Microfinance and DanChurchAid

Microfinance in DanChurchAid Popcorn and politics – May 15, 2008 ODR

Agenda
A very recent history of microfinance in DCA
Why you and DCA should care about microfinance
What is microfinance outside DCA?
What is microfinance inside DCA?
Questions for debate

Microfinance and DCA - a very recent history
1978: DCA supports microfinance-like schemes in Bangladesh
2004: A set of guidelines are drafted
2006: A group is set up to make microfinance more systematic in DCA
2006-7: Survey of microfinance by Biliana
2007-8: New microfinance guidelines are made, approved by Core group and Board (May)
2008 (Oct): ODR to work 10-20% with microfinance
Danish NGOs evaluate and discuss their microfinance activities

Why you and DCA should care about microfinance
Sustainability: The microfinance promise
World’s best 1000 microfinance banks are completely sustainable (and this is what has made the sector grow - graph).
LWF’s 138 Village Banks in Cambodia are sustainable
Pass-on-the-gift is better that not passing not the gift
Donors want it
Danida wants it, EU wants it, private donors wants it
DCA is using it a lot
– but not always very profesionally, constructively, nicely

What is microfinance globally – outside DCA?
Dinner suggestions: Small loans for very poor women, so they can start a business and work themselves out of poverty – in a group with their neighbours.
Not just loans – savings, insurance, money transfers
Usually not the poorest – cash-use and lending require resources which the poor do not have
Not just women (but mostly) – men too
Not just to start a buisiness– perhaps to grow a business
Microfinance alone can rarely get people out of poverty – other things are needed
Not just groups – more and more toward individuals

What is microfinance globally – outside DCA?
Definition:
Financial services, for example savings, credit, money transfers and insurance, adapted and targeted poorer groups.

Facts in global microfinance
130.000.000 clients in 2006
Interest rate at 15 to 60%
Used as a tool for development and poverty reduction since at least 1930
Different inside DCA because the normal MF:
Does not reach the poorest of the poor
Require bank-like competencies

What is microfinance in DCA? - in the sector
Formalized microfinance institutions
A part of our world: 130m poor clients, fastly growing, sustainable, on the ground
Informal microfinance institutions
Rotating savings and credit schemes, co-operative banks, village banks
Other market-based micro tools
Pass-on-the-gift systems, seed banks, more
Poorer, more vulnerable groups reached

What is microfinance in DCA? - activities
Formalized microfinance institutions
Create links: Know you financial market
Enhance inclusion: Who’s not reached?
Advocacy/consumer protection: Responsible microbanking
Informal microfinance institutions
Facilitate establishment and development of informal providers - Malawi
Integrate with programmes and projects – LWF Camb
Advocacy: Inclusive microbanking

What is microfinance in DCA?
Other market-based micro tools
One goat, ten goats - Ethiopia
Seed banks more effectively - Uganda
Others

What is microfinance in DCA?
Principles
Promote more than provide
Do savings more than credit
Know the financial market and what it can do for you

Questions for debate
Considering the programmes, projects and countries you know of, where and how could/does microfinance – or market-based microtools – contribue?
What are the main pitfalls and challenges to be considered?
How do we improve what we’re already doing?
Quality control, competence building, knowledge management?

Why you and DCA should care about microfinance: Demand

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Microfinance and DanChurchAid

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