Microfinance Focus May 2009

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www.microfinancefocus.com Microfinance Focus [ May 2009 ] 1

Savings: Meeting this Essential Need Advancement of technology Reinforce Securitization in Palestine Multiple Borrowing: Finding Solutions

Interview Padma Bhushan Ela Bhatt

Institution Spotlight Grameen Koota

MicrofinanceMicrofinanceMicrofinance & Environment & Environment & Environment

www.microfinancefocus.com

May 2009

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Cover Story : Microfinance and Environment

19...Microfinance & the Environmental Bottom Line

- GreenMicrofinance and CGAP

22...World's First Cell-Phone-Based Carbon-Micro-Credits Implementation

- David A. Palella

24...Backyard BBQs Meet Improved Cook—stoves

- Betsy Teutsch , GreenMicrofinance

Horizon

12...Reinforce the Microfinance Securitization in Palestine with priority to

the Gaza Strip.

-The Palestinian Network for Small and Microfinance

14...Savings: Meeting this Essential Need of Poor in India - By, Graham A. N. Wright

16..Multiple Borrowing: Finding Solutions

- Suresh K Krishna

Interview 28.. An Exclusive Interview with Padma Bhushan Ela Bhatt , (Magsaysay laureate)

Disclaimer Views expressed in the article/s are au-thor’s own views. It does not necessarily represent those of Microfinance Focus . Microfinance Focus does not take any re-sponsibility of correctness of those data. Reproduction in whole or in part without written permission is prohibited .

Perspective 07...Advancement of technology: Reduce the Cost and Maximize the Benefit to Client By, Dr. Souren Ghosal

May 2009 Contents

41… News 29...First Person-New York Desk 06… Editorial—The US Desk 05... Editorial-India Desk

Institution Spotlight 25...When the Buck Stops Grameen Koota: More than Just Credit

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BOARD OF ADVISORS Mrs. Frances Sinha Mr. Sitaram Rao Dr G. Gandhi EDITORIAL BOARD Dr. N Jeyaseelan Dr. Amrit Patel GOVERNING BOARD Mr. Suresh K Krishna , Chairman Mr. Ashish Gupta , Member Mr. M. V. Raman, Member Vikash Kumar , Executive Director

© copyright 2008-09 www.microfinancefocus.com

Our People

Team India Managing Editor Vikash Kumar Head—Knowledge Management Dr. Souren Ghosal Associate Editor Christina Weichselbaumer

Marketing and Outreach Manager Romain Testard

The US Managing Editor—US Jerome Peloquin

Associate Editor Pamela Faulkner Associate –Knowledge Management Raghunand Makonahalli Correspondent : New York Peter Burgess Marketing & Technology Editor Bruce Meraviglia Correspondent : Nairobi [ Africa ] Jastus Suchi Obadiah

Head Office Microfinance Focus—India Avalahalli, Anjanpura Post , Bangalore( India)-62 P: +91.80.28436237 |f: +91.80.28436577 Email: [email protected] Web: www.microfinancefocus.com Branch office Microfinance Focus— The US 717 Lawrence Street, NE | Washington, DC, 20017 Mobile +410.227.0498 Email: [email protected] Web: www.microfinancefocus.com

Sponsors :

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Vikash Kumar Managing Editor—India Write to the Editor [email protected]

GO GREEN

Global warming is no longer just warning but is happening and therefore poses many immediate and long term environmental threats It is our responsibility, a collective as well as an individual to protect our environment from its onslaughts.. Microfinance sector is already well poised to alleviate poverty could also contrib-ute significantly to help poor to acquire appropriate energy source and adopt or-ganic farming to checkmate global warming. Here, I am stressing the need to high-light another set of opportunity where this sector can contribute immensely and keep not only global warming at bay but also poor people to have access to cheap energy and fertilizer.

Role of small enterprise is largely a matter of evolving appropriate strategy to en-able them to become not only sustainable but also to contribute in developing healthy environment. In fact there are many wonderful outcomes could be possi-ble from this sector if i collectively they take the responsibility towards the envi-ronment protection. In fact it will add another social value contribution from the MFIs and we should consider it one of the essential parameter for socially respon-sible MFIs.

Impacting energy poverty by providing access to sustainable and eco-friendly sources of energy is one of many initiative MFIs can promote. Many MFIs are al-ready trying to promote non conventional energy sources like solar lamps, solar cooker, fuel saving stove etc. These all fuel efficient methodology and pollution free renewable energy sources offsets “carbon”, and therefore there is huge op-portunity for MFIs and its clients to en-cash its good work (by selling carbon credit) and contribute significantly to save environment from the growing warming alarms. It would be further encouraging if .appropriate rewards are also awarded to those who adopt these practices to reduce global warming.

Microfinance Institutions reach to entrepreneurs of Micro and small enterprises in rural and urban areas are perhaps best positioned to give significant push to gen-erate awareness and activities to halt global warming. Microenterprise mostly re-late to non -organize sector and many of these enterprises are not following the organic farming for one reason or the other. Here MFIs can play a crucial role spe-cially educating theses entrepreneurs to adopt eco-friendly microenterprise, or-ganic farming, and various sustainable industry standard practices that would help slowing down of global warming.. Donors and investors could provide incentives for adoption of such programs by MFIs and also could fund them or even create institutions to undertake research to stimulate availability of pollution free energy and farming practices. It is definitely going to be a big contribution towards halting global warming and consequent climate change by Microfinance institutions. all other stakeholders and no longer they would remain should not be just specta-tors…

From India Desk Editorial

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Can Microfinance Afford to be Green? The real question is; Can Microfinance afford NOT to be green? Good environmental practice is good business in general. Green business provides opportunity for all. In Kenya, Village Power vendors borrow from local Microfinance to purchase their so-lar lighting kits for powering reading lights and cell phone charges. Industries for Africa has developed a tractor to be built, sold , and serviced in Africa, by African’s that uses a multi bio-fuel engine and const only $2,000 USD. In Bangladesh, A Grameen Bank spin off project has already installed more solar cell energy units and the whole United States. These are all credible projects based upon micro lending and engaging every-day people in sound environmental practice. For some time now, The Microfinance Sector has been talking about the double bot-tom line. The original, “bottom-line, of course meaning profitability. The second bot-tom-line is Socially Responsibility where an one considers the social impact of business operations. We here at The Microfinance Focus Magazine subscribe to the universal standard adopted by the UN in 2007* With the ratification of the United Nations and ICLEI TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector full cost accounting. The Triple Bottom Line.

The addition of sound environmental practice to the double bottom line described above provides the three elements of the The Triple Bottom Line. 1. Socially Responsible 2. Environmentally Sound 3. Economically Viable The application this UN standard is not only a good idea, It drives clear thinking that will save all of us from ultimate poverty and possible ecological disaster. Global warm-ing and the loss of low lying land is of particular concern to poor nations such as Bang-ladesh and the Pacific Islands and archipelagos, this along with the rapid and impend-ing loss of rain forest due to wood cutting for fuel by the poor present opportunity for Microfinance to support new energy reduction businesses. Our Microfinance Sector needs to move proactively to support this global crisis and to generate new and engaging business possibilities for their clients. The rapid loss of our environment hurts everyone but, as always, the poor are the most vulnerable of all.

