Nicaraguan Microfinance in Crisis

> Posted by Sergio Guzmán

Credit: El Nuevo Diario, http://impreso.elnuevodiario.com.ni/2009/09/ 08/nacionales/109207

The microfinance industry in Nicaragua is under siege by a politically motivated group of borrowers who call themselves the No Payment Movement (Moviemiento No Pago).  The Movimiento No Pago includes from 3,000 to 5,000 producers, merchants and microentrepreneurs who are led by the former mayor of Jalapa Omar Vílchez. The movement commenced in Jalapa in the summer of 2008, with the takeover of an MFI and a riot incited by a protest speech.

Recently, the leaders of the movement have demanded that the Congress approve a Moratorium Law to give debtors a 10 year amortization period with interest rates that do not exceed 8 percent APR as a condition to stop harassment of the microfinance industry. The leaders of the Movimiento No Pago from the North and Caribbean regions of Nicaragua have threatened to burn the buildings of MFIs, take hostage MFI personnel and escalate their violence if their demands for a moratorium law are not met.

Credit: El Observador Económico www.elobservadoreconomico.com/ articulo/933

There has been important opposition to this moratorium law from many sectors. Several newspaper editorials and articles speak against the moratorium bill, which has not yet moved toward legislative action. The law was sent back to the economic committee of the National Assembly and Awaits review. 

According to one journalist, “Before erasing two decades of investment and progress with a vote, the National Assembly should investigate how microfinance operates and the reasons for its high costs as well as its social and economic impact as well as its clients’ satisfaction. A law that rewards clientele without willingness to pay and punishes honest and punctual clients, will incentivize a non-payment culture at a loss for all of the social stakeholders involved, including the banking system.”

How MFIs are doing on Client Protection – First Reports from the MIX

> Posted by Cara Forster

How do MFIs implement client protection principles?  Until now, we have only been able to guess at the answer to this important question.  But thanks to the MIX, we now have some preliminary data, giving us a first glimpse of what is going on inside MFIs. 

The MIX is testing its Social Performance reporting framework, a self-reporting survey covering various social performance issues. Question 8 of the survey focuses on client protection, and is based upon the Six Principles of Client Protection of The Smart Campaign.  The MIX has received responses from over 200 MFIs so far, but has only processed and posted publically the results from the first 53 MFIs.  The information in this post is based on an analysis of these first 53 institutions, which represent 29 countries and about 10 million total borrowers. 

1. Nearly all of the surveyed MFIs have multiple strategies for avoiding client over-indebtedness.

• 91 percent of MFIs evaluate repayment capacity and 85 percent have explicit written guidance on borrower debt thresholds.  A majority (57 percent) obtain information on existing client debt levels.
• Almost 40 percent of the MFIs reported on the percentage of their borrowers who also borrow from other financial institutions. Among the countries with a high incidence of multiple borrowing were

Credit Bureaus and Overindebtedness

> Posted by Elisabeth Rhyne

I’m blogging from the annual meeting of the MicroFinance Network hosted this year by Equity Bank in Nairobi.  Bob Annibale of Citi Microfinance led the group of CEOs from 25 leading MFIs around the world in a discussion of the impact of the global financial crisis on their institutions. 

It’s no surprise that a challenge at the top of everyone’s list was avoiding overindebting clients, especially when clients can borrow from several MFIs in the same location. This is something I saw first hand on a field visit to the large settlement of Karangwari, where not only Equity Bank but also K-Rep Bank, Kenya Women Finance Trust, Faulu, and Jamii Bora were active.  Carlos Labarthe of Compartamos noted that in Peru, with a very competitive microfinance market, the highly proficient credit bureau plays a key role in  keeping overindebtedness down.  Other network members contrasted this with Morocco, which lacks credit reference services, leaving lenders with no reliable way to find out about the existing debt of their clients. Carlos made a strong appeal to Microfinance Network members: “We have to help build the credit bureaus in our countries.” 

New Energy Links Podcast with ToughStuff

>Posted by Amanda Powell

In our latest Energy Links podcast Paul Rippey interviews Nick Sowden of ToughStuff. Nick shares ToughStuff’s success selling solar lamps in Madagascar and other countries using existing distributors, and a business in a box model. Listen here »

About Energy Links

The Energy Links Project is designed to develop, test, refine, document, and publicize integrated approaches to financing and marketing clean energy products to large numbers of people in developing countries. If you want to hear all of the podcasts in the Energy Links series you can listen here.

Three blogs feature the Smart Campaign

>Posted by Amanda Powell

Last week we introduced the Smart Campaign, formerly the Campaign for Client Protection. During our teleconference to introduce the campaign we discussed the past and future of the campaign. Over the past week three blogs have taken the opportunity to reflect on the campaign. The Connecting Women blog noted the tools the campaign has already created. This included the Client Protection Questionnaire and Self-Assessment Guide. Likewise, the Microfinance Insights blog underscored the need for client protection for both MFIs and investors.  They also observed client protection helps distinguish good lenders. The MicroCapital blog described not only the development of the Smart Campaign, but how one MFI in Nicaragua is already implementing the Client Protection Principles that campaign endorsers support.

Stay tuned for the latest about The Smart Campaign.

