Giving Women More than Credit: Women and Microfinance

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Seventy percent of the world’s poor are women, and microfinance is a powerful instrument of social change, particularly for women. Since women are often among the most vulnerable and poorest members of low-income societies, and given that 68 percent of global microfinance customers are women, it is no surprise that there are obvious economic and social benefits to involve women in microfinance programs. Recognizing that microfinance can empower women, women are also proving to be a good investment.  Studies show that women in poor rural regions are more reliable borrowers of credit than men. Additionally, women tend to invest in sectors that improve their families’ welfare, such as education and healthcare. In terms of social benefits, women’s financial inclusion has significantly contributed to female empowerment by giving women additional income earning opportunities, increasing their independence, and improving their status both within their families and their broader communities. To give just one illustrative example, in India the microfinance institution (MFI) Deepalaya has provided loans to 900 groups of poor rural women and these customers note that they now receive greater respect from their husbands, and some have even used their earnings to fight domestic abuse cases.

Although microfinance began thirty years ago as a gender-neutral industry, MFIs increasingly began to target women and recognized the potential of female entrepreneurs. The microfinance revolution started among rural women in Bangladesh in the 1970s and quickly spread to the rest of the developing world. Most notably, 11 percent of the poor in South Asia are accessing microcredit, followed by 7 percent in Latin America. In these areas, when poor women were given the opportunity to borrow and invest money in their businesses, they proved that they were reliable and efficient users of credit. Since then, a number of MFIs have tailored programs and developed products specifically for women. Women’s World Banking (WWB), a global network of MFIs that is committed to investing in women, showcases some of the microfinance products that are most useful to women, including savings and insurance products that facilitate women’s role in the household as caregivers; micro-health insurance products that help women save for health expenses; and mobile banking services that are designed to reach women who face access constraints.

Microfinance programs have drawn millions of women into commercial economic activities from which they were previously barred. The International Fund for Agricultural Development (IFAD) argues that women involved in microfinance, either as borrowers or savers, gain a level of power that allows them to make independent decisions and raise their status. MFIs that focus on women also tend to be highly regarded. The Grameen Foundation, for example, cites the importance of providing credit to women because they help break generational cycles of poverty by investing in their children. The Grameen Foundation is ranked number two on Philanthropedia’s International Microfinance 2012 ranking of MFIs. Another women’s focused MFI, Pro Mujer, launched in 1990 providing Latin America’s poor women with the means to improve their livelihoods. In addition to financial services, ProMujer has pioneered a healthcare and human development methodology.  They have disbursed over US$ 1 billion in loans and provided healthcare to approximately 1.6 million women and 6.4 million of their children and family members.

Furthermore, governments have also begun to take note of microfinance’s potential to empower women.  For example, India’s finance minister recently announced a plan to establish a small public bank for the poor run by and largely for women, due in part to the successes of similar Indian institutions and by the recognition that microfinance is an effective poverty reduction tool.

The successes and social benefits brought about by women-focused MFI’s should be celebrated, but it is important not to overlook the challenges facing rural women. 63 percent of women in the developing world lack formal bank accounts, and many more remain underrepresented in the financial sector. A 2012 study by Booz & Company concluded that microfinance is necessary but not sufficient for women who seek to enter the workforce, and that both government and the private sector must help women move beyond microfinance to reach their full potential. Additionally, depending on a country’s cultural norms, sometimes microfinance loans that are given to women actually end up being controlled by their male relatives.

