#tbt: Digital services to reach the unreachable at the 2013 Summit

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Speakers in the “Reaching Deeper and Lowering Costs: The Path ahead for Digital Services” plenary session at the 2013 Partnerships against Poverty Summit in Manila, Philippines. We learned how mobile devices can help provide better options to those who are reliant upon riskier, costlier options.

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Highlighting technology innovations in the microfinance sector, the plenary session “Reaching Deeper and Lowering Costs: The Path ahead for Digital Services” at the 2013 Partnerships against Poverty Summit was moderated by our very own Sabina Rogers, filling in for Karen Dávila, noted Philippine broadcast journalist.

It was a fun session, using visual aids to represent certain aspects of a value chain for delivering mobile and financial services. A house represented the client and the start of the digital transaction value chain; then images showed the mobile interface for conducting transactions; a sari-sari represented an agent kiosk; a net represented both communications networks as well as financial networks; and a bank stood in for a variety of types of financial institutions.

Speakers were asked to make use of the array to help them illustrate where the companies and organizations the represented fit into the value chain.

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Gordon Cooper, Head of Emerging Market Solutions, APCEMEA, VISA, and Raj Singh-Khaira, Vice President, RM & Consumer Services, FINO PayTech

Nadeem Hussein of Tameer Microfinance Bank (Pakistan) led off the discussion demonstrating how Tameer had a role in supporting a number of points along the value chain overall from understanding the consumer landscape to developing mobile transaction interfaces including working with agents, and all as a financial institution.

Raj Singh-Khaira of FINO PayTech (India) and focused on the need for institutions like his to diversify their involvement in a number of ways along the value chain because “the market is not mature enough for us to be just this one component…the agent kiosk in this example.” He pointed to the wide array of services FINO provides to achieve this diversity including a number of types of savings products, insurance, and some loans.

FINO serves over 67 million clients and employs more than 50,000 agents. Technology is important to help reach this kind of scale as opposed to manual transactions. He also mentioned the ability to better track and secure transactions through the use of digital means of transacting.

The role of VISA was presented by Gordon Cooper. “Visa is a Network, a network service provider. It’s all about interoperability,” cited Cooper; continuing, he described a project VISA launched several years ago which focused on finding one key way VISA could contribute to increasing access to formal financial services for low income individuals.

The result: launching mVISA in Rwanda, a mobile transactions platform (see this video). He focused on the necessity of interoperability, which refers to the ability of one financial service provider’s platform to link up with others’ platforms in order to enable customers on different networks or in different financial systems to transact. Increasing interoperability as a means to support wider access will be one major focus for VISA in the digital area.

Napoleon Nazareno of Smart Communications, one of the largest mobile network operators working in the Philippines, echoed Khaira. Smart is not isolated to only providing mobile phone connectivity, but also goes beyond to touch on all aspects of the value chain. Beginning more than a decade ago, Smart launched a small mobile banking service platform. By partnering with financial service providers over the years, this has now grown into a full-fledged mobile microfinance service platform.

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Ian Radcliffe, Director, WSBI-ESBG

Ian Radcliffe of WSBI illustrated their role in supporting the actors involved in the value chain as direct service providers. Their core activity is advocacy, but apart from that, they also deliver training and consultancy services to providers.

He highlighted an initiative begun about four years ago, to understand what it would it take to double the number of savings accounts among poor people. This launched the WSBI savings account program, which is now working with banks in 10 countries to develop and improve agent banking models and mobile banking models now, too.

Nazareno summarized the session nicely at one point during the presentations, pointing to the power of digital channels for reaching the financially exclude citing recent national survey in the Philippines.

He said, “80% of the households in the Philippines don’t have a bank account. On the other hand, 90% of Filipinos have a cell phone,” which highlights the viability of using mobile devices to provide financial services to those who would otherwise remain excluded. Mobile devices can help provide better options to those who are reliant upon riskier, costlier options, and, ultimately, ones that would stand in the way of their journey out of poverty.

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A participant at the 2013 Summit was having a great time.

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Watch the full video of this plenary

Wamda.com: Understanding microfinance in MENA

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>>by Archana Menon | April 3, 2016

“The Arab world has the lowest level of financial inclusion.”

This was the statement made by Dr. Abdulrahman Al Hamidi, director general and chairman of the Arab Monetary Fund (AMF) at the opening of the 18th Microcredit Summit in Abu Dhabi in March.

He cited World Bank data stating that 16 to 17 million small businesses in the Arab region have no access to financing and official financial services.

The theme of the summit, “Frontier Innovations in Financial Inclusion,” attracted 1,000 delegates from 60 countries. Jointly organized by the Khalifa Fund for Enterprise Development, the Arab Gulf Programme for Development (AGFUND), and the Microcredit Summit Campaign, the event was held March 14-17.

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Post MDG-4: Integrating health services to reduce child mortality

Millennium Development Goals: 2015 Progress Chart
Published articles to date: Introduction | MDG 1 | MDG 2 | MDG 3

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The United Nations recently issued The Millennium Development Goals Report, 2015, the latest assessment of progress towards the eight MDGs. In short, they have had mixed results. This article is part of a blog series reflecting on the MDGs and the U.N. report. These are produced in partnership with our colleagues at RESULTS.


>>Authored by Carley Tucker and Sabina Rogers

MDG 4: Reduce child mortality

Target 4.A: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate

From The Millennium Development Goals Report, 2015

From The Millennium Development Goals Report, 2015

The numbers appear heartening. According to the latest assessment on the Millennium Development Goals (MDGs), deaths of infants and children under five have greatly reduced. The under-five mortality rate has declined by more than half, from 90 to 43 deaths per 1000 births. Moreover, the annual rate of reduction in child deaths has more than doubled since 1990, and the rate has accelerated the most in Africa.

We learn that 4 out of every 5 of children have received at least one dose of the measles vaccine, preventing 15.6 million deaths between 2000 and 2013. In all, some 48 million children under five are alive today because of smart investments and increasing access to cost-effective health programs over the last 15 years.

This is good news for children around the world; however, underlying these advances is news that the achievements are not equitably distributed regionally, between rural and urban areas, nor socioeconomically.

Across all regions, progress toward MDG 4 has been “fair” to “excellent.” Furthest from reaching the target, though, are those living in sub-Saharan Africa and South Asia. While sub-Saharan Africa has had the largest decline in child mortality rates, it still experiences half of all child deaths in the world. Of the 10 countries with the highest number of under-five deaths, 5 are in Africa: Nigeria (#2 at 750,000), DR Congo (#4 at 305,000), Ethiopia (#5 at 184,000), Angola (#7 at 169,000), and Tanzania (#10 at 98,000). See the full list in this infographic from Humanosphere.

