Microfinance and microcredit

Archive for the ‘Microfinance’ Category

I´ve been talking earlier about Kiva.org as a channel between funds, microfinance institutions and entrepreneurs. And finally i´m also a proud lender, one hour ago i started with a small loan of $25 to a group working with animal sales in Uganda! It´s a big group of entrepreneurs that wants to expand their business in selling goats, i wish them luck and hopefully their complete loanrequest is raised soon.

Microfinance typically refers to various kind of small loans, savings, money transfers and other kind of financial services targeted to low-income clients. Now, as the market for microfinancing mature, there are new options also for foreign currency exchange which often been pointed out as a big risk factor.

Mini Foreign currency exchange

Recent studies show that currency risk is one of the biggest challenges for microfinancing. If the loans are taken in USD, which is very common, there is always a risk of foreign currency fluctaions.

But luckily, many forex brokers have recently expanded their services, in order to make it possible even for low income clients to trade forex.

For more info about online forex trading, check out Wikipedia and NFA, the American organisation for forex dealers.

A lot of people are living under poverty, but with microfinance they have the chance to lift themselves out of poverty. Microfinance provides financial resources like loans, savings, insurances and business training to help people build businesses.

Oktober 17th is the International Day for the Eradication of Poverty. The UN secretary-general Ban Ki-Moon is going to perform a speech that day. Wouldn´t it be good if the focus in his speech was on microfinance as the key in poverty ending? Accion international has a campaign in order to collect 5000 signatures. By giving your signature we can all help making big impact to spread the word.

On the Accion webpage you can find videos that presents the work in bringing financial services to the poor. The videoclips are from areas in the U.S., Peru, Uganda and Tanzania. You find introduction videos, a how to set up MFI-video, microentrepreneus telling their story and about the partners in the microfinance industry.

Here you find the microfinance videos.

Almost everywhere around the world the stockmarkets have been falling in the last time, due to things like banks loosing money in subprime loans.

But not everything are loosing value nowadays. The microfinance industry is developing and more traditional financial institutions are opening their eyes for microfinance because they starts to see the huge opportunities. Investing in microfinance and helping people start busiensses means profits for both the lender and borrower. It´s a stable and secure investment since the repayment rates of the loans are on a average close to 100%!

Vanatau belongs to the poorest countries of the pacific areas. Many people are out of reach of modern and secure banking services in the rural areas of Vanuatu. Some people that are employed by the government must make long trips to the nearest branch of the National Bank of Vanuatu (NBV) to deposit their salary in the bank. Some farmers are even hiding their money by burying it in the ground rather than going the long way to the bank and collect their money. Only 13% of the people in the rural areas have bank account and access to financial services. It is estimated that about 92,000 people need financial services.

The Asian Development Bank (ADB) is now supporting the development of banking services that will make it able for the people to use electronic banking and smartcard technology. The new electronic banking system will provide local access to secure and convenient banking services. The Asian Development Bank (ADB) will manage $600,000 in technical assistance, provided by the Japan Special Fund. The National Bank of Vanuatu will support with $150,000 more to complete the funding.

With this new technical support they can provide i wide range of modern banking services which will satisfy the clients financial needs. If it comes out good it can be a model to develop the financial services throughout the Pacific. When everything is up and running the National Bank of Vanuatu can start with microfinance products such as microcredit for example.

Local stores and bank agents will be supplied with the technology and equipment and the clients can open saving accounts with modern facilities, this is how the business model will work.

The Inter-American Development Bank(IDB) sponsors a new pilot rating program in Latin America set up by S&P to improve the infrastructure of microfinance institutions for national capital markets. S&P and IDB are cooperating in this project with the aim to gain acccess to the capital markets for the MFIs.

Standard&Poors involvement is a breakthrough in the microfinance industry, S&P talks the same “language” as investor and their benchmarking tools really opens up the capital markets for microfinance institutions.

The Microfinance Rating Methodology Working Group was put together in January 2007 consisting of analysts from S&P and experts in microfinance industry. They work together to find the information investors needs, how MFIs works and the state of the microfinance sector. The information from “The Microfinance Rating Methodology Working Group” are used by Standard&Poors when forming the outlines of the rating methodology and a tailored ranking system for MFIs

Earlier sufficient access to the mainstream capital markets wasn´t enough and made it hard for MFIs to find allocate fundings, because they where treated with mainstream metrics when being analyzed. The ongoing creation of new MFIs and adepting skills in handling funds will require far more easier access to the capital market.