Practitioners recognize that microfinance can only go so far, and they question whether a woman selling tortillas at the street corner can move up the economic ladder.  Microfinance is not a silver bullet, but there are impressive success stories. For example, a Jordanian woman whose Microfund For Women loan turned her from a janitor into a businesswoman who now supports seven households; a Kenyan woman who used loans from Kenya Women Finance Trust to open a hardware store that now employs 25 Africans; and a Pakistani woman whose $70 loan from the Kashf Foundation allowed her to open a jewelry business that became widely successful and provided the means to give her nine children an education. Although microfinance is not a cure-all, it has changed the lives of many women in the developing world. /cz

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Mobile or “branchless” banking (m-banking) is the delivery of financial services outside conventional bank branches through mobile phones and nonbank retail agents. M-banking technologies include smart cards and mobile phones that can conduct financial transactions. Although m-banking has only been around for about ten years, it has developed rapidly as a service that allows the “unbanked” – low-income individuals who do not have access to physical bank branches – to access financial services with their mobile devices. At present there are 30 million mobile money users worldwide. According to the Global 2012 Global Mobile Money Adoption Survey, there are more mobile money accounts than regular bank accounts in Kenya, Madagascar, Tanzania, and Uganda, and there more mobile money agent outlets than conventional bank branches in 28 countries. Given that 2.5 billion people are unbanked but 75 percent of the world’s population owns a cellphone, there are promising opportunities for synergies between mobile banking and microfinance.

The earliest m-banking services were developed to facilitate the financial transactions of existing bank customers in high-income countries. Today, m-banking is prominent in the developing world as a tool that allows banks to both better serve existing customers and reach out to new ones who live in rural areas where the nearest bank branch may be hundreds of miles away. The mobile money industry is rapidly expanding in developing countries: in 2001, there was one live mobile money service for the unbanked; in 2012 there were 150 live services. M-banking services run the gamut from money transfers to conversion transactions to bill and bulk payment services. Many m-banking platforms also provide savings and credit services at a banking agent, usually a retail or postal outlet. Current data show that customers use mobile money services for P2P transfers, bill payments, merchant payments, international remittances, and micro-insurance premiums. The vast majority of the value transacted on mobile money platforms is P2P transfers.

Many microfinance institutions have adopted m-banking platforms as an alternative delivery channel to reduce costs, facilitate greater outreach to rural areas, and increase existing customer convenience. The financial services provided by MFIs that offer m-banking include loan repayment, voluntary savings deposits, and checking account balances. In countries with an existing mobile money network, m-banking gives microfinance clients greater flexibility to manage their payments and deposits, allowing them to save time and money and experience greater financial security. In addition to improving existing customer convenience, m-banking has contributed to greater financial inclusion in the developing world, especially among women, who disproportionately lack formal bank accounts yet are largely responsible for managing family finances.

Because high operational expenses and limited capacity continue to limit the scale of MFIs, mobile banking offers an obvious way to offer microfinance services more cheaply and efficiently. A recent Focus Note by CGAP outlines some of the opportunities for MFIs who wish to take advantage of mobile banking. MFIs can adopt m-banking services to facilitate loan repayments and savings deposits. It is also possible for MFIs to serve as agents on behalf of a bank or mobile network operator; this provides MFIs with opportunities for learning about the mobile money industry without incurring high investment costs. Absent an existing m-banking network, MFIs may take advantage of mobile phone penetration to have their clients use phones for non-cash purposes. A survey of MFIs that plan to launch m-banking services revealed that these MFIs seek to use mobile banking to increase operational efficiency by reducing costs of service delivery as well as provide a channel to cross-sell their other products. Among MFIs surveyed that currently offer m-banking, respondents noted that loan repayments was the most widely used financial service, followed by voluntary savings deposits.

While there are clearly many opportunities for overlap between microfinance and mobile banking, significant challenges limit the degree to which MFIs can adopt m-banking services. In countries where an m-banking infrastructure does not already exist, it is very costly and time-consuming for MFIs to set up a mobile money platform from scratch. Most MFIs lack the funds and technical expertise to do so, and mobile network operators are usually only willing to partner with financial institutions that have a large customer base so that they can reach scale. It is also difficult to launch and implement a mobile banking channel without first understanding the needs and behaviors of clients that use mobile money.

Finally, in part because mobile banking is growing so quickly, non-bank financial service providers like mobile phone operators are not regulated as safely as traditional banks. At the moment, m-banking clients that use retail agents for cash-in/cash-out transactions are vulnerable to money laundering and exploitation. There is increasing concern among policymakers about the need for the m-banking regulatory environment to strike the right balance between keeping administrative costs low for agents and protecting consumers’ savings. /CZ

Click here to view the video on YouTube.

