Microfinance and DanChurchAid

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Very general introduction to microfinance in DanChurchAid, a Danish NGO

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  • Microfinance and DanChurchAid

    1. 1. Microfinance in DanChurchAid Popcorn and politics – May 15, 2008 ODR
    2. 2. Agenda <ul><li>A very recent history of microfinance in DCA </li></ul><ul><li>Why you and DCA should care about microfinance </li></ul><ul><li>What is microfinance outside DCA? </li></ul><ul><li>What is microfinance inside DCA? </li></ul><ul><li>Questions for debate </li></ul>
    3. 3. Microfinance and DCA - a very recent history <ul><li>1978: DCA supports microfinance-like schemes in Bangladesh </li></ul><ul><li>2004: A set of guidelines are drafted </li></ul><ul><li>2006: A group is set up to make microfinance more systematic in DCA </li></ul><ul><li>2006-7: Survey of microfinance by Biliana </li></ul><ul><li>2007-8: New microfinance guidelines are made, approved by Core group and Board (May) </li></ul><ul><li>2008 (Oct): ODR to work 10-20% with microfinance </li></ul>Danish NGOs evaluate and discuss their microfinance activities
    4. 4. Why you and DCA should care about microfinance <ul><li>Sustainability: The microfinance promise </li></ul><ul><ul><li>World’s best 1000 microfinance banks are completely sustainable (and this is what has made the sector grow - graph). </li></ul></ul><ul><ul><li>LWF’s 138 Village Banks in Cambodia are sustainable </li></ul></ul><ul><ul><li>Pass-on-the-gift is better that not passing not the gift </li></ul></ul><ul><li>Donors want it </li></ul><ul><ul><li>Danida wants it, EU wants it, private donors wants it </li></ul></ul><ul><li>DCA is using it a lot </li></ul><ul><ul><li>– but not always very profesionally, constructively, nicely </li></ul></ul>
    5. 5. What is microfinance globally – outside DCA? <ul><li>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. </li></ul><ul><li>Not just loans – savings, insurance, money transfers </li></ul><ul><li>Usually not the poorest – cash-use and lending require resources which the poor do not have </li></ul><ul><li>Not just women (but mostly) – men too </li></ul><ul><li>Not just to start a buisiness– perhaps to grow a business </li></ul><ul><li>Microfinance alone can rarely get people out of poverty – other things are needed </li></ul><ul><li>Not just groups – more and more toward individuals </li></ul>
    6. 6. What is microfinance globally – outside DCA? <ul><li>Definition: </li></ul><ul><li>Financial services, for example savings, credit, money transfers and insurance, adapted and targeted poorer groups. </li></ul>
    7. 7. Facts in global microfinance <ul><li>130.000.000 clients in 2006 </li></ul><ul><li>Interest rate at 15 to 60% </li></ul><ul><li>Used as a tool for development and poverty reduction since at least 1930 </li></ul><ul><li>Different inside DCA because the normal MF: </li></ul><ul><li>Does not reach the poorest of the poor </li></ul><ul><li>Require bank-like competencies </li></ul>
    8. 8. What is microfinance in DCA? - in the sector <ul><li>Formalized microfinance institutions </li></ul><ul><ul><li>A part of our world: 130m poor clients, fastly growing, sustainable, on the ground </li></ul></ul><ul><li>Informal microfinance institutions </li></ul><ul><ul><li>Rotating savings and credit schemes, co-operative banks, village banks </li></ul></ul><ul><li>Other market-based micro tools </li></ul><ul><ul><li>Pass-on-the-gift systems, seed banks, more </li></ul></ul>Poorer, more vulnerable groups reached
    9. 9. What is microfinance in DCA? - activities <ul><li>Formalized microfinance institutions </li></ul><ul><ul><li>Create links: Know you financial market </li></ul></ul><ul><ul><li>Enhance inclusion: Who’s not reached? </li></ul></ul><ul><ul><li>Advocacy/consumer protection: Responsible microbanking </li></ul></ul><ul><li>Informal microfinance institutions </li></ul><ul><ul><li>Facilitate establishment and development of informal providers - Malawi </li></ul></ul><ul><ul><li>Integrate with programmes and projects – LWF Camb </li></ul></ul><ul><ul><li>Advocacy: Inclusive microbanking </li></ul></ul>
    10. 10. What is microfinance in DCA? <ul><li>Other market-based micro tools </li></ul><ul><ul><li>One goat, ten goats - Ethiopia </li></ul></ul><ul><ul><li>Seed banks more effectively - Uganda </li></ul></ul><ul><ul><li>Others </li></ul></ul>
    11. 11. What is microfinance in DCA? <ul><ul><li>Principles </li></ul></ul><ul><ul><li>Promote more than provide </li></ul></ul><ul><ul><li>Do savings more than credit </li></ul></ul><ul><ul><li>Know the financial market and what it can do for you </li></ul></ul>
    12. 12. Questions for debate <ul><li>Considering the programmes, projects and countries you know of, where and how could/does microfinance – or market-based microtools – contribue? </li></ul><ul><li>What are the main pitfalls and challenges to be considered? </li></ul><ul><li>How do we improve what we’re already doing? </li></ul><ul><ul><li>Quality control, competence building, knowledge management? </li></ul></ul>
    13. 15. Why you and DCA should care about microfinance: Demand
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