Children living in rural areas are 1.7 times more likely to die than those living in urban populations. Child mortality is 1.9 times as prevalent among poor households as among wealthy. Those whose mothers lack education are 2.8 times more likely to die than if their mothers had reached the secondary or higher level. So, of the 16,000 children under five who die each day — mostly due to preventable causes such as pneumonia, diarrhea, and malaria — they are likely to be from poor, rural, and uneducated households.

Have we really made substantial progress achieving MDG 4 when young kids in rural and poor communities continue to be the ones more likely to die before their fifth birthday? Allowing this population to fall behind will only exacerbate the vicious cycle of poverty. In order to make permanent advances in reducing early deaths, global development actors need to narrow in on rural and impoverished areas, especially in sub-Saharan Africa and South Asia.

Where do we go from here?

Recognizing the need for a renewed effort towards improving health of the poorest households, the Microcredit Summit Campaign has identified integration of health and microfinance programming as one of its six pathways strategies key to ending extreme poverty. Poverty is both a factor contributing to and consequence of illness and disease, so it is not enough for clients to have access to financial services. The microfinance sector must look for ways to integrate healthcare to their microfinance services. Microfinance institutions (MFIs) can provide health services directly or through linkages with healthcare programs.

Campaign believes that microfinance services provide an optimal place for healthcare. Many MFIs are reaching very rural communities — to say nothing of savings groups, which are primarily a rural financial tool. MFIs have developed trust relationships with families; they meet regularly with clients and can, therefore, pass along information like how to care for their children. In addition, since many MFIs serve regions in Africa and South Asia where child mortality rates are the highest, a strong focus on healthcare will allow these organizations to directly combat this issue in the most afflicted regions.

Microfinance clients must also have access to good healthcare in order to run their businesses, and a healthy lifestyle begins at birth. In the “Healthy Mothers, Healthy Babies: Kalinga kay Inay” project, microfinance clients are learning simple but important lessons like the food and nutritional supplements that pregnant and young women need and the importance of giving birth in a health facility. They are attending community health fairs organized by CARD MRI and partners, receiving free gynecological exams, urinalysis, and vitamins and supplements to improve their chances of delivering a healthy baby.

70 percent of maternal and child deaths now concentrated in just 16 countries, health and non-health investments such as sanitation, education, infrastructure and gender equality can potentially double the impact on lives saved.

70 percent of maternal and child deaths are now concentrated in just 16 countries. Investments in sanitation, education, infrastructure, and gender equality can potentially double the impact on lives saved. Go to the Newborn Survival Map to learn more.

Integrating health and microfinance services will also support the efforts of the new Global Goals for Sustainable Development, which are set to be approved at the Sustainable Development Summit September 25 to 27. The ambitious Goal 3 (“Good health and well-being”) includes ending preventable deaths of newborns and children under 5 years of age by reducing child mortality to 20 or fewer deaths per 1000 births by 2030. It also seeks to reduce by one third premature mortality from non-communicable diseases through prevention, treatment, and promotion of mental health and well being.

There also efforts underway in the United States to maximize future investments by US Agency for International Development (USAID). To reach the goal of ending preventable child and maternal deaths by 2035, USAID has set bold, intermediate goals of saving 15 million child lives and 600,000 women’s lives by 2020. RESULTS, a grassroots advocacy organization, is lobbying for bipartisan legislation that will provide strong congressional oversight and ensure that “returns [are] measured in lives saved and healthy, prosperous communities.” (See the Fact Sheet.)

“We now have the chance to end these needless deaths in our lifetime,” said Joanne Carter, executive director of RESULTS and RESULTS Educational Fund (our parent organization). “The science shows we have the tools. That means in 2035 a child born in the poorest setting could have the same chance of reaching her fifth birthday as a child born in the richest.”

#tbt: Clients Continue Movement above the US$1 a day Threshold

The study found that, on net, 1.8 million microcredit client households, including 9.43 million household members, crossed the $1.25 a day poverty threshold between 1990 and 2008.

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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 2011. We commissioned a study to estimate the net number of microcredit client households in Bangladesh that crossed the US$1.25 a day threshold between 1990 and 2008. You can download a copy of the study from our Resource Library as well.


Authored by Sajjad Zohir, the director of the Economic Research Group; he is based in Bangladesh.

The Microcredit Summit Campaign is committed to using microfinance to powerfully contribute to the end of poverty. Its decade-long focus on client poverty measurement and progress out of poverty underscores this commitment. To this end, the Campaign continues to track progress towards its second goal to ensure that, from a starting point in 1990, 100 million of the world’s poorest families move from below US$1 a day adjusted for purchasing power parity (PPP) to above US$1 a day adjusted for PPP by 2015.

Evidence from Bangladesh

Findings from a nationwide study in Bangladesh commissioned by the Campaign shows promising results. The study, undertaken by the Bangladesh-based Economic Research Group, was administered between February and August 2009. Researchers surveyed a nationally representative sample of 4,000 Bangladeshi microcredit clients and estimated the net number of households in Bangladesh that crossed the US$1.25 a day threshold between 1990 and 2008.[1]

The study found that, on net, 1.8 million microcredit client households, including 9.43 million household members, crossed the $1.25 a day poverty threshold between 1990 and 2008. A second key issue raised in the report, seen in Figure 1 below, was that in some years a large percentage of clients left poverty, whereas, in years coinciding with the 1998 floods and the food crisis of 2008, many households, including some who where non-poor when they joined the microcredit program, slide below the $1.25 threshold.

Figure 1: Percentage of Client Households, on Net, Crossing the US$1.25 Threshold in Bangladesh

Figure 1: Percentage of Client Households, on Net, Crossing the US$1.25 Threshold in Bangladesh
Data showed that among those taking their first microcredit loan between 1990 and 2008, the following poorest client households crossed the US$1.25 threshold:

1990-1993 8.94%
1994-1997 19.83%
1998-2002 0.33%
2003-2008 1.84%

It is important to note that the findings in this report were significantly influenced by the period in which the data was collected. In 1998 Bangladesh suffered from what are often described as the most severe floods ever to hit the country. In 2008, a food crisis coupled with political instability in Bangladesh and the global economic crisis led to a general slack in economic activities. All these factors may have led to the depletion of assets that are commonly chosen as proxies to measure poverty status among the very poor in Bangladesh. This in turn may have led to under-estimation of the number of microcredit client households that may have otherwise crossed the threshold.