Slate Magazine Highlights the Smart Campaign

>Posted by Amanda Powell

We recently introduced the Smart Campaign as a global effort to unite microfinance leaders around instituting client protection practices in all that we do. Today, Slate Magazine cited the Smart Campaign as a method to implement client protection standards across the microfinance industry. The article also encourages readers to support organizations that put clients first, including Smart Campaign endorsers. Read Slate’s article here on how client protection benefits industry members and clients alike. You can also read more about the Smart Campaign and the principles our endorsers support at http://thesmartcampaign.org/.

Please Join us for a Round Table with the 2009 Banana Skins Authors

We are pleased to invite you to participate in a discussion with David Lascelles of CSFI and Philip Brown of Citi

Microfinance, about the future of the microfinance industry. The creators of the 2009 Microfinance Banana Skins will be joining us at the Center for Financial Inclusion at ACCION, in Washington DC, to discuss the report’s findings.

Published annually by CSFI, Citi, and CGAP, the report observes t he risks affecting growth in the microfinance industry. The findings have shifted significantly from the 2008 report due to the global financial crisis. Come listen to these experts discuss this year’s top-rated risks, how

2009’s findings differ from past survey’s, and implications for the microfinance industry. Space is limited, please RSVP to Amanda Powell (apowell@accion.org) no later than Tuesday, October 20th.

Date: Wednesday, October 21
Time: 4:00pm to 6:00pm
Place: Center for Financial Inclusion at ACCION International
Address: 1401 New York Ave., 12th Floor, Washington, DC 20005
RSVP: Amanda Powell at apowell@accion.org

HBS-ACCION Program on Strategic Leadership for Microfinance: Now Accepting Applications for 2010

> Posted by Anita Gardeva

We are pleased to announce that we are beginning to accept applications for the 2010 HBS-ACCION Program on Strategic Leadership for Microfinance.

The Program is scheduled to take place April 5^th through April 10^th, 2010 at Harvard Business School in Boston, Massachusetts.

The HBS-ACCION Program provides a unique opportunity for participants to expand their strategic thinking, learn through a proven case-study approach, and consider their role in finance for the bottom of the pyramid. The course is designed for CEOs and executives at leading microfinance institutions or mainstream banks, and is part of HBS’s Initiative on Social Enterprise.

The course will address fundamental challenges of doing business at the base of the financial sector, including:

• succeeding in highly competitive financial sectors
• maintaining a social focus in a commercial setting
• reaching new business segments
• developing innovative products and delivery channels

Applications are reviewed on a rolling basis and space is limited to 60 people.

For more information on the program and to apply please visit www.accion.org/hbs or email Anita Gardeva at hbsaccion@accion.org.

Exploring Financial Services for the Poor with Elisabeth Rhyne in American Banker

>Posted by Anita Gardeva

In an op-ed in yesterday’s American Banker, Elisabeth Rhyne, managing director of the Center for Financial Inclusion at ACCION, highlights the importance of innovative financial products and delivery methods that are tailored to the needs of clients.  Creativity and simplicity are the keys to opening the door to financial access for the poor.

“The first lesson for any financial service designer for the so-called base-of-the-pyramid market is that products for low-income people are not just scaled-down versions of products for the middle class.  To assume that they are might be called the subprime fallacy.”  With examples from countries around the world, Ms. Rhyne highlights successful innovations in providing financial services to the poor that are creative, yet simple, in their adaptation to the market’s local dynamics.  “Only simple products can be delivered at affordable prices to low-income people.  At the same time, simplified products must incorporate risk reduction in creative ways.”  Ms. Rhyne also points out that providers who are able to rethink the nature of banking have the potential to generate benefits for both their clients and their businesses.

The article, which is adapted from Ms. Rhyne’s latest book, Microfinance for Investors and Bankers: Understanding the Opportunities and Challenges at the Bottom of the Pyramid, is available on the American Banker website.  Access is password-protected but free trials are available. To read the book’s chapter from which the article was adapted, click here.

Introducing The Smart Campaign

>Posted by Amanda Powell

After months of research, planning, and collecting feedback from microfinance industry leaders, we are ready to introduce The Smart Campaign (formerly known as the Campaign for Client Protection in Microfinance). This campaign is a global effort to unite microfinance leaders around a common goal: to enhance client protection in all that we do – to better serve our clients, increase employee satisfaction, and strengthen the microfinance industry overall.  We want to see the microfinance industry be a leader in responsible finance and an example to “mainstream” finance.

As part of our official introduction to the campaign, we will be hosting an international teleconference with top industry leaders.  It will take place on Wednesday, October 21^st, at 10:00 a.m. (Eastern Standard Time, US**).  Click here to RSVP for the teleconference. (Please take note that the phone call will take place in English)

On the call, we will:

• Present the Campaign’s new look
• Update you on our activities since the 2008 Clinton Global Initiative announcement
• Provide you with an inside look at upcoming initiatives from The Smart Campaign, and
• Learn about emerging trends in client protection from top industry leaders

As we present the new look of The Smart Campaign we hope you will join us for this teleconference.

Please continue to follow the development of the Campaign as we strive to keep clients first in microfinance and bring full financial inclusion to people around the world.

** Seattle, 7:00a.m.; Mexico, Colombia, 9:00a.m.; Bolivia, Washington, DC, 10:00a.m.; Burkina Faso, 2:00p.m.; Switzerland, South Africa, 4:00p.m.; Egypt, Uganda, 5:00p.m.; India, 7:30p.m.; Cambodia, 9:00p.m.; Philippines, 10:00p.m.