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Microfinance Focus May 2009
 

Microfinance Focus May 2009

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Microfinance Focus (MF) is a monthly digital magazine. It is an international online monthly magazine focused on the microfinance sector. Microfinance Focus initiated publishing in July 2006

Microfinance Focus (MF) is a monthly digital magazine. It is an international online monthly magazine focused on the microfinance sector. Microfinance Focus initiated publishing in July 2006
http://www.indiamicrofinance.com/

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    Microfinance Focus May 2009 Microfinance Focus May 2009 Document Transcript

    • ` www.microfinancefocus.com May 2009 Microfinance & Environment Savings: Meeting this Essential Need Interview Padma Bhushan Ela Bhatt Advancement of technology Institution Spotlight Grameen Koota Reinforce Securitization in Palestine www.microfinancefocus.com Microfinance Focus [ May 2009 ] 1 Multiple Borrowing: Finding Solutions
    • ` May 2009 Contents Cover Story : Microfinance and Environment 19...Microfinance & the Environmental Bottom Line - GreenMicrofinance and CGAP 22...World's First Cell-Phone-Based Carbon-Micro-Credits Implementation - David A. Palella 24...Backyard BBQs Meet Improved Cook—stoves Interview 28.. An Exclusive Interview with - Betsy Teutsch , GreenMicrofinance Padma Bhushan Ela Bhatt , (Magsaysay laureate) Horizon 12...Reinforce the Microfinance Securitization in Palestine with priority to Institution Spotlight the Gaza Strip. 25...When the Buck Stops -The Palestinian Network for Small and Microfinance Grameen Koota: More than Just Credit 14...Savings: Meeting this Essential Need of Poor in India - By, Graham A. N. Wright 16..Multiple Borrowing: Finding Solutions - Suresh K Krishna 41… News 29...First Person-New York Desk 06… Editorial—The US Desk 05... Editorial-India Desk Perspective 07...Advancement of technology: Reduce the Cost and Maximize the Benefit to Client Disclaimer By, Dr. Souren Ghosal Views expressed in the article/s are au- thor’s own views. It does not necessarily represent those of Microfinance Focus . Microfinance Focus does not take any re- sponsibility of correctness of those data. Reproduction in whole or in part without written permission is prohibited . www.microfinancefocus.com Microfinance Focus [ May 2009 ] 2
    • ` Our People Team BOARD OF ADVISORS India Mrs. Frances Sinha Managing Editor Mr. Sitaram Rao Dr G. Gandhi Vikash Kumar EDITORIAL BOARD Head—Knowledge Management Dr. Souren Ghosal Dr. N Jeyaseelan Dr. Amrit Patel Associate Editor Christina Weichselbaumer GOVERNING BOARD Marketing and Outreach Manager Romain Testard Mr. Suresh K Krishna , Chairman Mr. Ashish Gupta , Member Mr. M. V. Raman, Member The US Vikash Kumar , Executive Director Managing Editor—US Jerome Peloquin Head Office Microfinance Focus—India Associate Editor Avalahalli, Anjanpura Post , Bangalore( India)-62 Pamela Faulkner P: +91.80.28436237 |f: +91.80.28436577 Email: info@microfinancefocus.com Associate –Knowledge Management Web: www.microfinancefocus.com Raghunand Makonahalli Correspondent : New York Branch office Peter Burgess Microfinance Focus— The US 717 Lawrence Street, NE | Washington, DC, Marketing & Technology Editor 20017 Bruce Meraviglia Mobile +410.227.0498 Email: managingeditor_us@microfinancefocus.com Correspondent : Nairobi [ Africa ] Jastus Suchi Obadiah Web: www.microfinancefocus.com Sponsors : www.microfinancefocus.com © copyright 2008-09 www.microfinancefocus.com ] 3 Microfinance Focus [ May 2009
    • ` www.microfinancefocus.com Microfinance Focus [ May 2009 ] 4
    • ` From India Desk Editorial GO GREEN Global warming is no longer just warning but is happening and therefore poses many immediate and long term environmental threats It is our responsibility, a collective as well as an individual to protect our environment from its onslaughts.. Microfinance sector is already well poised to alleviate poverty could also contrib- ute significantly to help poor to acquire appropriate energy source and adopt or- ganic farming to checkmate global warming. Here, I am stressing the need to high- light another set of opportunity where this sector can contribute immensely and keep not only global warming at bay but also poor people to have access to cheap energy and fertilizer. Role of small enterprise is largely a matter of evolving appropriate strategy to en- able them to become not only sustainable but also to contribute in developing healthy environment. In fact there are many wonderful outcomes could be possi- ble from this sector if i collectively they take the responsibility towards the envi- ronment protection. In fact it will add another social value contribution from the MFIs and we should consider it one of the essential parameter for socially respon- sible MFIs. Impacting energy poverty by providing access to sustainable and eco-friendly Vikash Kumar sources of energy is one of many initiative MFIs can promote. Many MFIs are al- ready trying to promote non conventional energy sources like solar lamps, solar Managing Editor—India cooker, fuel saving stove etc. These all fuel efficient methodology and pollution free renewable energy sources offsets “carbon”, and therefore there is huge op- Write to the Editor portunity for MFIs and its clients to en-cash its good work (by selling carbon credit) vikash@microfinancefocus.com and contribute significantly to save environment from the growing warming alarms. It would be further encouraging if .appropriate rewards are also awarded to those who adopt these practices to reduce global warming. Microfinance Institutions reach to entrepreneurs of Micro and small enterprises in rural and urban areas are perhaps best positioned to give significant push to gen- erate awareness and activities to halt global warming. Microenterprise mostly re- late to non -organize sector and many of these enterprises are not following the organic farming for one reason or the other. Here MFIs can play a crucial role spe- cially educating theses entrepreneurs to adopt eco-friendly microenterprise, or- ganic farming, and various sustainable industry standard practices that would help slowing down of global warming.. Donors and investors could provide incentives for adoption of such programs by MFIs and also could fund them or even create institutions to undertake research to stimulate availability of pollution free energy and farming practices. It is definitely going to be a big contribution towards halting global warming and consequent climate change by Microfinance institutions. all other stakeholders and no longer they would remain should not be just specta- tors… www.microfinancefocus.com Microfinance Focus [ May 2009 ] 5
    • ` From The US Desk Editorial Can Microfinance Afford to be Green? The real question is; Can Microfinance afford NOT to be green? Good environmental practice is good business in general. Green business provides opportunity for all. In Kenya, Village Power vendors borrow from local Microfinance to purchase their so- lar lighting kits for powering reading lights and cell phone charges. Industries for Africa has developed a tractor to be built, sold , and serviced in Africa, by African’s that uses a multi bio-fuel engine and const only $2,000 USD. In Bangladesh, A Grameen Bank spin off project has already installed more solar cell energy units and the whole United States. These are all credible projects based upon micro lending and engaging every- day people in sound environmental practice. For some time now, The Microfinance Sector has been talking about the double bot- tom line. The original, “bottom-line, of course meaning profitability. The second bot- tom-line is Socially Responsibility where an one considers the social impact of business operations. We here at The Microfinance Focus Magazine subscribe to the universal standard adopted by the UN in 2007* With the ratification of the United Nations and ICLEI TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector full cost accounting. The Triple Bottom Line. Jerome Peloquin Managing Editor- US The addition of sound environmental practice to the double bottom line described above provides the three elements of the The Triple Bottom Line. Write to the Editor 1. Socially Responsible managingedi- tor_us@microfinancefocus.com 2. Environmentally Sound 3. Economically Viable The application this UN standard is not only a good idea, It drives clear thinking that will save all of us from ultimate poverty and possible ecological disaster. Global warm- ing and the loss of low lying land is of particular concern to poor nations such as Bang- ladesh and the Pacific Islands and archipelagos, this along with the rapid and impend- ing loss of rain forest due to wood cutting for fuel by the poor present opportunity for Microfinance to support new energy reduction businesses. Our Microfinance Sector needs to move proactively to support this global crisis and to generate new and engaging business possibilities for their clients. The rapid loss of our environment hurts everyone but, as always, the poor are the most vulnerable of all. Here are the contacts for the pro environment business opportunities mentioned in this editorial Industries for Africa - http://www.industriesforafrica.com/index.html Village Power - Kenya - http://www.bioenergylists.org/stovesdoc/Karstad/canecoal/vpnchemelil.html Grameen Bank - solar project - http://www.climatechangecorp.com/content.asp?ContentID=5283 www.microfinancefocus.com Microfinance Focus [ May 2009 ] 6
