Microfinance Focus, June 30, 2010: Microfinance News Synopsis brings a compilation of industry headlines broadcasted by other news media from across the world.
Sanjay Nayar joins the Board of Grameen Capital India: Grameen Capital India, today said that it has appointed Sanjay Nayar as a Director on its Board. Sanjay Nayar is the CEO and Country Head for Kohlberg Kravis Roberts & Co (KKR) in India, a leading global alternative asset manager. Prior to KKR, Nayar was the CEO of Citigroup, India and South Asia, and a member of Citigroup’s Asia Executive Operating Committee and Senior Leadership Committee. Grameen Capital’s CEO Royston Braganza, said in a statement “the microfinance sector is at a key inflection point–how does it sustainably scale-up to meet the huge need without losing sight of the larger good. Strong commitment to social impact and fresh ideas are needed to continue to attract capital and new investor classes to the base of the pyramid.” [Economic Times]
IFAD allocates $ 1m to support Al-Amal Microfinance Bank’s capital: The International Fund for Agriculture and Development (IFAD) has allocated USD 1 million to support the Al-Amal Microfinance Bank’s capital, and USD 7 million to boost the bank’s lending capacity and spreading in the rural areas.This came during a meeting gathered on Tuesday the director of the bank Mohamed al-Lai and the IFAD’s mission headed by the Fund’s Vice-President Yukiko Omura. Omura voiced the Fund’s readiness to offer the technical support to enhance the bank’s capacity to spread in the different provinces of the country, praising the steps and activities made by the bank in spite of the short period, which did not exceed a year and a half. She stressed the importance of partnership between the Fund and the bank to enable the Fund to reach the poor people [Saba News]
MFBs look offshore to beef up capital: Following the liquidity crisis that has crippled operations of microfinance banks (MFBs) in the country, operators are looking offshore to beef up their capital. This formed part of the recently released 10-point plan to revitalise the sector by the national executive council of Nigerian National Association of Microfinance Banks (NAMB). One of the central components of the plan is to strengthen ties with developmental institutions, donor agencies and foreign MFBs that would take the form of bilateral visits, meetings, conferences and exchange programmes. More so, the plan includes the creation of an emergency endowment fund for banks to use during critical emergencies [Business Day]
Microfinance Focus, June 29, 2010: Obopay, a mobile banking and payment provider has entered into partnership with the financial group, Societe Generale to bring mobile payment services to banked and unbanked customers who have access to a mobile phone in Africa. The partnership between the companies is intended to make mobile payments available in new markets, with the first stage of the initiative launched in Senegal through Societe Generale de Banques au Senegal (SGBS).
The new service, offered as “Yoban’tel by Obopay”, is a carrier-agnostic, mobile money transfer and bill payment service that is available to all the people of Senegal with a mobile phone. This is accomplished by leveraging SGBS’s current branches and opening up new channels of distribution for banking services through commercial partners including Credit Mutuel du Senegal, TIGO and CANALSAT HORIZONS. Users can enroll for a mobile payment service and load or pick up cash at designated locations throughout Senegal. They can also use the service to send money to anyone throughout the country, or to pay a bill.
“In Senegal, traditional banking services are typically very limited; people can spend an entire day each month standing in line to pay for things like their utility services in cash,” said Richard Hababou, managing director of Societe Generale Innovations Group. “Yoban’tel by Obopay allows us to establish innovative and convenient mobile money transfer and payments for those Senegalese who have previously not had access to such services”. With Yoban’tel by Obopay, any Senegalese resident owning a mobile phone will be able to send money to recipients using a simple SMS transaction. Yoban’tel by Obopay services are available for both existing customers of the bank or new customers through a prepaid account.
“Partnering with one of the world’s leading banks, Societe Generale, enables them to put mobile money at the heart of their accounts,” said Obopay CEO Carol Realini, who founded the company following volunteer work in Africa, where she witnessed people in some of the most remote areas of the world carrying phones who lacked access to banking. “Their reach will bring new mobile money access to millions. Furthermore, this latest offering extends our experience in meeting the needs of four different sets of regulatory environments and market dynamics – including the US, India, Kenya and now Senegal – and gives us the expertise, robust platform and service offering needed to expand into new markets very quickly.”
