FinDev Gateway, 13 March 2024
Back in 2019, the music mega-star Taylor Swift learned that the master recordings of her first six albums had been sold for $300m to an investor whom Swift regarded as an “incessant, manipulative bully” that put his own interests ahead of the artist whose work he now owned. This was a classic case of an irresponsible exit. The seller – Swift’s old manager, who had played an important part in building up her stardom during the first decade of her career – chose to maximize returns, paying no heed to whether the buyer was a reasonable fit.
Now, imagine a similar scenario in the financial inclusion sector:
Consider an NGO that spent decades incubating a strong social mission in a financial institution serving poor clients, ending its involvement by selling all of its shares to an investor focused entirely on maximizing profits. Following the purchase, the buyer steers the institution away from its poorest clients, refocusing entirely on profits and dispensing with the niceties of impact measurement or even basic client protection.
That’s an extract from the recent joint publication by CERISE+SPTF and e-MFP which I co-authored, Rethinking Responsible Equity Exits. And it happens to be particularly appropriate to Cambodia.
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next billion, 10 May 2017
There is nothing so convenient as arguing against a straw man. You dress it up in whatever way you want, then tear it down, feeling great about the accomplishment.
That’s what Milford Bateman does in his recent NextBillion article, “Don’t Fear the Rate Cap: Why Cambodia’s Microcredit Regulations Aren’t Such a Bad Thing.” He starts with the rather startling – and entirely unsupported – assertion that the rate cap announced in Cambodia is an effort to “to avert an otherwise inevitable and destructive meltdown.” He then proceeds to raise an entire army of strawmen in the form of arguments I apparently made in my article in the Phnom Penh Post, none of which are there.
Did I “steer blame away from those responsible for the current crisis in Cambodia”? Where did I write that “the supply of microcredit will completely dry up as a result of government intervention”? Did I write “if the microcredit sector is constrained in some way or its growth halted, the poor will flock to the local money-lender to satisfy their huge thirst for microcredit”?
It may work in today’s political environment, but for a credentialed academic, such license with truth and facts is simply not acceptable. The trouble is that this approach pervades the entire article.
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Phnom Penh Post, 21 March 2017
On March 13, the National Bank of Cambodia announced a major new policy. Starting April 1, all microfinance institution operating in Cambodia will be required to lend at interest rates no higher than 18 percent per year. This is a deeply misguided regulation that will undo over a decade’s worth of successful financial policies.
At the dawn of this century, Cambodia’s financial sector was largely nonexistent. There were no ATMs, few bank branches, and equally few customers. In rural areas, there were no banks at all, and moneylenders held a monopoly on lending.
How times have changed!
Today’s village household has far greater control over its finances and is deeply connected to Cambodia’s growing economy. A farmer can borrow from a microfinance lender to buy seeds and fertiliser and set aside savings to help pay for his kids’ school fees. He can finance a solar panel to charge the phone that lets the family stay in touch with older children in the city, who themselves can send money home to the parents cheaply and reliably. None of this even requires the three-hour trip to town – a loan officer from a microfinance institution visits the village each week, while the village shopkeeper doubles as a microfinance agent who can send and receive payments. This picture is repeated in house after house, village after village, from the outskirts of Phnom Penh to the remotest corners of Cambodia. Today, in rural areas alone, half a million clients hold savings at microfinance institutions, and over a million borrow from them.
The new regulation puts all that under threat. more →
e-MFP, 20 October 2016
This week marks Financial Inclusion Week. In support of this effort to highlight what Financial Inclusion means for the Platform, e-MFP would like to highlight the work being done in Cambodia by its members and partners, including ADA, BIO, FMO, Incofin, and Proparco, as well as by the MIMOSA Project.
From its beginnings as a hotbed of NGO activity to one of the world’s most active microfinance markets today, Cambodia has always traced its own path in the sector. A decade ago, access to finance in Cambodia was minimal. Today, the Cambodia Microfinance Association counts 2 million loans outstanding for a population of 15 million, along with a growing number of deposit accounts, remittances, and other financial products. The Symbiotics MIV 2016 survey reports Cambodia receiving nearly 10% of microfinance investments in the world, second only to India – a country whose population is nearly 100 times larger.
What happens in Cambodia affects across the entire microfinance sector. And on that front, Cambodia is once again tracing its own path. more →
MIMOSA, 10 May 2016
Some lessons are unexpected. Back in 2000, during the height of internet stock craze, I was an amateur manager of a small stock fund consisting of 8 smalltime shareholders who were all my relatives. Being a bit of a contrarian, the fund focused mainly on biotech stocks, which were enjoying quite a strong run, even if not quite as exuberant as dotcom stocks. The fund did well – a roughly 250% return over 3 years, but as always, the lesson was not from this relative success, but from a far larger failure – the missed opportunity to bank a 750% return.
One stock stands out in my mind: Incyte Pharmaceuticals, which I had bought variously when it was trading in the $10-$20 range during 1998-99. By early 2000, it had crossed $100/share and was rapidly heading higher. At the time, I was well aware that there was no fundamental reason behind this runup – it was classic speculation. The question was when to sell? Internally, we had set a target of $150 (at a time when it was nearing $140 and rising rapidly). It was not to be. We sold some weeks later when it had slid down to the $60s…
Call me greedy and stupid. But I learned my lesson – I’m not made for stock trading! More importantly, it was my first introduction to the dangers of inexorable growth, which creates expectations that are difficult to reset and that far too often lead to disaster. more →
MIMOSA, 20 January 2016
Since publishing the first MIMOSA report – on Cambodia – I’ve heard one persistent critique. We say that the market is saturated, yet none of the current indicators appear to support it: repayments are great, there’s no field evidence of widespread overindebtedness, and the major MFIs are all undergoing a process of Smart Certification. How can we assert that Cambodia is at risk of overindebtedness, let alone a credit crisis, when no other indicators seem to support it?
These are important and reasonable questions. But here’s the rub – all the factors that point to a healthy market are either lagging indicators or are too vague or too poorly understood to be used as benchmarks. more →
Financial Access Initiative, 14 February 2013
It’s been over two years since the start of the great India insolvency. Four years since the Bosnia blight and No Pago Nicaragua. And nearly six years since the Morocco microfinance meltdown.
At this point, it’s reasonable to say that the first global crisis in microfinance has passed. Life is on the mend.
In a recent email, Alok Prasad, head of the Microfinance Institutions Network in India (MFIN) described its most recent quarterly report as “green shoots in evidence.” The numbers certainly bear him out. Elsewhere, investors speak of tightening their exposure to countries with overheating markets, pay attention to issues of overindebtedness, and are wary of the sort of runaway growth that was being posted by Indian MFIs back in 2008-10. more →
CGAP, 6 February 2013
Last month the Smart Campaign launched its certification program. For those who care about client protection, this is an important and welcome milestone in what has been an impressive journey, involving a broad spectrum of activities to promote client protection.
In the first post in this series, Philippe Serres describes one such project by the French development organization AFD and the Cambodian Microfinance Association (CMA) to support implementation of the Client Protection Principles, including support for MFIs seeking to undergo the Smart Certification process itself. Notably, this support comes alongside client protection requirements that funders like AFD, Proparco and FMO have been incorporating into their financing agreements with MFIs. Thus, not only are these funders supporting MFIs in their bid to strengthen client protection, they are increasingly making their funding conditional on the implementation of client protection practices.
In many respects, this is an exercise in self-regulation. The arrival of Smart Certification presents a unique opportunity to take these efforts to the next level and apply this self-regulation to the entire microfinance market in Cambodia and beyond. Read full article here.
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