Jerome Peloquin Managing Editor- US Write to the Editor [email protected]

From The US Desk Editorial

Here are the contacts for the pro environment business opportunities mentioned in this editorial Industries for Africa - http://www.industriesforafrica.com/index.html Village Power - Kenya - http://www.bioenergylists.org/stovesdoc/Karstad/canecoal/vpnchemelil.html Grameen Bank - solar project - http://www.climatechangecorp.com/content.asp?ContentID=5283

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I ndeed no institution can function without acquiring necessary skill, expertise and knowledge to run the same. It is also true that there should be well honed processes,

procedures, system and strategies evolved by the institutions over a period of time, beside ex-pertise and experience of people who have been empowered to run the institution. Micro financing institutions are no exception to this universal re-quirement for successfully running an institution. It is well known fact that strategies and systems as well as procedures and processes evolve over a period of time and constantly come under re-view due to change in knowledge, expertise, technology, culture, and environment both social and physical. DEFINE THE PATH It is obvious therefore that there should well de-fined path of learning for the people who man and run micro financing institutions. It has been observed that to make the learning process sim-ple and easily understood and practiced by any

man with just average intelligence a distinction at times has been made by some practitioners and consultants in between the concept of edu-cation and learning. Since micro financing insti-tutions cater to the needs of masses it has be-come imperative for these institutions to develop strategies, systems, processes and procedures in simple, transparent language as that would be easy to comprehend as well as to implement by any one with average intelligence and minimum education. In fact micro financing institutions undertake mass banking and not class banking that most of the modern commercial banks un-dertake and therefore it has to develop strategy, processes and also communication language that could be understood by poor people both in edu-cation and wealth accumulation so that they could avail the helping hand and fund of these institutions with confidence that they are not cheated and they could pursue sustainable busi-ness with confidence and necessary supportive expertise and funds of these institutions. It is obvious therefore that these institutions not only fund the business of the poor but also supple-

Advancement of technology: Reduce the Cost and Maximize the

Benefit to Client MICROFINANCE INSTITUTIONS NEED TO SHED COMPLACENCY AND LOOK FOR HIGHER TECH-NOLOGY & EXPERTISE TO SERVE THE POOR WITH MINIMUM COST AND MAXIMUM BENEFIT

Perspective

Dr. Souren Ghosal , Head– Knowledge Management , Microfinance Focus

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ment the lack of expertise both in technology and updated skill in the sphere of production and also market intelligence with regard to marketing their products at best price and time. For all these there is not only need to change the mind-set of executives of these institutions but also to train and equip them with latest technology and knowledge. NEED HIGH LEVEL OF KNOWLEDGE However it is interesting to note that to evolve simple processes and procedures as well as strategies and systems generally need much higher degree of intelligence, knowledge, and passion to innovate and therefore it has been mostly seen that pioneers of these institutions are generally highly educated and enlightened people and therefore they could develop sustain-able strategies and systems to make these insti-tutions deliver the objective of serving the ne-glected people of the society to help them to op-erate as a successful farmer and or artisans. In fact their vision and comprehension of the com-plex problem of poverty alleviation could help them to develop institutions empowering the poor to stand on their own feet and run a sus-tainable business without looking for alms and aids from states. It is true it has not happened everywhere but it cannot be denied that some visible transformation could be seen all around them to achieve the objectives laid down by the pioneers. This is something that has encouraged rapid growth of these institutions almost all over the world particularly where large numbers of poverty stricken people live. EDUCATION AND LEARNING TO GO HAND IN HAND It is therefore imperative to understand the dis-tinction in between education and learning that often seen to have been emphasized by some professionals with a strong belief that merely learning processes and procedures would help executives to practice with ease and confidence to operate in their allotted fields of work even without having any knowledge of how and why such processes and procedures have been evolved and considered best to optimize benefits to poor and also their earnings. It is needless to emphasize that such an approach would soon make them dull and mechanical and conse-quently averse to changing pattern of demands arising from growing revolution in technology

and knowledge. Furthermore it has to be under-stood that no system, process or even strategy is permanent in this fast changing world as both technology and knowledge with regard to tech-niques and strategies are fast changing and hence locking them to learn only the current processes and procedures would not help them to grow and sustain their interests as they would miss the excitements and challenges that are continuously growing in this sphere of funding the poor to run a sustainable business. NEED DYNAMIC EDUCATION RELATED LEARNING PRACTISES It would be necessary to educate them compre-hensively not only at their work places and on their allotted work but also in management insti-tutions where new processes and practices are researched and put to practice as pilot project. In fact education is no longer considered as mugging of thoughts and deliberations of enlightened people but as a tool to comprehend its application in practical life. It is therefore in-creasingly becoming a life or visualized case based teaching. In this regard it would be inter-esting to refer to money game played by first year MBA students of Harvard Business School as referred by NIALL FERGUSON in his recent book on THE ASCENT OF MONEY. He has ob-served that ‘it begins with a notional central bank paying the professor $ 100 on behalf of the government, for which he has done not very lu-crative consulting. The professor takes the bank-notes to a bank notionally operated by one of his students and deposits them there, receiving a deposit slip. Assuming, for the sake of simplicity, that this bank operates at 10% reserve ratio (that is, it wishes to maintain a ratio of its re-serves to its total liabilities at 10 %), it deposits $ 10 with the central bank and lends the other $ 90 to one of its clients. While the client decides what to do with his loan, he deposits the money in another bank. This bank also has a 10 per cent reserve rule, so it also deposits $ 9 at the central bank and lends out the remaining 81 to another of its clients. After several more rounds, the professor asks the class to compute the in-crease in supply of money.’ that is $ 271 ($100+90+81 dollar). Through such illustrative cases one could explain albeit in simple language how modern fractional reserve banking allows the creation of credit and hence enhanced money power.

Perspective : Advancement of Technology ...

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CONCEPT CLARIFICATION It is therefore could be seen that the concept of broader money and its leverage though highly complex and generally explained in exotic lan-guage however could also be brought out in a very simple language and also could be easily explained to executives of micro financing in what way this concept could be operated to maximize the velocity and use of money and consequently their own earning as well as that of borrowers. No one would therefore question the need of such knowledge for dealing with money and credit. It is obvious therefore that education and learning could go hand in hand and that too with the desired level of simple conversational language and avoiding jarring exotic language. In fact distinction in between education and learning is fast fading with the growth of empha-sis in case based teaching instead of giving stress to mugging and memorizing. It is the ap-plication of knowledge in economic and social activities that is increasingly looked for. NEED COMPREHENSIVE KNOWLEDGE It would be imperative for all executives of finan-cial institutions obviously including micro financ-ing institutions to acquire comprehensive knowl-edge with regard to all types of money creation and application and therefore they should clearly understand the concept of broad and narrow money and its leverage capability. In fact this would help them to develop appropriate strategy to maximize the turnover of money and revenue as well as benefit large number of borrowers. It is therefore obvious that education with live and imagined case studies equip the executives with not only to frame policy, procedures and prac-tices to operate and serve poor people better as they would be able to comprehend and assess their needs better and also have adequate knowledge with regard to operation to make it applicable to their target group of people. AVOIDING HIDE BOUND POLICIES Moreover learning simply the processes and pro-cedures that are practiced by the financial insti-tutions including micro financing will make them rule based executives. But the economic and so-cial environment is becoming highly dynamic and therefore hide-bound system and policy would not help them to develop innovation in their strategy, system and service and without such

changes the very sustainability of these institu-tions would be at stake. In fact it is an estab-lished fact that these institutions have to develop not only extension services to educate their bor-rowers to hold their hands to give boost to their economic activities both in farming and crafts-manship as generally these people are ill-equipped to run their business as commercial venture. It would therefore be necessary to de-velop adequate knowledge of markets and men with whom they have been operating. It would therefore helpful if executives of micro financing institutions have adequate knowledge and ex-perience in farming and craftsmanship so that way they can extend their helping hand and mind to their borrowers both in field and market. SHORT TERM OPERATION It is unfortunate that most of these institutions give stress on lending for short term purposes and collect repayment on weekly basis. It is true that there is definite gap even in this area as most of the artisans, traders and farmers do not always get their short-term funds from the bank-ing system and hence largely depend upon usuri-ous money lenders and therefore the assistance offered by micro financing institutions in this area on better terms as compared to money lenders obviously has been welcomed by such borrowers. But if one takes objective view of such development there would be not even an iota of doubt that these institutions are also ex-ploiting the weakness of bargaining capacity of artisans, traders and farmers as the interest rates and terms are not what normally charged/practiced by banks and even by NBFC. Obviously this approach and strategy could never be sus-tainable and therefore it would be necessary to focus attention to this growing menace and de-velop appropriate strategy to educate/ learn the game to become an appropriate agency to allevi-ate the poverty of poor people and transform them as vibrant, active agent to transform their economic condition by enabling them to pursue viable and sustainable economic pursuits in vil-lages and towns. NEED TRANSFORMATION OF PESENT ADHOC LENDING Such transformation would require highly moti-vated and enlightened institutions with vision and passion to build a society where people how-soever poor and uneducated could acquire nec-


