By Naagesh Naaraayana

Microfinance Focus, Aug. 29, 2009: The UPA government of India completed 100 days in office in its second term on Saturday. Every ministry has come out with promises, programmes and vision documents in the last 100 days. Here is a quick look at the government’s concrete steps towards financial inclusion, in particular.

As a first step, the Union Budget presented by Finance Minister Pranab Mukherjee on July 6, 2009 reiterated the UPA government’s commitment to create employment opportunities under the NREGA program, to empower more rural women and announced its ambitious plans to enrol at least half of them into the network of self-help group (SHG) movement. To be precise, it sought to:

* Strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per year,
* Reduce the proportion of people living below poverty line to less than half from current levels by 2014
* Ease the delivery mechanism for primary health care facilities with a view to improve the preventive and curative health care in the country.

HOW MUCH AND TO WHOM?

* The National Rural Employment Guarantee Act, (NREGA) was given an allocation of Rs.39,100 crore for the year 2009-10.
* The Accelerated Irrigation Benefit Programme (AIBP) received an additional Rs.1,000 crore, marking an increase of 75% over the allocation in 2008-09 budget.
* The Rashtriya Krishi Vikas Yojna (RKVY) is handed out an additional 30% funds over the 2008-09 budget.
* The budget proposed easy credit flow at reasonable rates, by providing a special fund of Rs 4,000 crore out of Rural

Infrastructure Development Fund (RIDF) to Small Industries Development Bank (SIDBI). This fund of Rs 4,000 crore is to help banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by March 2010.
* Rural banking network has been provided Rs 100 crore as one-time grant-in-aid to ensure provision of at least one centre/Point of Sales (POS) for banking services in each of the unbanked blocks in the country.
* The Rashtriya Mahila Kosh, which has been working towards the facilitation of credit support or microfinance to poor women, was rewarded with a corpus of Rs 500 crore from Rs 100 crore.
* The budget has proposed to provide interest subsidy to poor households for loans up to Rs. 1 lakh from banks.
* The National Rural Health Mission’s allocation has been raised by Rs 2,057 crore over and above Rs 12,070 crore provided in the interim budget.
* The Rashtriya Swasthya Bima Yojana (RSBY), a rural health program operationalised in financial year 2008-09, has been provided Rs 350 crore, marking 40% increase, in a move to bring more BPL families under the scheme.

LOOKING AHEAD:

First of all, the Microfinance Organisations Bill which lapsed before the elections was still pending for revision and re-introduction in parliament. While many microfinance institutions are not happy with certain contents of the Bill, a new Bill based on C. Rangarajan Committee recommendations on MFIs is still due.
Secondly, the proposal to implement housing-loan interest subsidy schemes through micro-housing finance institutions to reach out to the large informal sector has seen some progress though. The government has set in motion to open the country’s first dedicated micro-financing institution for housing loans to the poor. In addition, a committee led by National Housing Bank CMD S. Sridhar has been formed and asked to submit its report within three months after examining the changes that may be required to enable the existing micro-finance institutions to provide housing loans to the poor in the informal sector.
Thirdly, major attention was given to the NREGA which Prime Minister Dr Manmohan Singh, in his Independence Day speech on August 15 said, “In the coming days we will improve the programme to bring more transparency and accountability into it. New types of works will be added to the works that can be taken up under the programme.” Ten days later, the government agreed at an all-party meeting on August 26 to set up a Vigilance Committee within a fortnight at the district level under to be chaired by the local MP, a promising move in the direction.
Fourthly, Infosys co-founder Nandan Nilekani took over as head of the Unique Identification Authority of India (UIAI) on Thursday with a mandate to create a national database of identity details of citizens, which hopefully would pave the way to reach the rural and unbanked people.

But 100 days is too short a period to achieve major goals. Only time will tell us how far the UPA government achieves its long-term agenda.

Microfinance Focus, Aug. 28, 2009: United Nations Development Programme (UNDP) is planning to conduct an assessment study of fnancial literacy in seven states of India – Rajasthan, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Jharkhand, Bihar and Orissa.
The study will focus on understanding components of financial literacy, compilation and analytical overview of available packages and highlight the best practices in the delivery of tools and packages and delineate the relationship between financial literacy and financial inclusion.
The study is part of UNDP’s project on Financial Inclusion under the Poverty Reduction Programme for 2008-12. The other major project by the UNDP is on State Level Support to Livelihood Promotion Strategies. Both projects will focus on these seven Indian states.

