A Tale of Four IPOs: Is Public Investment in Microfinance Becoming OK Again?

Next Billion, 25 January 2016

Podcast with Anna Kanze, Grassroots Capital Management. more →

The Economics of Microsavings: High-yield loans as the lynchpin of deposit-driven microfinance

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 →

Unstable Core: is the funding of the Indian microfinance sector structurally flawed?

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 →