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essary skill, information, and opportunity to un-dertake viable and sustainable business proposi-tion- farms and or firms. This is perhaps easier to think and even propose or promise but need genuine passion and active interest of enlight-ened people to translate this into action. BUILD SMOOTH PATH OF LEARNING The path of learning has to be smooth so that no one tumbles while treading the path. But smoothness depends much on the preparation and application of latest technology and knowl-edge. It would be therefore necessary to visual-ize the aspiration level of people and the extent of present knowledge and technology could help them to attain their dreams. It is obviously diffi-cult task and therefore needs application of best available technology and knowledge and also passion and dedication to deliver the same to people. Learning curve is also not static but dy-namic and therefore strategies and systems also move along with that. To make the learning path smooth and straight it would be necessary to develop an appropriate dynamic plan that would not only teach processes and procedures but also bring out knowledge base of such policies and help developing and incorporating the changes that are feasible and provide high de-gree of satisfaction to their clients- borrowers and depositors. It would also be necessary to avoid opaque policies and strategies and maxi-mize transparency in product and service deliv-ery cost and time. COGNITIVE TRAPS In fact some cognitive traps as has been men-tioned by NIALL FERGUSON in his latest book ‘THE ASCENT OF MONEY ‘would perhaps help to develop a smooth path for learning. These traps are: 1. availability bias where decisions are taken on available memories; 2. hindsight bias where decisions are based on probabilities of events; 3. induction problem where policies and rules are framed on insufficient information; 4. conjunction fallacy where an overestimate is preferred due to optimism; 5. confrontation bias where one looks for con-firming evidence for their hypothesis; 6. contamination effect where irrelevant but proximate information influence a decision;

7. heuristic effect where pre-conceived value judgment affect decision making; 8. neglect scope where no adjustment is made to avoid possible harms that may arise from the decision; 9. overconfidence in calibrations which leads to under estimate the confidence interval levels; Apathy of bystander which leads to abdication of individual responsibility when in a crowd.

CONCLUSION It would be helpful therefore to build the path of learning avoiding the above traps and creating a good cocktail of knowledge and practice that would attract executives to learn and practice with ease and efficiency. It is obvious therefore that the path of learning should be built on latest knowledge base, with cases both live and visual-ized to illustrate the application of knowledge in practical life by building sound strategy and sys-tem; policy and procedure to create a sound and most convenient delivery model for products and services at least cost and inconvenience. In this regard prime need is to know your customers in as great details as feasible and thereafter get acquainted with the market, its nuances, and mood and hence contents of learning should deal with these in simple but exhaustive manner so that even common people could easily compre-hend. Obviously this needs thorough under-standing of men and market and that would not be feasible as one time exercise as these are highly complex institution and require detailed and continuous study. Hence learning is one time exercise but should be provided regularly. ******************

About the Author: Dr. Sourendra Nath Ghosal holds a PhD in Finance and holds Master degrees in both commerce and Economics. He has experience taught for 18 years in colleges and university of Jodhpur Rajasthan; Worked as principal cooperative training college for about 2 years at kalyani w. b. He worked with United Bank of India FOR 22 years and retired AS G.M. credit. He has also authored several books and Papers published in several national and International journals & newspaper. You may reached him at [email protected]


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Samvad: A Dialogue on Microfinance has been designed to encourage an open discussion of the issues that the sector must currently address. Over the course of the day-long conference, slated for the 30th of May (Saturday) at The Capitol (Rajbhavan Road), discussions will revolve around transparency & client protection, microfinance & financial inclusion, convergence of Government schemes and MFI services and microfinance & millennium develop-ment goals. Conference Objectives

An understanding of the initiatives by microfinance providers for the appropriateness to low-income clients.

Identification of implementation tools and certification standards that ensure pro-consumer practices.

Assessment of the impact of competition among MFIs on microfinance sustainability and client protection.

Development of ways and means to converge Government Schemes and MFI services.

Examination of a balance between social and financial sustainability in the Microfinance sector.

Conference Structure The conference will consist of an inaugural session followed by four technical sessions, of various themes, concluding with a valedictory session. Each session will have a panel of speakers who will deliver their thoughts on the given theme; an open house discussion will follow each of these sessions. The speakers bring rich experience and insight from rural development, corporations, banks, microfi-nance, academic institutions, NGOs and CBOs. Note : Participation is by invitation only.

Samvad: A Dialogue on Microfinance

A MICROFINANCE CONFERENCE Organized by Grameen Koota

30th May 2009 at Bangalore

Microfinance Focus , an official media Partner of

the Event will

provide you “real time Up-date” of the conference

through live blog

Stay Updated Visit :

www.microfinancefocus.com/events

About Grameen Koota Since 1999, Grameen Koota has created development opportunities for communi-ties through financial inclusion. Apart from credit services, the company has also ac-tively brought a host of non-credit offer-ings ranging from literacy programs to re-lief activities. Grameen Koota currently caters to 2.6 lakh clients, across Karnataka and Maharashtra, with plans to reach 2 million poor and low-income households by 2013 with micro financial and capacity building services. Visit : www.grameenkoota.org

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The Palestinian Network for Small and Microfinance (hereinafter: Sharakeh) is a non-profit non-governmental organization. Established in 2002, Sharakeh represents a forum of micro finance non-profit institutions and programs (hereinafter: MFIs) that aim at providing financial services to small enter-prises, and focuses its efforts on the growth of microfi-nance industry in the West Bank and Gaza Strip; par-ticularly that micro financing is considered one of the strongest tools for economic development consistent with Palestinian economy needs. Sharakeh represented nine active members when es-tablished, but expanded its representation of the sector with four additional associate members; Currently, the 13 Micro Finance programs and Institutions members of Sharakeh serve approximately 30,000 micro-entrepreneurs, with a portfolio of over 37 million US Dollars. (As of September 2008). Microfinance in the Gaza Strip Historically, the microfinance activity in the Gaza Strip (GS) exceeded similar activities in the West Bank (WB). Poverty rates were higher, resources were fewer and

Reinforce the

Microfinance Securitiza-

tion in

Palestine with

priority to the

Gaza Strip.

From: The Palestinian Network for Small and Microfinance

Horizon

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the continuous political aggression and siege against the GS contributed profoundly in in-creasing poverty rates and reducing potential opportunities for economic advancement. Since 2006, the microfinance sector in general and in the GS in particular, faced a huge drop in size of activities and considerable increase in PAR.. Due to post elections donors’ decision to seize injection of financial aid to the public sec-tor, and the political pressure imposed on Pal-estinians; microfinance institutions (MFIs) were forced to reduce activities in the GS while in-crease it in the WB. Although this shift was wit-nessed, MFIs focused on client retention in the GS using different methodologies; re-scheduling, re-financing and other. On December 27, 2008, an Israeli operations against Hammas in the Gaza Strip started, causing extreme infrastructure destruction, as well as severe human losses. Despite the continuous need, the Israeli Siege on GS starting 2006 and following the Palestin-ian Legislative Council elections and the public servants salary crisis, and the following political and economical obstacles imposed on both in-dividuals and microfinance institutions in GS, a significant drop of activities there were antici-pated. At the end of 2007, only 20% of the microfi-nance activities in the oPT was within the Gaza Strip. With continuous efforts from MFIs to sur-vive the crisis, by re-scheduling, writing off loans, and client retention efforts, MFIs in the Gaza Strip managed to slightly raise the per-centage of activities in Gaza to 25% in the first quarter. Although number of loans in the strip slightly increased during the first three quarters of 2008, (819 in Q1, 998 in Q2, and 1250 in Q3) their percentage of total loans disbursed in the oPT dropped to 18% at the end of Septem-ber 2008. MFIs suffered a great deal of losses while struggling the continuous deterioration on the political situation and the intensive aggression of the Israeli forces, throughout the past three years. Sharakeh has been examining the po-tential and possibilities to provide assistance to the MFIs in order to (1) Maintain their out-standing portfolio in the Gaza Strip, (2) Retain quality relationship with clients, and (3) con-