Bangalore, August 25, 2009: Microfinance Focus, a news portal and monthly e-magazine on microfinance, will serve as the official media partner of the “Microfinance India Summit 2009″ to be held in New Delhi from October 26 to 28.

The theme of the conference is “Doing Good and Doing Well: The need for balance”. The summit will focus on providing financial services to low-income groups, organisers said. The event, sixth in a series of annual summits organised by ACCESS Development Services, a microfinance solutions provider, will draw diverse perspectives of the future of microcredit in India.

“We will be happy to have Microfinance Focus as media partner for the Summit and wish to make it successful with mutual sharing of the vision and interest,” said summit organiser Yeshu Bansal, Manager Microfinance at ACCESS. Microfinance Focus will launch a live blog on its news portal to promote dialogue and communication on the Summit.

The customary “Microfinance India-State of the Sector Report 2009″ will be released at the event. This document, over the last three years, has become the most credible document for the sector in India.

Over the years, the Microfinance India Summit has emerged to become among the most important sectoral platforms globally, bringing together thought leaders to delve into and debate key current issues in the sector.

The summit will look at both the trade-offs and points of convergence in the sector which is trying to strike a balance between building the social as well as the financial capital; social performance measurement; client protection; products and services for the poor; and issues linked to connectivity of the unbanked. Microfinance institutions recorded an increase of almost four million clients during the year.

On the concluding day, the summit will discuss issues related to the “sustainable livelihood of the poor”. A separate “State of India’s Livelihoods-The 4 P Report” will also be released bringing together the diverse experiences from the livelihoods sector.

Microfinance Focus (MF) is a monthly digital magazine focused on the microfinance sector. The publication initiated publishing in 2006, addresses both social and business aspects of the microfinance sector. Microfinance Focus launched its news portal from July 1, 2009 which has evolved as a knowledge and communication hub with exclusive focus on microfinance news, views and trends all over the globe.

ACCESS is a not-for-profit company whose overall aim is to incubate new institutions to enable their self-sufficiency and self-sustainability. To this end, it offers specialised technical assistance under two verticals: microfinance and livelihoods. ACCESS assists the growing microfinance sector through streamlined and structured services to emerging MFIs and supports the enabling environment through the Microfinance India platform. Under the Livelihoods Program Unit, ACCESS impacts the lives of the poor by developing sustainable solutions for upscaling their income generation activities.
To optimise its resources and maximise the results of its interventions, ACCESS believes in partnering with key stakeholders in the sector in order to develop mutually reinforcing strategies, bring convergence of competencies and build consensus on key issues.

To see the live blog on Microfinance India Summit 2009, click
To know more about the summit, click

By Naagesh Naaraayana

Microfinance Focus, Aug. 27, 2009: Orissa-based BISWA (Bharat Integrated Social Welfare Agency) has raised Rs 10 crore from SNS Water Fund, an initiative by the Dutch-based SNS Group, to provide microfinance loans for installation of individual household toilet and drinking water.
Mr K.C. Malick, Chairman of the Sambalpur-based microfinance institution informed Microfinance Focus that the target groups will be both urban slum-dwellers and rural poor. The loans will be distributed mainly to provide water and sanitation through BISWA instead of making them dependent on government projects, he said.
“The provision of safe drinking water with a toilet at the household will make the people reduce their vulnerability to health hazards and in turn reduce their expenditure on health care, the saving of which will increase their capital creation and will ultimately help in poverty reduction on a sustainable basis in a business model rather than depnding upon the government.” said Mr Malick.
The amount will help the MFI to provide one million toilets with safe drinking water to the peopole and create one million employment opportunities by March 31, 2011, said Mr Malick. BISWA’s future plans include distributing Rs.5,600 millioin in microFinance during 2009-10 in Orissa and neighbouring Chattisgarh and Bihar where it is working.
The SNS Water Fund was created in 2005 by the SNS REAAL Group to invest in international water projects in Africa, Asia and Eastern Europe, targeting drinking water supply, sanitation, water purification and irrigation.
Earlier this month, Bangalore-based Grameen Koota raised Rs. 1.34 crore from Water.Org for a similar project in Tumkur, Karanataka early this month.

