envíelo por correo electrónico a info[a]microcreditsummit.org a más tardar el 15 de febrero de 2015 para poder incluir sus datos en el Informe del estado de la Campaña 2015.

Si su institución trabaja en varios países y desea llenar un solo Plan de Acción, favor de comunicarse con nosotros al enviar un correo a info[a]microcrocreditsummit.org. Por favor tome en cuenta que este año sólo estamos pidiendo información sobre sus prestatarios.

De tener cualquier pregunta, por favor comuníquese con el Secretariado enviando un correo a info@microcreditsummit.org.

The Campaign in 2014: Making Progress Toward Ending Extreme Poverty

Expokonool vendors being recognized in the closing ceremony for their hard work

At the 17th Microcredit Summit, Expokonool vendors were recognized in the closing ceremony for their hard work

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As we come to the end of the year, we reflect on 2014.

In 2014, we more than DOUBLED the number of Campaign Commitments, and in the past two years, 54 Commitments have been announced by 48 organizations, including AGFUND, the Food and Agriculture Organization (FAO) of the United Nations, the International Labour Organisation (ILO), BRAC, Grassroots Capital Management, Red Financiera Rural, Oikocredit, and Grameen Foundation. These organizations join a coalition to advance the industry toward helping 100 million families lift themselves out of extreme poverty.

With the first 5 installments of the Campaign’s new E-Workshop Series featuring Commitment-making organizations, more than 400 participants learned important practical lessons on innovations and tools that work to support those making the journey out of extreme poverty.

Organizations that made a Campaign Commitment are recognized on stage at the 17th Microcredit Summit in Mexico.

Organizations that made a Campaign Commitment were recognized on stage at the 17th Microcredit Summit in Mexico.

17th Microcredit Summit #17MCSummitIn September, 875 people from 60 countries joined us at the 17th Microcredit Summit in Mexico, including high-level dignitaries like Secretary of Economy Ildefonso Guajardo Villarreal, Yucatán Governor Rolando Zapata Bello, and Nobel laureate Muhammad Yunus. The agenda focused on the theme “Generation Next: Innovations in Microfinance.”

“The participation of global leaders in combating poverty. The cases that inspired partnership work in a joint effort to build a better future for generations.”
— a participant on what was best about the Summit

In the lead up to the Summit, the Campaign led 6 policy makers from Ghana, Mozambique, and Malawi on a 12 day intensive field visit to sites in Ethiopia and Mexico for a deep dive into successful strategies for implementing social protection and livelihood development programs. The policy makers developed innovation plans for implementing throughout 2015 the lessons learned from their trip on returning home.

Throughout the Summit, more than 160 presenters participated in 7 plenaries, 35 workshops, and 6 full-day trainings; the materials, including videos and presentations, can be viewed online. Together, we built a vision for the next generation of financial services that reach everyone and that provide even the poorest and most remote with the tools and resources they need to complete the journey to sustainable livelihoods.

To get an overview of the 17th Microcredit Summit and key topic areas discussed, you can read our article in the forthcoming winter edition of the Journal for Social Business to learn more about the financial and social services that are building pathways out of poverty.


In June, we launched Resilience: State of the Microcredit Summit Campaign Report, 2014. The report emphasizes the key role that actors in the financial ecosystem can play in helping end extreme poverty by promoting the frameworks, systems, partnerships and strategies that deliver the types of products and services that help build resilience.

In July, we published Integrated Health and Microfinance in India, Volume II with Freedom from Hunger and the Indian Institute of Public Health-Gandhinagar. It highlights the policy measures in the Indian microfinance sector since 2011, documents best practices towards integrating health and microfinance, and proposes an agenda for moving forward to expand access to healthcare.

We also launched a joint project in July called “Healthy Mothers, Healthy Babies: Partnering to improve maternal health in the Philippines” with Freedom from Hunger and CARD, the largest MFI in the Philippines. Together, we aim to improve health knowledge and promote behavior change for more than 600,000 women by December 2015 and strengthen “MFIs for Health,” a collaboration of health and microfinance practitioners in the Philippines.