tribute to the national poverty reduction ef-forts. A Credit Guarantee Scheme to address Contextual Risk for Microfinance Contextual risk has become structural for Pal-estinian MFIs as they are under a tremendous pressure whereby the effects of the violent, il-legal and illegitimate occupation of West Bank and the permanent locking of GAZA make it difficult for MFIs to implement their mission to promote financial services in a normal manner. This risk is broadly known. In order to address this specific risk, SIDI (Solidarité Internationale pour le Développe-ment & l’Investissement, France) and ACAD (The Arab Center for Agricultural Development) have been designing a Credit Guarantee Scheme (CGS) which has been operational since January 1st 2008 in order to secure ACAD’s loan portfolio. The scheme, endowed already with 200,000 Euros by SIDI (France) and Caixa Catalunya (Spain) has just received the commitment of the French Development Agency for another 100,000 €, is about to be opened up to other Palestinian MFI’s. SIDI and ACAD decided to open up the scheme for all MFI’s and the instrument to be institu-tionalized under SHARAKEH as a substantial input for the sector. Appeal to the donor community Sharakeh's appeal to the donor community re-volves around the preservation of the role of microfinance for economic development in structural crisis. Where it is in fact the goal is to create Credit Guarantee Scheme to serve the microfinance industry in general, relying on the tested Scheme. Sharakeh aims at establishing a three (3) mil-lion Euro scheme to initiate the fund and sup-port MFIs, with a priority of Gaza Strip. Cur-rently secured is the total amount of 300,000 Euros. ********************

Horizon: Reinforce the Microfinance Securitization in Palestine

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E vidence from across the world, clearly demonstrates that savings are

the most commonly sought after financial product sought by the poor. Poor people want and do save in response to a wide variety of risks/needs including those driven by life-cycle events, crises, macro-level structural events, consumption smoothing and of course, responding to opportunities. However, most low-income people in India and elsewhere have no access to secure savings, let alone a choice of savings products. Thus, their choice is only between extreme risk in the informal sector where they lose a large per-centage of their savings, and unsatisfied savings-demand.

Responding to these needs, the Government of India and Reserve Bank of In-dia clearly and fully committed to “Financial Inclusion” … and also to protect-ing poor people’s savings. These two commitments have set up a conflict of priorities and approaches (different departments in RBI responsible for finan-cial inclusion and prudential regulation.)

The micro-savings-agenda in India has so far been dominated by the motive of protection of savings. Financial inclusion has taken the backseat. Conse-quently, the access of the poor to savings products has remained extremely

Horizon

By, Graham A. N. Wright | Programme Director | MicroSave

Savings: Meeting this Essential Need of Poor

in India

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restricted:

• SHGs: There is growing evidence that SHG members are saving only limited amounts in the group, typically only Rs.50-100pcm and that the group fund is typically liquidated and distributed before it reaches any serious scale (Wright 2008). SHGs leave very limited money in banks – only enough to under write and lev-erage their loans. Why is this? SHG members seem to fear of off-setting loans against their savings and often do not trust SHGs as a place to save because they are unsure of the ac-counting/leadership etc.

• E-/M-Banking: E-/M-banking is acknowledged to have huge potential to create massive finan-cial inclusion and has taken off in Brazil, Philip-pines, Kenya etc. Here in India the Banking Correspondent model outlined in the RBI circu-lar of January 2006, opened the door for India to realise this potential … but excluded NBFCs (and thus most large MFIs) from acting as cor-respondents. However, the recent requirement for a branch within 5/15km may close that door – or at least restrict competition and new re-strictions also place on both balances and amounts transmitted. In common with some of the international experience, initial rollouts in Andhra Pradesh have, however, seen large-scale dormancy of accounts.

No-Frills-Accounts could principally be a flexible (save for prohibitive distances to the next bank branch in rural areas) option for poor people to save. Banks are being required to open No Frills Accounts by the RBI but these accounts are intrinsically loss-making for banks so they are often poorly publicised/ marketed by banks and a limited number of accounts are opened. Of those accounts opened, many/most dormant (except for pensions/National Rural Employ-ment Guarantee Scheme payments). And over-all the service quality offered to No Frills Ac-count holders is very poor – not least of all be-cause of the costs associated with offering a good service. But it is worth noting that such approaches have worked in South Africa where banks are permitted to charge limited fees, do not have to pay interest etc. and so it is a cost effective business opportunity for them.

It is time to recalibrate the balance between

protection of savings and financial inclusion. In the short run, it is preferable to give poor peo-ple the choice rather than drive or strand them in the high risk saving environments with which they are currently faced. We must however, seek to inform that choice – options might be provision of well-focused financial education, transparency norms for MFIs, and enforcing a minimum standard for risk management sys-tems within all MFIs, regardless of their legal form.

The recommendations of the “Raghu-Rajan-committee” (CFSR 2008) constitute an excel-lent basis for putting financial inclusion into the drivers’ seat. Opening the banking correspon-dent route to NBFCs would eventually give rise to a real choice of savings products – among which flexible life insurance-based schemes (e.g. LIC/Max), micro-mutual schemes and variations of asset-backed borrowing to save schemes might be the most obvious, particu-larly useful for long term asset accumulation. The beauty of these latter examples is: MFIs can pursue them already under today’s regula-tory framework.

References:

CFSR (2008): Draft Report of the Committee on Financial Sector Reforms, High Level Com-mittee chaired by Shri Raghuram G. Rajan, Government of India Planning Commission, New Delhi.

Mutesasira, L. K. / Wright, G. A. N. (2002) It Is Expensive to Be Poor: Losses Suffered by Peo-p l e S av i n g i n Ugan da , u n de r : www.MicroSave.org (Study Programme sec-tion) [21.11.2008]

Wright, G. A. N. (2008): Remembering Sav-ings: The Forgotten Half Microfinance in India, presentation at the Microfinance Summit, 12th Nov. 2008, New Delhi, under: http://w w w . m i c r o f i n a n c e i n d i a . o r g / a n n u a l -microfinance-india-summit-current.php#prez.

Horizon: Savings –meeting the essential need...

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Microfinance has accomplished what several of it’s detractors thought it never would – 100% loan utilization and, most importantly, recov-ery. The earnest and well-founded hope for a better life motivates women to enter into the contract of microfinance; business successes among borrowers only strengthens this faith in the institution of microfinance and draws more clients, who would otherwise have no access to credit, into the system. However, it has been noticed that some clients, in an effort to pro-cure the maximum possible funds, borrow from all available MFI sources. Despite efforts by some MFIs to educate clients on the mainte-nance of stable cash-flow, the problem of mul-

tiple borrowing persists and is now threatens considerable damage to the sector. Areas of Concern 1. Aiming to increase business volumes, some MFIs either inadequately check or ignore client borrowing habits. Multiple borrowings springing from such a situation adversely affect the qual-ity of the loan portfolio as clients put them-selves at a higher default risk. 2. In some areas, clients borrow from more than 7 MFIs at once. The absorption capability is not assessed; consequently, loans are misdi-rected, i.e. not used for the productive/income

Horizon

Multiple Borrowing: Finding Solutions

- Suresh K Krishna, Managing Director (Grameen Koota)

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generating purposes stated in the loan applica-tion data. 3. With increasing debts and misdirected funds, clients turn to informal sources (friends, rela-tives, money lenders etc) for further credit, fur-ther aggravating the debt trap. Several in this situation have held distress sales of movable assets. In extreme cases, mental depression resulting from the financial pressure causes some to commit suicide. These situations taint the image of an otherwise honorable sector. 4. Some clients have sought the intervention of religious leaders, political representatives and a-political individuals. Dictats issues by these parties to either delay or stop repayments, is disadvantageous to the microfinance structure. 5. Non-repayments and delayed repayments adversely affect the PAR of MFI. If the impact moves beyond acceptance levels, lenders will rethink their future investments, making it diffi-cult for MFIs to access credit. A well-rounded understanding of the situation and coordinated efforts of MFIs can draw out viable solutions to address this situation from aggregating. These steps will, in the long run, enable microfinance to continue to service the credit needs of the poor. Recommendations to MFIs 1. Multiple borrowing is not uncontrollable and

can be tackled by the collaborated efforts of MFIs through a common platform.

