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Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
Opportunities In Microfinance Amidst the Financial Crisis
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Opportunities In Microfinance Amidst the Financial Crisis

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  • 1. 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila John V. Owens Chief of Party, MABS
  • 2. Microfinance Still Hums, Despite Global Financial Crisis
    • Microfinance operates differently from US subprime lending
    • Sector is more resilient
    • Methodology – Cash-flow & Character-Based rather than Asset-Based
    • Loan Characteristics – small & short-term
    • Innovative risk-management techniques
  • 3. Optimism Amid the Anxiety
    • Dominoes of the crisis are hitting microfinance in very different ways worldwide
      • C redit crunch
      • Inflation
      • Currency Devaluation
      • Global Recession
      • Drop in Remittances
      • Higher Unemployment
    • Nimble clients are actually benefiting from hard times adapting strategies to meet frugal customer demands
  • 4. Challenge for the Philippines – Remittances?
  • 5. Stability of Deposits
    • Rural banks, with a broad base of deposits, are less exposed to refinancing and global crisis risks
    • Challenges:
    • Note that some deposits are more stable than others
    • In a world where SMS allows communication in seconds, bank failures and closures can lead to a loss of confidence in banks
    • Opportunities:
    • Higher deposit insurance coverage could lead to more confidence and higher deposits in rural banks
  • 6. MABS Participating Banks
    • So far, banks are stable, growing & report little or no direct impact from the crisis. Still, there are some troubling signs:
    • Slight deterioration in portfolio quality
      • Slight increase in portfolio at risk over the past 12 months
      • Causes - primarily due to bank issues rather than global crisis
    • Slower growth rate of microfinance portfolio, especially compared to past growth rates
      • Banks more hesitant to extend credit
      • Tightening up due to PAR & focus on collections
    • Deposit mobilization is stable (Legacy issue is in the past)
  • 7. Microfinance – Opportunity for Rural Banks during the Crisis
    • Banks looking at MF as a sound strategic investment decision
    • Loans are short-term, small, diversified
    • Solid cash generation potential
    • Solid track record of profitability
    • Sound risk assessment: methodology based on capacity to repay and character-based
  • 8. Strategies being recommended for Banks
    • Shore up financial position by increasing equity
      • Retain more earnings; pay out lower dividends
    • Diversify funding sources & secure additional funds
      • Focus on deposits (low income savers vs. institutional savers)
      • Negotiate credit lines
    • Rationalize operations but diversify
      • Reduce operating costs (to address decreasing profit margins)
      • Tighten risk management controls (to maintain healthy portfolios)
      • Manage portfolio growth: emphasis on those products that are short term, have smaller loan sizes and are more profitable
      • Diversify products and services
  • 9. Strategies being recommended for Banks
    • Marketing/Increase Public Confidence
      • Marketing campaign to focus on the importance of savings
      • Improve your image - Publish financial statements – MixMarket.org
      • Ratings – Get rated & publish reports
      • Maintain an image of safety
      • Follow improved transparency & fairness in dealing with clients
  • 10. Broader Range of Services to their Microfinance Clients…
  • 11. MABS IV – MEETING THE OPPORTUNITIES & CHALLENGES
    • Offering the MABS Approach to new banks – “GO BACK TO BASICS”
    • Product Diversification:
      • Expansion of Micro Agri Loans
      • Housing Microfinance Loans
      • Microinsurance
  • 12. MABS IV – MEETING THE OPPORTUNITIES & CHALLENGES
    • Improve Efficiency & Collections
      • Mobile Phone Banking Services
      • Support RB access to the Credit Bureau System
      • Small Claims Court Initiative
    • Training & Capacity Building
      • – MABSTeRS
      • Distance Learning
  • 13. Crisis as Opportunity?
    • Financial crisis could actually produce long-term benefits, even if they are painful – CGAP
    • Slower but stable growth
    • Stronger credit policies & procedures
    • Support for credit bureau
    • Better products
    • Consolidation of weaker banks into stronger ones
    • Boost to implement appropriate client protection policies & practices
    • Value of deposit-led approach
  • 14. Be savings-led and inspire your clients to save, match savings with loans, avoid funding mismatch, develop an array of savings and deposit products, be market driven…lend short and lend small, … race up on savings mobilization C.J. Agwu, Agric Banking FMFB

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