Founded in 2005, Obopay, Inc., (banks.obopay.com) offers financial institutions an open, trusted, secure and interoperable mobile payments service by transforming any mobile phone into a convenient and easy way to send and receive money. The company’s Mobile Money for Banks offers bank-branded, account-centric mobile service quickly, painlessly and at low deployment cost. Obopay’s broad-based offering addresses the needs of consumers and businesses around the world by providing a ubiquitous service that delivers value, empowers lives and improves opportunity for merchants both in the physical and virtual worlds. The company provides innovative mobile money services making it easy for mobile phone users to securely send and receive money, top-up their mobile, buy online, buy via mobile, pay bills and pay small businesses.
Microfinance Focus, June 29, 2010: Rockefeller Foundation will be funding the data sharing between the Microfinance Information Exchange (MIX) and the Global Impact Investing Network (GIIN) to develop a structured data feed that will enable the GIIN Impact Reporting and Investment Standards (IRIS) initiative to access financial and social performance data from more than 1,800 microfinance institutions (MFIs) currently reporting to MIX. Data exchange will result in increased transparency and comparability across microfinance and the broader impact investing industry
The GIIN will use the data in cross-sector analyses of the impact investing industry, which includes all for-profit investment that aims to generate social or environmental good. Once operational, the MIX data feed will be open to additional subscribers, such as investors or technology providers. This project represents an important step in unifying the currently fragmented landscape of social and environmental performance data for a growing set of investors who seek to finance global solutions. A grant of $187,000 from The Rockefeller Foundation is supporting the data exchange technology.
Both IRIS and MIX collect data using XBRL (eXtensible Business Reporting Language), a business reporting language created specifically to streamline the exchange and analysis of financial information. XBRL is becoming the standard reporting mechanism for global financial sectors, and is used by the FDIC (Federal Deposit Insurance Corporation) and SEC (Securities and Exchange Commission) in the United States, the International Accounting Standards Board (IASB) and regulators and exchanges throughout Asia, Europe, Africa, and Latin America. By adopting XBRL-based data collection, MIX and IRIS are creating standard reporting frameworks that enable the integration of social and environmental performance reporting into mainstream markets.
Microfinance Focus, June 29, 2010: Microfinance News Synopsis brings a compilation of industry headlines broadcasted by other news media from across the world.
MFIs as engine of inclusive growth: For those of us, who have been in microfinance since its origins about 20 years ago, we remember the days when no one paid much attention to us except other colleagues in the development sector. Much has changed in the past two decades and microfinance has evolved into a thriving sector. Today, microfinance even creates newspaper headlines, sometimes adulatory, and at other times sensational. The truth lies somewhere in between. Microfinance is not a panacea which removes poverty in one go, nor is it a new form of money lending to exploit the poor [Economic Times]
SKS plans to lower cost of funds: SKS Microfinance is planning to raise resources via financial instruments such as commercial papers and non-convertible debentures to bring down its cost of funds by 100 to 200 basis points. Lower cost of funds for SKS can translate into the average borrowing cost for customers coming down to 26.3-27.3 per cent from 28.3 per cent now, said a top official. SKS distributes small loans that begin at Rs 2,000 to Rs 12,000 to poor women so they can start and expand simple businesses . These women are generally engaged in micro-enterprises ranging from raising cows and goats in order to sell their milk, to opening a village tea stall. The company uses the group lending model where women guarantee each other’s loans. “Whenever we have attained a critical mass, we have brought down the borrowing costs [Hindu Business Line]
Vittana Streamlines Microfinance Service: Vittana, a non-profit micro-finance lending service which provides education funding, is now enabling lenders to re-lend directly. Lenders on the service now no longer need to go through PayPal directly for each payment and re-payment. CEO Kushal Chakrabarti said no June 12th, “Today, I have the honor of announcing that, as of last week, Vittana lenders had given over 200,000 US$ in loans to hundreds of young people who want to become engineers, policemen, biologists and much more.” Vitanna is closer to the business model of Kiva than the commercial peer to peer lending companies such as Prosper.com and Lending Club. Vitanna aims to “enabling students around the world to get access to higher education for the first time.” The company says that student loans do not exist in most parts [American Banking News]
Suisse Bank, ACBS Offer N1b Loan to Microfinance Banks: Nigerian micro-finance banks can now get as much as N1 billion loan to finance small scale businesses in the country through a new partnership between the Suisse Bank Plc of London,Smart Links Limited of Dubai and the African Capital and Business Support Limited. The loan being offered by the partnership is interest free for the first one year and subject to repayment in four years thereafter,the Vice Chairman of ACBS,Benjamin Aduli said yesterday in Abuja. Aduli,speaking at a BusinessDay,ACBS Microfinance Banks workshop, gave some conditions under which the nation’s microfinance banks [Leadership]
Microfinance Focus, June 29, 2010: Bangalore based Non-Banking Financial Company, Grameen Financial Services (Grameen Koota) has completed Rs 31.15 crore Securitization with IFMR, a Chennai based inclusive-finance company. The securitisation transaction involved over 27,000 microloan contracts of Grameen Koota being pooled and issued as debt securities by Alpha Pioneer IFMR Capital 2010, the special purpose vehicle or SPV created for this purpose. The securities were issued in two tranches with the P1+ (so) rated senior tranche being subscribed by a large Indian mutual fund and the P4+ (so) rated subordinated piece being bought by IFMR Capital in its role of the market builder for these securities.