2. A thorough mapping of wards and villages within the state and a subsequent allocation of areas to MFIs can help in better planning of activity. A similar strategy was adopted by the RBI through the Service Area Ap-proach, which eliminated multiple financing by commercial banks in rural areas.

3. At present, some members have over bor-rowed from multiple MFI sources. By shar-ing information, these institutions can en-sure that no individual member receives

more than Rs 50,000 from the microfinance sector.

4. A client’s ability to absorb credit and repay debts must be analyzed before loans are disbursed. Discrete inquiries regarding bor-rowings can also be made to determing whether cash generation meets existing repayment commitments.

5. In areas of high MFI density, all MFI’s can impose maximum sealing on the loan size all loans, regardless of the loan cycle.

6. Regular Loan Utilization Checks must be conducted to confirm the appropriate use of funds and also to determine the total bor-rowings and utilization of funds.

7. Raise awareness in the field staff and mem-bers about the drawbacks and ill-effects of multiple borrowing. This will result in finan-cially aware and disciplined members as well as a quality loan portfolio. Non credit services should also be highlighted.

While, like every other sector, microfinance too faces regular challenges, these hurdles are not insurmountable. Harnessing the knowledge and experience of the individual MFIs can result in effective remedial measures that will serve to strengthen the sector and it’s impact on pov-erty. ***********************

“A client’s ability to absorb credit and repay debts must be analyzed before loans are disbursed. Discrete inquiries regard-ing borrowings can also be made to determing whether cash generation meets existing repayment commitments.”

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Horizon: Multiple Borrowings...

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Microfinance & Environment

“We have to take the hard decision ! We and each one of us must take a decision on this planet. And also we should inculcate among our chil-dren a simple way of living. We should not live in a way, that it harms another person. Once you take this decision, everything will be solved. We have no right to live a life which is harming anybody else. It is like traffic laws: You can't have a car and knock everybody off the road. There's a rule you have to drive safely, so that you don't harm anybody. Same thing is for living on this planet. We are sharing with each other.” Prof. Yunus on “Environment and Climate change”

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C an microfinance and environmental sustainability go hand-in-hand? Some in the industry say it’s not only possi-ble, but essential that microfinance

works to prevent environmental damage. It is becoming increasingly clear that the impacts of climate change, pollution, poor waste manage-ment, and other environmental problems must be part of the long-term approach to economic development. Otherwise, we risk destroying natural resources that are essential for contin-ued economic growth, as well as endangering public health and safety. Environmental impacts are gaining prominence in the global development agenda and becom-ing a concern for some national governments

and social and environmental investors. Build-ing capacity for green microfinance may in fact be a smart way to prepare for shifting funding priorities and inevitable changes in environ-mental regulation. How can microfinance help to address environ-mental issues? Conservation and environmental protection are global issues, and much of the responsibility for addressing them rests in the industrialized world. However, there is growing interest in “green microfinance,” which includes programs that encourage eco-friendly microen-terprises and support microfinance clients’ use of renewable energy. The development of car-bon-credit aggregation strategies also creates a

Microfinance & the Environmental Bottom Line

By : GreenMicrofinance and CGAP

Cover Story

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new opportunity to include smaller enterprises in a green agenda. Donors and investors can build capacity for green microfinance by providing necessary technical assistance and by supporting environ-mentally sustainable microfinance projects. For example, the Netherlands Development Finance Company (FMO) has developed evaluation cri-teria and tools to help MFI's assess and man-age the social and environmental impacts and risks of microenterprises. CIDA has also pro-duced an Environmental Sourcebook for MFIs. IFC, Triodos, Calvert, Shell Foundation, and EBRD are among other donors who are includ-ing the environmental bottom line on their agenda. In this article, we explore some of the eco-microfinance initiatives promoted today, such as: Green microenterprises Renewable energy entrepreneurship Carbon credit aggregation Green microenterprises Eco-friendly microenterprises can provide sus-tainable sources of income to microfinance cli-ents, including the production of organic fertil-izers and biomass charcoal briquettes, clean energy cook stove fabrication, and handicrafts made from sustainably sourced materials. Vari-ous industry standards, from groups like the Forest Stewardship Council, provide guidelines on “sustainable sourcing.” MFIs that deal with agricultural clients can seek partners that will help clients adapt to evolving conditions through the adoption of environmen-tally-friendly farming techniques. Organiza-tions, such as Sustainable Harvest Interna-tional, help by providing key technical support. Subsidy can also play a positive role as clients shift their approach to a more eco-friendly standard. Engaging in environmentally sound busi-ness practices can: Help microentrepreneurs preserve and pro-

tect their long-term income

Protect the health of communities Lower overhead for microenterprises Enable MFIs to invest in a growing market

that meshes well with the agendas of triple-bottom line investors.

Renewable energy entrepreneurship Microfinance clients often use fossil fuels like natural gas and petroleum as sources of en-ergy. These fuel sources contribute to the greenhouse gas problem, the degradation of local ecosystems, and cause health problems. Implementing renewable energy systems, like solar, wind, and biogas can offer great cost savings, as well as health benefits. MFIs offer-ing personal consumption “energy loans” can help microfinance clients leverage these re-sources for their homes and businesses. Renewable energy can also be a source of in-come for a new class of business – renewable energy microenterprises. Social and environ-mental entrepreneurs from the industrialized world are helping to create this micro entrepre-neurship opportunity. For example, Barefoot Power is a socially-conscious business that em-ploys micro entrepreneurs to distribute solar-powered products and systems in the develop-ing world. Grameen Shakti is a nonprofit with the mission of eliminating energy poverty with renewable-energy entrepreneurs. They support programs in solar energy, biogas, and improved cook-stoves, which include training and capacity building for entrepreneurs who promote the systems, as well as financial products tailored for renewable energy uptake. In the micro-utility model, one entrepreneur will install a so-lar system and sell power to those in the com-munity who cannot yet afford to invest in their own. Carbon credit aggregation Carbon credit aggregators, like MicroEnergy Credits and E + Co, work with MFIs that pro-vide renewable energy loans to clients. Each loan can be translated into a small carbon credit. Though these credits are too small to be traded on the multi-million or billion dollar car-bon markets created by the Kyoto Protocol, ag-

Cover Story : Microfinance & the Environmental Bottom Line

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gregators bundle these credits and then sell them on the voluntary carbon market to net polluters. Carbon credit aggregation offers: Financial rewards for MFIs that provide energy loans, creating an incentive to continue green-ing products A better standard of living, and more control over energy resources, for clients who switch to renewable sources of energy for their homes or businesses Business opportunities for micro en-trepreneurs who supply renewable energy ser-vices or systems Conclusion The conventional path of economic develop-ment has tied greater prosperity to increased energy consumption, with its corresponding negative environmental impact. This does not

have to be the case. MFIs can contribute, along with their clients, to solving the crises we face today. Microfinance clients continue to be im-pacted by global climate change and environ-mental degradation, but we are also seeing that they can be part of the way forward. ******************************** To Know more about Microfinance Gateway http://www.microfinancegateway.org To Know more about GreenMicrofinance http://ww.greenmicrofinance.org

Cover Story : Microfinance & the Environmental Bottom Line

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Carbon Manna Unlimited is implementing the world's first cell-phone-based Car-bon Micro Credit or Carbon Micro Profit-Sharing system in the Mbeere and Siaya Districts of Kenya, to include the town of Kogelo, President Barack Obama's an-cestral home town. The enrollment target for this pilot program is 5,000 fami-lies. The cell-phone-based Carbon Micro Credit system employs SMS (simple message service) and unique identifiers to potentially allow millions of families in Kenya and other countries in the Developing World to claim on a bi-weekly or monthly basis the carbon offsets they produce by using more efficient cooking methods such as a modern charcoal stove or solar cooker, instead of an inefficient open-pit fire burning biomass. As a result, each family is able to monetize directly its own contribution to mitigating global warming, while also reducing nationwide rates of deforestation and desertification. Each family that cooks more efficiently may claim approximately 3 tons of CO2 offsets/year, which is worth about US$ 15 - 30 when sold in Europe on a regu-lated or voluntary carbon-offset market. The family also saves far more on fuel -- from US$ 70 - 150/year. For individuals living on less than US$ 1 - 2/day, these earnings and savings are very significant. Pre-selling tens or hundreds of thousands of tons of bundled Carbon Micro Cred-its provides the start-up capital needed to buy stoves and cell phones for the participating families, thus making the system self-funding and markets-based. Later the offsets are crowd-sourced in arrears by the tens of thousands of families participating in the program. Lastly, validation and auditing protocols

