Social Performance Indicators Blog

Not Just Credit: Savings and Insurance Products through CRECER, Bolivia

Posted by: Katherine Oglietti

 A CRECER client in her restaurant

Interview with: Fabiola Céspedes Quiroga
Research Coordinator, CRECER, Bolivia

CRECER began in 1990, following a new management philosophy developed by Freedom from Hunger called Crédito con Educación (Credit with Education). Currently, CRECER facilitates financial services and products integrated with development services to 102,212 clients, of which 90% are women, 64% have only completed primary education, and 38% live in rural areas. As a non-regulated NGO, government policies prevent CRECER from accepting deposits or offering insurance products.  However, the organization has taken creative measures in order to facilitate these services to their clients. While commercial banks such as Parabank in Azerbaijan are downscaling in order to adapt their financial services to microfinance clients, NGOs such as CRECER are searching for ways to increase their institutional capacity in order to offer more financial services to their clients. In this interview, CRECER speaks about the various financial products it offers.

Downscaling Commercial Banks Can Offer High Quality Products to Microfinance Clients

Posted by: Katherine Oglietti

Information for this MFI profile was provided through an interview with Tofig Gasimov, Director of International Relations at Parabank, Azerbaijan; MIX Market; and the Parabank website.

Parabank is one of the oldest commercial banks in Azerbaijan; it was formed in 1991. Though it has been successful as a commercial bank, it is currently scaling down in order to also reach a low-income population that, according to the bank’s social mission, still faces difficulties in accessing financing. It initiated its microfinance component in 2004 with a venture in unsecured loans for cattle breeding in rural villages. The bank now supports businesses in any scale, from micro to large enterprises, and it has made a shift from lending not only to individuals but also through solidarity groups. While Parabank viewed this shift as a risk, the portfolio at risk over 30 days on its microcredit portfolio is actually a percentage point lower than its regular portfolio.

As a commercial bank, Parabank is able to offer a wide range of financial services to its clients in both rural and urban areas such as fixed term and checking accounts, educational loans, and insurance products; the social performance report indicates that it is able to offer more products than its peers. Clients have access to vehicle and real estate insurance through several different insurance companies in Azerbaijan. Last year, Parabank included Credit Life Insurance in their programming in order to protect the unsecured group loans (which are only 3% of the loan portfolio). This covers the full amount of the loan in cases where the client is unable to repay the loan due to serious health conditions or death. Though initiated for the purpose of reducing the risk of overindebtedness for its low-income microloan clients, Credit Life Insurance will soon be applied to all types of loans. Here we see an increased focus on client protection that occurred simultaneously with a shift towards microfinance.

Announcement: PPI™ Initiative in Africa

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The Grameen Foundation made an announcement today that it will begin an initiative with three MFIs in Sub-Saharan Africa to use the PPI™ (Progress out of Poverty Index™) to assess client poverty levels, better target poor clients, and track how they are moving out of poverty. The initiative, the first of its kind in Africa, is being facilitated by the PPI™ Users Collaborative in Africa (PUCA), a new, multi-stakeholder group that unites five charter partners—Oikocredit, Catholic Relief Services, Terrafina Microfinance, Planet Rating and Grameen Foundation—with the national microfinance networks APIM/Mali and  APSFD Senegal. As Sub-Saharan Africa is the poorest region in the world, it is particularly important for MFIs of that region to measure whether and how MFIs are able to contribute to poverty alleviation, improving their strategies accordingly.

More information on this initiative is available on the Progress out of Poverty Blog and the Grameen Foundation webpage.

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Innovation Meets Financial Education: Swadhaar in India

Posted by: Katherine Oglietti

Interview with: Preeti Telang, General Manager – Programmes and Operations, Swadhaar FinAccess

Swadhaar FinAccess (SFA), which currently operates in Mumbai, India, was founded in 2005 with the objective of providing the urban poor increased access to financial services, bridging the gap with the formal banking sector. In  2008, the promoters of Swadhaar FinAccess transferred the existing microcredit portfolio of SFA to its newly created Non-Banking Financial Company, Swadhaar FinServe Private Ltd. (SFPL). SFA, the nonprofit entity, focuses on a financial education and savings program, facilitating savings accounts to its clients through Citibank. We spoke with Preeti Telang of FinAccess, who offered her insight as to the importance of combining financial education with the facilitation of savings products.

MIX: What are the major obstacles preventing women who live in urban informal dwellings from being able to save?

Preeti Telang: There are three major obstacles that prevent Indian women from saving:

1) Lack of knowledge about savings. I strongly believe that our female clients would like to save. It is not that they do not want to save; it is that they do not know how to save.  They find it very difficult to set aside money from their limited incomes and put it into savings. Savings essentially becomes the last thing on their agenda, as it is for most of us, so they have to learn that savings should be a high priority.

