Financial Access Initiative, 14 February 2013
It’s been over two years since the start of the great India insolvency. Four years since the Bosnia blight and No Pago Nicaragua. And nearly six years since the Morocco microfinance meltdown.
At this point, it’s reasonable to say that the first global crisis in microfinance has passed. Life is on the mend.
In a recent email, Alok Prasad, head of the Microfinance Institutions Network in India (MFIN) described its most recent quarterly report as “green shoots in evidence.” The numbers certainly bear him out. Elsewhere, investors speak of tightening their exposure to countries with overheating markets, pay attention to issues of overindebtedness, and are wary of the sort of runaway growth that was being posted by Indian MFIs back in 2008-10. more →
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 →
Microfinance Focus, 25 November 2012, Co-authored with Vikash Kumar
This article is part of a series aimed at understanding what’s happening in India’s affordable housing sector. It is based on interviews with residents of three low-cost housing projects: Vaishnavi Sai (outside Mumbai), Anandgram (outside Pune), and Janaadhar Shubha (outside Bangalore). The interviews were conducted during May-June 2012. Read Part 1 here.
After a long train ride – nearly two hours – the line ends. Passengers disembark at a small, but bustling community, easily covered on foot. The commerce around the station is busy, but within a few city blocks, one already spies farmland beyond the last rows of houses. Residents of all stripes live here, but the feel is decidedly working-class.
This could easily be late 19th century streetcar suburb outside Chicago or New York. Or a fin-de-siècle banlieue on the outskirts of Paris. But no, it’s Virar, one of the terminal stops on the Western Railways line heading north out of Mumbai. Read full article here.
Microfinance Focus, 16 October 2012, Co-authored with Vikash Kumar
This article is part of a series aimed at understanding what’s happening in India’s affordable housing sector. It is based on interviews with residents of three low-cost housing projects: Vaishnavi Sai (outside Mumbai), Anandgram (outside Pune), and Janaadhar Shubha (outside Bangalore). The interviews were conducted during May-June 2012. Read Part 2 here.
Something is afoot in the low cost housing market in India. Over the last two years, dozens of commercially-built projects targeted at the lower middle class have been going up in cities across the country, with tens, if not hundreds, of thousands of units being built. In the past six months, many of these projects have begun opening their doors to the new residents. We decided to pay some of them a visit. more →
European Microfinance Platform, August 2012 Newsletter
Allow me an impertinent question, dear reader: what was the largest loan you ever borrowed? Now, let me venture a guess – was it your home mortgage? If you answered no, then you probably fit either of three profiles: 1) you never had to buy a home, 2) you live in a country with limited financial access, or 3) you are very lucky.
Let’s set luck aside for the moment. Why the first two assumptions? Because in developed countries, mortgage finance takes by far the largest share of consumer credit. In the US, mortgages on residential property account for 84% of average household debt. In the UK, the number is 89%. There is no question that the primary goal of retail lending in rich countries is to fund housing. Now consider the numbers for housing loans in the microfinance sector.
They are depressingly small. more →
MicrofinanceFocus, 28 March 2012
Last month, the headlines of the world’s papers read déjà vu. “Suicides in India linked to microfinance debt.” “SKS Microfinance implicated in farmer suicides.” The headlines may have differed, but the article was one and the same, penned by Erika Kinetz of the Associated Press. SKS was appalled, calling the report “libelous” and “scurrilous.”
For what it’s worth, the damage has been minimal. SKS stock slid 4.25% on the day of the article, but recovered within a few days of trading. The slide shows little distinction from its already volatile trading pattern (Figure 1). Of course bad news can also cause lenders and investors to take a second look, or simply slow things down. One MFI manager told me of exactly this very reaction on the part of an Indian bank in the immediate days after the AP article. But the story got relatively little press in India, and no follow-up of significance. By now it’s reasonable to say that the microfinance sector in India can breathe a sigh of relief. Seeing bad news get swept back under the carpet can be quite satisfying, even if the stink remains. more →