David A. Palella , Founder, CARBON MANNA UNLIMITED

To Know more about his ini-tiative :- Visit http://www.carbonmanna.org/

World's First Cell-Phone-

Based Carbon-Micro-Credits Implementation

Cover Story

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will ensure that the offsets were indeed pro-duced. Invented in April 2008, Carbon Micro Credits (CMCs) are NOT a form of debt-based microfi-nance; rather, they provide immediate micro PROFITS to the poor and are therefore similar in concept to frequent flyer miles. They are an as-set, not a liability. And like frequent flyer miles, they are a fungible, universal currency and non-inflatable store-of-value. Carbon Micro Credits may take any “currency” form, depending on the sophistication level of a country’s mobile carriers, banking network, and mobile money transfer systems. Possible ava-tars of Carbon Micro Credits include e-money (electronic reward points), cell-phone minutes, or cash. In Kenya and Tanzania, Carbon Micro Credits may be converted into cash and with-drawn via cell phone at 1,000s of locations (stores or banks) using the Safaricom M-Pesa or Zain ZAP mobile money transfer networks. In short, every cell phone is an ATM.

Moreover, this same cell-phone-based system may be applied to, among other uses, the claim-ing, aggregating, tracking, monetizing and au-diting of personal emission reductions or CO2 offsets produced by planting trees to sequester carbon, installing solar panels for lighting in place of kerosene lamps or diesel generators, conversion of inefficient-combustion 2-stroke motorcycle engines to direct fuel-injection, or biomethane capture and combustion. Finally, once implemented, the installed base of cell phones in a Carbon Manna program also provides a channel for applications in micro-healthcare (public health messages), micro-medicine (individual patient diagnosis & treat-ment), micro-education, and dissemination of business information (crop prices, market & weather conditions, etc.) In 2010, the cell-phone-based Carbon Micro Profit-Sharing Sys-tem will be expanded to other East African coun-tries, starting with Tanzania, Malawi and Rwanda. ********************

Cover Story : World's First Cell-Phone-Based Carbon-Micro-Credits Implementation

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Last Sunday’s supplement ran an ad which really stuck with me -- so much that a few days later, I went back to my recycled newspapers to confirm my recollection: Walmart is selling spiffy, stainless steel backyard BBQ gas grills for $298. Such grills have long been a suburban status symbol of ma-cho domesticity, much evolved from the little ket-tle-style charcoal burning versions of my child-hood. My first shock was that they’re so cheap (thank you, China) that all elite symbolism has passed. Now average people with backyards who shop at discount stores can afford this luxury and fuel it with a tank of propane gas, advertised for $17.82. My second reaction is looking at this snazzy item through the lens of third-world cooking; in my role as Director of Communications for GreenMicrofi-nance, I have learned a great deal about life with-out the infrastructures we in North America take for granted. GMf’s mission is to bring clean en-ergy, environmental benefit and poverty allevia-tion to the world’s two billion people without ac-cess to modern energy systems. Most of these households cook over foraged wood or dung in open fires; given population expansion, this re-quires ever more time to gather since close-by supplies are exhausted. This is not exactly Martha Stewart’s domain. Not only is the direct burning of wood, dung and crop residue extremely ineffi-cient, it is highly polluting, resulting in respiratory disease as well as black carbon emission. It’s ex-actly the kind of outdoor “campfire” that in the affluent world has been replaced first by kettle barbeques and, as we all became more affluent, gas grills. Slightly better-off families in the developing world can afford LP, liquid petroleum – generally all im-ported and way beyond the means of a Bottom of the Pyramid family. So the type of grill Walmart is selling is actually a high-end third-world stove. The irony, of course, is that for Walmart’s custom-ers, this is not a primary cookstove. It is just for

r e c r e a t i o na l w a rm weather backyard barbe-ques. The indoor range, gas or electric, serves that duty. One breakthrough for perpetually impoverished developing world house-holds is improved cook-stoves, paired with gas produced by a family’s biodigester. A slightly higher-tech version of composting, these cisterns have a seal so the waste which is dumped into them is processed anaerobically. Within a month or so, the biodigester yields methane gas along with very rich fertilizer. There are hundreds of different types of stoves being designed and mar-keted in the developing world. While very simple, they accomplish a great many improvements. They consume less fuel, making them less expen-sive to run. They utilize locally produced gas (ideally the “in-house” product!), eliminating the time required foraging for wood and dung. And since they are more efficient, they produce less pollution, resulting in improved health. The cost of a typical improved cookstove which can provide so many beneficial health, environ-mental and economic impacts? About $20 -- be-yond the budget of most Bottom of the Pyramid households… *****************

Backyard BBQs Meet Improved

Betsy Teutsch , Green Microfinance

About the author : Betsy Teutsch serves as Director of Communications at Greenmicrofinance (www.greenmicrofinance.org) and blogs about socially responsible investing and consuming at Mon-eyChangesThings. The mission of GreenMicrofi-nance, catalyzing green microenterprise and clean energy generation for the Bottom of the Pyramid, is an excit-ing pairing of Teutsch's interests in eco-sustainability and poverty eradication.

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I n 1997, a year after his work Give Us Credit was published, Alex Counts set up

the Grameen Foundation with a modest $6,000 in seed capital and a charge from Dr Yunus. Si-multaneously, during this time, Give Us Credit set the wheels of micro credit turning in another part of the world. Vinatha M Reddy poured over the pages of the book at her house in Bangalore, India. Surely, in this book lay the future of the poor. Suresh K Krishna thought so too. Together, they were able to source seed capital from Grameen Trust in Bangladesh and thus, in 1999, began the microfinance work of Grameen Koota. A 2008 Access Report indicates that microfinance currently reaches over 300 million India's poor households. 13 million of them reside in parts of Grameen Koota's home state– Karnataka. Fig-ures, as of March 2009, show that the MFI (Grameen Koota) services 0.26 clients through it's group lending program. The collective efforts of MFIs in the region has only just scratched the surface, but is committed to penetrating deeper and providing need-based credit. Typically a woman earning less than or between INR 42 – 84 a day (USD 1 – 2 per day), the Grameen Koota client is able to begin income

generating activities (trading, animal husbandry, agricultural production and transportation) through a wide range of credit products. Clients earn access to higher loan values as they build a steady credit history, a common indication of re-liability in the microfinance circuit. Initially offering services to women around Avalahalli (a village near Bangalore), Grameen Koota now operates in 23 districts with 80 branch offices. Operations were recently launched in a second state – Maharashtra. The repayment rate is almost perfect (fluctuating fractionally from month to month), and the cur-rent portfolio totals in excess of Rs. 180 crores ($36 million). However, Dr Yunus's primary objective of social development through microfinance has not been overshadowed by impressive performance and outreach figures. Grameen Koota is exemplary of responsible MFIs aiming to use micro credit ser-vices as a tool to promote non-credit services and facilities. The company's Socio-Economic Development (SED) Workshops are conducted regularly in various districts of operation, reaching not just clients and their families, but also the community at large. Subject experts are engaged to raise

When the Buck Stops Grameen Koota: More than Just Credit

Institution Spotlight

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awareness on a range of subjects from health to law. Separate interactive sessions are organized for the husbands of clients – an insightful move that helps maintain the delicate domestic equilib-rium by involving the family member that con-ventional microfinance technically excludes. To-gether with The Indian School of Microfinance for Women (Ahmadabad) and AKMI (Association of Karnataka Microfinance Institutions, a state-level governing council whose establishment was initi-ated by Grameen Koota), the MFI delivered fi-nancial literacy programs. Currently, the Govern-ment of India and the Reserve Bank of India are the driving forces behind such programs nation-ally. Client education is a primary focus for most MFIs. In South America, Accion International has successfully developed a micro entrepreneurial training program that caters to a wide clientèle range. Grameen Koota, in association with Ac-cion International, launched a pilot project of the very same program – Dialogue on Business. The highly interactive modules have been adapted to the context of the Indian entrepreneur. Project proposals reveal that the Grameen Koota explo-ration of the education space is not yet com-plete. A functional literacy program is in the pipeline. While the focus in the rural centres remain within the realms of education and awareness, that in urban and peri-urban areas has been on technol-ogy. One of the Grameen Koota branches (Eijipura) in Bangalore is currently refining a mo-bile banking service for clients. With logistical support from mChek, clients are able to conduct cashless transactions, eliminating the security risks that come with transporting large sums of money. In another strategic partnership, Grameen Koota and MoneyGram offer further monetary services to clients. MoneyGram pay-ment systems provide financial institutions, such as banks, thrifts and credit unions, with payment processing services, primarily for official checks, and with money orders for sale to their consum-ers. Grameen Koota is proposing to offer these services to customers. While it currently seems to throb with enough energy, the social development activity list has been designed to encompass more than just the obvious. Considerations have been expansive enough to include environmental responsibility.