Footnote

[1] This study made no attempt to establish causality between microcredit and poverty alleviation. Instead, it simply estimates the change in status of microcredit client households between 1990 and 2008, when compared with their status during the time of the first loan received by any member of the household.


Related reading

#tbt: The Faces Behind the Statistics

#ThrowbackThursday

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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 2005. Microfinance client Janèt Dèval attended literacy courses offered by Fonkoze and shares how her business has been improved. Indeed, it has cemented her determination to continue improving herself and her loyalty to her microfinance institution.


Microfinance stands as one of the most promising and cost-effective tools in the fight against global poverty.

Jonathan Morduch, Chair
United Nations Expert Group on Poverty Statistics

Janèt Dèval, a client of Fonkoze, a microcredit institution in Haiti, is one of the 66.6 million poorest clients reached. Janèt has been a credit client for more than two years and comes regularly to all meetings. She has also been a part of every literacy program available and is about to start the newest module on developing business skills. Not only could she not read or write when she started, but she has had an extra challenge: Janèt has only a fraction of her hearing due to an injury when she was 20 years old.

My husband didn’t want me to send my five children to school because his parents didn’t send him to school. From the beginning, he said he would not pay and he has never given even one goud, but I always knew it was important. For a long time I have gone to Port-au-Prince to buy goods to sell in Hinche, and I put all my money into paying for school for my children.

When I found out that Fonkoze gave literacy classes for market women, I was so happy. I never went to school even one day. I didn’t know anything about school. I started right away with basic literacy and I have tried to never miss a class.

I couldn’t write my name and I didn’t understand anything, but I kept going even when my husband got angry. My kids pushed me and encouraged me and they helped me practice my letters. The monitor, Christa, told me to keep writing every day even when I didn’t understand.

I can write my name now, and I write it everywhere. Imagine, I used to go to Port-au-Prince to buy and I couldn’t read the bags and I felt lost. I couldn’t keep track of what I bought. The drivers sometimes would take my boxes off the truck and give them to someone else, but I didn’t know until I got all the way home. Now, I can’t lose anything. Now I write my name on every box and I know what I buy.

I finished Alfa Baz and Alfa Pos and then I went to the Health Program, too. I still don’t know many things, so I want to keep going. I take my notebook to my school and I write in it because one day I hope to read and understand everything. I bought two books in the market and my kids help me read them.

I work hard in the market so that I can repay my loans, keep going to school and so that my kids have that chance, too. If my parents would have sent me to school, I would have thrown a party for them to say thank you.[1]

The Microcredit Summit was launched to multiply stories like this 100 million times, but a number of barriers continue to impede the Campaign’s success.

Read the 2005 Report.


Footnote

[1] From the Fonkoze website www.fonkoze.org.

#tbt: Lobbying the World Bank, Part II

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“We measure what we value and we value what we measure. It is clear that donor agencies value strong financial performance because they require their clients to measure their financial performance precisely. Except for USAID, other donors still do not demonstrate a similar value on measuring the poverty level of entering clients.”
Read the entire 2004 State of the Campaign Report.

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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 2004. The RESULTS International Conference is this weekend (July 18-21), and grassroots activists from the U.S. and around the world will be in D.C. to lobby the USAID Administrator and World Bank Directors. In reviewing advocacy fights in the early 2000s, we remember our campaign to push the World Bank to mandate the use of poverty measurement tools by their partners.


In this introduction to the State of the Microcredit Summit Campaign Report, rather than presenting a neat, uncontested picture of the field of microcredit seen solely from the Campaign’s perspective, we think it useful to listen to the challenges and opposition to what the Campaign and these parliamentarians have championed, coming as it does from some of the most influential institutions in development. In the pages that follow, we invite you to listen in on debates that contrast the views of the World Bank and CGAP with those of industry leaders like BRAC founder Fazle Abed, Grameen Bank founder Muhammad Yunus, and the Microcredit Summit Campaign. What follows are excerpts from the World Bank and CGAP’s responses to the 700 parliamentarians, along with reactions from the Microcredit Summit Campaign.

In his response to 188 British Parliamentarians, World Bank President James Wolfensohn wrote, “I very much agree with your observation that microfinance has a demonstrated, powerful impact in improving the livelihood of the poor, and a crucial role in reducing poverty. Access to financial services for the poor is a critical condition for the attainment of the Millennium Development Goals.”…This show of support is important, but the words must be followed by more effective action.

Wolfensohn asked officials from the World Bank and the Consultative Group to Assist the Poor (CGAP), to jointly address the detailed issues raised in the parliamentarians’ letter…

Continuing from Part I

WB/CGAP: We of course agree that conventional microfinance does not automatically push itself deeper to reach poorer clients. In fact, many MFls do move away from poorer clients to those who are better-off, under the assumption that better-off clients pose lower risks and the larger loans they would be taking would increase institutional profitability and sustainability. We believe, therefore, that there needs to be a sustained effort at trying to reach poorer people. This needs to come from understanding client needs and developing products and services that are useful to them. It needs to come from developing better targeting tools and identifying, encouraging and funding innovations that enable sustainable financial services to the very poor. It needs to come from greater transparency so that information is made available on whether institutions are actually reaching very poor clients. What is required is a set of incentives that promote such activities and ongoing demonstration [that] financial services to the very poor is a feasible and sustainable business.

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

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

MCS: What greater incentive is there for promoting outreach to those below $1 a day than for an MFI to know that the World Bank and other donors want them to use a cost-effective poverty measurement tool? Wouldn’t this give us “greater transparency so that information is made available on whether institutions are actually reaching very poor clients?”

Advocacy efforts to ensure that donor efforts in microfinance reached the very poor began in 1986. There has never been a greater move to ensure that the very poor are reached than has occurred since the U.S. legislation became law in 2003. This change took 17 years and a Congressional mandate. With the Millennium Development Goals due in just 11 years, another decade of soft incentives is insufficient. Freedom from Hunger’s Chris Dunford argues that we measure what we value and that we value what we measure. It is clear that donor agencies value strong financial performance because they require their clients to measure their financial performance precisely. Except for USAID, other donors still do not demonstrate a similar value on measuring the poverty level of entering clients.

WB/CGAP: Many of the poorest people with no sources of income require grants, employment and other services, rather than microcredit. Donor support for developing models that “graduate” them from welfare-type safety net programs to where they have sufficient incomes to productively use financial services, is far more important than credit per se. Credit is, after all, debt, and under certain circumstances it can make the extremely poor more vulnerable, not less vulnerable.