Microinsurance involves the provision of wide-ranging insurance services to low income populations previously unable to hedge against life’s uncertainties. Such products are extremely important in the developing world where a bad harvest, death, or a natural disaster can rapidly eradicate gains against poverty. Although still experimental today, the industry was virtually non-existent 10 years ago. According to the Microinsurance Network there are currently approximately 500 million microinsurance recipients, and there will likely be upwards of one billion by the end of the decade. Products include life insurance, health insurance, crop insurance, and livestock insurance. The International Finance Corporation (IFC) has recently estimated that the the industry has the potential to become a US$50 billion market.

One of the leading promoters of the industry is the Microinsurance Innovation Facility (MIF), housed at the International Labor Organization (ILO) and supported by institutions such as the Gates Foundation. The MIF/ILO’s goal is to guard against risk and fight against poverty by increasing low-income families’ access to quality insurance. The organization does not underwrite microinsurance programs, but it does engage in capacity building, research activities, the dissemination of knowledge on good practices, and fundraising for the development of training programs. For example, in its recent briefing note “Savings in Microinsurance: Lessons from India” it examined four savings-linked insurance products offered by Indian insurers and presented a framework for use in program design.

In addition to benefiting low income families, microinsurance also provides value to microfinance institutions themselves. By partnering with commercial insurance companies, MFIs are able to increase the probability that their loans will be repaid by protecting clients from risks such as a bad harvest or bad health. An increasing number of MFIs are requiring that loans be linked to microinsurance and premiums may be deducted from the loan upfront.

While donor organizations and foundations have provided an impetus for microinsurance, private insurers have responded by underwriting microinsurance products. SwissRe launched a microinsurance program to help Rwandan farmers protect their crops, and the company recently stated that 4 billion people can benefit from microinsurance.

In addition to international insurers, local and regional insurance firms have entered the arena to meet the challenges of providing products and services to low-premium clients. Several such approaches have been developed by AON Affinity do Brasil, which has endeavored to create cost-effective retail distribution channels.

Another alternative and innovative approach has recently been reported from Ghana, where burials are an expensive affair and produce a strain on poor households. In response to this the mobile phone developer Tigo has developed an insurance product to cover burial costs which they have been offering to their customers free of charge for one year in order to promote this type of product. A local insurance firm (partnered with Tigo) actually underwrites the insurance policies.

Besides commercial insurers, a range of other insurance providers have emerged that include mutual, cooperative and other community-based or community-led insurance organizations.

A roundup of recent microinsurance organizational activity is outlined below:

• Multilateral organizations such as the Asian Development Bank, the World Bank, and the International Finance Corporation (IFC), have focused on regulations, policies and guidelines regarding microinsurance. To this end the Asian Development Bank (ADB) recently supported a study for the Government of the Philippines aimed at strengthening the capacity of government regulators and microinsurance providers in the country.
• Recent studies have shown that microinsurance can increase agricultural output and productivity. Xavier Gine, a senior economist at the World Bank, has noted that increased access to insurance may induce farmers to replace subsistence farming with higher-return, higher-risk cash crops. Likewise, a recent study by Dean Karlan, et al has indicated that farmers who have access to insurance are disproportionately likely to increase expenditures aimed at increasing productivity.
• The Microinsurance Innovation Facility recently held a forum on the impact of health based microinsurance. The participants reviewed the impact of health microinsurance in India and found that insured study participants sought health care services more frequently, received better quality health care, and reduced their out-of-pocket expenses.
• The rapidly expanding Microinsurance Network acquired institutional legal status this past May. The organization promotes the development of effective insurance services for low-income people by encouraging shared learning, facilitating knowledge generation, and providing a multi-stakeholder platform.
• The Microinsurance Catastrophe Risk Organization (MiCRO), a reinsurance company, has been drawing significant attention for having provided microinsurance coverage to clients of Fonkoze, Haiti’s largest microfinance institution, prior to Hurricane Sandy. The insurance was designed to protect Fonkoze’s loans by protecting its clients from natural disasters, and has proven quite beneficial to many of the hurricane’s victims – so much so that the International Finance Corporation (IFC) has decided to provide the program with $1.7 million in funding.
• At the World Economic Forum in Davos prominent stakeholders in the world of microinsurance held a discussion entitled “Bringing Microinsurance to Scale”. The role of microinsurance was confirmed as an essential component of financial inclusion, however it was noted that affordable and accessible products need to be developed.

