Building Domestic Financial Systems  that Work for the Majority Women’s World Banking
Women’s World Banking Affiliates, Associates, GNBI and AFMIN Members provide  financial services to about 18 million low i...
Why Microfinance Can Change the Way the World Works 500 million poor entrepreneurs and producers, mainly women 1. 4. 3. 2....
Building Financial Services that Respond to What Poor Women Want What Poor Women Want <ul><li>Asset Building, Risk </li></...
Building Core Microfinance Services ― Focus on Income and Assets Other Non-core Offerings in Inclusive Financial Systems C...
Key Non-Financial Products and Services <ul><li>Financial counseling and training </li></ul><ul><li>Commercial linkages </...
What Low Income Women Need to Build Income and Assets— Needs That Microfinance Can Meet Profitably Market Penetration of T...
The Core Paradigm in Building Financial Systems that Work for the Poor Majority Encourage a range of financial institution...
Policy, Regulatory and Legal Frameworks are Needed for Microfinance Operations Key Features of  Microfinance Transaction c...
Focus for Country Actions in the Next Three Years <ul><li>Retail capacity needs to be built in most countries </li></ul><u...
Building Blocks of Domestic Financial Markets That Work for the Poor Majority Interest rates Financial sector policies Gov...
The nine most important measures for building the policies, regulations and legal structures for financial systems that se...
Key institutions and services that need to be in place to support the build-up of solid, responsive retail capacity in mic...
Key financial instruments and arrangements if the domestic financial market is to respond to the needs of MFIs  <ul><li>Do...
Role of Government DO DON’T <ul><li>Promote microfinance as a key vehicle in tackling poverty, and as vital part of the fi...
Paradigm Shift in Retail Banking with the Poor <ul><li>Low interest rates </li></ul><ul><li>Low repayments </li></ul><ul><...
Leading banks and microfinance institutions are innovating to provide efficient, responsive, sustainable services Innovati...
<ul><li>Average loan US$ 900 </li></ul><ul><li>Average savings account US$ $125 </li></ul><ul><li>Cross-selling of 3.4 pro...
Key areas for action <ul><li>Build retail capacity in microfinance </li></ul><ul><li>Build the depth and diversity of prod...
Private Sector WWB Network Members Low Income  Women Policy Makers, Donors Mobilizing Key Actors to Focus on the Majority
LARGE ENTERPRISES Middle Class Low-Income Entrepreneurs  and Households Wealthy Building Enterprise Systems that Treat the...
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Wwb nancy barry

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Wwb nancy barry

  1. 1. Building Domestic Financial Systems that Work for the Majority Women’s World Banking
  2. 2. Women’s World Banking Affiliates, Associates, GNBI and AFMIN Members provide financial services to about 18 million low income entrepreneurs, in about 40 countries Bolivia Brazil Chile Colombia Dominican Republic Ecuador Haiti Mexico Paraguay Peru LAC Benin Burundi Ethiopia The Gambia Ghana Guinea Ivory Coast Kenya Mali Niger Nigeria South Africa Togo Uganda Bangladesh India Indonesia Mongolia Nepal Pakistan The Philippines Sri Lanka Thailand Bosnia-Herzegovina Jordan Morocco The Netherlands Russian Federation Switzerland USA North America Africa Europe, ME and North Africa Asia
  3. 3. Why Microfinance Can Change the Way the World Works 500 million poor entrepreneurs and producers, mainly women 1. 4. 3. 2. <ul><li>Microfinance: </li></ul><ul><li>Lending </li></ul><ul><li>Savings </li></ul><ul><li>Insurance </li></ul><ul><li>Housing </li></ul><ul><li>Remittances </li></ul><ul><li>Increases: </li></ul><ul><li>Income </li></ul><ul><li>Assets </li></ul><ul><li>Security </li></ul><ul><li>Confidence in future </li></ul>Better: Health Population Education Community participation Banking for the majority
  4. 4. Building Financial Services that Respond to What Poor Women Want What Poor Women Want <ul><li>Asset Building, Risk </li></ul><ul><li>Mitigating Products </li></ul><ul><li>Voluntary savings </li></ul><ul><li>Health and life insurance </li></ul><ul><li>Variety of Products </li></ul><ul><li>Housing loans </li></ul><ul><li>Education loans </li></ul><ul><li>Life cycle products </li></ul><ul><li>Business development services </li></ul>Group Individual Loans <ul><li>Flexible Loans </li></ul><ul><li>Small initial loan sizes </li></ul><ul><li>Larger loans over time </li></ul><ul><li>Longer terms </li></ul>No Traditional Collateral <ul><li>Service </li></ul><ul><li>Rapid, convenient access </li></ul><ul><li>Respect, connection </li></ul>Source: WWB research
