MICROFINANCE AND INCLUSIVE DEVELOPMENT: DECLARATIONS

DECLARATIONS

An alternative Summit on Microfinance focusing on inclusive development has been organized by National Rural Livelihoods Mission, Ministry of Rural Development, Government of India, SERP, Government of Andhra Pradesh, and International Network of Alternative Microfinance Institutions (INAFI India) from 21-23, 2011. The international conference was attended by delegates from India, Bangladesh, Sri Lanka, Nepal, Afghanistan, Philippines, and China.

With primacy on social capital, development outcome and savings-led microfinance services, the summit had deliberated upon the multi-dimensional aspects of development covering livelihoods, health, MDGs, social security, gender empowerment and mainstreaming across the development spectrum. A host of operational and policy issues have emerged from the deliberations, so also policy leads in many of the topical issues. Synthesizing these issues and policy leads/recommendations, the summit resolved to commend the following declarations to the world of microfinance including the practitioners, Government, regulators and policy makers.

1.      The purpose of microfinance being poverty reduction, development outcome connecting with Millennium Development Goals, securing social security and entitlements should be guiding the provision of microfinance services.

2.      The institutions delivering micro-credit shall be recognized as MCIs i.e. Micro Credit Institutions and not as MFIs as it gives rise to misleading expectations and under advantages. The summit recognizes the need to develop appropriate nomenclature for microfinance with inclusive development.

3.      The social capital model of microfinance shall focus on building institutions founded on mutuality and solidarity, specifically federations of SHG, and specialized institutions on health, education, livelihood for technical support to SHGs.

4.      Microfinance shall go beyond credit and shall include ‘Savings-first’ approach with differentiated savings products for livelihood, health, education and life cycle needs; insurance and micro pension for social for social security, remittance services for migrants, micro justice for conflict resolution.

5.      Holistic development approach with social and financial intermediation, livelihoods/enterprise promotion, integration with mainstream for civic intermediation with proper sequencing, graduation, context and member specific interventions shall guide the microfinance programmes.

6.      Microfinance interventions shall be integrated into sub-sector economic development process such as agriculture, farming, dairy, fisheries, etc.

7.      Capacity building of the enabling and demand stream is a crucial component of microfinance interventions and needs continuous public investment.

8.      Self-regulation process shall be a part of the microfinance programmes, which would promote growth with equality. The SHG Federations shall draw a road map and set standards for governance, financial and social development aspects according to their age and contexts and evolve action plans for implementation.

9.      In building livelihoods systems, community ownership in the form of producer and marketing companies with professional management shall be promoted with innovative and appropriate credit products. Creation of value and supply chain needs public investments for establishing infrastructure like cold chain, transport and processing.

10.   Gender empowerment and mainstreaming shall remain the core of the microfinance programmes.

11.   Highly vulnerable groups including Destitute, aged, physically and mentally challenged shall be organized with the help of microfinance exclusively with higher degree of sensitivity and innovation.

12.   Mainstreaming microfinance through linkages with the banking system shall promote financial inclusion to provide access with affordability for the poor. The banking system shall respond to the microfinance clients with timely credit and appropriate financial products.

Microfinance Faces Changing Risks: Banana Skins 2011

With growth in some markets moving at a fast pace, the microfinance sector faces changing risks. The latest Microfinance Banana Skins 2011 report shows that microfinance institutions must confront new realities to sustain the good reputation the microfinance industry has enjoyed in recent years. The survey measured the risk perceptions of more than 500 practitioners, investors, and close observers of microfinance in 86 countries. Read more

INAFI International signs partnership agreements with migrant organizations in Belgium, Luxembourg, and The Netherlands

International Network of Alternative Financial Institutions (INAFI International) recently signed partnership agreements with CGMD, FAAL, and DFD  to collaborate the project  “Harnessing the potentials of remittances for development in Africa by linking microfinance institutions (MFIs) and immigrant associations in Europe”(MIGR/2008/153-811), a three-year project funded by the European Commission. The project aims to actively involve diaspora organizations in various activities by forging partnerships.