This is the second round of securitization by Grameen Koota and was structured and arranged by IFMR Capital, that has worked to enable funding to microfinance institutions through its Rs. 200 Cr. securitization program. The paper was issued as two-part PTCs (Pass through Certificates) rated by CRISIL. Marking the occasion, Mr .Suresh Krishna, MD Grameen Koota said, “This is the second transaction and just shows the tremendous faith that our investors have in us and in growth of Microfinance sector at large. The benefit will definitely go down to our customers as well”.
With this deal, funding facilitated by IFMR for the microfinance sector has reached about INR 3 billion. Ms Sucharita, CEO IFMR said, “Despite tight liquidity conditions, this securitization has resulted in a significant cost reduction for Grameen Koota. The steady flow of microfinance backed securities in the capital markets can be attributed to the exceptionally strong performance of rated microfinance securitizations and the resulting interest from both, a larger number and a larger variety of investors such as mutual funds and private wealth banks. IFMR Capital has been very pleased with the performance of its second loss investments in Grameen Koota and other transactions.”
Earlier in March 2010, IFMR also structured and arranged a Rs. 264.7 million securitisation transaction. The transaction was backed by 25,446 microloans originated by Grameen Koota. IFMR Capital Pioneer III, the Special Purpose Vehicle created for the transaction, issued two tranches of securities rated by Crisil. An 80% senior tranche rated AA(so) that was subscribed to by IndusInd bank and a 20% subordinated junior tranche rated BBB(so) that was invested into by IFMR Capital. Both tranches have an expected maturity of 13 months.
Grameen Koota is an NBFC registered with the Reserve Bank of India, Grameen Koota has a portfolio outstanding of Rs. 330.17 crore with a client base of more than 427,144 spread across 37 districts in Karnataka, Maharashtra and Tamil Nadu. It has recently raised its third round of equity of Rs. 27.5 Crore from Micro Ventures Funds, Italy, Aavishkaar Goodwell and Incofin (Belgium). Earlier, Grameen Koota had PE funding of Rs. 9.20 Crore from Aavishkaar Goodwell.
Securitization or portfolio sales are increasingly becoming the preferred method of fundraising by microfinance institutions in India. But the recently proposed RBI (Reserve bank of India)guidelines for securitization by NBFCs tend to restrict this popular route for MFIs. The guidelines seek to lay down a minimum holding period of 9 months before a loan could be sold out but microfinance loans have a natural tendency to get prepaid within 9-10 months as the borrower typically pays off the tail of the remaining and takes a new loan. Industry experts have expressed their concerns and are making presentations to the Central Bank to address the issue and keep the securitization route open to microfinance institutions.
Microfinance Focus, June 29, 2010: Microfund for Women (MFW), Jordan’s first microfinance program has recently launched the region’s first gender-sensitive microinsurance product, CareGiver. The products targets to help low-income women better cope with financial burdens associated with a medical emergency. With support from the International Labor Organization (ILO), MFW and its partner, Women’s World Banking (WWB), are providing this innovative insurance policy to MFW borrowers, of which there are currently 52,000. Ninety-seven percent are women. Clients pay a nominal monthly premium with their loan repayment and receive coverage for each night they stay in hospital.
Launched in April, CareGiver (or Ri’aya in Arabic), is designed to help women and their families better cope with the incidental expenses associated with hospitalization, such as medical fees, lost income and childcare. Mary Ellen Iskenderian, President and CEO of WWB, says: “Women, more often than not, are the family’s primary caregiver. During a health event, there’s more than just medical expenses – lost wages, childcare, even transportation to and from the hospital – all add pressure on that household during a tough time. The CareGiver Program is designed to address just that issue.”