MCS: “Donor support for developing models that ‘graduate’ them from welfare-type safety net programs to where they have sufficient incomes to productively use financial services” is important, but which donors are leading in this area and how extensive is that leadership? The impression is given that very poor families should not access microfinance but instead choose the services they need as if these services are readily available. This is a false choice for the very poor when 29,000 of the children of the poorest die each day from mostly preventable malnutrition and disease, when 104 million of their primary-school aged children are not in school, and when the services they desperately need are not likely to be available today or in the near future.

World Bank and CGAP officials say that “Credit is, after all, debt, and under certain circumstances it can make the extremely poor more vulnerable, not less vulnerable,” but it is the debt that they have taken on from unscrupulous moneylenders that mires hundreds of millions in a life of grinding poverty. As Karen L. McGuinness of Princeton University wrote in a letter for The New York Times, “The reality in most poor countries is that the poorest are already saddled with incredible debt at usurious rates from local moneylenders. This is the fundamental predicament that microfinance institutions have effectively addressed for nearly three decades now.”

WB/CGAP: We fully agree that there is a need for cost effective poverty measurement tools. Much greater transparency is required on whom financial institutions are reaching. CGAP has been very active in developing tools to encourage a deepening of microfinance outreach. It has developed a “Client Poverty Assessment Tool” and a “Poverty Audit of Microfinance Institutions’ Pro- Poor Services” for donors to determine whether their funded institutions do indeed try hard and succeed in working with the very poor. Recently, CGAP has also been working with financial institutions to assist them to develop their own simple and cost-effective poverty assessment tools.

MCS: While the work of CGAP is appreciated, it has not created the breakthrough in thinking and action that the new U.S. law has forged. Developing new tools can still be a far cry from ensuring their use. Even though CGAP’s Poverty Measurement Tool has been available for at least four years, not more than a handful of CGAP’s 29 members have ever used it. The slow pace of voluntary implementation is insufficient for ensuring the change necessary for cutting absolute poverty in half by 2015.

WB/CGAP: We are aware of the microfinance legislation passed in 2002 by the U.S. Congress. In fact, at the urging of its bilateral and multilateral donor members, CGAP launched a discussion on its website on whether the approach promoted by such legislation could be more broadly applicable to other donor agencies. A very active discussion followed and the result was that many senior members of the microfinance community were opposed to the extension of such mandates in other donor agencies. (The discussion submissions can be found on the internet under US Poverty Mandate Discussion at www.microfinancegateway.org.)

MCS: It is true that many senior members of the microfinance community were opposed. In fact, the first four statements posted were from CGAP Executive Committee members, all of whom were opposed to adoption of the new mandate by other aid agencies. On the other hand, the mandate had the support of Fazle Abed, Chairman of BRAC, Shafiqal Haque Choudhury, Managing Director of ASA, Muhammad Yunus, Managing Director of Grameen Bank, Chris Dunford, President of Freedom from Hunger, Anton Simanowitz, Director of ImpAct, Didier Thys, CEO of The MIX, Alex Counts, President of Grameen Foundation U.S.A., and other key players. These are the opinions from leaders of some of the largest and most successful poverty-focused microfinance institutions in the world.

Relevant reading

#tbt: Lobbying the World Bank, Part I

#Tbt_6

Elizabeth Littlefield, CEO of CGAP in 2004, said at the 2004 Microcredit Summit in Bangladesh, “There is no evidence of a necessary trade-off between poverty and sustainability.”
Read her full quote on page 12 of the 2004 State of the Campaign Report.

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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 2004. The RESULTS International Conference is only three weeks away (July 18-21), and grassroots activists from the U.S. and around the world will be in D.C. to lobby the USAID Administrator and World Bank Directors. Therefore, we’re reviewing advocacy successes and struggles in the early 2000s. This week, we look at a breakthrough we achieved in getting the World Bank to recognize microfinance as an important strategic element in reducing poverty and announcing that they were committed to increasing their funding for microfinance.


In this introduction to the State of the Microcredit Summit Campaign Report, rather than presenting a neat, uncontested picture of the field of microcredit seen solely from the Campaign’s perspective, we think it useful to listen to the challenges and opposition to what the Campaign and these parliamentarians have championed, coming as it does from some of the most influential institutions in development. In the pages that follow, we invite you to listen in on debates that contrast the views of the World Bank and CGAP with those of industry leaders like BRAC founder Fazle Abed, Grameen Bank founder Muhammad Yunus, and the Microcredit Summit Campaign. What follows are excerpts from the World Bank and CGAP’s responses to the 700 parliamentarians, along with reactions from the Microcredit Summit Campaign.

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

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

In his response to 188 British Parliamentarians, World Bank President James Wolfensohn wrote, “I very much agree with your observation that microfinance has a demonstrated, powerful impact in improving the livelihood of the poor, and a crucial role in reducing poverty. Access to financial services for the poor is a critical condition for the attainment of the Millennium Development Goals.”

This is a tremendous vote of confidence from Mr. Wolfensohn, but if, as Wolfensohn says, “access to financial services for the poor is a critical condition for the attainment of the Millennium Development Goals (MDGs),” then reaching those below $1 a day is also critical. Mr. Wolfensohn acknowledges the poverty goal, which seeks to cut absolute poverty in half by 2015, as the lead MDG. Absolute poverty is measured by those living below $1 a day, adjusted for purchasing power parity. This show of support is important, but the words must be followed by more effective action.

Wolfensohn asked officials from the World Bank and the Consultative Group to Assist the Poor (CGAP), to jointly address the detailed issues raised in the parliamentarians’ letter.

World Bank and CGAP officials begin their own response to the parliamentarians on a hopeful note when they write that microfinance forms “…an important strategic element in any broad based effort to reduce poverty,” and assert that the World Bank and CGAP “are committed to massively scaling up this access to financial services.”

While it is good for the Bank to declare microfinance as an important strategic element in reducing poverty, there is still a disconnect between this assertion and the fact that microfinance constitutes less than one percent of annual Bank spending. Assigning such a low priority to microfinance is neither strategic nor a sign it is viewed as important. There is also a disconnect between the Bank’s enviable commitment “to massively scaling up…access to financial services,” and the fact that the Bank offers nothing measurable in response to the parliamentarians’ request to double spending. It would seem that a massive scale-up would at least equal a doubling from less than one percent to less than two percent.