Pregnant woman attending the first community health fair of “Healthy Mothers, Healthy Babies” program in the Philippines

Join us for a fantastic 2015!

Looking Back at 2014, the Year of Resilience

Lea en español (traducido por Google) *** Lisez en français (traduit par Google)


>>By Larry Reed, Director, Microcredit Summit Campaign

Larry visits a CARD group in Tacloban

Larry visits a CARD group in Tacloban whose members are rebuilding with the help of CARD’s quick and appropriate response to the Typhoon Yolanda disaster.

I started 2014 in Tacloban, Philippines, where one of the worst storms of this century, Typhoon Yolanda (or Haiyan outside the Philippines), made landfall. I visited Tacloban 75 days after the Typhoon hit to see how the storm affected the lives of microfinance clients, and what role financial services could play in helping them get back on their feet.

In the Central Business District only a few shops had dared to reopen. The dangling power lines and intermittent electricity made regular operations a challenge.

When I traveled to the parts of town where people lived in poverty, I found something much worse. Yolanda struck these low lying areas the hardest, hit them first with her 100 mph winds and then with the storm surge that followed in her wake, uprooting everything that was not permanently attached to the ground and then carrying it out to sea as the waters receded.

Homes and everything in them had been taken away, so people rebuilt with scrap lumber and sheets of plastic. They established homes and businesses again, selling daily necessities from the side of their rebuilt houses.

A mix of charity and financial services played a key role in helping people get back on their feet. Aid organizations employed people to help clean their neighborhoods and the rest of the city, giving them daily cash wages.

Microfinance institutions like CARD and ASKI got back into the city as soon as they could, providing rice and medicines for their clients’ immediate needs, while also paying insurance claims, providing access to savings and issuing emergency rebuilding loans long before any commercial banks restarted operations.

I came away with great admiration for the strength and resilience developed by those that live with constant vulnerability and an appreciation that the role that fast and appropriate financial services, delivered with a human touch, can have in catalyzing that energy to rapidly rebuild destroyed neighborhoods.

In August of this year, I visited another great example of resilience, this one over a decade in the making. Several government ministries in Ethiopia banded together under the leadership of the Prime Minister to design a program that would build resiliency in the land and the people that regularly suffered from drought. International aid organizations united behind this plan that now covers over 5 million people.

With support from the MasterCard Foundation, the Campaign hosted a trip for government ministers and leaders of government anti-poverty programs from Ghana, Mozambique, and Malawi to visit this Productive Safety Net Program (PNSP) in Ethiopia.

Participants of the Innovations in Social Protection project

Participants of the Innovations in Social Protection project on a field visit in Ethiopia.

Under the PNSP, people living in poverty who are not able to work (the elderly, the disabled, and mothers with young children) receive regular cash payments in exchange for maintaining regular health checkups and keeping their children in school.

Those who can work participate in local public works programs decided on by the leadership of each village. These projects can include expanding school facilities and building health clinics; although, most of them involve work that improves the productive capacity of the land.

With technical support from NGOs with highly trained professional on staff, the villagers work together to build dams, retention ponds, irrigation channels and hillside terraces. They receive the payment for their work in accounts set up in local banks or microfinance institutions, which also provide loans to help them expand businesses that profit from the land’s increase productivity.

Those who started the program with the greatest poverty participate in an ultra-poor graduation programs that provides them with an asset transfer, a savings account, business training, mentoring, and access to credit.

We visited at the end of the rainy season, and we could easily see the transformation that the PNSP had brought to the land and its people. We looked down a valley filled with tall green plants, with every hillside terraced and water flowing into dams and ponds that would provide irrigation after the rains stopped. Land that used to struggle to provide one crop now provided two or three crops a year.