Soukeyna Ndiaye Ba, Executive Director of INAFI and Pape Sene, President of Coordination Générale des Migrants pour le Développement (CGMD) signed the partnership agreement after the workshop was conducted at the Centre culturel ELZENHOF in Brussels last November 26. The workshop was attended by about 65 participants representing various African diaspora organizations based in Belgium. CGMD is a federation of various diaspora organizations based in Belgium which are actively involved in migration and development.

 In Luxembourg, INAFI signed partnership agreement with the Federation des Associations Africaines du Luxembourg (FAAL) represented by David Foka, President of FAAL. FAAL is a federation of African diaspora organizations based in Luxembourg which primary objective is to facilitate integration of migrants and combat racism and discrimination. Ndiaye Ba signed the agreement representing INAFI International last November 30 at Abbaye de Neumünster, Luxembourg.

Then on December 3, partnership agreement was signed between INAFI International and Diaspora Forum for Development (DFD) at The Hub, Amsterdam, The Netherlands. DFD D) is a platform of more than 40 diaspora organizations, platforms and networks representing more than 30 countries coming from Africa, Latin America and Asia. Santo Deng signed the agreement on behalf of DFD.

The Migrant Tour was launched last October  21 in Montreaux, Switzerland where  INAFI signed  partnership agreement with World Diaspora Fund, a Swiss-based Cooperative which offer migrants a secure investment vehicle that will contribute to the development of their countries of origin. WDF invests through loans, guarantees, or even taking stakes in microfinance institutions in the South. The Fund will also participate in financing infrastructure identified by the migrants. The WDF also invests through guarantees, loans and equity in Microfinance institutions that are regulated and sustainable. It will also participate to the co-financing of infrastructures proposed by the migrants. The WDF will invest through loans, guarantees, or even taking stakes in microfinance institutions in the South. The Fund will also participate in financing infrastructure identified by the migrants.

The project to foster the links between migration and development is being implemented by IINAFI International and Oxfam Novib. The project aims to achieve financial access for migrants and families, and enhance money transfer competition by providing knowledge, technical assistance, and building partnerships to and with immigrant associations in Europe, microfinance institutions in Africa and money transfer operators.

The project will train and enable 10 microfinance institutions (MFIs) located in 10 Sub-Saharan Africa (SSA) countries (Benin, Burkina Faso, Ethiopia, Ghana, Kenya, Mali, Nigeria, Senegal, Tanzania, and Uganda) to increase their competitive edge in money transfers services and other financial-driven instruments. It will also enable MFIs to build partnerships including a co-development program with immigrant associations working or residing in ten European countries (Belgium, France, Germany, Italy, Luxembourg, Netherlands, UK, Spain, Switzerland, and Sweden).

The Migrant Tour was coordinated by Jean Pouit, Project Manager and Daniela Russo, Project Officer. Leila Rispens-Noel, Senior Advisor of INAFI International also participated in the events conducted in Belgium, Luxembourg, and The Netherlands.

Resource: The Role of Microfinance in Asset-Building and Poverty Reduction: The Case of Sinapi Aba Trust of Ghana

The paper evaluates the extent to which Sinapi Aba Trust has contributed to poverty reduction among rural and urban poor especially women by supporting them with small loans to expand their businesses to generate income to build up their asset base. Using a cross-sectional data from 547 respondents, the study found that participation in the programme has enabled established clients to own savings deposits and subscribe to a client welfare scheme which serves as insurance to pay off debts in times of illness or death. Established clients were also found to be in a better position to contribute towards the education of their children and payment of healthcare for members of their households as well as contribution towards the purchase of household durables. The study noted that programmes that are financially sustainable have greater effects on participants, and that there is the need for clients’ graduation to benefit most from participation in such programmes.