    • ` Perspective Advancement of technology: Reduce the Cost and Maximize the Benefit to Client MICROFINANCE INSTITUTIONS NEED TO SHED COMPLACENCY AND LOOK FOR HIGHER TECH- NOLOGY & EXPERTISE TO SERVE THE POOR WITH MINIMUM COST AND MAXIMUM BENEFIT Dr. Souren Ghosal , Head– Knowledge Management , Microfinance Focus I ndeed no institution can function without man with just average intelligence a distinction acquiring necessary skill, expertise and at times has been made by some practitioners knowledge to run the same. It is also true and consultants in between the concept of edu- that there should be well honed processes, cation and learning. Since micro financing insti- procedures, system and strategies evolved by tutions cater to the needs of masses it has be- the institutions over a period of time, beside ex- come imperative for these institutions to develop pertise and experience of people who have been strategies, systems, processes and procedures in empowered to run the institution. Micro financing simple, transparent language as that would be institutions are no exception to this universal re- easy to comprehend as well as to implement by quirement for successfully running an institution. any one with average intelligence and minimum It is well known fact that strategies and systems education. In fact micro financing institutions as well as procedures and processes evolve over undertake mass banking and not class banking a period of time and constantly come under re- that most of the modern commercial banks un- view due to change in knowledge, expertise, dertake and therefore it has to develop strategy, technology, culture, and environment both social processes and also communication language that and physical. could be understood by poor people both in edu- cation and wealth accumulation so that they DEFINE THE PATH could avail the helping hand and fund of these institutions with confidence that they are not It is obvious therefore that there should well de- cheated and they could pursue sustainable busi- fined path of learning for the people who man ness with confidence and necessary supportive and run micro financing institutions. It has been expertise and funds of these institutions. It is observed that to make the learning process sim- obvious therefore that these institutions not only ple and easily understood and practiced by any fund the business of the poor but also supple- www.microfinancefocus.com Microfinance Focus [ May 2009 ] 7
    • Perspective : Advancement of Technology ... ` ment the lack of expertise both in technology and knowledge. Furthermore it has to be under- and updated skill in the sphere of production and stood that no system, process or even strategy also market intelligence with regard to marketing is permanent in this fast changing world as both their products at best price and time. For all technology and knowledge with regard to tech- these there is not only need to change the mind- niques and strategies are fast changing and set of executives of these institutions but also to hence locking them to learn only the current train and equip them with latest technology and processes and procedures would not help them knowledge. to grow and sustain their interests as they would miss the excitements and challenges that are NEED HIGH LEVEL OF KNOWLEDGE continuously growing in this sphere of funding the poor to run a sustainable business. However it is interesting to note that to evolve simple processes and procedures as well as NEED DYNAMIC EDUCATION RELATED LEARNING strategies and systems generally need much PRACTISES higher degree of intelligence, knowledge, and passion to innovate and therefore it has been It would be necessary to educate them compre- mostly seen that pioneers of these institutions hensively not only at their work places and on are generally highly educated and enlightened their allotted work but also in management insti- people and therefore they could develop sustain- tutions where new processes and practices are able strategies and systems to make these insti- researched and put to practice as pilot project. tutions deliver the objective of serving the ne- In fact education is no longer considered as glected people of the society to help them to op- mugging of thoughts and deliberations of erate as a successful farmer and or artisans. In enlightened people but as a tool to comprehend fact their vision and comprehension of the com- its application in practical life. It is therefore in- plex problem of poverty alleviation could help creasingly becoming a life or visualized case them to develop institutions empowering the based teaching. In this regard it would be inter- poor to stand on their own feet and run a sus- esting to refer to money game played by first tainable business without looking for alms and year MBA students of Harvard Business School aids from states. It is true it has not happened as referred by NIALL FERGUSON in his recent everywhere but it cannot be denied that some book on THE ASCENT OF MONEY. He has ob- visible transformation could be seen all around served that ‘it begins with a notional central them to achieve the objectives laid down by the bank paying the professor $ 100 on behalf of the pioneers. This is something that has encouraged government, for which he has done not very lu- rapid growth of these institutions almost all over crative consulting. The professor takes the bank- the world particularly where large numbers of notes to a bank notionally operated by one of his poverty stricken people live. students and deposits them there, receiving a deposit slip. Assuming, for the sake of simplicity, EDUCATION AND LEARNING TO GO HAND IN that this bank operates at 10% reserve ratio HAND (that is, it wishes to maintain a ratio of its re- serves to its total liabilities at 10 %), it deposits It is therefore imperative to understand the dis- $ 10 with the central bank and lends the other $ tinction in between education and learning that 90 to one of its clients. While the client decides often seen to have been emphasized by some what to do with his loan, he deposits the money professionals with a strong belief that merely in another bank. This bank also has a 10 per learning processes and procedures would help cent reserve rule, so it also deposits $ 9 at the executives to practice with ease and confidence central bank and lends out the remaining 81 to to operate in their allotted fields of work even another of its clients. After several more rounds, without having any knowledge of how and why the professor asks the class to compute the in- such processes and procedures have been crease in supply of money.’ that is $ 271 evolved and considered best to optimize benefits ($100+90+81 dollar). Through such illustrative to poor and also their earnings. It is needless to cases one could explain albeit in simple language emphasize that such an approach would soon how modern fractional reserve banking allows make them dull and mechanical and conse- the creation of credit and hence enhanced quently averse to changing pattern of demands money power. arising from growing revolution in technology www.microfinancefocus.com Microfinance Focus [ May 2009 ] 8
    • Perspective : Advancement of Technology ... ` CONCEPT CLARIFICATION changes the very sustainability of these institu- tions would be at stake. In fact it is an estab- It is therefore could be seen that the concept of lished fact that these institutions have to develop broader money and its leverage though highly not only extension services to educate their bor- complex and generally explained in exotic lan- rowers to hold their hands to give boost to their guage however could also be brought out in a economic activities both in farming and crafts- very simple language and also could be easily manship as generally these people are ill- explained to executives of micro financing in equipped to run their business as commercial what way this concept could be operated to venture. It would therefore be necessary to de- maximize the velocity and use of money and velop adequate knowledge of markets and men consequently their own earning as well as that of with whom they have been operating. It would borrowers. No one would therefore question the therefore helpful if executives of micro financing need of such knowledge for dealing with money institutions have adequate knowledge and ex- and credit. It is obvious therefore that education perience in farming and craftsmanship so that and learning could go hand in hand and that too way they can extend their helping hand and with the desired level of simple conversational mind to their borrowers both in field and market. language and avoiding jarring exotic language. In fact distinction in between education and SHORT TERM OPERATION learning is fast fading with the growth of empha- sis in case based teaching instead of giving It is unfortunate that most of these institutions stress to mugging and memorizing. It is the ap- give stress on lending for short term purposes plication of knowledge in economic and social and collect repayment on weekly basis. It is true activities that is increasingly looked for. that there is definite gap even in this area as most of the artisans, traders and farmers do not NEED COMPREHENSIVE KNOWLEDGE always get their short-term funds from the bank- ing system and hence largely depend upon usuri- It would be imperative for all executives of finan- ous money lenders and therefore the assistance cial institutions obviously including micro financ- offered by micro financing institutions in this ing institutions to acquire comprehensive knowl- area on better terms as compared to money edge with regard to all types of money creation lenders obviously has been welcomed by such and application and therefore they should clearly borrowers. But if one takes objective view of understand the concept of broad and narrow such development there would be not even an money and its leverage capability. In fact this iota of doubt that these institutions are also ex- would help them to develop appropriate strategy ploiting the weakness of bargaining capacity of to maximize the turnover of money and revenue artisans, traders and farmers as the interest as well as benefit large number of borrowers. It rates and terms are not what normally charged/ is therefore obvious that education with live and practiced by banks and even by NBFC. Obviously imagined case studies equip the executives with this approach and strategy could never be sus- not only to frame policy, procedures and prac- tainable and therefore it would be necessary to tices to operate and serve poor people better as focus attention to this growing menace and de- they would be able to comprehend and assess velop appropriate strategy to educate/ learn the their needs better and also have adequate game to become an appropriate agency to allevi- knowledge with regard to operation to make it ate the poverty of poor people and transform applicable to their target group of people. them as vibrant, active agent to transform their economic condition by enabling them to pursue AVOIDING HIDE BOUND POLICIES viable and sustainable economic pursuits in vil- lages and towns. Moreover learning simply the processes and pro- cedures that are practiced by the financial insti- NEED TRANSFORMATION OF PESENT ADHOC tutions including micro financing will make them LENDING rule based executives. But the economic and so- cial environment is becoming highly dynamic and Such transformation would require highly moti- therefore hide-bound system and policy would vated and enlightened institutions with vision not help them to develop innovation in their and passion to build a society where people how- strategy, system and service and without such soever poor and uneducated could acquire nec- www.microfinancefocus.com Microfinance Focus [ May 2009 ] 9