Almost a quarter of the people who had started with this public assistance program now no longer needed it. I tried to imagine what it must feel like for the men and women working together on the hillside, digging a retention pond together, to look down the hill and see every part of the valley filled with green plants that would provide food for their animals and income for their livelihoods and to know that, not only were they and their children better off, but their entire community was better off because of the work they had done.

In September, we helped to assemble almost 900 people from 60 different countries in Merida, Mexico, for the 17th Microcredit Summit. As we gathered in the land of the ancient Maya who envisaged a new world coming into being at this time, we imagined a world where all people have access to financial products and services they need to protect against vulnerability and invest in opportunity.

Opening Ceremony - Prof Yunus_453x604

“Poor people didn’t create poverty. It’s the system that created the poverty. And, if we want to end poverty, we have to change the system.”

Muhammad Yunus issued the challenge for the Summit in his opening talk. “Poor people didn’t create poverty. It’s the system that created the poverty,” he told us. “And, if we want to end poverty, we have to change the system.”

During our 5 plenary sessions and 40 workshops, we heard from innovative thinkers and doers who are working to change the system. We discussed ideas and formed partnerships to begin or expand innovative programs that link conditional cash transfers to savings groups; extend agricultural value chains to small scale producers; provide health education, financing, and services in group meetings of microfinance clients; and employ digital technology that delivers payments and other financial services at a fraction of the cost of moving cash.

Together we made Commitments for what we would do to help extend financial services to all and help speed the end of extreme poverty. Then we closed by celebrating the real heroes of this work: the men and women who employ these services in order to earn and save enough to provide for their families and build a better future for their children.

I just completed my last trip of the year to the Inclusive Finance India Summit and saw a different type of resilience on display. Microfinance institutions in India have been devastated by the Andhra Pradesh crisis, where rapid growth in lending led to over-borrowing, client defaults, and a harsh response from the state government that halted collection efforts.

The sector is now growing rapidly again, enough that a few observers are worried that there may be some areas of overheating in the state of Karnataka, where many MFIs have moved.

Almost all the delegates I spoke with expressed excitement about new regulations announced by the Reserve Bank of India, which create a category of Small Finance Bank that can take deposits and make loans. The regulations also create a new category of Payments Bank to allow for institutions that make money from payment transaction, rather than from intermediating savings and credit.

A local community health volunteer trained and supervised by Bandhan, an Indian MFI, meets with members of a local self-help group and their families. (Photo courtesy of Johnson & Johnson)

A local community health volunteer trained and supervised by Bandhan, an Indian MFI, meets with members of a local self-help group and their families. (Photo courtesy of Johnson & Johnson)

In a dinner session I had with leaders from MFIs, I heard a lot of discussion about how they might transform their operations under these new regulations to provide a broader ranges of services to their clients. It will be interesting to watch this period of creative destruction that will take place in India as MFIs, mobile phone operators, and banks all adapt to the new regulations. I was glad to hear in our dinner the creativity and passion of many leaders to use these new opportunities to expand the services they provide to those living in poverty.

And now, as the year comes to a close, so does news of another Super Typhoon hitting the Philippines. This time, people knew about the power of storm surges and moved to higher ground before the storm struck, resulting in a much lower loss of life.

But still, thousands of people will go back to where they lived and find their houses and businesses destroyed. The fortunate ones will find an officer of a microfinance institution waiting for them, asking them what they need to get back on their feet.

On behalf of everyone at the Microcredit Summit Campaign, thank you for taking an active role in this global movement to bring appropriate financial services to those who struggle against poverty and vulnerability. It is our great honor and privilege to be working with you as we join with others to help bring an end to extreme poverty in our towns, our countries and our world.

May you be filled this holiday season with joy as you share the love of your family and reflect on the new financial system that we are creating together.

Sincerely,

Larry Reed

Resilience: Moving Past the “Scramble to Survive”

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Excerpts from a review of the 2014 State of the Campaign Report published by NextBillion. EspañolFrançais Continue reading