Envirofit launched a range of clean burning bio-mass cook stoves that reduce toxic emissions by as much as 80% while using 50% less fuel. Con-sequently, the cooking cycle drops by 40%. Grameen Koota works with Envirfit and Selco In-dia to provide these stoves to clients at nominal rates. Grameen Koota currently works with 13 banking partners. With an equity base of Rs 18 crores ($3.6 million) as on 28th Feb-09, the company will be seeking investments of upto Rs 80 crore ($16 million) this year. A sound financial founda-tion allows MFIs like Grameen Koota to reamin actively involved in effective social development, even at the micro level of need. Grameen Koota conducted a pilot project in collaboration with HDFC Bank that encouraged the construction of a basic hygiene facility – toilets. A loan product of Rs. 4, 000 ($80) per client (payable in 2 years) was offered. The pilot results show promising potential for the activity on a larger scale. The Access Report (2008) focuses on the impor-tance of providing need-based credit products. The challenges involved in tailor-made products, including operational and technological expenses, cannot be ignored. However, some MFIs have been able to reinterpret the directive so as to still provide timely services based on need. These services, though, are non-credit. Grameen Koota does well to advance it's stand in the credit-based space of microfinance while simulta-neously building brand loyalty through non-credit initiatives. A good example here would be the relief activity in Madhugiri (Karnataka). Tragi-

Operational Snapshot Districts 23 Branches 80 Centers 8,902 Members 255,410 Active Borrowers 210,602 Current portfolio Rs 179.98 Cr $ 36.00 m Own portfolio Rs 114.06 Cr $ 22.82 m Managed portfolio Rs 65.92 Cr $ 13.18 m Repayment Rate 99.97%

Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit

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cally, 24 huts were razed to the ground in a fire that broke out in a village. While some of the victims were Grameen Koota clients, relief was not restricted to them alone. All those affected were provided with mats, food and basic necessi-ties. In a separate initiative, Grameen Koota made available a 'Livelihoods Kit' – a package of food at wholesale prices, resulting in a reduction in the overall expenses of a household. In the months to come, Grameen Koota has a roll out of activities designed for the benefit of communities. After the initial experimental entry into the area of health and hygiene, a far more determined and impactful project will be launched to make basic health care accessible and affordable in rural areas. Government schemes have been relatively untapped by the microfinance sector. Methods to effectively inte-grate the two are currently being considered at the Grameen Koota Head Office. During this

time, still more attention will be given to the Grameen-prescribed PPI (Progress out of Poverty Index), which serves as a measure of the impact of micro credit and non-credit work. Much will continue to be written about the credit services offered and the financial advancements made by Grameen Koota, but the company's management continues to maintain that the pri-mary objective is aligned with the vision of Dr Yunus – poverty alleviation. When Grameen Koota touches 50 lakh clients (5 million) in the coming years and publications can write about nothing but the enormous success of the Grameen Koota health care project, then there will be some sense of real social change. *********************************

Read an Exclusive Interview with Dr. Yunus

www.microfinancefocus.com/events

Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit

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MF Focus: Founding SEWA helped practically so many women getting out of poverty and becom

ing more self-confident. What about the political impact?

Bhatt: This is part of the game, SEWA has grown large and has its presence. We are dealing in the mainstream

economy and we are bound to shed up the power struc-tures: With the moneylenders, in our homes and villages and of course move to the government. We need to be

better organized, based on our values. MF Focus: You are still convinced about using the

method of civil disobedience?

Bhatt: Itself civil disobedience is a protest and whatever is unjust, you have to do something. There are several ways and civil disobedience is one, we should use when

necessary. MF Focus: What is important and what can be

done, to abandon the lack of women’s self-confidence?

Bhatt: The most important thing is coming together. Those who are alone are weak and more vulnerable, they are more often poor. We need to rely on certain inclusive values and our mission. The members should own an manage their corpo-

rates. This is a fluent process which empowers. Women have to start facing the reality and start taking initiative. MF Focus: In a few days the election will begin in India…

Bhatt: We have our own manifesto and sent it to the candidates, trying to influence them. Nobody of the candidates has women as economic active agents in his/her programme.

MF Focus: What do you expect from the international level, industrialized countries for fighting poverty and improving women’s situation?

Bhatt: All these theoretical concepts and models for development and management are coming from undustrialised coun-tries. And they failed, they created gaps, even farmers are hungry. All these systems and models should be devastated.

All this has to change, we need a totally new thinking and women are the solution. We need to be aware of nature and rely on women. This is the answer.

Interview

An Exclusive Interview with

Padma Bhushan Ela Bhatt , (Magsaysay laureate)

“The most important thing is coming together. Those who are alone are weak and more

vulnerable, they are more often poor. We need to rely on certain inclusive values and our mission. The members should own an manage their corporate. This is a fluent process which empowers. Women have to start facing the reality and start taking initiative..”

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I had an informal conversation with Howard Finkelstein in a cafŽ not far from Wall Street last week. I have been aware of Howard's work with microfinance for some time ... his work as a lawyer helping to structure some of the first deals to bring capital market money into the microfinance industry ... but I did not have much idea of the context and motivation that he was bringing to this work. Howard has worked closely with many organizations that make institutional investment and is able to point to the stel-lar record of the microfinance industry in delivering on its promises ... something that cannot be said for other asset classes including supposedly safe mortgage backed securities and the like. I am not sure how Howard first became interested in microfi-nance ... but it was several years ago way before microfi-nance got onto the broader financial radar. What struck me about Howard was that key idea that microfinance can de-liver value to clients at a low cost in ways that other parts of the banking and finance sector cannot is still central to his view of microfinance. He was very clear that the unique value of the microfinance industry was the person to person nature of the business. This is paramount within the borrow-ing groups and between the borrowers and the branch loan officers. When I suggested that microfinance could enhance its value to society by expanding into bigger loans to small enter-prises ... the SME sector ... Howard pointed out that this needed a very different approach to lending and managing the portfolio, and the skill set did not exists in most MFIs. Howard acknowledged that the SME sector needed better financial services ... but this would not be achieved success-fully by having existing MFIs operating scaling to these "bigger" loans. Rather, Howard pointed out that expansion of the microfinance industry was needed to serve all those within the very poor bottom of the pyramid that could bene-fit from access to microfinance. The statistics suggest that there has been progress in reaching the BoP with microfi-nance ... according to the MicroFinance Summit more than 100 million microfinance clients in 2007 and a tenfold in-crease in just a few years ... but there are still perhaps a bil-lion people who are not reached by microfinance. I asked Howard how this huge growth could come about. How does the industry access the capital it needs? Howard started by observing that absolutely superb microfinance operations operating on a not-for-profit model were doing great work, but could not grow because of their financing