    • Perspective : Advancement of Technology ... ` essary skill, information, and opportunity to un- 7. heuristic effect where pre-conceived value dertake viable and sustainable business proposi- judgment affect decision making; tion- farms and or firms. This is perhaps easier 8. neglect scope where no adjustment is made to think and even propose or promise but need to avoid possible harms that may arise from the genuine passion and active interest of enlight- decision; ened people to translate this into action. 9. overconfidence in calibrations which leads to BUILD SMOOTH PATH OF LEARNING under estimate the confidence interval levels; Apathy of bystander which leads to abdication of The path of learning has to be smooth so that no individual responsibility when in a crowd. one tumbles while treading the path. But smoothness depends much on the preparation CONCLUSION and application of latest technology and knowl- edge. It would be therefore necessary to visual- It would be helpful therefore to build the path of ize the aspiration level of people and the extent learning avoiding the above traps and creating a of present knowledge and technology could help good cocktail of knowledge and practice that them to attain their dreams. It is obviously diffi- would attract executives to learn and practice cult task and therefore needs application of best with ease and efficiency. It is obvious therefore available technology and knowledge and also that the path of learning should be built on latest passion and dedication to deliver the same to knowledge base, with cases both live and visual- people. Learning curve is also not static but dy- ized to illustrate the application of knowledge in namic and therefore strategies and systems also practical life by building sound strategy and sys- move along with that. To make the learning path tem; policy and procedure to create a sound and smooth and straight it would be necessary to most convenient delivery model for products and develop an appropriate dynamic plan that would services at least cost and inconvenience. In this not only teach processes and procedures but regard prime need is to know your customers in also bring out knowledge base of such policies as great details as feasible and thereafter get and help developing and incorporating the acquainted with the market, its nuances, and changes that are feasible and provide high de- mood and hence contents of learning should deal gree of satisfaction to their clients- borrowers with these in simple but exhaustive manner so and depositors. It would also be necessary to that even common people could easily compre- avoid opaque policies and strategies and maxi- hend. Obviously this needs thorough under- mize transparency in product and service deliv- standing of men and market and that would not ery cost and time. be feasible as one time exercise as these are highly complex institution and require detailed COGNITIVE TRAPS and continuous study. Hence learning is one time exercise but should be provided regularly. In fact some cognitive traps as has been men- tioned by NIALL FERGUSON in his latest book ****************** ‘THE ASCENT OF MONEY ‘would perhaps help to develop a smooth path for learning. These traps are: 1. availability bias where decisions are taken on About the Author: available memories; 2. hindsight bias where decisions are based on Dr. Sourendra Nath Ghosal holds a PhD in Finance and holds probabilities of events; Master degrees in both commerce and Economics. He has 3. induction problem where policies and rules experience taught for 18 years in colleges and university of are framed on insufficient information; Jodhpur Rajasthan; Worked as principal cooperative training 4. conjunction fallacy where an overestimate is college for about 2 years at kalyani w. b. He worked with preferred due to optimism; United Bank of India FOR 22 years and retired AS G.M. credit. 5. confrontation bias where one looks for con- He has also authored several books and Papers published in firming evidence for their hypothesis; several national and International journals & newspaper. You 6. contamination effect where irrelevant but may reached him at souren@microfinancefocus.com proximate information influence a decision; www.microfinancefocus.com Microfinance Focus [ May 2009 ] 10
    • ` Samvad: A Dialogue on Microfinance A MICROFINANCE CONFERENCE Organized by Grameen Koota 30th May 2009 at Bangalore Samvad: A Dialogue on Microfinance has been designed Microfinance Focus , to encourage an open discussion of the issues that the sector must currently address. Over the course of the day an official media Partner of -long conference, slated for the 30th of May (Saturday) at the Event The Capitol (Rajbhavan Road), discussions will revolve will around transparency & client protection, microfinance & provide you “real time Up- financial inclusion, convergence of Government schemes and MFI services and microfinance & millennium develop- date” of the conference ment goals. through live blog Conference Objectives Stay Updated  An understanding of the initiatives by microfinance providers for the appropriateness to low-income clients. Visit :  Identification of implementation tools and certification standards that www.microfinancefocus.com/events ensure pro-consumer practices.  Assessment of the impact of competition among MFIs on microfinance sustainability and client protection.  Development of ways and means to converge Government Schemes and MFI services. About Grameen Koota  Examination of a balance between social and financial sustainability in the Microfinance sector. Since 1999, Grameen Koota has created development opportunities for communi- ties through financial inclusion. Apart from Conference Structure credit services, the company has also ac- tively brought a host of non-credit offer- The conference will consist of an inaugural session followed by four technical sessions, of various themes, concluding with a valedictory session. Each session ings ranging from literacy programs to re- will have a panel of speakers who will deliver their thoughts on the given theme; lief activities. Grameen Koota currently an open house discussion will follow each of these sessions. The speakers bring caters to 2.6 lakh clients, across Karnataka rich experience and insight from rural development, corporations, banks, microfi- and Maharashtra, with plans to reach 2 nance, academic institutions, NGOs and CBOs. million poor and low-income households by 2013 with micro financial and capacity Note : Participation is by invitation only. building services. www.microfinancefocus.com Visit : www.grameenkoota.org Microfinance Focus [ May 2009 ] 11
    • ` Horizon Reinforce the Microfinance Securitiza- tion in Palestine The Palestinian Network for Small and Microfinance (hereinafter: Sharakeh) is a non-profit non- with governmental organization. Established in 2002, Sharakeh represents a forum of micro finance non- profit institutions and programs (hereinafter: MFIs) that aim at providing financial services to small enter- priority prises, and focuses its efforts on the growth of microfi- nance industry in the West Bank and Gaza Strip; par- ticularly that micro financing is considered one of the to the strongest tools for economic development consistent with Palestinian economy needs. Sharakeh represented nine active members when es- Gaza Strip. tablished, but expanded its representation of the sector with four additional associate members; Currently, the 13 Micro Finance programs and Institutions members of Sharakeh serve approximately 30,000 micro- entrepreneurs, with a portfolio of over 37 million US Dollars. (As of September 2008). Microfinance in the Gaza Strip From: The Palestinian Network for Small Historically, the microfinance activity in the Gaza Strip and Microfinance (GS) exceeded similar activities in the West Bank (WB). Poverty rates were higher, resources were fewer and www.microfinancefocus.com Microfinance Focus [ May 2009 ] 12
    • Horizon: Reinforce the Microfinance Securitization in Palestine ` the continuous political aggression and siege tribute to the national poverty reduction ef- against the GS contributed profoundly in in- forts. creasing poverty rates and reducing potential opportunities for economic advancement. A Credit Guarantee Scheme to address Contextual Risk for Microfinance Since 2006, the microfinance sector in general and in the GS in particular, faced a huge drop Contextual risk has become structural for Pal- in size of activities and considerable increase in estinian MFIs as they are under a tremendous PAR.. Due to post elections donors’ decision to pressure whereby the effects of the violent, il- seize injection of financial aid to the public sec- legal and illegitimate occupation of West Bank tor, and the political pressure imposed on Pal- and the permanent locking of GAZA make it estinians; microfinance institutions (MFIs) were difficult for MFIs to implement their mission to forced to reduce activities in the GS while in- promote financial services in a normal manner. crease it in the WB. Although this shift was wit- This risk is broadly known. nessed, MFIs focused on client retention in the GS using different methodologies; re- In order to address this specific risk, SIDI scheduling, re-financing and other. (Solidarité Internationale pour le Développe- ment & l’Investissement, France) and ACAD On December 27, 2008, an Israeli operations (The Arab Center for Agricultural Development) against Hammas in the Gaza Strip started, have been designing a Credit Guarantee causing extreme infrastructure destruction, as Scheme (CGS) which has been operational well as severe human losses. since January 1st 2008 in order to secure Despite the continuous need, the