Clients are automatically covered when they take a new loan from MFW; they do not need to have a medical exam, and there are no exclusions for pre-existing conditions. Women are also covered if they need to go to hospital when they are pregnant. Clients can use their coverage on anything they choose, from transportation costs, nutritious food to covering financial losses from their business incurred due to their hospital confinement.
In the case of an unforeseen health event, low-income families typically use their savings or borrow from others to cover the expenses. In some cases, they may temporarily remove children from school to contribute to the family income,” says MFW Deputy General Manager, Fatina Abu Okab. “CareGiver will allow women and their families to manage risk and use their assets more productively.”
Last month, Naela Hamdan became the first claimant of CareGiver. An MFW client for seven years, Mrs. Hamdan was hospitalized for three days and was unable to work or care for her family. “I was very happy when I heard about this program. MFW quickly responded to my claim and I received my benefit just three days after lodging it. This kind of insurance really gives you peace of mind,” Mrs. Hamdan said, adding that the benefit helped her recoup the losses she sustained from having to close her business.
CareGiver is being provided in conjunction with Zurich Financial Services and Al Manara Insurance. Brandon Mathews, Zurich’s Head of Microinsurance, says: “Planning for adverse events – saving rather than investing in their businesses – may put women at a further disadvantage. Insurance is what is used to plan for such events. If we can unlock more entrepreneurial investment by low-income women while protecting them and their families against some of life’s risks, we’ll see a multiplier effect that’ll make a difference.”
Insurance is increasingly being recognized as a powerful tool in addressing poverty eradication. CareGiver is the second insurance product offered by MFW. All MFW clients are protected by the Himaya Life Insurance scheme, which offers coverage for death and full or partial disability. Unlike most life insurance schemes offered by microfinance institutions, Himaya also covers the life of the borrower’s spouse.
Microfinance Focus , June 25, 2010 : The only agreement in Microfinance seems to be the ultimate goal that it should reduce poverty. A decade ago, the Micro-debt part of the sector, which now is a large employer in Europe and North America, predicted that if they would receive some billions of $US more in socially motivated funds they would ensure that millions households receive loans and that each year 5% of those borrowers would be poor no more. They received promises from the G8 countries to that effect, from the UN and the World Bank Group in Monterrey (2002) and Gleneagles (2005). Well, the goal of significant poverty reduction seems to be far off now and the Microcredit arm of the Millennium Development Goals is busy getting its defence up; that they are not to blame for having failed the poor. That Microfinance has not evaporated as a trend in socio-economic development may be due to the fact that it concerns the always happy activity of “giving away money” and that all people involved can get away by arguing that they are extremely successful in helping “their” poor clients and they have widely smiling clients on pictures to prove it. And the poor will always need money from whatever source, they will not try to invoke their individual rights to get compensation for false promises.
Some things have improved. As I explained in an earlier article in MFF, many practitioners who argue that Microfinance is about “distributing financial services to poor people”, especially “ loans to economically active people” have come to understand that collecting, stabilising (in the form of specific longer term savings products) managing and on-lending of customers’ deposits helps their clients as well as the Microfinance institution. It increases the assets of poor people so that they become less poor, it helps the poor better plan their money, it helps to better know customers thus improving risk management and it may reduce funding costs thus contribute to bringing down lending interest rates. Some of these experts have learnt from their twenty or so years of grassroots experience and transformed their organisations, such as GrameenBank. However, at international conferences, such as Prof. Yunus at the Nobel Prize acceptance speech, they still speak for an hour without even mentioning once the terms deposits, savings or financial intermediation. Why is that?
Over the last five years many different new issues have entered the scene and are being tried with so many different approaches; technological support (computerisation, mobile telecommunication technology), “value chain financing”, “social performance measurement” (SPM), individual uncollateralised cash-flow based lending, MFI transformation into retail banking, etcetera. And of course the promoters of micro-enterprise development and credit still dominate the public media with their slogan that Microfinance is defined by loans for working capital for the “economically active poor” (a confusion on its own; is not every poor person getting money from whatever source possible in order to stay alive and thus “economically active”?). These many different activities produced an important level of confusion. They are not presented in a manner that can build a viable business model in a specific market. How does a socio-political lending program focusing on women groups that have subsistence business activities organises itself to manage itself to decide what it wants to do in the future? If it wants to principally remain a tool for women groups to meet and discuss different issues other than finance, which of the above tools would it need to improve these activities? If it wants to become a rural finance institution how shall it dispose of its non-financial services and how will it manage members that do not want or understand that change? What future plans should Savings Clubs make if they want to better structure their activities that now end each year by dividing the savings? How can an MFI transform into a retail bank that can continue to integrate so far unbanked people, including diversifying clients and products, in a process where it determines independently which tools it can use in what sequence and in a manner that ensures its financial sustainability and sustained growth?