Microfinance Focus, Aug 26, 2009: Admitting that lack of awareness among rural masses and delayed payment of wages have affected the implementation of NREGA in several states of India, the Union government has assured to set up monitoring committees in every district under local MPs within a fortnight.
“Lack of awareness, inability of workers to submit written (job) applications, delayed payment of wages, non-maintenance of records such as muster rolls, and quality of assets created under the programme” are the problem areas acknowledged by Union Minister for Rural Development C.P. Joshi at an all-party meeting chaired by him in New Delhi.  Responding to a suggestion by Lalu Prasad, Joshi agreed to set up a Vigilance Committee within a fortnight at the district level to be chaired by the local MP.
The all-party meeting, the first ever convened by the Ministry of Rural Development to discuss the implementation of NREGA, was attended by the representatives of BJP, CPI (M), SP and RJD chief Lalu Prasad, Congress and NCP. Union Ministers of State Shishir Adhikari and Agatha Sangma and department secretary Rita Sharma attended the meeting.
Other views included BJP representative Rajendra Agarwal’s observation that the NREGA had not reached the poor to the desired extent, while CPI (M) leader Ram Chander Dome sought spot payment of wages in villages where banks have no branches. Samajwadi Party leader D.D. Tiwari faovoured greater participation and NCP representative Ramrao Adik wanted the scope of works to be widened.
Mr. Joshi assured to hold another meeting ahead of the winter session of parliament and initiate a cumulative effort to create awareness about the programme. He said funds were provided to the state governments to 250 drought-affected districts to prevent migration and provide drinking water.
NREGA, one of the flagship schemes of the Central government, was launched on February 2, 2006 in Andhra Pradesh and has been expanded to cover all the 614 districts across India. The program aims to provide to every rural household a guarantee of at least 100 days of employment during a financial year by providing unskilled manual work in rural areas to those members of the rural household who volunteer to do such work. Since its inception the program has benefitted over 10 crore rural households. It has provided employment opportunities to more than 4.479 crore households in 2008-09.
The program’s salient features include financial inclusion and more than 5.77 crores savings accounts in the banks and Post Offices have been opened for the NREGA workers, The rural workers are provided time-bound employment guarantee and wage payment within 15 days, incentive-disincentive structure to the State Governments for providing employment as 90 per cent of the cost for employment provided is borne by the Centre or payment of unemployment allowance at their own cost and emphasis on labour intensive works prohibiting the use of contractors and machinery. The Act also mandates 33 per cent participation for women. NREGA workers have been identified as a category for Jan Shree Bima Yojna for insurance cover.
Budget allocation for NREGA in 2008-09 was Rs. 16,000 crore initially and was revised to Rs. 30,000 crore. It was hiked to Rs 31,000 crore during the current financial year 2009-10.

Microfinance Focus, Aug. 27, 2009: International Finance Corporation, an investment arm of the World Bank, has provided $1 billion in new financing to businesses in West and Central Africa in the year ended June 2009, a 58 per cent increase, as part of its commitment in private sector investment and advisory services in the region, said Director for West and Central Africa, Yolande Duhem, at the release of its annual operational results.

During the fiscal year that ended in June 2009, IFC increased its investment in Sub-Saharan Africa to $1.8 billion reaching 30 countries, up from $1.4 billion in 25 countries the previous year. Of the $1.8 billion, IFC provided $1 billion in new financing to businesses in West and Central Africa, a 58 per cent increase. IFC Advisory Services in Africa also increased its volume in Sub-Saharan Africa by 35 per cent to $38 million and doubled its work in conflict-affected countries.

“Reaching Africa’s smaller markets is a top priority for IFC,” said IFC Director for West and Central Africa, Yolande Duhem. “Through innovative financing, increased advisory services, and working together with partners who share our commitment to African development, we have been able to finance more businesses in West and Central Africa.”

Among IFC’s major transactions in Senegal and West Africa in the fiscal year ended June 2009 was a $2 million trade finance line to Ecobank Senegal, part of a regional financing of more than $200 million to Togo-based Ecobank Transnational, Inc.

IFC last year committed its first investment in Sao Tome and Principe, which became an IFC member state in October 2008, by providing a trade finance line of $1 million to Banco Internacional de Sao Tome e Principe. IFC opened new offices in the Central African Republic and Ethiopia.

