Microfinance Report

Borrower Story: Lorise from Haiti

Lorise gave a passionate and excited testimony about the impact of microfinance on her life. She is a borrower at Fonkoze in Haiti and recently graduated into Fonkoze's full-fledged microfinance program.

Drop by Drop: Using Microfinance to Provide Safe Drinking Water

ACCESS & HUL in Base of Pyramid Partnership to bring Safe Drinking Water to Rural Poor

by Mallika Ahluwalia
Project Associate
ACCESS Development Services

Yakalakshmi lives in Nekkunda village, Telengana region in Andhra Pradesh, India with her husband and two children. Though she has water piped to her house by the village panchayat (local government body), her entire family fell ill for a month last monsoon season by drinking water directly from the tap. “We all got high fever and severe diarrhea”, she says, “we had to spend around Rs. 4000 on health care, which was very difficult for us”. So when she got the opportunity this January to buy an effective water purifier through her Self Help Group (SHG) on an installment basis she was one of the first to sign up.

Yakalakshmi is just one of the beneficiaries of a unique tie-up between ACCESS Development Services, an Indian microfinance technical services non-profit organization, and Hindustan Unilever Limited, one of the country’s largest producers of fast-moving consumer goods, to provide safe drinking water to rural poor. “Most of these villages have piped water or boreholes”, says Padma, Project Coordinator at a local NGO, PEACE, “the problem is that tests by UNICEF in this district show that up to 70 percent of these sources are contaminated.” The contamination gets even worse during the rainy season, especially due to poor sanitation and waste-management practices.

The Power of a Signature

Technology is growing by leaps and bounds in the microfinance industry. Microfinance Report recently reported on the use of smart cards, biometrics, and mobile phones as the latest technological innovations. These advances are making microfinance more efficient and cost effective, while simultaneously disconnecting the borrower from a subtle, yet powerfully transformative tool: the signature.

The Rise of Mobile Phone Banking

by Jay Milbrandt

The mobile phone can be found everywhere, even the most unlikely of places: Salanga, rural Bangladesh.

The mobile phone is becoming the new bank for the poor. Recent leaps in mobile technology are providing the first access to financial services that many people throughout the world have had. Originally introduced into many developing countries as a small microenterprise opportunity, e.g. the Grameen “phone lady,” the mobile phone has become ubiquitous and nearly an essential for daily life.

New Policy in Nigeria Will Cut Microfinance Institutions: Good or Bad?

On January 1, Nigeria joined the ranks of developing nations adopting laws and policies to regulate the microfinance sector. Under the new Microfinance Policy of the Central Bank of Nigeria, community banks and microfinance institutions must increase their capital base from 5 NGN (approximately $42,000 USD) to 20 NGN (approximately $169,000 USD). The purpose of the policy is to “create micro-finance banks that are financially sound, stable, self-sustaining and integral to their communities with potential to attract more resources and expand services to their customers.” In the process, 145 microfinance institutions and community banks may lose their licenses.

Biometrics and Smart Cards Serve as Successful Microfinance Innovations in Asia

by Jay Milbrandt

Signatures and paper ledgers may soon be a thing of the past.

Microfinance institutions in India and Indonesia lead the world in the use of biometrics and smart cards. These recent innovations in microfinance have led to lower administration costs and greater efficiency for borrowers, dispelling the myth that the use of these advanced technologies is cost prohibitive for microfinance.

Political Violence Threatens Kenya’s Microfinance Sector

by Jay Milbrandt

Recent and continuing political violence in Kenya has torn though the country’s microfinance sector. According to Business Daily Africa, “The previous year had seen a lending boom by banks and micro finance institutions to small and medium scale enterprises which have now emerged as major economic drivers in the last five years. But those gains could now be lost. The raging violence has targeted small businesses in major towns, where most borrowers are more likely to set up business.”

Microfinance Grows Despite Economic Downturns

Despite global economic downturns, the poor remain highly bankable. Citigroup, a leader in microfinance amongst many global banks, announced that the microfinance field appears “largely immune from the global credit liquidity problems following the U.S. subprime mortgage crisis.

In previous economic crises, the microfinance remained sector remained strong. Bob Annible, global director of Citigroup’s microfinance operations noted that, “When Indonesia had its financial crisis in the 1990s, the microfinance sector did not experience it as strongly as the formal sector.”

Borrower Story: Meera from Bangladesh

by Jay Milbrandt

Meera with her two daughters on right and left.
Photo: (c) Jay Milbrandt collection.

The shear numbers are overwhelming. 1.2 billion people throughout the world live in extreme poverty. Accordingly, extreme poverty is defined by the World Bank as living below $1 per day purchasing power parity threshold. And, by the year 2025, the United Nations set the Millennium Challenge goal of eliminating extreme poverty. Many statistics currently suggest that this goal may not be met. But, these are just statistics, and they’re easy to get lost in. In Bangladesh, at least, the goal appears to be well on the way. When you travel through Bangladesh meeting the microcredit borrowers, you realize that behind every number is a life—real people and real families. Suddenly, the numbers fade away and the statistics come alive.

Microfinance Scam in Uganda Raises Red Flags

Banana stands serve well as a microenterprise in central Uganda.
Photo: (c) Jay Milbrandt.

Last month, the Support Organisation for Micro Enterprises Development (SOMED), closed its doors and its directors disappeared. An editorial by The Monitor in Kampala, Uganda, fears that millions of shillings deposited by the rural poor may have been lost. The scenario raises red flags and the concern that other fraudulent microfinance institutions may be poised to do the same.