World Bank and Consultative Group to Assist the Poor (WB/CGAP) officials continue by saying, “While the World Bank Group already provides more microfinance funding than any other agency, we remain committed to doing much more. The fundamental constraint to an exponential increase in the numbers of poor people receiving financial access is, however, a real absence of retail institutional capacity. Building this capacity is an integral part of the financial systems of our client countries and is, therefore, a critical task for the World Bank Group and other agencies.”

MCS: The World Bank should provide more microfinance funds than any other agency given that its overall portfolio dwarfs that of all other bilateral and multilateral donor institutions. However, the World Bank does not provide more funding than any agency. USAID surpasses the Bank’s total spending in microfinance. In addition, more than one percent of USAID’s funds and more than three percent of UNDP funds[5] go to microfinance.

Retail institutional capacity does exist. Some of the global and domestic partners of a number of institutions and networks are either already reaching very poor clients or gearing up to do so as a result of the new U.S. law. These include institutions and networks such as ASA, BRAC, PKSF[6] and Grameen Bank in Bangladesh, NABARD and SIDBI in India, Pro Mujer, Freedom from Hunger, Opportunity International, FINCA, CARE, Save the Children, Catholic Relief Services, World Vision, Katalysis, Grameen Foundation U.S.A., ACCION and World Relief in the U.S., Développement international Desjardins in Canada, members of The Africa Microfinance Network (AFMIN), Sanabel members in the Middle East and North Africa, and members of REDCAMIF and Foro Latinoamericano y del Caribe de Finanzas Rurales in Latin America.

PKSF alone estimates that for the six years beginning July 2004 and ending in June 2010, $562 million could be absorbed by its 192 Bangladeshi partner organizations and those to come. This is in just one country.

There are scores of institutions around the world that have demonstrated the vision and systems to reach the very poor sustainably. To say there is “a real absence of retail institutional capacity” is to imply that whatever capacity exists has been fully exploited. This is clearly not the case. The greater problem is the low priority donor agencies place on finding institutions with the vision and systems necessary for expansion to the very poor, not the “absence of retail institutional capacity.”

WB/CGAP: We agree with the spirit of your recommendation that at least 50% of World Bank funds should be reaching those living on less than a dollar a day. However, we do not think that earmarking funds would be the best strategic choice for moving the microfinance industry towards sustainably serving much larger numbers of those in absolute poverty. In fact, such directed lending could have an adverse effect on scaling up, through distorting markets. Many MFIs achieve sustainability through increasing outreach to a larger diversified client group. They end up serving much larger absolute numbers of the very poor, even though they may have a smaller percentage of very poor clients in comparison with poverty-focused institutions that are not sustainable. Such MFIs would be penalized through the suggested mandate.

MCS: Institutions that do not exclusively, or even predominantly, target the poorest need not be penalized. The parliamentarians are not asking that all MFIs reach the very poor or that half of an MFI’s clients fall below $1 a day when they entered the program. They are asking that, on balance, half of World Bank spending in microfinance go to people who were very poor when they started with the program. Within the World Bank’s portfolio there might be a group of institutions that primarily serves better-off clients, another group with a more mixed clientele, and a third group largely serving those starting below $1 a day. Yet institutions such as the World Bank have not provided incentives to reach those below $1 a day. If anything, the Bank and others have discouraged depth of outreach. This is why the parliamentarians believe earmarking is required. The World Bank/CGAP response leaves the impression, however unintended, that programs reaching very poor clients may be less sustainable, but this is far from current reality. CGAP CEO, Elizabeth Littlefield, backed that up with remarks made at the Asia/Pacific Microcredit Summit held in Dhaka, Bangladesh in February 2004.

“There is no evidence of a necessary trade-off between poverty and sustainability,” Littlefield said in Dhaka. “…Very recent data from our MicroBanking Bulletin (MBB) and from The Microfinance Information eXchange (The MIX) show us that the best poverty-focused microfinance institutions are breaking right through conventional wisdom. Of the 124 microfinance institutions reporting to the MBB, 66 were fully selfsufficient. Of those, 18 were institutions that work with very poor populations, the poorest. These 18 institutions had higher average sustainability, higher return on assets, and higher return on equity than the overall averages. Sustainable microfinance institutions that serve lower end markets, the poorest, reach, on average, one and a half times as many borrowers as other microfinance [institutions] and they do it with fewer resources. Hence, these institutions do a much better job of stretching their resources to reach more clients. In terms of clients served, they are far more efficient with their human resources, serving each borrower at half the cost, on average, of a sustainable institution serving higher market segments.”

Footnotes

[5] Approximately two percent of USAID funds and three percent of UNDP funds go to microfinance.

[6] Palli Karma Sahayak Foundation (PKSF) is a Banlgadesh-based autonomous microcredit fund.

Relevant resources

#tbt: A New Law and New Hope

#Tbt_5

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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 2004. The RESULTS International Conference is only three weeks away (July 18-21), and grassroots activists from the U.S. and around the world will be in D.C. to lobby the USAID Administrator and World Bank Directors. Therefore, in the weeks leading up to that great event, we’ll review advocacy successes and struggles in the early 2000s wherein we achieved breakthroughs in poverty measurement in order to target the extreme poor and other concessions from USAID and the World Bank.


The revolution in reaching the very poor is most evident in a new U.S. law and the resistance to it by some leaders in international development. The law, which was enacted in June 2003, calls for the U.S. Agency for International Development (USAID) to develop and certify two or more cost-effective poverty measurement tools that measure $1 a day poverty. The new tools are to replace loan size, which is currently used and has proven to be inadequate for poverty measurement. As Freedom from Hunger President Chris Dunford remarked, “The average loan size for entering clients tells you more about the institution making the loan than it does about the poverty level of the person receiving it.”

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

Download the full 2004 State of the Campaign Report in our Resource Library

After the newly mandated tools are certified, institutions receiving microenterprise funds from USAID will be required to use one of them and report the number of entering clients who start below $1 a day. The law is an effort to bring accountability and transparency to the long-standing Congressional commitment to have at least half of USAID microenterprise funds benefit very poor clients. This new law, particularly if it is adopted by other aid-giving countries and institutions, would have a great impact on the Microcredit Summit’s commitment to reaching the very poor and provide tremendous support to the MDG focused on halving the number of families living below $1 a day by 2015.

While the new law demonstrates the revolution that is taking place in microfinance, efforts to expand the revolution have been met with resistance. This resistance comes from major development institutions that have been asked to adopt policies similar to the new U.S. law — The World Bank, the regional development banks, and the United Nations Development Program (UNDP).