It is widely recognized that the greatest challenge for microinsurance schemes is providing real value for poor households. And, finding the right balance between adequate protection and affordability is critical.

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Over the past several decades, microfinance has been viewed in somewhat idealist terms. But it has now entered the realm of an industry that embraces consumers, institutions, regulators, donors, investors, and other stakeholders. As any evolving industry, it faces new challenges that can give rise to financial crises, questionable operating practices, and control issues. As a result, experts are calling for the introduction and/or strengthening of corporate governance standards in microfinance institutions (MFIs).

To this end the Council of Microfinance Equity Funds – the first membership organization to bring together the leading private entities that make equity investments in microfinance institutions – has recently updated its well-known document, The Practice of Corporate Governance in Microfinance Institutions, originally draft in 2005. According to the Center for Financial Inclusion, the original document was intended for two reasons in particular: To address the lack of existing guidance designed specifically for the unique characteristics of MFIs, and to extend beyond the ultimately impractical generalizations often utilized when discussing MFI governance. The new document builds on these original issues and provides new or expanded guidance regarding legal structures, social performance management, the alignment of incentives, making responsible exits, and risk management.

The World Microfinance Forum Geneva is getting involved in the discussion as well and recently created a working group tasked with developing 10 easy-to-measure good governance metrics which can be utilized to analyze the state of the industry in this regard. The completed list was largely focused on the state of the Board of Directors, and included indicators such as the number of independent board members, the qualifications of the board members, the frequency of board meetings, the separation of the CEO and the Chairmanship, and the presence of risk management and audit functions.

The Microfinance Information Exchange (MIX) conducted a survey in 2011 to measure governance in microfinance. The survey tested a new set of governance indicators recruited a sample of 162 MFIs across 57 countries to seek out data regarding the state of governance. Among the notable results was a positive correlation between risk management functions, internal auditing, and Board committees; suggesting that good MFI governance procedures do not exist in isolation from each other. In addition, MFIs of a wide variety of sizes and in a wide variety of locations were found to have relatively independent boards. Interestingly, however, there was no correlation found between governance and financial performance, although the authors were quick to note that the small sample size and lack of historical data rendered this result far from authoritative.

The Fundacion Microfinanzas BBVA took a further step in publishing in 2011 The Universal Corporate Governance Code for Microfinance Institutions, which contains a series of good practices, standards and principles in accordance with generally accepted international standards. The publication defines good corporate governance and covers the roles and responsibilities of the board of directors, the management,

On a similar note, Philippe Serres of the Agence Francaise de Developpement (AFD), was recently interviewed by Microfinance Focus regarding an issue tied inextricably to corporate governance: how to promote financial transparency among microfinance institutions in Sub-Saharan Africa. In his interview Mr. Serres described how the AFD, the European Union, and PlaNet Finance had been working together to create a guide for transparency to be used by institutions in the region to promote financial transparency on issues such as interest rates, audits, and ratings designations, as well as how to properly interact with regulators, staff, and other parties. According to Mr. Serres the project was designed above all to help to improve the overall stability of the sector and that the tenets of the document were being further promoted by direct interactions between PlaNet Finance and numerous MFIs.

As corporate governance becomes more of a byword in the industry, and increasingly crucial to both stability and the desire for both social impact and positive returns, it is likely this discussion will become an increasingly conspicuous piece of the microfinance debate. See below for videos of experts at the World Microfinance Forum Geneva discuss these important issues.