Continuing that confusion, many social Micro-lenders mix different kinds of funding sources for realising their confused ideas: deposits from their customers, deposits from neighbouring citizens who desire only safekeeping of their money, borrowings from local commercial banks, commercial investments from local businessmen, grants from local governments, subsidies from foreign donors, “social” investments below local and international capital market rates, “subordinated” loans that have no real debt obligations and are below market conditions, and in general help from everybody who wants to give something, buildings, uniforms, money, cupboards, training, advice etcetera. Such confusion and the temptation to welcome any outside offer of support and advice are understandable. In some countries microcredit institutions were told that they needed to mobilise and on-lend public deposits and central bank was instructed that they should provide such organisations with licenses. As a result, trends can be observed in some countries of slowing deposits, continuing short term nature of such deposits (still desperately and incorrectly called “savings”), continuing rapid growth of lending that results in over-indebtedness, criticism on high interest rates, creative accounting and slowly worsening repayment performance.
What can we, Microfinance practitioners, authorities and experts of all kinds do to help poor people and their (micro-) financial institutions to better manage money? How can we help citizens and businesses to work with (micro-) financial institutions to integrate into sustained economic growth and job creation processes through financial intermediation?
I suggest that we start by understanding the processes at work in local markets. If a market is about interchangeable goods or services with similar characteristics, usage purpose and pricing then we can conclude that in some geographic areas microfinance is a different market than banking and should thus not be policed and regulated in the same way. In other areas it even means that services called Microfinance are different between them and should be distinguished and separated into different markets, with different authorities, players, rules, as well as with different appropriate support mechanisms. In most countries Microfinance stretches out over different markets and one can consequently not talk about “promoting competition to support growth of MFIs”. Experts, authorities and practitioners need to first understand and agree on the existence and workings of the different markets before making a strategy for integration of Microfinance in one or the other.
It seems clear to me that social microcredit should be separated from Microfinance as a tool for building inclusive market-oriented financial sectors. It might hurt the social experts who have gotten rather fond of using banking and other financial sector terms; blaming bankers for greed whilst undertaking “banking of the poor” and sometimes becoming rather good at it, with profits, share-value increases, IPOs and all, or by sometimes cleverly hiding profits by talking instead of autonomy and cost-covering. In some instances such social experts became very successful in undermining any local efforts of forging an alliance for local financial intermediation where local excess funds are used for local re-investments in economy and society. Again I personally think also that citizens, also those that sit in banks and in governments, are in the long term more committed to local sustained development than foreigners. Foreigners are more easily tired of local challenges, find less performance incentives and their project term often ends in three years. I also think that equitable, locally determined salary earning is key to promoting professionalism and to maintaining a stable national currency and stable financial markets, simply saying that local monetary policies make sense. It also means to say that I think that, with all due respect to their commitment and role in humanitarian activities, only activities remunerated according to a commercial pricing mechanism will feed economies and thus the citizens who live there.
Foreign support in Microfinance of any kind can only contribute marginally when they fully understand, respect and integrate into the local socio-economic growth process. And Microfinance experts also need to understand how individuals respond to specific financial stimuli. People are not machines, markets are not perfect and markets of social, economic and financial products and services in many countries are twisted and mixed up. Especially poor people are often discouraged and impatient, they often don’t act rationally but opportunistically. By clearing the area, by clearly defining specific markets, their players and (potential) customers, experts can help increase understanding. MF experts can assist in making the data that MFI produce and transfer to the public authorities detailed, reliable and verifiable without making that process cost a lot of time and resources. The authorities can thus do their work and form an accurate image of the operations and health of the institutions and of the clients they service. They can determine in which markets MFIs operate, in the banking sector or in social affairs and regulate these separate markets better on the basis of clear and consistent strategies and policies.