In November 2003 more than 700 parliamentarians from the United States, the United Kingdom, Canada, Japan, Australia, India, and Mexico wrote to the heads of the World Bank, the Asian, African, and Inter-American Development Banks, and UNDP. The parliamentarians lauded the institutions’ commitment to achieving the Millennium Development Goals (MDGs) which they said are “crucial to building a safer and more equitable world — and will show our constituents that development programs are truly making a difference.”

The parliamentarians continue with a concern that:

…sustainable microfinance for the very poor has not received sufficient priority in your policies and practice aimed at cutting absolute poverty in half by 2015, the most crucial — and most difficult — of the MDGs. As important as it is to support well-designed health, education, and good governance programs, these interventions alone will not ensure that some 600 million people move out of poverty.

The parliamentarians ask the heads of these powerful institutions for the following:

  • Increased funding for microenterprise: We urge you to make substantial increases in the proportion of your institutions’ lending and grants that go to microenterprise and actually reach clients. For example, the World Bank estimates that an average of $168 million in funding, less than one percent of Bank resources approved annually, is approved each year for microenterprise. We believe resources devoted to microenterprise should at least be doubled (emphasis added).
  • At least 50 percent of funds reaching the poorest: By December 31, 2004, we would like to see your institutions make the commitment to having at least 50 percent of your microfinance funds reach clients who are below US$1 a day when they start with a program.
  • Use of cost-effective poverty measurement tools to ensure meeting the target: By December 31, 2005, the microenterprise institutions should be required to use cost-effective poverty measurement tools that can determine which families start below US$1 a day and use the same or similar tools to show which families have moved above US$1 a day.
  • Annual reporting of results: By December 31, 2006, we would urge your institutions to report, on an annual basis, the amount of funds provided for microenterprise and the percentage of those funds that reach families who begin with a program at below US$1 a day.

In their letter, the parliamentarians discuss the new U.S. law and say, “We believe your institutions should be a vital part of this process and urge you to adopt a similar procedure.”

Relevant resources

#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.

Tackling poverty by combining saving, training, and microcredit

Martha Kimuyu Kinai, 68, started a woman's group when she was 18. She has 4 grandchildren and teaches her community how to make charcoal clay using wood charcoal and soil mixture. Martha is an example in Mumandu 15kms from Machakos near Nairobi, and has learned more business skills from Hand in Hand training.

Martha Kimuyu Kinai, 68, started a woman’s group when she was 18. She has 4 grandchildren and teaches her community how to make charcoal clay using wood charcoal and soil mixture. Martha is an example in Mumandu 15kms from Machakos near Nairobi, and has learned more business skills from Hand in Hand training.
Photo courtesy of Georgina Goodwin for Hand in Hand International

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>> Authored by Josefine Lindänge, CEO of Hand in Hand International

Decades of microcredit have shown us that while it is a powerful tool in the arsenal of international development it is not, as the World Bank Forum on microcredit in February made clear, a magic bullet to tackle poverty. Over the years there have been many studies into the effects of microcredit, most recently by Innovations for Poverty Action (IPA) and The Abdul Latif Jameel Poverty Action Lab (J-PAL) which concluded that small, short-term loans generally do not lead to increased income (American Economics Association). But, is this a reason for the sector to discard microloans all together?

On the contrary. At Hand in Hand, our experience in the field has taught us that access to finance is vital in the fight against poverty. But on its own, it will not transform a microenterprise from loss to profit nor will it transform a small scale farmer eking out a living on a small plot of land into a micro-entrepreneur. In order to achieve our ambitious objectives we need to understand our clients, as the World Bank Forum in February highlighted.

Microcredit is more effective when supported by non-financial services like financial and business training.

We have been providing a package of business training and credit to more than one million people in some of the world’s most deprived countries since 2003. As a result, they have created 1.4 million micro-enterprises which provide jobs and incomes for 2 million people.

Of course millions of microentrepreneurs already exist in the informal economy where, the World Bank (World Development report 2013, page 48) estimates, more than 3 billion people are working, nearly half of whom work in farming, small household businesses, or in casual/seasonal day labor, earning a poorly paid and often vulnerable living. Rather than seeing this as a problem, we should ask ourselves what these people need to establish or transform their small, unprofitable enterprises into thriving businesses.

The power of microcredit +

Of course, combining group savings and skills training with microcredit is not unique. But most NGOs focus just on one or two of these elements. At Hand in Hand we combine all three and even add a fourth by connecting entrepreneurs to larger markets.

Firstly, we create community groups who support each other, save together, and learn together. Then we train the group members to discover and develop small businesses that make use of their skills and potential; the training includes bookkeeping, profit and loss, creating a basic business plan and marketing. Members have to complete these first two steps before we provide access to microcredit. Finally, we help scale up their businesses by facilitating access to larger markets and advising on the production of higher value products rather than commodities.

Zacharie Itegekaharmde, a mobile phone agent (Kayonza District, Rwanda)

Zacharie Itegekaharmde, a mobile phone agent (Kayonza District, Rwanda)
Photo courtesy of Hand in Hand International

We work with our members for up to three years, and it is only after they have completed all the training modules, can demonstrate high attendance rates at meetings, good repayment on internal lending, a required level of savings, and submission of a solid and approved business plan that they qualify for credit — either from our own microfinance facilities or from partners.

Saving: the key to financial success

There are two dimensions within our program to facilitate financial inclusion: access to savings and then access to credit.

Saving is an important component of financial education and one many in the developed world take for granted. But, the question is, do the poor have any “spare” money to save? Surely that is exactly why they need microcredit?

Among the many entrepreneurs I have met and talked to over the years, saving is always mentioned as the most important skill they have learned. The change to spending what they need and saving the rest for “a rainy day” is transformative and, I think, best explained by one of our successful entrepreneurs in Rwanda, Rahabu: “You know what it is like. You go to the market because you need salt. But when you are there, you see some nice tomatoes so you buy those as well. I don’t do that anymore. I have learnt to buy what I need and save what is left.”

Rahabu Mukampenda, Retailer, Rwanda.
Photo courtesy of Georgina Goodwin for Hand in Hand International

Our members start out in saving groups before receiving microloans. The savings enables them to buy the first stock, equipment, animals, or crops they need to get their microenterprise off the ground. Once they have met all the requirements I mentioned earlier, then they are able to apply for microcredit. The credit history they have built up as members and within the internal saving-loan-repayment system of our savings groups is crucial to securing that first microloan.