Israeli Siege ACAD’s loan portfolio. The scheme, endowed on GS starting 2006 and following the Palestin- already with 200,000 Euros by SIDI (France) ian Legislative Council elections and the public and Caixa Catalunya (Spain) has just received servants salary crisis, and the following political the commitment of the French Development and economical obstacles imposed on both in- Agency for another 100,000 €, is about to be dividuals and microfinance institutions in GS, a opened up to other Palestinian MFI’s. significant drop of activities there were antici- pated. SIDI and ACAD decided to open up the scheme for all MFI’s and the instrument to be institu- At the end of 2007, only 20% of the microfi- tionalized under SHARAKEH as a substantial nance activities in the oPT was within the Gaza input for the sector. Strip. With continuous efforts from MFIs to sur- vive the crisis, by re-scheduling, writing off Appeal to the donor community loans, and client retention efforts, MFIs in the Gaza Strip managed to slightly raise the per- Sharakeh's appeal to the donor community re- centage of activities in Gaza to 25% in the first volves around the preservation of the role of quarter. Although number of loans in the strip microfinance for economic development in slightly increased during the first three quarters structural crisis. Where it is in fact the goal is of 2008, (819 in Q1, 998 in Q2, and 1250 in to create Credit Guarantee Scheme to serve Q3) their percentage of total loans disbursed in the microfinance industry in general, relying on the oPT dropped to 18% at the end of Septem- the tested Scheme. ber 2008. Sharakeh aims at establishing a three (3) mil- MFIs suffered a great deal of losses while lion Euro scheme to initiate the fund and sup- struggling the continuous deterioration on the port MFIs, with a priority of Gaza Strip. Cur- political situation and the intensive aggression rently secured is the total amount of 300,000 of the Israeli forces, throughout the past three Euros. years. Sharakeh has been examining the po- tential and possibilities to provide assistance to the MFIs in order to (1) Maintain their out- ******************** standing portfolio in the Gaza Strip, (2) Retain quality relationship with clients, and (3) con- www.microfinancefocus.com Microfinance Focus [ May 2009 ] 13
    • ` Horizon Savings: Meeting this Essential Need of Poor in India By, Graham A. N. Wright | Programme Director | MicroSave E vidence from across the world, clearly demonstrates that savings are the most commonly sought after financial product sought by the poor. Poor people want and do save in response to a wide variety of risks/needs including those driven by life-cycle events, crises, macro-level structural events, consumption smoothing and of course, responding to opportunities. However, most low-income people in India and elsewhere have no access to secure savings, let alone a choice of savings products. Thus, their choice is only between extreme risk in the informal sector where they lose a large per- centage of their savings, and unsatisfied savings-demand. Responding to these needs, the Government of India and Reserve Bank of In- dia clearly and fully committed to “Financial Inclusion” … and also to protect- ing poor people’s savings. These two commitments have set up a conflict of priorities and approaches (different departments in RBI responsible for finan- cial inclusion and prudential regulation.) The micro-savings-agenda in India has so far been dominated by the motive of protection of savings. Financial inclusion has taken the backseat. Conse- quently, the access of the poor to savings products has remained extremely www.microfinancefocus.com Microfinance Focus [ May 2009 ] 14
    • Horizon: Savings –meeting the essential need... ` restricted: protection of savings and financial inclusion. In the short run, it is preferable to give poor peo- • SHGs: There is growing evidence that SHG ple the choice rather than drive or strand them members are saving only limited amounts in in the high risk saving environments with which the group, typically only Rs.50-100pcm and they are currently faced. We must however, that the group fund is typically liquidated and seek to inform that choice – options might be distributed before it reaches any serious scale provision of well-focused financial education, (Wright 2008). SHGs leave very limited money transparency norms for MFIs, and enforcing a in banks – only enough to under write and lev- minimum standard for risk management sys- erage their loans. Why is this? SHG members tems within all MFIs, regardless of their legal seem to fear of off-setting loans against their form. savings and often do not trust SHGs as a place to save because they are unsure of the ac- The recommendations of the “Raghu-Rajan- counting/leadership etc. committee” (CFSR 2008) constitute an excel- lent basis for putting financial inclusion into the • E-/M-Banking: E-/M-banking is acknowledged drivers’ seat. Opening the banking correspon- to have huge potential to create massive finan- dent route to NBFCs would eventually give rise cial inclusion and has taken off in Brazil, Philip- to a real choice of savings products – among pines, Kenya etc. Here in India the Banking which flexible life insurance-based schemes Correspondent model outlined in the RBI circu- (e.g. LIC/Max), micro-mutual schemes and lar of January 2006, opened the door for India variations of asset-backed borrowing to save to realise this potential … but excluded NBFCs schemes might be the most obvious, particu- (and thus most large MFIs) from acting as cor- larly useful for long term asset accumulation. respondents. However, the recent requirement The beauty of these latter examples is: MFIs for a branch within 5/15km may close that door can pursue them already under today’s regula- – or at least restrict competition and new re- tory framework. strictions also place on both balances and amounts transmitted. In common with some of References: the international experience, initial rollouts in Andhra Pradesh have, however, seen large- CFSR (2008): Draft Report of the Committee scale dormancy of accounts. on Financial Sector Reforms, High Level Com- mittee chaired by Shri Raghuram G. Rajan, No-Frills-Accounts could principally be a flexible Government of India Planning Commission, (save for prohibitive distances to the next bank New Delhi. branch in rural areas) option for poor people to save. Banks are being required to open No Mutesasira, L. K. / Wright, G. A. N. (2002) It Is Frills Accounts by the RBI but these accounts Expensive to Be Poor: Losses Suffered by Peo- are intrinsically loss-making for banks so they ple Saving in Uganda, under: are often poorly publicised/ marketed by banks www.MicroSave.org (Study Programme sec- and a limited number of accounts are opened. tion) [21.11.2008] Of those accounts opened, many/most dormant (except for pensions/National Rural Employ- Wright, G. A. N. (2008): Remembering Sav- ment Guarantee Scheme payments). And over- ings: The Forgotten Half Microfinance in India, all the service quality offered to No Frills Ac- presentation at the Microfinance Summit, 12th count holders is very poor – not least of all be- Nov. 2008, New Delhi, under: http:// cause of the costs associated with offering a www.microfinanceindia.org/annual - good service. But it is worth noting that such microfinance-india-summit-current.php#prez. approaches have worked in South Africa where banks are permitted to charge limited fees, do not have to pay interest etc. and so it is a cost effective business opportunity for them. It is time to recalibrate the balance between www.microfinancefocus.com Microfinance Focus [ May 2009 ] 15
    • ` Horizon Multiple Borrowing: Finding Solutions - Suresh K Krishna, Managing Director (Grameen Koota) Microfinance has accomplished what several of tiple borrowing persists and is now threatens it’s detractors thought it never would – 100% considerable damage to the sector. loan utilization and, most importantly, recov- ery. The earnest and well-founded hope for a Areas of Concern better life motivates women to enter into the contract of microfinance; business successes 1. Aiming to increase business volumes, some among borrowers only strengthens this faith in MFIs either inadequately check or ignore client the institution of microfinance and draws more borrowing habits. Multiple borrowings springing clients, who would otherwise have no access to from such a situation adversely affect the qual- credit, into the system. However, it has been ity of the loan portfolio as clients put them- noticed that some clients, in an effort to pro- selves at a higher default risk. cure the maximum possible funds, borrow from 2. In some areas, clients borrow from more all available MFI sources. Despite efforts by than 7 MFIs at once. The absorption capability some MFIs to educate clients on the mainte- is not assessed; consequently, loans are misdi- nance of stable cash-flow, the problem of mul- rected, i.e. not used for the productive/income www.microfinancefocus.com Microfinance Focus [ May 2009 ] 16