constraints. More grants would help ... but there was a very clear limit to this growth. He acknowledged that savings ... client savings accounts ... was a good way for an MFI to fund itself ... but reminded me that banking rules and regulations to safeguard depositors made this very difficult for most MFIs in most countries. He noted that bilateral and multilateral development agen-cies had had a big role in funding MFIs and NGOs doing mi-crofinance, they were still a big source of funds, especially IFC of the World Bank group and KFW (Germany). There was, however, a limit to the expansion of this source of funding. Howard sees the big opportunity to be to get institutional investors to become engaged with microfinance ... where safe, modest returns are possible ... and the impact on client lives can be huge. This has started. Slowly the financing infrastructure is emerging for this ... microfinance investment vehicles (MIVs) are being created to serve as a link between institutional investors and MFIs. They are absolutely needed to bridge the gaps between the essen-tial culture of the successful MFI and the culture of inves-tors ... and needed to help ensure that the MFI remains true to social purpose as well as financial sustainability. Will profiteering take over the microfinance sector if capital market investment becomes the main financing source for the sector? Howard did not seem to think that this would naturally follow ... rather microfinance would be a place in the financial system where return and social responsibility could coexist for a true win-win. Will the microfinance industry get distorted by institutional financing so that only the financially big grow while the small but socially essential wither and die? The answer to this is not clear yet ... the microfinance industry financing infra-structure is not fully developed ... the rating systems are way better than they were, but have a long way to go, for exam-ple. I came away from the conversation impressed with the clar-ity and logic of Howard's views of the industry. The industry is not perfect ... but it is pretty good ... and the potential for it to grow and do a lot of good in the next few years can be achieved with responsible institutional investment. ******************* Write to the Editor [email protected]

From New York Desk First Person :Howard Finkelstein

Peter Burgess, Correspondent , New York

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Equitas Fine-tunes Processes Using Newgen’s Document Management Solution Newgen Software Technologies Limited, a market leader in Business Process Management (BPM) and Enterprise Document Management, today an-nounced the successful implementation of its suite of DMS products at Equitas, a Chennai-based, Mi-crofinance Company to streamline the existing processes leading to increased productivity. Equi-tas, a leading microfinance company, has over 700 employees and operates out of 90 locations. With Newgen’s solution, Equitas wanted to improve scalability and increase productivity by eliminating document movement, anywhere access, distrib-uted capture and automatic data extraction. New-gen, with its vast experience in business process automation, was selected by Equitas to streamline its entire gamut of Microfinance operations, backed by a completely automated system that minimizes the physical documents and reduces manpower requirements while ensuring high pro-

ductivity. Ethiopia: Microfinance Institutions Loan Portfolio Stands at 4.6 bln Birr (USD 415 ml) The microfinance institutions operating across the nation have reached over 2.2 million active bor-rowers with an outstanding loan portfolio of ap-proximately 4.6 billion birr, the Association of Ethiopian Microfinance Institutions (AEMFI) said. In connection with its 10th year anniversary, which will be celebrated starting from May 18 with vari-ous events, the association said that the microfi-nance institutions were moreover able to mobilize 1.6 billion birr in savings respectively. The 10th an-niversary of the association is a unique opportunity to celebrate the success of the industry as a whole, it said. Currently, the network has 29 member mi-crofinance institutions and associate members. Plans are under way during the anniversary to con-duct regional network workshops, present the as-

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sociation’s performance and challenges over the last 10 years and to promote the role of microfi-nance in Ethiopia. “AEMFI has been recognized as a leader and voice of microfinance in Ethiopia for the past 10 years. It has been supporting ac-tion-oriented research activities, value-adding trainings, knowledge management, standard set-tings and best practices, which have all made ma-jor contributions to improve the performance and professionalism of the microfinance institu-tions,” said Dr. Wolday Ameha, executive direc-tor of the association. Since 2006 the association had established a financial cooperative unit to provide support to the cooperative sub-sector. Read more : http://www.pressreleasepoint.com/ethiopia-microfinance-institutions-loan-portfolio-stands-46-bln-birr-usd-415-ml Enda Inter-Arabe Goes Live on Mifos Information Management Platform Source: Grameen Foundation

Sanabel Microfinance Conference -- Grameen-Jameel Pan-Arab Microfinance Limited and Grameen Foundation today announced the first Arab microfinance institution (MFI) to go live on the Mifos open source Management Information System (MIS) platform Enda inter-arabe (enda) in Tunisia. One of the Arab Region's pioneering MFIs, enda selected Mifos, a highly flexible, cost-effective technology platform specifically designed for mi-crofinance, to help drive and sustain its outreach, innovation and growth. Enda expects its invest-ment in Mifos, the open source initiative devel-oped by Grameen Foundation and launched in the Arab World by Grameen-Jameel, will assist it in managing its high growth from the current 100,000-plus poor clients across Tunisia to its tar-get of 300,000 by the end of 2012. The an-nouncement was made at the 2009 Sanabel Mi-crofinance Conference in Beirut, Lebanon, the

largest gathering of microfinance practitioners and leading stakeholders in the Middle East and North Africa. Read More : www.grameenfoundation.org. Microfinance Leader Awarded Prestigious IDB Prize for Latin American Development

Source: Accion

ACCION(R) International, a pioneer and leader in microfinance, today announced that it has been awarded the Inter-American Development Bank's "Juscelino Kubitschek Award" for its contribu-tions to economic and financial development in Latin America and the Caribbean. ACCION was recognized by the IDB specifically for its work in microfinance -- the provision of small, working-capital loans, savings products and other financial tools designed to help people work their way out of poverty with dignity and pride. Created to mark the 50th anniversary of the IDB's founding, the award drew nominations from 145 organizations representing 22 countries in the Americas and Europe. It is the largest award granted by a multilateral institution in Latin American and the Caribbean, and carries with it a prize of $100,000. According to the IDB, ACCION was selected for the magnitude of its social im-pact in the region, which began in Latin America in 1961 with community-development projects in Venezuela. ACCION first experimented with mi-crolending in Recife, Brazil as early as 1973. Read more : http://www.accion.org/

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Stop Managing Personalities and Start Managing “The Process.” Due to a growing number of requests… Microfinance Fo-cus Magazine plans to pro-vide access to the team of MFI management experts on our staff. Microfinance Fo-cus Magazine is launching a new initiative designed to provide MFI management with key organizational skills. Principal among them is Busi-ness Process Management. (BPM) effective management of business processes enables a host of other essential com-ponents of organization man-agement. All processes are cross-departmental. This is where many costly problems start. When a process (budgeting, Sales, Portfolio

Management) crosses be-tween departments, the po-tential for delay, duplication, loss, and other mistakes are multiplied. Without well-prepared graphic processes, management has difficulty troubleshooting human prob-lems … and introducing tech-nology without effective process just makes it worse. The MF Focus Business Proc-ess Management is an inte-grated, interactive and per-formance based training process that produces a com-petent and certified internal process management team. Each MFI that is participates may be certified as a CMFPO demonstrating that all proc-esses and procedures are documented and auditable on demand. Our program is designed by a team of key

managers and staff, all of whom have in-depth MFI experience including: Dr. Souren Ghosal, Knowledge Advisor, Mr. Jerome Pelo-quin, Managing Editor, US and Bruce Meraviglia, IT Engi-neer and Instructional Expert The Process Management Team - Through engagement of all Departmental Managers as The Process Management Team, both cooperation and communication are greatly enhanced. Managers’ need to work together to solve process bottlenecks. Every department manager knows that the problem being solved for another depart-ment today could be his problem tomorrow. Process Management promotes co-operation and reduces con-flict and lost time. With ef-

fective business processes in place senior managers can readily track performance, analyze problems easier, un-derstand the business better, and direct the application of technology so as to really improve operations and profit. Everyone who participates in the program will be able to create effective functional process models. We guaran-tee it, or you get your money back! Our performance based learning uses the Con-sult, Train, Mentor method. We work with each and every manager on the team so that they are fully confident and capable of creating, monitor-ing, and modifying their proc-esses as change and perform-ance improvement WE GUARANTTE IT!

Process Management: The Number One Issue for MFI Leadership

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Copyright: Microfinance Focus 2009-10

A Publication of Centre For Microfinance Promotion trust Avalahalli , Anjanapura Post ,Bangalore—560062 P: 91.80.28436237 | Fax: 91.80.28436577 Website : www.microfinancefocus.com Email: [email protected]

Microfinance Focus May 2009

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