Source

Peru: the world’s best climate for microfinance

The success of microfinance sometimes appears simply a matter of a brilliant idea (lending small amounts to unbanked entrepreneurs) and a charismatic leader (Muhammad Yunus, now a Nobel prize winner).

But microfinance’s future growth may depend on governments and big investors. So it’s significant that, according to a new report out today, Peru has the world’s best business and policy environment for microfinance. Bangladesh, home of the Grameen Bank, doesn’t even make the top 30. Read more

NEWS FROM Lift Above Poverty Organisation (LAPO Nigeria)

After years of growth LAPO has entered a phase of consolidation in 2009.  This consisted of series of actions towards transformation into a regulated nation-wide microfinance institution and strengthening of our service delivery structures and systems. This had become necessary in order to address emerging issues and concerns in the international microfinance community and at the same time take advantage of current developments in the Nigerian microfinance market. Expectedly there have been obvious challenges but your support and understanding have been helpful in addressing them.

 LAPO with its strong  service delivery structures and systems; responsive products and services and  expertise in micro-lending remains  outstanding and acknowledged in the local microfinance market

Periodically, we shall use this e-newsletter to update our partners on significant developments in LAPO.

Central Bank of Nigeria Approves LAPO Microfinance Bank

The Central Bank of Nigeria has given approval to the application of LAPO Microfinance Bank Limited. With this LAPO comes under the regulation of the bank. The approval marks a significant development in the life of our institution and in addressing the issue of savings mobilization. With the approval by CBN, LAPO Microfinance bank now has a new board of 7 members and the CEO. Two of the seven seats are reserved for future investors and partners. Dr. Philip Osarenren Emokpae (economist; monetary policy, management and marketing) the former chairman of LAPO now chairs the new board. 

New CFO JOINS LAPO

A new Chief Financial Officer has joined LAPO. He is Dr. Kamakhya Narain Singh. Dr. Singh holds an MBA (finance and strategy) and a PhD (Strategic management of MFIs and their role in sustainable development) from Oxford University UK and the Banaras Hindu University, India,    respectively. He is a member of the Indian Institute of Chartered Financial Analysts (CFA) and the Indian Institute of Banking and Finance. Prior to this appointment, Dr. Singh was a microfinance specialist with the Asian Development Bank, and has more than 15 years of professional experience in the MF and SME sector in Europe, Asia and Africa. He resumed on May 3.

International Auditing Firm Preparing 2009 figures

After intensive discussion with our short list of international auditing firms based in Lagos on contents and fees we have now signed an agreement with Deloitte. Their auditors are starting with immediate effect to prepare the 2009 auditing report. It is expected to have the approved and authorized report by August/ September ready to be forwarded to our partners.

German Bank Manager as Volunteer

A German banker Barbara Hagelschuer from the “Sparkassen Gruppe” (largest banking organization in Germany) will be in LAPO in the next four months. She will be involved  in internal operational and financial system strengthening components of the transformation process.

Consultant to support the Change Process

LAPO is closely working with a management coach and consultant Bernhard Vester. He is involved in consulting on change management, strategy and organizational development. 

Strategic Functions Are Now Operating From Lagos

An annex of LAPO’s Head Office has been established in Lagos. Strategic functions such as finance, credit relationship management are carried out in the Lagos office. The office in the Lagos a commercial nerve center of West Africa will facilitate interface with our partners, regulators and other collaborators. The office is located at 65, Kudirat Abiola Way, Oregun, Ikeja.

Interest Rates And Charges Reviewed

In addition to the reduction in interest rate in October 2009, LAPO has again reviewed its charges. Registration fee and loan application fee of N500 and N200 respectively have been removed. There is training and loan processing fee of 1%. Insurance cover will now be provided at a premium of .6%. These changes take effect in June 2010. It is expected that as a regulated microfinance bank with easy access to public savings, LAPO will be able to offer lower rates on its facilities in the near future.