Click here to view the video on YouTube.

In 2003, the United Nations identified four main goals focused on access and delivery of financial services, particularly to low income segments of society: 1) reasonable cost for services; 2) sound institutions and prudential regulations; 3) financial and institutional sustainability; and 4) multiple providers of financial services.

Over the past ten years, financial inclusion has gradually become an increasingly conspicuous part in the development community discussions. The concept is really quite simple: improve people’s lives by increasing their access to basic financial services such as insurance, savings accounts, loans, and remittances. By doing so you empower them to smooth their consumption over time, avoid potentially dangerous shadow markets, undertake entrepreneurial pursuits, and broaden their financial horizons, among other things. This, it is presumed, will help them to improve their quality of life, and hopefully lift them out of poverty.

As this concept has increased in popularity so has institutional involvement. For example a recent study by McKinsey & Co. found that full financial inclusion for billions of the world’s poor is achievable but it will require scaling and innovation, and mobile banking will play a key role in delivery of financial services. The World Bank has created the Financial Inclusion (Global Findex) Database to measure how people in 148 countries – particularly the poor, women, and rural residents – save, borrow, make payments and manage risk. The  Boston University Center for Finance, Law, and Policy created the “Financial Inclusion Guide” for microfinance and related practitioners.  And, the Center for Financial Inclusion has committed to building a growing movement to reach full financial inclusion by 2020 by engaging in debate and action.

In 2009, the Alliance for Financial Inclusion (AFI) issued the Maya declaration whereby central banks among the developing nations accepted financial inclusion as their common objective.  The topic has even been a buzzword of recent G20 summits, and in 2010 the G20’s Financial Inclusion Experts Group (FIEG) released its nine “Principles for Innovative Financial Inclusion”, intended to “form the basis of a concrete and pragmatic action plan for improving access to financial services amongst the poor.”  Then this past year in Baja California the topic gained more momentum when the Mexican G20 leadership pressed for a greater focus on the issues affecting the developing world.

So how big of a problem is this?

According to the G20 Financial Inclusion Action Plan, as of 2010 more than 2 billion adults lacked access to basic financial services, and millions of micro, small, and medium sized enterprises (MSMEs) lacked sufficient access to credit.

This is where microfinance comes in. Originally designed for the allocation of credit to the unbanked, microfinance institutions (MFIs) have been slowly expanding their range of services to satisfy the needs of the perpetually unbanked. In addition to credit, MFIs have been among the first institutions to provide underserved populations with access to bank accounts, remittances, savings accounts, insurance and other financial services.

Many MFIs now offer a wide range of financial services utilizing a variety of delivery channels, from brick-and-mortar banking facilities, to mobile banking, to POS (point of sale) devices, and agent services as well as financial education and livelihoods training programs.  For example, Bandhan, the Kashf Foundation, Grameen, and BRAC all offer financial products that extend beyond microloans.  As MFIs introduce financial inclusion programs to best serve their customers, many are gaining an awareness of customers’ needs and customer service.  To adopt suitable financial inclusion strategies, researchers are helping MFIs identify market and client segmentation.  CGAP’s 2011 study of financial access noted that the ‘microcredit revolution’ demonstrated that poor people in the informal economy form valuable clients, and financial services can help improve household welfare and stimulate enterprise development. Identifying suitable products for such clients is challenging, as shown in a recent CGAP study on “Applied Research Methodologies for Financial Inclusion”. By studying the needs and expectations of low-income Brazilians in relation to financial instruments, researchers are finding that not all financial products are suitable for every consumer.

Given the increasing importance which the international community has been putting on the concept of financial inclusion, it is quite likely that this trend towards the expansion of financial services will only grow stronger; and microfinance will continue in its ongoing evolution.

Asad Mahmood: Challenges for Microfinance

“I think that what is most needed in microfinance today is innovation, collaboration, and customer orientation.”