    • Horizon: Multiple Borrowings... ` “A client’s ability to absorb credit and repay debts must be analyzed before loans are disbursed. Discrete inquiries regard- ing borrowings can also be made to determing whether cash generation meets existing repayment commitments.” generating purposes stated in the loan applica- more than Rs 50,000 from the microfinance tion data. sector. 3. With increasing debts and misdirected funds, 4. A client’s ability to absorb credit and repay clients turn to informal sources (friends, rela- debts must be analyzed before loans are tives, money lenders etc) for further credit, fur- disbursed. Discrete inquiries regarding bor- ther aggravating the debt trap. Several in this rowings can also be made to determing situation have held distress sales of movable whether cash generation meets existing assets. In extreme cases, mental depression repayment commitments. resulting from the financial pressure causes 5. In areas of high MFI density, all MFI’s can some to commit suicide. These situations taint impose maximum sealing on the loan size the image of an otherwise honorable sector. all loans, regardless of the loan cycle. 4. Some clients have sought the intervention of 6. Regular Loan Utilization Checks must be religious leaders, political representatives and a conducted to confirm the appropriate use of -political individuals. Dictats issues by these funds and also to determine the total bor- parties to either delay or stop repayments, is rowings and utilization of funds. disadvantageous to the microfinance structure. 7. Raise awareness in the field staff and mem- 5. Non-repayments and delayed repayments bers about the drawbacks and ill-effects of adversely affect the PAR of MFI. If the impact multiple borrowing. This will result in finan- moves beyond acceptance levels, lenders will cially aware and disciplined members as rethink their future investments, making it diffi- well as a quality loan portfolio. Non credit cult for MFIs to access credit. services should also be highlighted. A well-rounded understanding of the situation and coordinated efforts of MFIs can draw out While, like every other sector, microfinance too viable solutions to address this situation from faces regular challenges, these hurdles are not aggregating. These steps will, in the long run, insurmountable. Harnessing the knowledge and enable microfinance to continue to service the experience of the individual MFIs can result in credit needs of the poor. effective remedial measures that will serve to strengthen the sector and it’s impact on pov- Recommendations to MFIs erty. 1. Multiple borrowing is not uncontrollable and *********************** can be tackled by the collaborated efforts of MFIs through a common platform. 2. A thorough mapping of wards and villages within the state and a subsequent allocation of areas to MFIs can help in better planning of activity. A similar strategy was adopted Read Microfinance Focus by the RBI through the Service Area Ap- proach, which eliminated multiple financing Every Month by commercial banks in rural areas. 3. At present, some members have over bor- rowed from multiple MFI sources. By shar- www.microfinancefocus.com ing information, these institutions can en- sure that no individual member receives www.microfinancefocus.com Microfinance Focus [ May 2009 ] 17
    • ` Cover Story Microfinance & Environment “We have to take the hard decision ! We and each one of us must take a decision on this planet. And also we should inculcate among our chil- dren a simple way of living. We should not live in a way, that it harms another person. Once you take this decision, everything will be solved. We have no right to live a life which is harming anybody else. It is like traffic laws: You can't have a car and knock everybody off the road. There's a rule you have to drive safely, so that you don't harm anybody. Same thing is for living on this planet. We are sharing with each other.” Prof. Yunus on “Environment and Climate change” www.microfinancefocus.com Microfinance Focus [ May 2009 ] 18
    • ` Cover Story Microfinance & the Environmental Bottom Line By : GreenMicrofinance and CGAP C an microfinance and environmental and social and environmental investors. Build- sustainability go hand-in-hand? Some ing capacity for green microfinance may in fact in the industry say it’s not only possi- be a smart way to prepare for shifting funding ble, but essential that microfinance priorities and inevitable changes in environ- works to prevent environmental damage. It is mental regulation. becoming increasingly clear that the impacts of climate change, pollution, poor waste manage- How can microfinance help to address environ- ment, and other environmental problems must mental issues? Conservation and environmental be part of the long-term approach to economic protection are global issues, and much of the development. Otherwise, we risk destroying responsibility for addressing them rests in the natural resources that are essential for contin- industrialized world. However, there is growing ued economic growth, as well as endangering interest in “green microfinance,” which includes public health and safety. programs that encourage eco-friendly microen- terprises and support microfinance clients’ use Environmental impacts are gaining prominence of renewable energy. The development of car- in the global development agenda and becom- bon-credit aggregation strategies also creates a ing a concern for some national governments www.microfinancefocus.com Microfinance Focus [ May 2009 ] 19
    • Cover Story : Microfinance & the Environmental Bottom Line ` new opportunity to include smaller enterprises  Protect the health of communities in a green agenda.  Lower overhead for microenterprises Donors and investors can build capacity for  Enable MFIs to invest in a growing market green microfinance by providing necessary that meshes well with the agendas of triple- technical assistance and by supporting environ- bottom line investors. mentally sustainable microfinance projects. For example, the Netherlands Development Finance Renewable energy entrepreneurship Company (FMO) has developed evaluation cri- teria and tools to help MFI's assess and man- Microfinance clients often use fossil fuels like age the social and environmental impacts and natural gas and petroleum as sources of en- risks of microenterprises. CIDA has also pro- ergy. These fuel sources contribute to the duced an Environmental Sourcebook for MFIs. greenhouse gas problem, the degradation of IFC, Triodos, Calvert, Shell Foundation, and local ecosystems, and cause health problems. EBRD are among other donors who are includ- Implementing renewable energy systems, like ing the environmental bottom line on their solar, wind, and biogas can offer great cost agenda. savings, as well as health benefits. MFIs offer- ing personal consumption “energy loans” can In this article, we explore some of the eco- help microfinance clients leverage these re- microfinance initiatives promoted today, such sources for their homes and businesses. as: Renewable energy can also be a source of in- come for a new class of business – renewable  Green microenterprises energy microenterprises. Social and environ-  Renewable energy entrepreneurship mental entrepreneurs from the industrialized  Carbon credit aggregation world are helping to create this micro entrepre-  Green microenterprises neurship opportunity. For example, Barefoot Power is a socially-conscious business that em- Eco-friendly microenterprises can provide sus- ploys micro entrepreneurs to distribute solar- tainable sources of income to microfinance cli- powered products and systems in the develop- ents, including the production of organic fertil- ing world. izers and biomass charcoal briquettes, clean energy cook stove fabrication, and handicrafts Grameen Shakti is a nonprofit with the mission made from sustainably sourced materials. Vari- of eliminating energy poverty with renewable- ous industry standards, from groups like the energy entrepreneurs. They support programs Forest Stewardship Council, provide guidelines in solar energy, biogas, and improved cook- on “sustainable sourcing.” stoves, which include training and capacity building for entrepreneurs who promote the MFIs that deal with agricultural clients can seek systems, as well as financial products tailored partners that will help clients adapt to evolving for renewable energy uptake. In the micro- conditions through the adoption of environmen- utility model, one entrepreneur will install a so- tally-friendly farming techniques. Organiza- lar system and sell power to those in the com- tions, such as Sustainable Harvest Interna- munity who cannot yet afford to invest in their tional, help by providing key technical support. own. Subsidy can also play a positive role as clients shift their approach to a more eco-friendly Carbon credit aggregation standard. Carbon credit aggregators, like MicroEnergy Engaging in environmentally sound busi- Credits and E + Co, work with MFIs that pro- ness practices can: vide renewable energy loans to clients. Each loan can be translated into a small carbon  Help microentrepreneurs preserve and pro- credit. Though these credits are too small to be tect their long-term income traded on the multi-million or billion dollar car- bon markets created by the Kyoto Protocol, ag- www.microfinancefocus.com Microfinance Focus [ May 2009 ] 20
    • Cover Story : Microfinance & the Environmental Bottom Line ` gregators bundle these credits and then sell have to be the case. MFIs can contribute, along them on the voluntary carbon market to net with their clients, to solving the crises we face polluters. Carbon credit aggregation offers: today. Microfinance clients continue to be im- Financial rewards for MFIs that provide energy pacted by global climate change and environ- loans, creating an incentive to continue green- mental degradation, but we are also seeing ing products that they can be part of the way forward. A better standard of living, and more control ******************************** over energy resources, for clients who switch to renewable sources of energy for their homes or To Know more about Microfinance Gateway businesses Business opportunities for micro en- trepreneurs who supply renewable energy ser- http://www.microfinancegateway.org vices or systems Conclusion To Know more about GreenMicrofinance The conventional path of economic develop- http://ww.greenmicrofinance.org ment has tied greater prosperity to increased energy consumption, with its corresponding negative environmental impact. This does not Read Our Previous Issues Download at www.microfinancefocus.com www.microfinancefocus.com Microfinance Focus [ May 2009 ] 21
