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 →
e-MFP, 27 February 2015
The microfinance sector has been abuzz with the implications of the “final word” study on microcredit impact. For many, including myself, this has been an opportunity to consider a trend that’s been taking place for several years now – from microfinance to financial inclusion. In my last blog, I touched upon the subject of metrics that this new shift requires. I would like to delve deeper.
To use the definition of the Center for Financial Inclusion, “Financial inclusion means that a full suite of financial services is provided, with quality, to all who can use them, by a range of providers, to financially capable clients.” That encompasses many things, but perhaps more intuitively, financial inclusion means providing serving those who aren’t being served – whether they are too poor, too informal, or too remote.
It’s a compelling goal. Yet the metrics we use to measure progress came from a time when microfinance meant making loans to the poor. They simply are not up to the task of measuring financial inclusion. more →
e-MFP, 12 February 2015
The verdict is out. Final publication of six randomly-controlled studies (RCTs) has drawn a pretty thick line under the words of David Roodman: the average impact of microcredit on poverty is about zero. The notion that microfinance lifts the poor out of poverty is officially dead.
Now, the caveats. The studies evaluated microcredit only – not savings or payments or insurance. Nor did they cover so-called microfinance-plus programs, which provide training, health care or other interventions, along with credit. It’s quite possible that these or other specialized branches of microfinance practice do raise the living standards of the poor. But, if I may be so bold, even the best of these initiatives are probably less effective than we might have supposed.
This is good news. We in the microfinance community could use some humility. We’re financiers, not doctors, scientists, or teachers. To think that we can alter the lives of millions is hubris. more →
e-MFP, 31 October 2014
I’ve been poring over the data collected by the Angelucci, Karlan & Zinman study of Compartamos clients. To recap from my previous blog, with an average monthly loan payment of 2,100 for the loans in the study (and for Mexican MFIs generally), the figure of 1,572 pesos as the average client income poses a seemingly impossible debt-to-income ratio of 130%.
The immediate question is whether the income figure is reliable. It does seem extremely low, putting the clients below the 3rd income percentile in the country. Can we get anything more from that data? more →
e-MFP, 24 October 2014
This is part 3 of a 3-part installment from my brief visit to Mexico in October 2014. Read parts one and two.
The biggest mystery about Mexico is understanding the numbers. They just don’t quite seem to add up. And that’s what was dogging me throughout the visit, including the two days spent in Mexico City talking to various actors in the sector.
I was lucky – it just so happened that ProDesarrollo was releasing its 2013-14 Sector Benchmarking, and I managed to get myself invited to the event. A great opportunity to network with many actors in the sector at once. I also got to see the presentation of the market figures. At the outset of the trip, I laid out several hypotheses. It seems to me that there are really only two that matter more than all the rest: 1) the number of unique clients and number of loans they hold, and 2) the profile of the MFI clients on which the market rests. more →
e-MFP, 24 October 2014
This is part 2 of a 3-part installment from my brief visit to Mexico in October 2014. See: parts one and three.
My first stop in Mexico was a place I first heard about nearly two years ago: Chiapas. The state is in many ways one of the centers of Mexican microfinance. According to ProDesarrollo’s 2013-14 Benchmarking, Chiapas is tied with much larger Veracruz for the largest number of the network’s members (32). The number of MFI branches per population is nearly double the national average. It’s also Mexico’s least developed state.
In all, I spent about 22 hours in Chiapas. But even that paltry amount of time can prove revealing. more →
e-MFP, 6 October 2014
This is part 1 of a 3-part installment from my brief visit to Mexico in October 2014. See: parts two and three.
I’m on my way to Mexico, for what I hope to be the start of a deeper exploration of overindebtedness in the country. Data analysis an ocean away can be revealing, but there’s nothing like seeing the numbers come alive when visiting the field. First stop: Tapachula, Chiapas.
Every analyst has his or her own approach. For me, I find it best to come with a number of hypotheses and then see to what extent reality reflects those initial preconceptions. I like to keep an open mind and am always willing to change my view. Still, having a pre-existing framework in mind helps structure field observations, especially when time is short.
I’ve already shared my thoughts on multiple borrowing and overindebtedness in Mexico, but those go back a couple of months. Since then, I’ve spent a fair bit of time digging deeper into the data and comparing Mexico to what I’ve seen elsewhere (including finalizing a study of Moroccan MFIs during 2008-13, including how they dealt with substantial multiple borrowing during 2009). Based on this and earlier work, I’m putting down some of my hypotheses below. more →
e-MFP, 7 Jul 2014
My latest post on the credit bubble in Mexico had one especially interesting comment. Jose Manuel asked to consider the loan sizes in the country as a factor that might explain the prevalence of multiple borrowing.
The comment is highly relevant. What Jose Manuel suggests is that loans in Mexico are unusually small. And in a way, he is right. On a per capita GNI basis, Mexico’s loans are smaller than in any other country. By contrast, India’s loans are nearly three times larger. This has two potential implications: first, small microfinance loans put less of a burden on Mexican borrower incomes, and second, their inadequate size encourages clients to borrow from multiple lenders in order to meet their requirements. And yet, I find that both implications are incorrect and that multiple borrowing levels in Mexico continue to point to a very large bubble. more →
e-MFP, 2 Jul 2012
Last week, as its football team was preparing for its match with the Netherlands, Mexico hosted the International Forum for Financial Inclusion. It was an important event, opened by the President of Mexico, Enrique Peña Nieto, and attended by such notables as Christine Lagarde. By all accounts, it was an excellent meeting where representatives of financial regulators from around the world shared their experiences and strategies to promote financial inclusion in their countries.
But one thing stood out. During his speech, Jaime González Aguade, President of the Comisión Nacional Bancaria y de Valores (agency in charge of regulating Mexico’s financial sector) stated:
I have no reason to dispute his assertion. But one has to wonder — how should this leadership be reconciled with the high rates of overindebtedness among the country’s microfinance clients? And when the bubble bursts, might it not undermine the very efforts to expand financial inclusion that Mexico is promoting?
|
|