Group members wishing to borrow from the group savings fund are required to present a basic business plan to the group. It is then up to the group to decide whether or not to invest, how much to invest, and what the rate of return should be, which demonstrates a clear understanding of some fairly complicated financial transactions, auguring well for future debt repayments.

Members are selected for credit or linked to microfinance institutions (MFIs) when they meet the criteria I have described and we are confident they are fully prepared to take on the risk of a loan because our training focuses on the meaning of debt, importance of repayment, as well as the opportunities presented by a loan. Although we do not recommend particular MFIs to our members, we do make them aware of the various financial institutions or banks that exist, their different requirements, and what to look for or avoid. Since 2003, we have overseen the dispersal of more than US $240 million in microloans.

These partnerships with microfinance institutions are essential for our microentrepreneurs to take the next step on their journey. An independent review of our work in India in 2012 found that over 95 percent of loans were used for productive purposes and the repayment rate is 99.8 percent.

In short then, a symbiotic approach between access to finance and non-financial services like Hand in Hand’s support is needed to tackle the root cause of poverty.

About the author

JosefineJosefine began her career at the United Nations Department for Economic and Social Affairs, Finance for Development section. After working a number of years in the private sector, she joined Hand in Hand in 2008. Josefine played a decisive role in establishing Hand in Hand Eastern Africa, and was promoted to Chief Operating Officer of Hand in Hand International in 2011. She holds a B.Sc. and M.Sc. in Development Economics and International Economics from Lund University in Sweden and studied strategic leadership for microfinance at Harvard Business School.

Relevant Resources

#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.

Measuring what’s important: client transformation

Research Results ESAF India

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Published on the Center for Financial Inclusion’s blog April 15th.

Measuring Transformation

>> Posted by Bobbi Gray, Research Director, Freedom from Hunger

While recent research indicates that access to and use of microcredit alone is not transformative for the average client served (see “Where Credit Is Due“), there has been very little discussion about the types of indicators being used to measure “transformation” in the ongoing debates. In fact, it seems that we all have accepted the general findings that microcredit has only had modest impacts on, along with other indicators of poverty and well-being, education, health, and social capital because the randomized controlled trials (RCTs) have said so. There needs to be greater thought and debate about the choices of indicators used to support these conclusions.

Freedom from Hunger over the past 20-plus years has integrated health with microfinance and helped build a body of knowledge indicating that microfinance plus health services can enhance health outcomes. In an ongoing partnership with the Microcredit Summit Campaign, supported by Johnson & Johnson, we have pilot-tested a series of health indicators that financial service providers (FSPs) can use to track client health outcomes. This pilot test was built on years of experience of evaluating health outcomes with our FSP partners, as well as on similar experiences of developing common tracking indicators in the health sector. We created a list of criteria to assess the types of indicators we felt would be meaningful to track—for individuals with and without health services – which included dimensions of feasibility, usability, and reliability. Initial results have been shared in several webinars with SEEP and the Social Performance Task Force.

It’s important to note that this pilot test effort was not about “proving” impact, but rather developing common techniques for monitoring client outcomes that FSPs could use over time. However, this experience has shown how difficult it is to identify indicators that best measure certain health outcomes. What initially might appear as an intuitive indicator to use — for example, how often a person reports being ill or seeking medical treatment — is found to be more difficult than expected. Morbidity — or reports of illness — is not an easy measure for health sector actors or those who directly work to improve health outcomes because it is influenced by the seasons, by specific efforts, and other factors, so care has to be taken when interpreting results. Reports of seeking medical treatment are complicated by whether people are satisfied with the services they can seek and may not always reflect financial capability but preferences or lack of available health services.

Read the rest of the article

Relevant resources

Exploring the potential of low-income women in Pakistan

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

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Pathway

Microfinance savings and/or borrowing groups linked with
health education, health financing, and health product delivery


>>Authored by Roshaneh Zafar, Executive Director, Kashf Foundation

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

Last year, Kashf Foundation made a Campaign Commitment to increase the number of persons from low-income communities who were accessing health insurance to 100,000, and Kashf surpassed this target by nearly one-third. At the end of 2014, Kashf was able to cover 129,000 women, men, and children from poor households with health insurance.

“Upon reaching the hospital, I looked hesitantly at my daughter, but seeing her face full of pain and agony, I realized I had to be brave for her. The hospital was the biggest I had ever seen, and I was sure that the doctors would not even consider treating my daughter. But, as soon as I showed them my insurance card, not only was I treated with the utmost respect, they arranged the best possible care for my daughter without taking a single penny from me.” — Noshaba

Noshaba with daughter Rabia Farooq-Kashf health insurance client

Noshaba with daughter Rabia Farooq; Kashf health insurance clients
Photo Credit: Kashf Foundation

Noshaba and her daughter belong to one of those Kashf families who have been able to access high quality healthcare as result of the Kashf Micro-health Insurance product. Kashf’s innovative product provides health insurance coverage to the entire household up to Rs. 30,000 of in-patient expenses for every member of the household! Kashf’s health insurance also covers maternity benefits and provides clients with a work-compensation settlement if either of the main breadwinners for the household is hospitalized.

During 2014, Kashf worked with the health insurance company to organize 15 health camps and 17 out-patient sessions in low-income communities to create awareness about identification and prevention of disease. Through their insurance, low-income households also have access to a tele-health helpline where they can call to discuss medical problems and symptoms.

Client-centered product design

Kashf Foundation committed in 2014 to make data-driven decisions, using meta-data trends to optimize products and services to meet clients’ needs and to increase the impact of Kashf on the lives of clients. To this end, Kashf engaged with the Centre for Research in Economics and Business for a randomized control trial (RCT) and has collected the baseline data for 990 clients. These clients will be re-evaluated in August 2015 and the end line report will be available by the end of 2015.

Kashf also committed to create credit products aligned to the specific cash-flow needs of the most popular women-led micro-businesses. In the last year, Kashf has undertaken the research and development on these products and tested some prototypes. Kashf will be working throughout 2015 on improving these prototypes and streamlining and optimizing the processes further along with contextualizing its products and services to better service the clients.

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

Building client capacity

Kashf understands the equal importance of building the capacity of women entrepreneurs to take more informed and confident decisions. To this end, Kashf has invested in the training and development of low-income women entrepreneurs, having trained more than 600,000 females in financial education and literacy by December 2013.

As part of their 2014 Commitment, Kashf Foundation trained an additional 200,000 women in financial education, bringing the cumulative outreach of Kashf’s Financial Education program to over 800,000 women.