    • ` Cover Story World's First Cell-Phone- Based Carbon-Micro-Credits Implementation David A. Palella , Founder, CARBON MANNA UNLIMITED Carbon Manna Unlimited is implementing the world's first cell-phone-based Car- bon Micro Credit or Carbon Micro Profit-Sharing system in the Mbeere and Siaya Districts of Kenya, to include the town of Kogelo, President Barack Obama's an- cestral home town. The enrollment target for this pilot program is 5,000 fami- lies. The cell-phone-based Carbon Micro Credit system employs SMS (simple message service) and unique identifiers to potentially allow millions of families in Kenya and other countries in the Developing World to claim on a bi-weekly or monthly basis the carbon offsets they produce by using more efficient cooking methods such as a modern charcoal stove or solar cooker, instead of an inefficient open- pit fire burning biomass. As a result, each family is able to monetize directly its own contribution to mitigating global warming, while also reducing nationwide rates of deforestation and desertification. To Know more about his ini- tiative :- Each family that cooks more efficiently may claim approximately 3 tons of CO2 offsets/year, which is worth about US$ 15 - 30 when sold in Europe on a regu- Visit lated or voluntary carbon-offset market. The family also saves far more on fuel - http://www.carbonmanna.org/ - from US$ 70 - 150/year. For individuals living on less than US$ 1 - 2/day, these earnings and savings are very significant. Pre-selling tens or hundreds of thousands of tons of bundled Carbon Micro Cred- its provides the start-up capital needed to buy stoves and cell phones for the participating families, thus making the system self-funding and markets- based. Later the offsets are crowd-sourced in arrears by the tens of thousands of families participating in the program. Lastly, validation and auditing protocols www.microfinancefocus.com Microfinance Focus [ May 2009 ] 22
    • Cover Story : World's First Cell-Phone-Based Carbon-Micro-Credits Implementation ` will ensure that the offsets were indeed pro- Moreover, this same cell-phone-based system duced. may be applied to, among other uses, the claim- ing, aggregating, tracking, monetizing and au- Invented in April 2008, Carbon Micro Credits diting of personal emission reductions or CO2 (CMCs) are NOT a form of debt-based microfi- offsets produced by planting trees to sequester nance; rather, they provide immediate micro carbon, installing solar panels for lighting in PROFITS to the poor and are therefore similar in place of kerosene lamps or diesel generators, concept to frequent flyer miles. They are an as- conversion of inefficient-combustion 2-stroke set, not a liability. And like frequent flyer miles, motorcycle engines to direct fuel-injection, or they are a fungible, universal currency and non- biomethane capture and combustion. inflatable store-of-value. Finally, once implemented, the installed base of Carbon Micro Credits may take any “currency” cell phones in a Carbon Manna program also form, depending on the sophistication level of a provides a channel for applications in micro- country’s mobile carriers, banking network, and healthcare (public health messages), micro- mobile money transfer systems. Possible ava- medicine (individual patient diagnosis & treat- tars of Carbon Micro Credits include e-money ment), micro-education, and dissemination of (electronic reward points), cell-phone minutes, business information (crop prices, market & or cash. In Kenya and Tanzania, Carbon Micro weather conditions, etc.) In 2010, the cell- Credits may be converted into cash and with- phone-based Carbon Micro Profit-Sharing Sys- drawn via cell phone at 1,000s of locations tem will be expanded to other East African coun- (stores or banks) using the Safaricom M-Pesa or tries, starting with Tanzania, Malawi and Zain ZAP mobile money transfer networks. In Rwanda. short, every cell phone is an ATM. ******************** www.microfinancefocus.com Microfinance Focus [ May 2009 ] 23
    • ` Cover Story Backyard BBQs Meet Improved Betsy Teutsch , Green Microfinance Last Sunday’s supplement ran an ad which really recreati onal warm stuck with me -- so much that a few days later, I weather backyard barbe- went back to my recycled newspapers to confirm ques. The indoor range, my recollection: Walmart is selling spiffy, stainless gas or electric, serves steel backyard BBQ gas grills for $298. Such grills that duty. have long been a suburban status symbol of ma- cho domesticity, much evolved from the little ket- One breakthrough for tle-style charcoal burning versions of my child- perpetually impoverished hood. My first shock was that they’re so cheap developing world house- (thank you, China) that all elite symbolism has holds is improved cook- passed. Now average people with backyards who stoves, paired with gas shop at discount stores can afford this luxury and produced by a family’s biodigester. A slightly fuel it with a tank of propane gas, advertised for higher-tech version of composting, these cisterns $17.82. have a seal so the waste which is dumped into them is processed anaerobically. Within a month My second reaction is looking at this snazzy item or so, the biodigester yields methane gas along through the lens of third-world cooking; in my role with very rich fertilizer. There are hundreds of as Director of Communications for GreenMicrofi- different types of stoves being designed and mar- nance, I have learned a great deal about life with- keted in the developing world. While very simple, out the infrastructures we in North America take they accomplish a great many improvements. for granted. GMf’s mission is to bring clean en- They consume less fuel, making them less expen- ergy, environmental benefit and poverty allevia- sive to run. They utilize locally produced gas tion to the world’s two billion people without ac- (ideally the “in-house” product!), eliminating the cess to modern energy systems. Most of these time required foraging for wood and dung. And households cook over foraged wood or dung in since they are more efficient, they produce less open fires; given population expansion, this re- pollution, resulting in improved health. quires ever more time to gather since close-by supplies are exhausted. This is not exactly Martha The cost of a typical improved cookstove which Stewart’s domain. Not only is the direct burning can provide so many beneficial health, environ- of wood, dung and crop residue extremely ineffi- mental and economic impacts? About $20 -- be- cient, it is highly polluting, resulting in respiratory yond the budget of most Bottom of the Pyramid disease as well as black carbon emission. It’s ex- households… actly the kind of outdoor “campfire” that in the ***************** affluent world has been replaced first by kettle barbeques and, as we all became more affluent, About the author : gas grills. Betsy Teutsch serves as Director of Communications at Greenmicrofinance (www.greenmicrofinance.org) and blogs Slightly better-off families in the developing world about socially responsible investing and consuming at Mon- can afford LP, liquid petroleum – generally all im- eyChangesThings. The mission of GreenMicrofi- ported and way beyond the means of a Bottom of nance, catalyzing green microenterprise and clean energy the Pyramid family. So the type of grill Walmart is generation for the Bottom of the Pyramid, is an excit- selling is actually a high-end third-world stove. ing pairing of Teutsch's interests in eco-sustainability and The irony, of course, is that for Walmart’s custom- poverty eradication. ers, this is not a primary cookstove. It is just for www.microfinancefocus.com Microfinance Focus [ May 2009 ] 24
    • ` Institution Spotlight When the Buck Stops Grameen Koota: More than Just Credit I generating activities (trading, animal husbandry, agricultural production and transportation) n 1997, a year after his work Give Us through a wide range of credit products. Clients Credit was published, Alex Counts set up earn access to higher loan values as they build a the Grameen Foundation with a modest $6,000 steady credit history, a common indication of re- in seed capital and a charge from Dr Yunus. Si- liability in the microfinance circuit. multaneously, during this time, Give Us Credit set the wheels of micro credit turning in another Initially offering services to women around part of the world. Vinatha M Reddy poured over Avalahalli (a village near Bangalore), Grameen the pages of the book at her house in Bangalore, Koota now operates in 23 districts with 80 India. Surely, in this book lay the future of the branch offices. Operations were recently poor. Suresh K Krishna thought so too. Together, launched in a second state – Maharashtra. The they were able to source seed capital from repayment rate is almost perfect (fluctuating Grameen Trust in Bangladesh and thus, in 1999, fractionally from month to month), and the cur- began the microfinance work of Grameen Koota. rent portfolio totals in excess of Rs. 180 crores ($36 million). A 2008 Access Report indicates that microfinance currently reaches over 300 million India's poor However, Dr Yunus's primary objective of social households. 13 million of them reside in parts of development through microfinance has not been Grameen Koota's home state– Karnataka. Fig- overshadowed by impressive performance and ures, as of March 2009, show that the MFI outreach figures. Grameen Koota is exemplary of (Grameen Koota) services 0.26 clients through responsible MFIs aiming to use micro credit ser- it's group lending program. The collective efforts vices as a tool to promote non-credit services of MFIs in the region has only just scratched the and facilities. surface, but is committed to penetrating deeper and providing need-based credit. The company's Socio-Economic Development (SED) Workshops are conducted regularly in Typically a woman earning less than or between various districts of operation, reaching not just INR 42 – 84 a day (USD 1 – 2 per day), the clients and their families, but also the community Grameen Koota client is able to begin income at large. Subject experts are engaged to raise www.microfinancefocus.com Microfinance Focus [ May 2009 ] 25