Q: As you envision, what do you believe are the key elements (issues, challenges, etc.) of microfinance for the next 10 years?

AM. I believe that one of our biggest issues in microfinance is that we have not been focusing on customers, and that there has been too much emphasis on making money from microfinance. We need to identify products to meet customers’ needs, and to recognize that finance is not the only thing that will solve issues of poverty. Invariably microfinance clients have social needs (e.g. a roof over their heads and proper nutrition) as well as access to financial products such as savings. The goal of social finance should not be to just maximize profits.

The microfinance industry has to reassess itself because it has moved on since it began several decades ago. High interest rates can no longer be charged as in the past. We have to come up with more innovative approaches for microfinance. The industry has to be more customer-centric, and not just focused on making money.

We should seed a Think Tank, comprised of academics, NGOs, private and public sector participants, to figure out how to best deal with the poor, and come up with new and innovative models. We should all work collaboratively to find the best model(s) for microfinance going forward.

Q. It has been estimated that some US$25 billion to US$50 billion will be needed to support microfinance in the next few years. Where do you expect such funds to come from? And, who are the key players at present?

AM. Both the private institutional sector and the retail sector are potential sources for capital if we could show institutional and individual investors that microfinance truly benefits the poor. Despite the multitude of academic research, the quantifiable achievements of microfinance haven’t really been demonstrated. The exact impact of microfinance on poverty remains uncertain. Furthermore, negative media coverage of microfinance [relating to the Indian (Andrah Pradesh) situation, and highly visible IPOs in India and Mexico] have tainted the industry.

Q. What is the critical role for the investment community in microfinance?

AM. The investment community should seek balance – a middle road – between profitability and social goals for the poor. Investors should demand customer protection, along with transparency, accountability, and reasonableness (on profits).

Q. What really works in microfinance — for you personally? As microfinance has been on the scene for several decades now, what are the achievements that microfinance can claim?

AM. One of the greatest achievements of microfinance has been the breaking down of mental models of poor people. In the past, helping the poor was viewed as a charity. But microfinance has shown that introducing business methods to poor people is a viable approach. Millions of people now come to MFIs (globally) seeking loans and other financial services. As microfinance has gained acceptability by clients, investors and the general public, the industry needs to question the models being used. Are they still relevant and are the needs of the poor being sufficiently/efficiently addressed? In response, microfinance is now starting to look at other areas such as education, housing, financing solar energy products, etc.

There are also major fundamental changes in microfinance. Technology is enabling lower cost delivery of services to customers, and providing greater transparency.

Q. How would you address the role/function of microfinance vis-a-vis impact investing?

AM. Microfinance is the mother of social impact investing. The mistakes made in microfinance should form the basis for ‘lessons learned’ because impact investing could encounter the same problems as microfinance. There is a lot of idealism and exaggeration in impact investing. There is a disconnect between reality on the ground and potentiality of impact investing. First, we should define ‘impact investing’; is it building roads and bridges? There is a lot of puffery; some people working in impact investing have never made an investment. While some research reports claim that impact investing is a trillion dollar sector with billions of profits to be made, the reality on the ground is much different and it is difficult to place even small amounts of money in profitable social ventures that are viable.

We are sitting at a glorious time in human history. These decades will be pivotal. In summary, I think that what is most needed in microfinance today is innovation, collaboration, and customer orientation.

Click here to view the video on YouTube.

According to experts approximately 1.1 billion people, or roughly one-sixth of the world’s population, currently live in inadequate housing conditions in urban areas alone. Such people rarely have access to mortgages, and have little hope of saving enough money to purchase a house outright. As a result, many have turned to a process known as “progressive building” or “progressive housing” in order to address their housing needs. They save enough money to address one housing issue, i.e. building a roof or a floor, or undergoing basic repairs, and upon completion begin to save for another project down the road – a process which can take years or even generations to complete. From a broader perspective, housing finance is viewed as a means for providing shelter, creating jobs, and fueling growth, according to a recent study by McKinsey and Company.