By Naagesh Naaraayana

Microfinance Focus, Aug. 26, 2009: Here is another innovative idea in microfinance. A new “loan guarantee” offer from the portal ‘United Prosperity’ is enabling individual lenders to nearly double the ‘impact’ of their small contributions to fund the poorest entrepreneurs in the world.
The non-profit United Prosperity is a person-to-person microloan website based on a concept of loan guarantees. Under this, a group of United Prosperity microlenders agree to pay the local lending institution if the impoverished borrower doesn’t.
This creates a stronger initial borrowing position for a person who is living in poverty. And by having part of the loan guaranteed, local banks release almost twice the guaranteed amount. When the loan is repaid, the microlenders get their money back. With these loan guarantees, for a given amount of money, United Prosperity generates nearly twice as many loans as traditional microloan models.

HOW IT WORKS?

Farida, a poor woman in India supports her family by sewing children’s school uniforms. She wanted to grow her business with a second machine. The cost for a used sewing machine requires $175, but with no credit history she could not get any bank loan. So Farida applied for a microloan to a local Microfinance Institution (MFI), which in turn, packaged Farida’s request with five others into a ‘borrowing group and
asked a bank for the $1,052 in total. Based on factors including the MFI’s credit record, the bank decided to provide the loan but to lower its risk, it wanted United Prosperity to guarantee the repayment of $578, nearly half the amount. United Prosperity agreed and raised
the $578 online from twelve international microlenders and deposited that amount in a savings account with the bank. Shortly, Farida’s group
got the full $1,052 they wanted.
United Prosperity thus, supports entrepreneurs, mostly women, who are in extreme poverty, which is roughly estimated by the World Bank as living on less than US $2 a day. The United Prosperity website profiles poor entrepreneurs who need a microloan, often less than $200 each, to buy raw materials, upgrade manufacturing equipment, buy farm supplies, or increase inventory for small shops and stores.

Ever since the website went live in the summer of 2009, it has raised funds from more than 110 microlenders from 15 countries which helped about 100 beneficiaries. Bhalchander Vishwanath, founder of United Prosperity said, “Nearly 2.5 billion people in the world live in extreme poverty. They do not have access to basic necessities which most of us take for granted. Helping so many people come out of poverty mandates that we utilize every dollar to its fullest extent to provide the greatest social impact. The process of loan guarantees allows us to get more loans done, and it means individual contributors on United Prosperity get the maximum impact.”
United Prosperity microlenders, who Mr. Vishwanath calls ‘compassionate social guarantors,’ do not receive interest from their contributions.

Microfinance Focus, Aug. 26, 2009: Despite the continued progress made by the countries in Asia and Pacific, hunger still remains widespread and many economies are struggling to meet other Millennium Development Goals (MDG), including reductions in maternal mortality rates and access to sanitation, latest available data show, said Asia Development Bank in a statement.  The trend reflected in ‘Key Indicators 2009,’ the Asian Development Bank’s (ADB) flagship annual statistical publication, which presents the latest available economic, financial, social, environmental, and MDG indicators for regional members of the ADB.

Over the past 15 years, Asia has made rapid progress in the fight against poverty, reducing the number of poor from around one in two people to around one in four. However, large pockets of extreme poverty continue to persist even as many economies have posted record growth rates over that time.

“With the recent global downturn, which has led to large declines in exports, production, and aggregate demand, regional growth will continue to be under severe downward pressure,” said Jong-Wha Lee, ADB Chief Economist. “Slower growth in the short-term will make progress in achieving the Millennium Development Goals difficult for many countries in Asia and the Pacific.”

The region’s other major challenges on goals are linked to sanitation and maternal mortality. The indicators show that maternal mortality rates remain very high in many countries like Afghanistan, Cambodia and Nepal, while more than a quarter of urban households in 13 countries still lack access to improved sanitation. The region’s fast growth in recent years has also put severe strains on the environment, with developing Asian countries becoming heavy contributors to greenhouse gas emissions, the statement said.

‘Key Indicators 2009′ regional tables provide further insights into the overall health of the region. The latest available data show that a growing number of people aged 65 or over is expected to put an increasing strain on health and welfare infrastructure going forward while per capita incomes show that the gap between rich and poor countries remains wide. Inflows of foreign direct investment fell sharply in a number of economies last year as a result of the global economic crisis, while registering new businesses remains a lengthy process in some countries.

On the positive front, the data show that savings ratios in Asia remain broadly high, intra-regional trade is strong, and the balance of payments position of most economies is sound.