Trends and Developments
Changing Mindsets on Youth, Opportunity and Financial Services
In March, CGAP convened policy makers from eight countries to discuss the role of financial services in their strategies for youth development. The participants agreed that youth finance represents a largely untapped opportunity for addressing social issues since the vast majority of the world's 1.2 billion young people live in developing countries and are particularly vulnerable to economic problems. Governments have an important role of changing the mindset of banks from viewing youth as a risk to viewing youth as an opportunity, and they are working to make it easier for youth to access the financial services they need. Read more
From Financial Literacy to Financial Capabilities: Implications for Practitioners
In the United States, it is financial literacy month, but all the talk these days is of financial capability. Why? Is this another fad to make the topic of financial literacy a little more interesting? Is it an effort by one group or another to differentiate themselves? Maybe. Read more
A New Business Model for Savings Mobilization?
My work using the Financial Diaries methodology has made me very cognizant of how much cash low-income people handle daily – more cash, in real terms, than a middle-income person in a developed country handles. If we are to increase financial inclusion by increasing low-income individuals’ use of savings products, we have to find ways to channel some of the large amounts of cash they handle into those products, in ways that they value. Read more
Can Self-regulation Protect Microfinance Clients?
Last week the Smart Campaign launched the much-anticipated Client Protection Certification Program, an independent, third party evaluation to publicly recognize financial institutions that meet adequate standards of care in how they treat clients. This post launches a short series that offers different perspectives on how certification can benefit clients, individual MFIs, and the broader sector. Read more
10 Priorities For Financial Inclusion In 2013 And Beyond
Because they recognize its importance for economic and social progress, global and national policymakers have made it a priority to advance financial inclusion so people can access and use the appropriate financial services that help them improve their lives. To make real progress, we at CGAP believe the field has 10 priorities over the next 5 years. Read more
CARIB-CAP...Caribbean MFIs to receive more support
Traditionally, microfinance institutions in the English-speaking Caribbean (including Suriname) have not performed well, and have been weak institutionally, compared to their counterparts in Latin America and the Dominican Republic. This has been due to, among other things, a lack of knowledge about international best practices in microfinance which has resulted in a lack of technical, financial and governance skills as well as the market intelligence needed to develop products and services that meet the needs of their clients.
A historic partnership
In recognition of these challenges, in 2008, the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB), the European Commission (EC) and the Caribbean Development Bank came together in a historic partnership in microfinance, to strengthen Caribbean MFIs, through the Caribbean Microfinance Capacity-Building programme (CARIB-CAP). This was the first systematic attempt by the MIF/IDB, the CDB and the EC to tackle issues in the microfinance sector in the Caribbean on a regional basis. According to the MIF, the project represented the final stage in the roadmap for strengthening MFIs in the Latin America and the Caribbean (LAC) region.
The programme sought to improve the financial performance and outreach of MFIs in the region. CARIB-CAP I as it is now known was executed over thirty-six (36) months; ending in November 2011 with sound results:
- 18 MFIs (MFIs & Credit Unions) received individualized financial performance assessments, costing just under US$17,000 per institution. Each participating institution contributed less that 5% of this amount.
- 10 MFIs participated in capacity-building programme to improve financial performance. The average cost per institution was US$160,000. Each institution contributed US$4,200.
- A methodology for MFIs to set appropriate performance targets, and a reporting format to assess micro-credit portfolios were introduced and are now being utilized by 10 project beneficiaries.
- Establishment of individual loan officer performance incentive programmes in 10 MFIs.
- 10 MFIs rolled out new or re-scoped non-collaterialized micro-credit products (loans based on upfront deposit and compulsory savings) on a pilot basis to clients.
- An increased awareness of the importance of social performance, transparency and good governance for MFIs.
- Establishment of the Caribbean Microfinance Alliance (CMFA) to foster knowledge-sharing and to advocate on behalf of the sector. Launched with 8 members, membership now stands at 20.
- Caribbean Microfinance Fora held to promote knowledge-sharing and bring international best practices to MFIs. Events have brought together experts from the Pacific, Europe, the United States, Latin America and the Caribbean.
- 2 first-ever Caribbean regional studies completed on: The Demand for Financial Services among Low-Income People; and Financial Regulation in the English-Speaking Caribbean.
CARIB-CAP I and the knowledge-sharing, both in the context of project activities and the Caribbean Microfinance Fora, started a process of positive change in the microfinance sector. Significant gains were made in terms of a fundamental change in mindset on the part of the MFIs and improvements in financial performance. A mid-term evaluation of the program confirmed a new awareness of ‘what microfinance is, what it is not, and what changes need to occur in their institutions to offer ‘true’ microfinance’.
….But more needed to be done
Despite the successful implementation of CARIB-CAP I, it was agreed that more needed to be done, both on the demand and supply side of microfinance in the region, in order to produce a stronger sector. As part of the Microfinance in Underserved and Frontier Markets Agenda, CARIB-CAP I sponsors have once again agreed to a second-phase capacity-building program- CARIB-CAP II. The overall goal of this second-phase is to create a more developed microfinance industry in the English-speaking Caribbean; by creating a knowledge-sharing eco-system for MFIs in the region and building on the performance results and the achievements of CARIB-CAP I. CARIB-CAP II would continue to work with seven (7) CARIB-CAP I MFIs along with eight (8) new institutions.