  5. 5. Building Core Microfinance Services ― Focus on Income and Assets Other Non-core Offerings in Inclusive Financial Systems Core Offerings Remittances for Microfinance Savings Insurance Housing Finance Education Loans Flexible Working Capital Loans Debit and Credit Card Facilities Transfer Payments Consumer Finance
  6. 6. Key Non-Financial Products and Services <ul><li>Financial counseling and training </li></ul><ul><li>Commercial linkages </li></ul><ul><li>Health and education </li></ul><ul><li>Business advisory services </li></ul><ul><li>Dealing with legal barriers </li></ul>
  7. 7. What Low Income Women Need to Build Income and Assets— Needs That Microfinance Can Meet Profitably Market Penetration of Target Market in Most Countries <1% Life and health insurance <1% Ability to finance housing, education, health care <10% Ability to accumulate savings Credit to fuel growth of productive activities <10%
  8. 8. The Core Paradigm in Building Financial Systems that Work for the Poor Majority Encourage a range of financial institutions and methodologies: <ul><li>Commercial banks </li></ul><ul><li>Regulated MFIs </li></ul><ul><li>Microfinance NGOs </li></ul><ul><li>Finance companies </li></ul><ul><li>Coops, credit unions </li></ul><ul><li>Grassroots organizations </li></ul>Adopt standards on performance in: <ul><li>Client reach </li></ul><ul><li>Efficiency, profitability </li></ul><ul><li>Financial integration </li></ul><ul><li>Impact </li></ul><ul><li>Portfolio size, growth </li></ul><ul><li>Portfolio quality </li></ul>Provide appropriate support modalities—institutions that meet high standards need: <ul><li>Policies, regulations and legal structures that fit microfinance </li></ul><ul><li>Access to finance that fits the institution’s size and stage </li></ul><ul><li>The ability to mobilize savings </li></ul>1. 3. 2.
  9. 9. Policy, Regulatory and Legal Frameworks are Needed for Microfinance Operations Key Features of Microfinance Transaction costs are high Clients lack conventional collateral Simple MIS, accounting Savings important to client and MFI Many small branches Loan officers not traditional bankers Institutions need to be able to charge relatively high interest rates Microloans as loan class, with portfolio Quality and lending methods--not loan Collateral—used to evaluate risk. Simple while rigorous reporting requirements – with microfinance standards and benchmarks Ability for high performing MFIs to mobilize deposits from borrowers and from the public Ability to establish branches and agencies rapidly Flexibility in hiring, and performance-based incentives Responsive Framework
  10. 10. Focus for Country Actions in the Next Three Years <ul><li>Retail capacity needs to be built in most countries </li></ul><ul><li>Savings and other asset building products require attention </li></ul><ul><li>Transaction costs need to be reduced </li></ul><ul><li>Financing that fits different stages of MFIs is needed in many markets </li></ul><ul><li>Country-level visions and strategies—built by key stakeholders </li></ul><ul><li>Policies, regulation, legal structures need to be implemented </li></ul><ul><li>Key elements of institutional infrastructure need to be constructed </li></ul><ul><li>Performance indicators and standards need to be implemented </li></ul><ul><li>Increased attention is needed in measuring impact of microfinance </li></ul><ul><li>Government and private sector have important roles to play </li></ul>
  11. 11. Building Blocks of Domestic Financial Markets That Work for the Poor Majority Interest rates Financial sector policies Governmentpolicy Regulations, supervision Legal structures Legal systems Performance indicators Governmentrole Policy Industry Infra- structure Financing Microfinance – Domestic Capital Markets Domestic capital markets Tech service providers Wholesale financial institutions MF networks, associations Rating agencies Credit bureaus Tech applications Payment systems Donor support Business services Savings mobilization Wholesale financing Bonds, securitizations Grants for smaller MFIs Guarantee mechan-isms Transpar-ency Healthy market overall Commercial Banks Micro- Finance NGOs Regulated MFIs Coopera-tives, Credit Unions, Savings Grass Roots Groups Others Retail Capacity, Supply Product Offerings Impact in Poor Households Savings Microloans – Working Capital Insurance Remittances, savings, assets Income Assets Education, Health Women’s Decision-making, Power Community Participation