In recent years the world of microfinance has begun to address this issue more diligently, and has been developing various methodologies designed to aid low income families in their search for adequate shelter. Some experts, particularly in Africa, view this as an opportunity for microfinance that includes group loans to purchase land and housing. To this end MFIs have been providing small loans, usually between $500 and $1,500, to poor families to facilitate the expedition of their progressive home building process. Lenders often do not require a title to guarantee the loan – an important innovation given the questionable legal foundations regarding land ownership in many developing countries – and use a variety of methods including requisite prior micro-enterprise success, co-signers, savings groups, mandatory savings requirements, and/or automatic salary deductions to minimize risks. Through a series of loans, borrowers are able to increase the speed of their home completion, and do so at much lower rates than they would had they saved up enough cash to access a traditional mortgage.

The World Bank has been in the forefront of affordable housing for the bottom of the pyramid for the past 15 years, advising governments on policies and systems as well as property rights, lending operations and funding instruments. There have also been some attempts to attract corporate investors to finance housing at the bottom of the pyramid. Most, however, are social or impact investors. For example, Habitat for Humanity International established a US $50 million MicroBuild Fund in 2010 for affordable housing worldwide which provides capital to microfinance institutions to support small loans for housing improvements. In India, Habitat partnered with ASK to support local microfinance institutions offering about $1,000 for home improvements to existing clients of the MFI.

In addition to being beneficial to low income families, housing microloans also appear to be beneficial to many MFIs. They make use of the staff, systems, and knowledge already existing at such institutions, are in high demand, and in many cases become profitable within one year. Mibanco in Peru developed an $11.6 million dollar portfolio in 3 years, and FAMA in Nicaragua dispersed nearly $1 million in one year – programs which Accion has reported as being profitable for both institutions.

Major microfinance players such as Accion International have already begun to take part in the industry, and microloans have been utilized by MFIs in the Dominican Republic, Peru, Nicaragua, El Salvador, Ecuador, Haiti, Paraguay, Mexico, Bolivia, Guatemala and Honduras, among others. Given the high demand, profitability, and the important role which housing plays in public health, and macroeconomic growth, the role of MFIs in the housing industry is likely to continue to grow. SEWA Bank in India has been offering housing finance loans for the past 37 years, particularly for women, for basic home repairs and adding basic housing facilities (e.g. water storage tank, electricity).

Some of the challenges facing housing microfinance are lack of title and lack of security that are often required by regulators; but they need to understand that this is micro housing not home mortgaging. Additionally, municipalities have to address basic infrastructure for residents, including water and sanitation. To meet the immense needs for affordable housing, it has been estimated that there is some US$800 in circulation (including a projected US$100 MicroBuild fund established by Habitat for Humanity, philanthropy and guarantors).

More recently, some experts (such as Jamie Ritchie of Rooftops Canada) have been emphasizing the idea that a model for ‘housing microfinance’ consists of housing support services combined with financial services and community development.

Videos on housing microfinance:

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Click here to view the video on YouTube.

Click here to view the video on YouTube.

But we have differing voices within the microfinance community. Some experts are beginning to question the efficacy of microfinance in fighting poverty. Still others question the impact of microfinance on overall economic development and whether it can enable simple, low-income economies to grow into modern high-income economies.

And, the debate goes on.

Click here to view the video on YouTube.

Over the past 10 years, as microfinance has grown and matured, access to financial services has broadened its mandate to include savings, microinsurance and other financial products.  While loans still constitute the primary offering, savings and other asset accumulation mechanisms are gaining a solid foothold.    “Access to financial services” and “innovative financial inclusion” are garnering support from governments, donor agencies and philanthropic organizations.  The Gates Foundation, for example, is supporting savings and deposit-taking initiatives.   Studies indicate that savings have a greater impact on growing microbusinesses than loans.  Whereas loans provide cash flow for microbusinesses, savings enable growth through capital investments. 

Portfolios of the Poor.  

Click here to view the video on YouTube.