Clearly a major boost for the region, the programme is expected to further strengthen the institutional capacity of MFIs to provide a range of affordable financial services to micro-entrepreneurs and low income households in the Caribbean.
For further information contact Maureen Webber, CARIB-CAP II Project Manager at [email protected]
Financial Capability: Not Many Answers, but Lots of Great Questions
Overheard at a party in Washington: “You should SOOO switch banks! Did you know that my bank offers reimbursement for ATM fees?” Outside financial inclusion circles, it’s not often that a party conversation turns to a comparison of financial services. And even when it does, what seems like a high level of “financial capability” does not always translate into better use of financial services. If it did, the ease with which Americans talked about the great deal they got when they re-financed their homes would not have gone hand in hand with a financial crisis triggered by flaws in our mortgage banking system. Read more
Who Makes the Rules for the Rule Makers? The Vital Role of Government ...
Washington DC, USA, February, 23 2012 - In October of 2006 in Basel, home to the Basel Committee on Banking Supervision and several other financial sector standard-setting bodies, Johann de Waard of the Dutch Foreign Ministry (and member of CGAP’s Council of Governors) remarked with excitement to me and his Crown Princess, Her Royal Highness Princess Máxima, that we had just given him a peek at potentially one of the most fundamental developments in the global financial order since the Renaissance.
What Ails Microfinance?
Maharashtra, India, February, 14 2012 - There is no proof that microcredit alleviates poverty; on the other hand, it can make the already risky lives of the poorest even riskier, says researcher David Roodman.
Think Again: Microfinance
Washington, DC, February, 01 2012 - Small loans probably won't lift people out of poverty or empower women. But that doesn't mean they're useless. Read more
Financial Inclusion by 2020? Five Global Trends That Will Shape the Answer
Washington, DC, January 9, 2012 - With 2012 now here, the Center for Financial Inclusion’s target year for full financial inclusion – 2020 – is not very far away. If we peer carefully out into the horizon, we can already start to see the outlines of the world at that time. Demographers may disagree about projections far into the century, but the path to 2020 is pretty clear. Here are five important demographic trends that we need to consider as we chart a path toward full financial inclusion.
Social Performance: A Truth in Advertising Approach
Washington, United States, January 5, 2012 - The microfinance community pursues a double bottom line: both social and financial. Originally, the social bottom line dominated, while the financial bottom line was seen as a means (not an end) of achieving social ends, particularly through scale and permanence. But as microfinance became more commercial, financial returns began to hog the attention. Not only are financial returns a great motivator, they are much more easily communicated, monitored and understood than social returns.
Microfinance: Is it time to write off group loans?
London, United Kingdom, December 23, 2011 - Microfinance institutions across the world are moving from group lending to individual lending. Yet, there is not much rigorous evidence on the borrower impact of both types of microcredit to either support or challenge such a strategic shift. This column presents such evidence from a randomised field experiment in Mongolia.
New success model for microfinance: A matter of trust
Boston, United States, December 21, 2011 - Professor Bill Dickens and Matt Jordan, AS '11, are using game theory to gain a better understanding of the economics of microlending and why it is more successful in some countries. In some countries, poor borrowers repay loans to microcredit lenders at rates of close to 100 percent while other countries see repayment rates so low that it makes microlending unsustainable - a disparity that economists have been unable to fully understand.
MIF partners with Nordic Development Fund to finance a pioneer Green Microfinance Initiative
Washington DC, United States, October 18, 2011 - The Mulilateral Investment Fund (MIF), a member of the IDB Group, is partnering with the Nordic Development Fund (NDF) to launch a pioneering $7 million program to pilot green microfinance products for both mitigation and adaptation to climate change in Latin America and the Caribbean. The four-year project, known as the "Ecomicro Program," is the first to pilot microfinance products related to climate change products and businesses in the region and it will be implemented regionwide. The program will provide training to microfinance institutions to develop sustainable green finance instruments; adjust their risk management models to include climate change risk; and incorporate climate impact into their internal policies and operations.
Industry Mobilizes to Prevent Over-indebtedness in Push for Responsible Finance, CGap
Washington, United States, October 13, 2011 - The microfinance industry is stepping up its efforts around responsible finance, including consumer protection measures and efforts to prevent over-indebtedness, according to CGAP, the global industry body dedicated to advancing financial access for the world's poor. The drive for rapid growth of microfinance into new markets is being accompanied by a renewed emphasis on providing access to responsible financial services that deliver the greatest benefits for poor people. In a new paper CGAP argues that this stepped up emphasis on responsible delivery will translate into microfinance institutions adhering to codes of conduct, improved regulation, and efforts to improve customer awareness and financial capability.
Cambridge, United Kingdom, October 4, 2011 - So-called "impact investors" - providers of capital to businesses that solve social challenges while generating a profit - are the current rage in economic development. US President Barack Obama's Office for Social Innovation and Civic Participation recently convened more than 100 practitioners to discuss how impact investing could be unleashed in the United States and the Developing world. The United Nations Foundation and the US State Department have launched a $50 million public-private partnership to promote clean cooking stoves in poor countries. In the united Kingdom, the Netherlands, and France, development agencies are looking to reposition some of their funding to businesses serving the poor.