    • `Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit awareness on a range of subjects from health to law. Separate interactive sessions are organized Operational Snapshot for the husbands of clients – an insightful move that helps maintain the delicate domestic equilib- Districts 23 rium by involving the family member that con- Branches 80 ventional microfinance technically excludes. To- Centers 8,902 gether with The Indian School of Microfinance for Members 255,410 Women (Ahmadabad) and AKMI (Association of Active Borrowers 210,602 Karnataka Microfinance Institutions, a state-level governing council whose establishment was initi- Current portfolio Rs 179.98 Cr ated by Grameen Koota), the MFI delivered fi- $ 36.00 m nancial literacy programs. Currently, the Govern- Own portfolio Rs 114.06 Cr ment of India and the Reserve Bank of India are $ 22.82 m the driving forces behind such programs nation- Managed portfolio Rs 65.92 Cr ally. $ 13.18 m Client education is a primary focus for most Repayment Rate 99.97% MFIs. In South America, Accion International has successfully developed a micro entrepreneurial Envirofit launched a range of clean burning bio- training program that caters to a wide clientèle mass cook stoves that reduce toxic emissions by range. Grameen Koota, in association with Ac- as much as 80% while using 50% less fuel. Con- cion International, launched a pilot project of the sequently, the cooking cycle drops by 40%. very same program – Dialogue on Business. The Grameen Koota works with Envirfit and Selco In- highly interactive modules have been adapted to dia to provide these stoves to clients at nominal the context of the Indian entrepreneur. Project rates. proposals reveal that the Grameen Koota explo- ration of the education space is not yet com- Grameen Koota currently works with 13 banking plete. A functional literacy program is in the partners. With an equity base of Rs 18 crores pipeline. ($3.6 million) as on 28th Feb-09, the company will be seeking investments of upto Rs 80 crore While the focus in the rural centres remain within ($16 million) this year. A sound financial founda- the realms of education and awareness, that in tion allows MFIs like Grameen Koota to reamin urban and peri-urban areas has been on technol- actively involved in effective social development, ogy. One of the Grameen Koota branches even at the micro level of need. Grameen Koota (Eijipura) in Bangalore is currently refining a mo- conducted a pilot project in collaboration with bile banking service for clients. With logistical HDFC Bank that encouraged the construction of a support from mChek, clients are able to conduct basic hygiene facility – toilets. A loan product of cashless transactions, eliminating the security Rs. 4, 000 ($80) per client (payable in 2 years) risks that come with transporting large sums of was offered. The pilot results show promising money. In another strategic partnership, potential for the activity on a larger scale. Grameen Koota and MoneyGram offer further monetary services to clients. MoneyGram pay- The Access Report (2008) focuses on the impor- ment systems provide financial institutions, such tance of providing need-based credit products. as banks, thrifts and credit unions, with payment The challenges involved in tailor-made products, processing services, primarily for official checks, including operational and technological expenses, and with money orders for sale to their consum- cannot be ignored. However, some MFIs have ers. Grameen Koota is proposing to offer these been able to reinterpret the directive so as to services to customers. still provide timely services based on need. These services, though, are non-credit. Grameen While it currently seems to throb with enough Koota does well to advance it's stand in the energy, the social development activity list has credit-based space of microfinance while simulta- been designed to encompass more than just the neously building brand loyalty through non-credit obvious. Considerations have been expansive initiatives. A good example here would be the enough to include environmental responsibility. relief activity in Madhugiri (Karnataka). Tragi- www.microfinancefocus.com Microfinance Focus [ May 2009 ] 26
    • `Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit cally, 24 huts were razed to the ground in a fire time, still more attention will be given to the that broke out in a village. While some of the Grameen-prescribed PPI (Progress out of Poverty victims were Grameen Koota clients, relief was Index), which serves as a measure of the impact not restricted to them alone. All those affected of micro credit and non-credit work. were provided with mats, food and basic necessi- ties. In a separate initiative, Grameen Koota Much will continue to be written about the credit made available a 'Livelihoods Kit' – a package of services offered and the financial advancements food at wholesale prices, resulting in a reduction made by Grameen Koota, but the company's in the overall expenses of a household. management continues to maintain that the pri- mary objective is aligned with the vision of Dr In the months to come, Grameen Koota has a Yunus – poverty alleviation. roll out of activities designed for the benefit of communities. After the initial experimental entry When Grameen Koota touches 50 lakh clients (5 into the area of health and hygiene, a far more million) in the coming years and publications can determined and impactful project will be write about nothing but the enormous success of launched to make basic health care accessible the Grameen Koota health care project, then and affordable in rural areas. Government there will be some sense of real social change. schemes have been relatively untapped by the microfinance sector. Methods to effectively inte- ********************************* grate the two are currently being considered at the Grameen Koota Head Office. During this Read an Exclusive Interview with Dr. Yunus www.microfinancefocus.com/events www.microfinancefocus.com Microfinance Focus [ May 2009 ] 27
    • ` Interview MF Focus: Founding SEWA helped practically so An Exclusive Interview many women getting out of poverty and becom with ing more self-confident. What about the political impact? Padma Bhushan Ela Bhatt , Bhatt: This is part of the game, SEWA has grown large (Magsaysay laureate) and has its presence. We are dealing in the mainstream economy and we are bound to shed up the power struc- tures: With the moneylenders, in our homes and villages and of course move to the government. We need to be better organized, based on our values. MF Focus: You are still convinced about using the method of civil disobedience? Bhatt: Itself civil disobedience is a protest and whatever is unjust, you have to do something. There are several ways and civil disobedience is one, we should use when necessary. MF Focus: What is important and what can be done, to abandon the lack of women’s self- confidence? Bhatt: The most important thing is coming together. Those who are alone are weak and more vulnerable, they are more often poor. We need to rely on certain inclusive values and our mission. The members should own an manage their corpo- rates. This is a fluent process which empowers. Women have to start facing the reality and start taking initiative. MF Focus: In a few days the election will begin in India… Bhatt: We have our own manifesto and sent it to the candidates, trying to influence them. Nobody of the candidates has women as economic active agents in his/her programme. MF Focus: What do you expect from the international level, industrialized countries for fighting poverty and improving women’s situation? Bhatt: All these theoretical concepts and models for development and management are coming from undustrialised coun- tries. And they failed, they created gaps, even farmers are hungry. All these systems and models should be devastated. All this has to change, we need a totally new thinking and women are the solution. We need to be aware of nature and rely on women. This is the answer. “ The most important thing is coming together. Those who are alone are weak and more vulnerable, they are more often poor. We need to rely on certain inclusive values and our mission. The members should own an manage their corporate. This is a fluent process which empowers. Women have to start facing the reality and start taking initiative..” www.microfinancefocus.com Microfinance Focus [ May 2009 ] 28
    • ` From New York Desk First Person :Howard Finkelstein Peter Burgess, Correspondent , New York I had an informal conversation with Howard Finkelstein in a constraints. More grants would help ... but there was a very cafŽ not far from Wall Street last week. I have been aware of clear limit to this growth. He acknowledged that savings ... Howard's work with microfinance for some time ... his work client savings accounts ... was a good way for an MFI to fund as a lawyer helping to structure some of the first deals to itself ... but reminded me that banking rules and regulations bring capital market money into the microfinance industry ... to safeguard depositors made this very difficult for most but I did not have much idea of the context and motivation MFIs in most countries. that he was bringing to this work. He noted that bilateral and multilateral development agen- Howard has worked closely with many organizations that cies had had a big role in funding MFIs and NGOs doing mi- make institutional investment and is able to point to the stel- crofinance, they were still a big source of funds, especially lar record of the microfinance industry in delivering on its IFC of the World Bank group and KFW (Germany). There was, promises ... something that cannot be said for other asset however, a limit to the expansion of this source of funding. classes including supposedly safe mortgage backed securities and the like. Howard sees the big opportunity to be to get institutional investors to become engaged with microfinance ... where I am not sure how Howard first became interested in microfi- safe, modest returns are possible ... and the impact on client nance ... but it was several years ago way before microfi- lives can be huge. This has started. nance got onto the broader financial radar. What struck me Slowly the financing infrastructure is emerging for this ... about Howard was that key idea that microfinance can de- microfinance investment vehicles (MIVs) are being created to liver value to clients at a low cost in ways that other parts of serve as a link between institutional investors and MFIs. They the banking and finance sector cannot is still central to his are absolutely needed to bridge the gaps between the essen- view of microfinance. He was very clear that the unique tial culture of the successful MFI and the culture of inves- value of the microfinance industry was the person to person tors ... and needed to help ensure that the MFI remains true nature of the business. This is paramount within the borrow- to social purpose as well as financial sustainability. ing groups and between the borrowers and the branch loan officers. Will profiteering take over the microfinance sector if capital When I suggested that microfinance could enhance its value market investment becomes the main financing source for to society by expanding into bigger loans to small enter- the sector? Howard did not seem to think that this would prises ... the SME sector ... Howard pointed out that this naturally follow ... rather microfinance would be a place in