e-MFP, 3 February 2017
Financial Inclusion. Housing.
How often have you seen the two concepts appear together? If you think rarely – you’re not alone. Housing finance is that mysterious niche that crops up from time to time, but rarely makes headlines in our sector. And that’s both a conundrum and a shame.
Housing is a core human need and a top investment priority for families anywhere. Whether rich or poor, housing is often the single largest capital investment these families will ever make, that is to say, it cries out for effective products to help finance it. Unsurprisingly, housing finance is a core of financial services in wealthy nations. Indeed, if you’re over 40, chances are that a home mortgage is the single largest loan that you, dear reader, ever held. And yet in the financial inclusion and microfinance sector, housing gets notoriously short shrift. Habitat for Humanity, the world’s leading NGO dedicated to housing, estimates that while 1.2 billion people need improved shelter, just 2% of microfinance portfolios are dedicated to housing. more →
Next Billion, 25 January 2016
Podcast with Anna Kanze, Grassroots Capital Management. more →
e-MFP, 20 September 2016
Last week saw two nearly identical financial scandals hit two very different parts of the world. One was the revelation that Wells Fargo, one of the leading US banks, had falsely created some 2 million accounts for customers who never asked for them and were largely unaware of their existence. The other was about banks in India secretly depositing 1 rupee (0.015 euro) into their customer’s accounts.
What’s remarkable is the sheer silliness of the scandals – for the most part, this was not a case of money being stolen or fraudulently taken from customers. Instead, the scandals were being driven by the need to meet targets. In the case of Wells Fargo, staff were under pressure to meet sales goals. In the case of India, the banks needed to comply with government targets aimed at expanding savings accounts to financially excluded populations. In both cases staff managed to meet the targets, while completely missing the objectives the targets were meant to achieve. The financial writer Matt Levine put this brilliantly: “Measurement is sort of an evil genie: It grants your wishes, but it takes them just a bit too literally.”
Naturally, in our line of work, it’s the India scandal that’s most relevant. And frankly, we at e-MFP are not one bit surprised. more →
MIMOSA, 10 May 2016
Some lessons are unexpected. Back in 2000, during the height of internet stock craze, I was an amateur manager of a small stock fund consisting of 8 smalltime shareholders who were all my relatives. Being a bit of a contrarian, the fund focused mainly on biotech stocks, which were enjoying quite a strong run, even if not quite as exuberant as dotcom stocks. The fund did well – a roughly 250% return over 3 years, but as always, the lesson was not from this relative success, but from a far larger failure – the missed opportunity to bank a 750% return.
One stock stands out in my mind: Incyte Pharmaceuticals, which I had bought variously when it was trading in the $10-$20 range during 1998-99. By early 2000, it had crossed $100/share and was rapidly heading higher. At the time, I was well aware that there was no fundamental reason behind this runup – it was classic speculation. The question was when to sell? Internally, we had set a target of $150 (at a time when it was nearing $140 and rising rapidly). It was not to be. We sold some weeks later when it had slid down to the $60s…
Call me greedy and stupid. But I learned my lesson – I’m not made for stock trading! More importantly, it was my first introduction to the dangers of inexorable growth, which creates expectations that are difficult to reset and that far too often lead to disaster. more →
MIMOSA, 20 January 2016
Since publishing the first MIMOSA report – on Cambodia – I’ve heard one persistent critique. We say that the market is saturated, yet none of the current indicators appear to support it: repayments are great, there’s no field evidence of widespread overindebtedness, and the major MFIs are all undergoing a process of Smart Certification. How can we assert that Cambodia is at risk of overindebtedness, let alone a credit crisis, when no other indicators seem to support it?
These are important and reasonable questions. But here’s the rub – all the factors that point to a healthy market are either lagging indicators or are too vague or too poorly understood to be used as benchmarks. more →
NextBillion, 11 May 2015
Since it was published a few weeks ago, the 2014 Global Findex financial inclusion report has made a splash in media around the world. The headlines may have differed, but the articles all mention the key finding from the press release published by the World Bank: Massive Drop in Number of Unbanked. According to the Findex survey, which covered more than 150,000 people in 143 economies, the number of people with financial access grew from 51 percent to 62 percent between 2011 and 2014, a shift that reportedly represents a total of 700 million people worldwide.
While we highly appreciate the survey and the light it shines on the state of financial inclusion across the world, we are concerned about the accuracy of this headline finding. The growth it suggests is almost certainly overstated. To illustrate this concern, we suggest an alternative news headline, also based on the survey findings:
Number of Unbanked in U.S. and Eurozone Cut in Half
U.S. unbanked population drops from 12% to 6% in 2011-14; Eurozone cuts number of unbanked from 9 percent to 5 percent, according to report.
If this headline seems removed from reality, that’s because it is. more →
e-MFP, 27 April 2015
The press release from the World Bank did not hold back: “Massive Drop in Number of Unbanked,” reads the headline. In just three years, the number of adults with a bank account has grown from 51% to 62% — an increase of 700 million people. That’s a fantastic number!
And that’s the problem. Fantastic is good for children’s bed-time stories. It’s a bit more concerning when it comes to survey data. What’s the story behind this incredible, utterly unprecedented growth? What happened in these past three years that might explain it? more →
e-MFP, 23 March 2015
The microfinance sector has many actors with many different objectives, but if there is one common element that all agree on, it’s that microfinance should not harm the clients. And one of the most important elements of client protection is responsible collections.
To operate as viable enterprises, MFIs must collect on their loans. Inevitably, some clients prove unable to repay. Some cases seem easy – a client has suffered an unexpected tragedy, so an MFI will work to understand her situation and make alternative arrangements to repay the debts, be it a grace period, rescheduling, or even extension of a supplemental loan. But what to do with those cases where a client has simply borrowed too much? What if she did it for a “bad” reason – say, to buy a television? What if a borrower lied by denying that she had other debts? Unfortunately, such situations do happen.
In such cases recovery is still the goal. But one cannot recover money that’s not there. Responsible MFIs don’t press their clients to sell key income-generating assets that they depend on for survival. The key is to find the middle path – maintain pressure to repay, but not so high that the client is pushed into destitution.
So what about Greece? Does the experience of microfinance have any useful lessons for the Greek government and its creditors? more →