CGAP, 6 February 2013
Last month the Smart Campaign launched its certification program. For those who care about client protection, this is an important and welcome milestone in what has been an impressive journey, involving a broad spectrum of activities to promote client protection.
In the first post in this series, Philippe Serres describes one such project by the French development organization AFD and the Cambodian Microfinance Association (CMA) to support implementation of the Client Protection Principles, including support for MFIs seeking to undergo the Smart Certification process itself. Notably, this support comes alongside client protection requirements that funders like AFD, Proparco and FMO have been incorporating into their financing agreements with MFIs. Thus, not only are these funders supporting MFIs in their bid to strengthen client protection, they are increasingly making their funding conditional on the implementation of client protection practices.
In many respects, this is an exercise in self-regulation. The arrival of Smart Certification presents a unique opportunity to take these efforts to the next level and apply this self-regulation to the entire microfinance market in Cambodia and beyond. Read full article here.
Microfinance Focus, 10 December 2012; microDinero (Spanish), 12 December 2012
Over the past 18 months, one of the microfinance sector’s largest and most prominent funds, Blue Orchard’s Dexia Micro-Credit Fund (recently renamed Blue Orchard Microfinance Fund), saw a major outflow of investor capital, with some $268 million or nearly 50% of the fund’s peak value having been redeemed. The scale of these outflows is unprecedented in the sector. For years, investment capital largely flowed one way: in. The exit doors were there, but rarely used. That is no longer the case. The pioneer of the microfinance investment industry has now crossed another milestone in the industry’s development.
Like Dexia, many microfinance funds (commonly referred to as Microfinance Investment Vehicles or MIVs) are subject to unscheduled redemptions. For those funds, their investors, as well as others in the sector, BlueOrchard’s experience holds important lessons, and it is those lessons that this article hopes to convey. more →
Financial Access Initiative, 6-13 February 2012
I have a confession to make. When I began composing this blog, I approached it with a fairly simple hypothesis: Microfinance institutions (MFIs) that engage in large-scale deposit taking must likewise grow their loan portfolios. After all, deposits are a source of funding with high operational cost that must be appropriately offset by growing revenue, and only microfinance portfolios provide yields high enough to achieve that. And because many poor families have a higher demand for savings services than for credit, the resulting over-liquidity could push MFIs into unsustainable portfolio growth, eventually leading to the very credit bubbles that microsavings advocates are trying to avoid.
It seems a reasonable enough hypothesis, and sufficiently controversial to be interesting. Trouble is, it’s not true. Reality turns out to be more complicated. more →
MicrofinanceFocus, 27 December 2011
On October 14, 2010, the Andhra Pradesh government issued an Ordinance that effectively shut down the microfinance market in the state. That shutdown continues to this day, with collections at negligible levels. It’s clear that the AP microfinance market is dead and will not recover for years.
Important as AP has been to India microfinance, it is not everything. Despite the year-long crisis, repayment rates in other states remain strong. And though AP-oriented MFIs have been seriously or even terminally wounded, others have remained unscathed.
Despite this, in the intervening period funding for MFIs – largely dependent on a handful of Indian state and commercial banks – has persisted in a state of severe liquidity deficit. more →