needed a very different approach to lending and managing the financial system where return and social responsibility the portfolio, and the skill set did not exists in most MFIs. could coexist for a true win-win. Howard acknowledged that the SME sector needed better Will the microfinance industry get distorted by institutional financial services ... but this would not be achieved success- financing so that only the financially big grow while the small fully by having existing MFIs operating scaling to these but socially essential wither and die? The answer to this is quot;biggerquot; loans. Rather, Howard pointed out that expansion of not clear yet ... the microfinance industry financing infra- the microfinance industry was needed to serve all those structure is not fully developed ... the rating systems are way within the very poor bottom of the pyramid that could bene- better than they were, but have a long way to go, for exam- fit from access to microfinance. The statistics suggest that ple. there has been progress in reaching the BoP with microfi- nance ... according to the MicroFinance Summit more than I came away from the conversation impressed with the clar- 100 million microfinance clients in 2007 and a tenfold in- ity and logic of Howard's views of the industry. The industry crease in just a few years ... but there are still perhaps a bil- is not perfect ... but it is pretty good ... and the potential for lion people who are not reached by microfinance. it to grow and do a lot of good in the next few years can be achieved with responsible institutional investment. I asked Howard how this huge growth could come about. How does the industry access the capital it needs? Howard ******************* started by observing that absolutely superb microfinance Write to the Editor peterbnyc@gmail.com operations operating on a not-for-profit model were doing greatwww.microfinancefocus.com Microfinance Focus [ May 2009 ] 29 work, but could not grow because of their financing
    • ` News Equitas Fine-tunes Processes Using Newgen’s ductivity. Document Management Solution Ethiopia: Microfinance Institutions Loan Portfolio Newgen Software Technologies Limited, a market Stands at 4.6 bln Birr (USD 415 ml) leader in Business Process Management (BPM) and Enterprise Document Management, today an- The microfinance institutions operating across the nounced the successful implementation of its suite nation have reached over 2.2 million active bor- of DMS products at Equitas, a Chennai-based, Mi- rowers with an outstanding loan portfolio of ap- crofinance Company to streamline the existing proximately 4.6 billion birr, the Association of processes leading to increased productivity. Equi- Ethiopian Microfinance Institutions (AEMFI) said. tas, a leading microfinance company, has over 700 employees and operates out of 90 locations. With In connection with its 10th year anniversary, which Newgen’s solution, Equitas wanted to improve will be celebrated starting from May 18 with vari- scalability and increase productivity by eliminating ous events, the association said that the microfi- document movement, anywhere access, distrib- nance institutions were moreover able to mobilize uted capture and automatic data extraction. New- 1.6 billion birr in savings respectively. The 10th an- gen, with its vast experience in business process niversary of the association is a unique opportunity automation, was selected by Equitas to streamline to celebrate the success of the industry as a whole, its entire gamut of Microfinance operations, it said. Currently, the network has 29 member mi- backed by a completely automated system that crofinance institutions and associate members. minimizes the physical documents and reduces Plans are under way during the anniversary to con- manpower requirements while ensuring high pro- duct regional network workshops, present the as- Advertise with Microfinance Focus We offer cost effective, magazine and website advertising solutions. Write to us for detail ads@microfinancefocus.com www.microfinancefocus.com Microfinance Focus [ May 2009 ] 30
    • News ` sociation’s performance and challenges over the largest gathering of microfinance practitioners last 10 years and to promote the role of microfi- and leading stakeholders in the Middle East and nance in Ethiopia. “AEMFI has been recognized North Africa. as a leader and voice of microfinance in Ethiopia for the past 10 years. It has been supporting ac- Read More : www.grameenfoundation.org. tion-oriented research activities, value-adding trainings, knowledge management, standard set- Microfinance Leader Awarded Prestigious IDB Prize tings and best practices, which have all made ma- for Latin American Development jor contributions to improve the performance and professionalism of the microfinance institu- Source: Accion tions,” said Dr. Wolday Ameha, executive direc- ACCION(R) International, a pioneer and leader in tor of the association. Since 2006 the association microfinance, today announced that it has been had established a financial cooperative unit to awarded the Inter-American Development Bank's provide support to the cooperative sub-sector. quot;Juscelino Kubitschek Awardquot; for its contribu- tions to economic and financial development in Read more : http://www.pressreleasepoint.com/ ethiopia-microfinance-institutions-loan-portfolio- Latin America and the Caribbean. stands-46-bln-birr-usd-415-ml ACCION was recognized by the IDB specifically for its work in microfinance -- the provision of small, working-capital loans, savings products and other Enda Inter-Arabe Goes Live on Mifos Information financial tools designed to help people work their Management Platform way out of poverty with dignity and pride. Source: Grameen Foundation Created to mark the 50th anniversary of the IDB's founding, the award drew nominations from 145 Sanabel Microfinance Conference -- Grameen- organizations representing 22 countries in the Jameel Pan-Arab Microfinance Limited and Americas and Europe. It is the largest award Grameen Foundation today announced the first granted by a multilateral institution in Latin Arab microfinance institution (MFI) to go live on American and the Caribbean, and carries with it a the Mifos open source Management Information prize of $100,000. According to the IDB, ACCION System (MIS) platform Enda inter-arabe (enda) in was selected for the magnitude of its social im- Tunisia. pact in the region, which began in Latin America One of the Arab Region's pioneering MFIs, enda in 1961 with community-development projects in selected Mifos, a highly flexible, cost-effective Venezuela. ACCION first experimented with mi- technology platform specifically designed for mi- crolending in Recife, Brazil as early as 1973. crofinance, to help drive and sustain its outreach, Read more : http://www.accion.org/ innovation and growth. Enda expects its invest- ment in Mifos, the open source initiative devel- ********************************** oped by Grameen Foundation and launched in the Arab World by Grameen-Jameel, will assist it in managing its high growth from the current 100,000-plus poor clients across Tunisia to its tar- get of 300,000 by the end of 2012. The an- nouncement was made at the 2009 Sanabel Mi- crofinance Conference in Beirut, Lebanon, the www.microfinancefocus.com Microfinance Focus [ May 2009 ] 31
    • ` Process Management: The Number One Issue for MFI Leadership Management) crosses be- managers and staff, all of fective business processes in Stop Managing Personalities tween departments, the po- whom have in-depth MFI place senior managers can and Start Managing “The tential for delay, duplication, experience including: Dr. readily track performance, Process.” loss, and other mistakes are Souren Ghosal, Knowledge analyze problems easier, un- Due to a growing number of multiplied. Without well- Advisor, Mr. Jerome Pelo- derstand the business better, requests… Microfinance Fo- prepared graphic processes, quin, Managing Editor, US and direct the application of cus Magazine plans to pro- management has difficulty and Bruce Meraviglia, IT Engi- technology so as to really vide access to the team of troubleshooting human prob- neer and Instructional Expert improve operations and MFI management experts on lems … and introducing tech- The Process Management profit. our staff. Microfinance Fo- nology without effective Team - Through engagement Everyone who participates in cus Magazine is launching a process just makes it worse. of all Departmental Managers the program will be able to new initiative designed to The MF Focus Business Proc- as The Process Management create effective functional provide MFI management ess Management is an inte- Team, both cooperation and process models. We guaran- with key organizational skills. grated, interactive and per- communication are greatly tee it, or you get your money Principal among them is Busi- formance based training enhanced. Managers’ need back! Our performance ness Process Management. process that produces a com- to work together to solve based learning uses the Con- (BPM) effective management petent and certified internal process bottlenecks. Every sult, Train, Mentor method. of business processes enables process management team. department manager knows We work with each and every a host of other essential com- Each MFI that is participates that the problem being manager on the team so that ponents of organization man- may be certified as a CMFPO solved for another depart- they are fully confident and agement. All processes are demonstrating that all proc- ment today could be his capable of creating, monitor- cross-departmental. This is esses and procedures are problem tomorrow. Process ing, and modifying their proc- where many costly problems documented and auditable Management promotes co- esses as change and perform- start. When a process on demand. Our program is operation and reduces con- ance improvement WE (budgeting, Sales, Portfolio designed by a team of key flict and lost time. With ef- GUARANTTE IT! www.microfinancefocus.com Microfinance Focus [ May 2009 ] 32
    • ` Copyright: Microfinance Focus 2009-10 A Publication of Centre For Microfinance Promotion trust Avalahalli , Anjanapura Post ,Bangalore—560062 P: 91.80.28436237 | Fax: 91.80.28436577 Website : www.microfinancefocus.com Email: info@microfinancefocus.com [ May 2009 ] 33 www.microfinancefocus.com Microfinance Focus