Support Haiti through Microfinance

Posted by: Katherine Oglietti

Following the earthquake in Haiti, we featured guest posts from Sogesol and Fonkoze affiliates because we were able to make rapid contact with them, yet these MFIs are not the only ones who need support. It is necessary to emphasize that each of the microfinance institutions in Haiti and their clients have suffered greatly as a result of this catastrophe, and each will have much rebuilding to do. They have born losses of staff members and damages to their institutions. They are struggling to overcome these heavy blows to their organizations while redoubling their efforts to provide desperately needed loans and financial services to their clients. 

Photos by Leigh Carter, Fonkoze USA

As the rubble is cleared and the dust settles, microfinance will become an essential component of the rebuilding process, helping microentrepreneurs get back on their feet. MFIs have the capacity to offer loans for rebuilding homes and businesses; the ability to offer such financing will be contingent upon a large increase in funding. Please consider channeling your support for Haiti’s continual and sustainable development through one or more of these microfinance institutions who have been working to support Haitian microentrepreneurs and families for many years. 

MIX Market has information on six microfinance institutions from Haiti. Please find below the information that we could find on each of these organizations, as well as how to contribute to their funds for relief efforts.

Announcement: Social Performance Task Force Annual Meeting

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Social Performance Task Force Annual Meeting

June 28, 2010 – July 2, 2010
Bern, Switzerland

Sponsored by the Swiss Agency for Development and Cooperation, Liechtenstein Development Service, CGAP, and the Ford Foundation

For more information, please see the attached invitation letter, city guide, and hotel reservation form.

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MFIs’ Financial Products and Services: An Overview of SP Report Data

Posted by: Taea Calcut

As mentioned in an earlier post, MFIs exist first and foremost to provide financial products and services to populations underserved or excluded by formal financial institutions. So, what have MFIs identified as the most important products and services to meet their clients’ needs?

Graph 1: Percentage of MFIs Offering Financial Products/Services (n = 166)

 

Using data from a sample of 166 MFIs that submitted social performance reports to MIX, we find that 100% of MFIs offer credit products to their clients, yet less than half currently offer additional products or services (Graph 1).  Of those MFIs that do offer additional products and services, insurance emerges as the most popular product type.

Innovating Microinsurance

Guest Post by: Craig Churchill - Head of the Microinsurance Innovation Facility, International Labour Organization (ILO)

 
MiBanco, Peru, and the insurance company it now owns, Protecta.

Craig Churchill is the head of the ILO's Microinsurance Innovation Facility, launched in 2008 with a grant from the Bill & Melinda Gates Foundation to promote better insurance products for more low-income households. In this post, he evaluates the pros and cons of implementing microinsurance policies, and offers specific guidelines that MFIs can follow to increase their leverage and negotiating power.

Many microfinance institutions (MFIs) are looking beyond credit to see what other financial services they can offer their clients, and in those discussions insurance invariably is raised as a possible option. But should an MFI get involved in offering insurance?

When microfinance institutions are interested in insurance, their primary motivation is often to reduce their credit risk in the event that borrowers or their family members experience death, illness or other losses. If insurance can help protect the households in such circumstances, it will indirectly safeguard the MFI’s portfolio.

Another significant motivation behind the interest in insurance is to improve the welfare of their clients. MFIs typically have dual missions to alleviate poverty or promote economic development while generating a profit (or covering their costs). The social mission of improving the welfare of poor households can be enhanced through the protection provided by insurance.

There are also a number of legitimately commercial reasons why MFIs might be interested in providing insurance, such as enhancing retention, improving product profitability, diversifying their income streams and reaching out to new markets.

Worse than a War Zone: Sogesol Assesses the Damage in Haiti

Guest post by: Melissa Lumpkin, ACCION International

 

Melissa Lumpkin is a member of ACCION’s Africa & Haiti Global Programs team.  Based in Washington DC, she is the project manager and board representative for ACCION’s partner in Haiti, Sogesol.  She can be reached at mlumpkin@accion.org.

Anyone who has experience living, traveling or working in Haiti will tell you that life for most Haitians is tough – and this on a good day.  The impact of last week’s earthquake has been catastrophic and the country will face immense challenges in rebuilding.

For the past decade, ACCION has worked with Sogesol, the microfinance arm of Haiti’s largest bank, to bring microfinance services and hope for a better future to Haiti’s self-employed poor. Over the past week, we’ve remained in close communication with the President and Directeur Général of Sogesol. The DG confirmed that she, along with several staff and ACCION’s resident advisor, were at the Sogesol headquarters in Petion-Ville when the earthquake hit. Fortunately, they were able to get out of the building and safely home. Yet, a disaster of this magnitude leaves no one untouched – all have lost many close friends and witnessed widespread destruction. Our own resident advisor wrote, “Melissa, the conditions here in Haiti are unimaginable. Please… whatever ACCION can do to help.  It is worse than a war zone.”   

Back to Basics: Financial Services and Social Performance

Posted by: Taea Calcut

The core function of microfinance institutions is to provide financial services to populations traditionally marginalized from countries' formal financial sector. Over the next two weeks, the Social Performance Indicators Blog will return to the basics of microfinance, examining its broad range of financial offerings through a lens of MIX Social Performance Report data and interviews with MFIs that have pushed the boundaries of product innovation to meet target clients' unique needs and constraints.