  12. 12. The nine most important measures for building the policies, regulations and legal structures for financial systems that serve the poor majority <ul><li>Liberalized interest rates for microfinance, relying on competition and transparency to lower costs and rates </li></ul><ul><li>Inclusive financial sector policies that incorporate measures to ensure responsive, solid services to the poor </li></ul><ul><li>An explicit, supportive government policy and strategy for microfinance, with objectives, key policies and support, roles </li></ul><ul><li>Regulations and supervision capacities that respond to the characteristics of microfinance. </li></ul><ul><li>A range of suitable legal structures that enable organizations of different types and sizes to provide diversified microfinance products in a sustainable way. </li></ul><ul><li>Legal and judicial systems that support secured and unsecured lending </li></ul><ul><li>Common performance indicators , definitions and standards </li></ul><ul><li>Government’s role as an enabler, not retail provider </li></ul><ul><li>Donor support to complement private capital , e.g., financing younger institutions, capacity building, innovation and policy change </li></ul>
  13. 13. Key institutions and services that need to be in place to support the build-up of solid, responsive retail capacity in microfinance <ul><li>Technical service providers </li></ul><ul><li>Wholesale finance institutions </li></ul><ul><li>Microfinance networks, industry associations </li></ul><ul><li>Rating agencies </li></ul><ul><li>Credit bureaus </li></ul><ul><li>IT platforms and application of technology </li></ul><ul><li>Payment systems </li></ul><ul><li>Information and business services for microentrepreneurs </li></ul><ul><li>Domestic capital markets development </li></ul>
  14. 14. Key financial instruments and arrangements if the domestic financial market is to respond to the needs of MFIs <ul><li>Domestic savings mobilization </li></ul><ul><li>Domestic wholesale financing </li></ul><ul><li>Bonds and securitization issues </li></ul><ul><li>Grants and soft loans to enable high potential MFIs to reach sustainable scale, and to support capacity building and innovation for MFIs at all stages </li></ul><ul><li>Guarantee mechanisms </li></ul><ul><li>Enhanced transparency, ratings, credit bureaus, information disclosure </li></ul><ul><li>Healthy domestic capital market </li></ul>
  15. 15. Role of Government DO DON’T <ul><li>Promote microfinance as a key vehicle in tackling poverty, and as vital part of the financial system </li></ul><ul><li>Create policies, regulations and legal structures that encourage responsive, sustainable microfinance </li></ul><ul><li>Have government agencies provide retail microfinance </li></ul><ul><li>Encourage a range of regulated and unregulated institutions that meet performance standards </li></ul><ul><li>Back one model </li></ul><ul><li>Support autonomous, wholesale structures </li></ul><ul><li>Encourage competition, capacity building and innovation to lower costs and interest rates in microfinance </li></ul><ul><li>Place interest rate ceilings on micro loans </li></ul>
  16. 16. Paradigm Shift in Retail Banking with the Poor <ul><li>Low interest rates </li></ul><ul><li>Low repayments </li></ul><ul><li>Low “know your customer” </li></ul><ul><li>Minimal loan amounts </li></ul><ul><li>Low, sporadic, and shallow outreach relative to demand </li></ul><ul><li>Interest rates that cover costs, enable profits </li></ul><ul><li>Excellent portfolio quality </li></ul><ul><li>Understand household economies, economic activities of the poor </li></ul><ul><li>Financial products and processes that respond to poor households, enterprises </li></ul><ul><li>High outreach, impact </li></ul>Compliance Culture Sustainable Microfinance
  17. 17. Leading banks and microfinance institutions are innovating to provide efficient, responsive, sustainable services Innovations Helping clients build assets and mitigate risk Cutting costs to clients and the institutions Mobilizing capital markets for microfinance Building new distribution channels
  18. 18. <ul><li>Average loan US$ 900 </li></ul><ul><li>Average savings account US$ $125 </li></ul><ul><li>Cross-selling of 3.4 products per client </li></ul><ul><li>First banking experience for 50% of new clients </li></ul>Moving to Customer Focus in Microfinance
  19. 19. Key areas for action <ul><li>Build retail capacity in microfinance </li></ul><ul><li>Build the depth and diversity of product offerings </li></ul><ul><li>Build domestic financial markets for microfinance </li></ul><ul><li>Utilize technology to cut costs and expand outreach </li></ul><ul><li>Build permanent state policies and country strategies </li></ul><ul><li>Mobilize new actors, help them learn the business and play effective roles </li></ul>
  20. 20. Private Sector WWB Network Members Low Income Women Policy Makers, Donors Mobilizing Key Actors to Focus on the Majority
  21. 21. LARGE ENTERPRISES Middle Class Low-Income Entrepreneurs and Households Wealthy Building Enterprise Systems that Treat the Poor as the Top Priority
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