e-MFP, 2 Jul 2012
Last week, as its football team was preparing for its match with the Netherlands, Mexico hosted the International Forum for Financial Inclusion. It was an important event, opened by the President of Mexico, Enrique Peña Nieto, and attended by such notables as Christine Lagarde. By all accounts, it was an excellent meeting where representatives of financial regulators from around the world shared their experiences and strategies to promote financial inclusion in their countries.
But one thing stood out. During his speech, Jaime González Aguade, President of the Comisión Nacional Bancaria y de Valores (agency in charge of regulating Mexico’s financial sector) stated:
I have no reason to dispute his assertion. But one has to wonder — how should this leadership be reconciled with the high rates of overindebtedness among the country’s microfinance clients? And when the bubble bursts, might it not undermine the very efforts to expand financial inclusion that Mexico is promoting?
e-MFP, 19 Jun 2014
You know the game of musical chairs: players sit on chairs arranged in a circle. The music starts and the players start circling – dancing, running – while chairs are progressively removed. Then the music stops and chaos erupts as the players seek to find a place to sit.
In Mexico, the number of chairs remaining is few indeed, even as the MFIs continue to dance. The recently published study by the Microfinance CEO Working Group has shown just few chairs are left. More →
e-MFP, 30 May 2014
Or the more things change, the more they stay the same… Sometimes it seems as though there is no shortage of proverbs when it comes to looking at the seemingly inevitable credit business cycle. In my last blog I took a look at the unprecedented stability of the US banking sector during the 50 years following the Great Depression. Recent news from Mexico – in the form of a study by the Microfinance CEO Working Group – shows just how far away we’re from that world.
There’s much to say about that study, and also the Working Group itself, which deserves credit for the willingness to publicly share the data, no matter how distressing the findings might be. And yes, they are distressing. More →
e-MFP, 22 May 2014
Recently, I was reading the Economist and came across Charles Keating’s obituary. That name means little to most readers outside the US, but for me it reminded of an idea that’s been percolating in my mind for quite some time now: while rich countries offer valuable lessons for microfinance regulation, those lessons alone won’t be enough.
You see, Charles Keating was the poster-child of the Savings & Loan Crisis during the late-1980s, which saw the collapse of many of these small banks across the US, ending an unprecedented 50-year period of stability in the US banking sector. From today’s vantage point, that period is also difficult to understand. More →
CGAP, 7 August 2013, co-authored with Emmanuelle Javoy
When you hear the word “Mimosa,” you might immediately think of the refreshing champagne cocktail. But now the MIMOSA – the Microfinance Index of Market Outreach and Saturation – also has relevance to financial inclusion. In brief, the MIMOSA is a simple way of measuring microfinance market capacity, an important complement to the approach described in a recent blog in this series by Annette Krauss and her colleagues from the University of Zurich. The key difference in the two approaches is that they work from entirely opposite starting points. more →
My collaboration with Planet Rating has just yielded its first publication: the Microfinance Index of Market Outreach and Saturation (MIMOSA). Here’s an excerpt from the introduction:
Outreach. Competition. Access. Over-indebtedness. Hardly any discussion of microfinance goes by without hearing one or more of these words. At heart, they are different facets of the same question: what is the potential market for loans from Microfinance Institutions (MFIs) in a given country?
This is a question that has not yet been fully answered, nor is this the first attempt at answering it. Perhaps the best-done study thus far was a recent paper by a team at the University of Zurich, and there are several others that preceded it. However, none of these studies have been able to propose a methodology that would simultaneously be simple to use, show reasonably accurate results, and be easily applied to nearly all developing countries. That is the objective we have set for MIMOSA.
The release in April 2012 of the Global Findex database, created by the World Bank, provides a unique opportunity to accomplish this. The Global Findex is a dataset on the use of formal and informal financial services (bank accounts, savings, credit, payments, etc.), based on surveys of at least 1,000 individuals in each of the 148 countries covered, all conducted in 2011. Both the initial analysis by the survey authors, as well as most of the subsequent analysis of this extraordinary dataset has focused on the question of insufficient access to financial services. This paper zooms in on one component of financial access – credit – and asks the opposite question: when is there too much access?
Read the full study here.
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.
Financial Access Initiative, 13 September 2012
I have written before how tiny Zidisha Microfinance is challenging long-held assumptions by leveraging internet social media and mobile payments like M-PESA to lend to clients without the help of loan officers or local staff. Since then, Zidisha has grown from tiny to small, with a portfolio now at $200,000, over 430 active borrowers, not to mention its 1400+ lenders. And, as before, its operations remain solid, with PAR30 at a respectable 6.6%[1] (check out its stats for more).
I’ve been advising Zidisha since before its launch in 2010, and with that had the opportunity to watch the evolution of the platform’s many innovations. One feature, introduced in August 2011, allows borrowers to request to reschedule their loans, regardless of whether they are delinquent or not. more →
Financial Access Initiative, 11 January 2012; Microfinance Focus, 14 January 2012
If there’s one microfinance word that rose above all others in 2011, it’s overindebtedness. As of the time of writing, it racks up the highest count on CGAP blog’s tag cloud (not counting generic terms like “microfinance”). It seems fitting, then, to start 2012 with a blog post on this very subject.
When we talk about overindebtedness, it usually comes for the perspective of the industry’s responsibility, whether the MFI, funders, or regulators. Prevention of overindebtedness came up as the most widely evaluated client protection principle in the Smart Campaign’s survey of social rating agencies and microfinance investors.
This is, of course, all right and proper. It is the industry’s job to practice responsible lending, and avoiding overindebting clients deserves a place at the top of that agenda. But no matter the level of diligence on the part of lenders and financial education provided to clients, some borrowers will still become overindebted – be it because of bad business decisions, destabilizing macroeconomic shifts, or simply a string of bad luck. So what becomes of clients that, despite best efforts, still become overindebted? more →
|
|