Volume of Operations is in the Increase

Monthly disbursement rose from N500 million in January to N1.5billion in April.  January to April disbursement is N5.2 billion. This represent 30% increase over the figure of N4 billion for the same period of 2009. The N21billion for the year is realizable.

INSURANCE COVER FOR LAPO CLIENTS

LAPO has launched an insurance scheme for her clients. This is in collaboration with GoldLink Insurance a major insurance company in Nigeria. Cover provided includes life, fire in market place and medical (hospitalization only). The premium rate is .6% of loan amount.

Improvements in our Data Processing

The migration of our existing software M2 to the more robust software FOCUS by the Fern company in North Ireland was successfully activated. This will not only lead to more reliable data but will also help reduce workload on branch level.

Publisher:        Godwin Ehigiamusoe, CEO of LAPO

Hints of the Subprime in New Microcredit

Enthusiasm for microfinance has surged since Professor Muhammad Yunus and his Grameen Bank shared the Nobel Peace Prize in 2006.

This November, APEC finance ministers will be asked to adopt an initiative on “financial inclusion” when they meet in Kyoto.

Unfortunately, this coincides with a wave of financialization of micro-lending, a phenomenon Yunus deplores. Read more

Sub-Saharan Africans Bank on Family for Business Loans

Washington, DC, June, 11 2010 - Sub-Saharan Africans would most likely turn to their families if they needed money to start a business, according to Gallup surveys of 18 countries in the region.

Forty-two percent of respondents spontaneously named "family" as their primary source for funds, while banks (16%) and friends (15%) were a distant second. Despite the emphasis on microfinance in recent years in sub-Saharan Africa, 4% mentioned these institutions. Read more

Where a little bit goes a long way: microcredit loans to women in need

Hasine Taçilik, a 44-year-old woman living in Yukarı Köseli village in the southeastern province of Diyarbakır, earns a living for her seven children through selling dairy products produced from a dairy cow that was purchased with a small loan.

“This lovely sorrel-colored cow brought joy, peace and happiness to our house,” she says.

Taçilik is, in fact, just one of thousands of indigent women whose lives were radically changed by obtaining as little as TL 100 up to TL 700 in credit from a micro lending institution. The money has to be repaid within 46 weeks in weekly or bi-weekly installments without interest but with a small service fee. Normally, these people are excluded from the formal financial system, as it is impossible for them to provide guarantees and the collateral demanded by commercial banks, in addition to coming up against social and gender barriers. But based solely on trust, the microfinance system has played a vital role in lifting the poor out of poverty throughout the world.
Read more

Creating a global private equity fund for the African microfinance

A Regional Investment Fund for micro, small and medium enterprises in Sub-Saharan Africa (REGMIFA) was launched on 5th May 2010 in Berlin. Symbiotics Investment Manager SA, a Geneva-based management company specialized in microfinance, was selected to manage this new fund.

Created by the German Federal Ministry for Economic Cooperation and Development (BMZ) and the development bank KFW, the REGMIFA will be given a budget of $ 150 million. The fund is meant to meet the financing needs of African financial intermediaries who provide loans to micro, small and medium enterprises in Africa. Read more

French version:

How Microfinance is Helping to End Poverty in Developing Countries

Namono Lakeri lost her husband to AIDS in 1996. She expanded her business with a loan and now all her children attend school

FEATURE: Small Premiums, Long Term Benefits: Why Poor Women Need Microinsurance

Monica Kirunguru’s husband was an outgoing man, and a prominent member of his community. The couple lived together on a farm near Mount Kenya, where they worked hard to support their seven children and five grandchildren.

In August 2009, Monica’s husband was admitted to the hospital. One month later, he passed away.
Coping with the emotional shock that accompanies the death of a life partner can be staggeringly difficult. Coping with the financial shock at the same time, however, can make the situation seem unbearable. Typically, a Kenyan woman in Monica’s circumstances would have two options to cover the hospital and funeral expenses: take out a high-interest emergency loan, or approach friends and family for money. Read more