Kashf’s financial education trainings use adult teaching methods to equip female participants with the required skills and tools through story-telling, games, and experiential learning. Improved financial literacy has helped women entrepreneurs to understand their saving situations better, save more, and attain higher economic status and more economic security.

Photo Credit: Kashf Foundation

Photo Credit: Kashf Foundation

Kashf has made continuous efforts to promote the business case for investing in low-income households, and especially in women, and in addressing the issue of access to training opportunities and promoting quality trainings. Kashf is focusing in 2015 on providing vocational skills training to 760 women of rural and marginalized population of Lahore on three trades — domestic tailoring, Ada work, and beautician — and establishing their linkages with the market to support their income generation through entrepreneurship development.

Relevant Resources

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:

 

From Microcredit to What?! by Sam Daley-Harris

April is the Month of Microfinance. http://monthofmicrofinance.org/

April is the Month of Microfinance. http://monthofmicrofinance.org/

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Reposted with permission


>>Authored by Sam Daley-Harris, founder and former director of the Microcredit Summit Campaign. He is currently running the Center for Citizen Empowerment and Transformation.

When the American Economic Journal recently published a group of independent studies suggesting that tiny loans to the poor usually don’t raise incomes, it left me scratching my head (although this response to those studies did ring true). As the first director of the Microcredit Summit Campaign, I’ve had the privilege of observing anti-poverty fighters like Grameen Bank founder Muhammad Yunus and BRAC founder Fazle Abed for decades. They, and others like them, never said, “We’re giving millions of microloans a year, we’re done!” Instead, they kept asking this question: “What more do our clients need to move themselves and their families out of poverty.” That question, the effectiveness of their responses to it, and the scale of their institutions have helped their country, Bangladesh, be among the poorest countries in the world most likely to achieve all of the Millennium Development Goals on time.

I first met Muhammad Yunus in 1987. By then Grameen Bank had already worked with its clients to develop the bank’s “16 Decisions,” pledges the clients made that included: 1) we shall not live in dilapidated houses, we shall repair our houses and work towards constructing new houses, 2) we shall grow vegetables all the year round, eat plenty of them and sell the surplus, 3) we shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health, 4) we shall educate our children, 5) we shall build and use pit-latrines, and 6) we shall drink water from tube wells. If it is not available, we shall boil water or use alum.

To be sure, banks like Citi and Barclay’s never had a pit latrine policy with their clients, but this poverty-fighting microfinance institution (MFI) did.

It would take weeks of blogging to cover BRAC’s beyond-the-micro-loan initiatives. But, just as an example, BRAC’s ultra-poor program has been replicated around the world and its schools for children who never entered school or dropped out at an early age are a global model.

Grameen Phone ladies

Grameen Phone ladies

Grameen Phone and Grameen Shakti (a renewable energy company) are giants in Bangladesh and their work with the poor are examples of a microfinance institution continuing to ask what more can be done to improve the well-being its clients.

This eye-popping creativity coming out of microfinance has fascinated me for decades and has taken an entirely different direction with the work of Marshall Saunders, founder of Citizen’s Climate Lobby. In the early 1990s, Saunders worked with Rotary to raise $700,000 for FINCA, teamed with Grameen Foundation and their five-year strategy to help its partners add five million new clients, and then rolled up his sleeves and started Grameen del la Frontera, a microfinance institution in the state of Sonora, Mexico. But along the way, Saunders also got involved as a citizen advocate with the anti-poverty lobby group RESULTS.

Saunders’ view of the world was shaped, in part, by this early encounter with RESULTS. He joined me for a radio interview I was doing on the NPR station in San Diego. During the interview I mentioned that RESULTS had successfully lobbied Congress for $200 million for microcredit.

“At first I thought ‘that’s not right,’” Saunders recalled. “I had busted my butt for three years to raise nearly $700,000 through Rotary, and RESULTS had raised $200 million in their lobbying….it didn’t seem to be realistic, the $200 million. I did make a mental note of it however.”

Saunders continued his work with RESULTS and made a serious commitment to Grameen de la Frontera. He had read about climate change and realized that sea level rise would affect some of his clients.

“It occurred to me that I was trying to get 5,000 more borrowers in Mexico,” Saunders said, “and that Bangladesh might lose millions due to sea level rise. I felt I had to get to the bottom of this. I went to see “An Inconvenient Truth” and went back about a week later…. Then I read that Al Gore was going to train 1,000 people. I said “holy socks, of course that’s what I want to do.”

He joined about 250 others in Nashville, TN for one of the trainings and returned to San Diego to lead the slide show dozens of times. Early on he realized that 98 percent of the information focused on the problem of climate change and that just 2 percent focused on what people could do about it. In addition, many of the actions centered on using more energy efficient light bulbs but didn’t really get at the big picture, public policy.

This microfinance promoter, hunger activist and newly minted climate educator was now reading the newspaper every morning and read that Congress had just approved $18 billion in subsidies to the fossil fuel industry.

“I’d gotten people to change 18 light bulbs yesterday,” he thought, “and that same day Congress approved $18 billion in subsidies to the fossil fuel industry. This is never going to work.”

In 2007 Saunders asked me to coach him in starting Citizens Climate Lobby (CCL). Several months later he led his first presentation with 29 people in the room. He hoped that at least four would agree to become the first chapter of CCL, but all 29 said yes. In 2014, CCL volunteers in the US and Canada had 2,253 letters to the editor published (up from 36 in 2010), had 291 op-eds published (up from 20 in 2010), and had 1,086 meetings with members of Congress, Parliament, or their staff (up from 106 in 2010). Doing something to protect microfinance clients in Bangladesh from the effects of climate change was his first impetus.

When the American Economic Journal recently published a group of independent studies suggesting that tiny loans to the poor usually don’t raise incomes it left me scratching my head. While CCL is truly a unique case, I still wonder why the researchers keep looking at just one intervention when the practitioners know it takes more and why they keep looking at the wrong institutions.


Sam Daley-Harris is the author of Reclaiming Our Democracy (www.reclaimingourdemocracy.org). He founded the anti-poverty lobby RESULTS in 1980 (www.results.org), founded the Microcredit Summit Campaign in 1995 (www.microcreditsummit.org), founded what would grow to become Truelift in 2010 (www.truelift.com), and founded the Center for Citizen Empowerment and Transformation in 2012 (www.citizenempowermentandtransformation.org). Portions of this blog are taken from Reclaiming Our Democracy: Healing the Break between People and Government © Copyright 2013 by Sam Daley-Harris. Published by Camino Books, Inc., Philadelphia, PA. Used by permission of the publisher. All rights reserved.