Finally, it is has been “high time” indeed that foreign donors are held accountable for failures, violations of local policies and laws, and for damages caused by their work. Damages that are caused by distorting markets and violating consumer rights. How to solve a conflict between a social lender that provides loans at subsidised interest rates where an MFI tries to become self-sustainable; who should pay for the direct and indirect costs for implementing a solution? How should a borrower get its rights reinforced when a micro-lender applies one-off fees and charges on top of interest rates in violation of lending and consumer laws (“transparency in lending”)? Will the donor of the microlender pay for all the legal and miscellaneous costs where a local authority has clearly established that the borrower has justified cause? Will the mobile telephone company pay when its independent pre-paid card seller or POS-payment machine agents lose money that was collected from depositors in “branchless banking” activities (now often legally incorrectly called “mobile banking”)? In my view it is high time we take a big step away from the comfy times where foreign donors and NGOs are shielded from criticism because of their good intentions. Especially when operating in financial markets they need to fully accept their responsibilities, even when that means that some donors threaten reconsidering their “commitments”.
About the Author
Peter van Dijk, Microfinance Consultant| Indonesia
Peter van Dijk is a lawyer by training who entered the financial sector in January 1994 working for five years with the World Savings Banks Institute responsible for promoting the interests of savings banks in Africa and Asia. Mr. van Dijk worked from 2000 to end 2002 with the Central Bank and the Finance Ministry in Uganda on one of the world’s first laws that supported the integration of Microfinance Institutions into the banking sector. From January 2003 to end 2004 he worked with the International Monetary Fund (IMF) in developing a Microfinance Policy and in its West African Technical Assistance Centre West Afritac, he advised 10 Francophone countries on Microfinance policy development, regulation and supervision. End 2004 Peter moved to South Africa on the invitation of its Microfinance regulator to provide advice and he undertook the first study on Financial Services for Poor Households on behalf of the Finance Ministry. In South Africa he was also a member of the organizing committee of the African Microfinance Conference in Cape Town end August 2005 and during that year he advised the United Nations on its “Year of Microcredit, Building Inclusive Financial Sectors”. Since January 2006, Peter is an independent consultant in Microfinance and Financial Sector Development and he has undertaken technical assistance projects in several African and Asian countries. In recent projects, he worked with several central banks (Cambodia, Laos, Madagascar, Nigeria, and Pakistan) on reviewing policies, regulations and on strengthening the capacities of Microfinance regulators, managers and trainers. He provided training on Legal Issues in Microfinance with the International Development Law Organisation (IDLO) and with the Frankfurt Bankakademie. Last year he published an article on Public Policy Issues to make Financial Sector Cooperatives Work.
Views expressed in the article by author is his own and do not necessarily represent those of Microfinance Focus. Microfinance Focus does not take any responsibility for correctness of the data presented by contributors. Reproduction in whole or in part without written permission is prohibited.
Microfinance Focus, June 24. 2010: SKS Microfinance which is going to be India’s first microfinance company to list on the Stock Exchanges may hit the market in the next week, subject to regulatory approvals. It plans to sell 16.79 million shares in its initial public offering (IPO). The firm plans to issue 7.44 million fresh shares while the rest will be sold by existing stakeholders Sequoia Capital, SKS Capital, Mauritius Unitas Corporation (MUC) and Mutual Benefit Trusts.
Citigroup Global Markets India, Kotak Mahindra Capital Company, Credit Suisse Securities (India) Private Limited and Karvy Computershare Private are the book running lead managers for the offering. SKS was started in 1997 as a public society in the form of an NGO, Swayam Krishi Sangam (also known as SKS Societyor SKS NGO) and transformed itself into the largest MFI in India and the fastest growing MFI in the world, as of September 2009 reaching 5.3 million poor women, or some 20% of all MFI clients in India.SKS Society created5 a private company, SKS Microfinance Private Limited in 2003, which became a Non-Banking Financial Company (NBFC) in 2005. Finally, in May 2009, the Company was converted into a public limited company.
Microfinance Focus, June 24, 2010: Despite exponential growth and expansion, the Indian microfinance industry has not witnessed mergers and acquisitions so far. The market continues to remain highly fragmented. This was one of the issues discussed in a panel at MCCM. Mr. Bejul Somaia of Lightspeed Advisory Services said, “Consolidation doesn’t happen in any sector in India. Indian entrepreneurs are unique in the sense that they can continue even if there is difficulty in raising capital. Not many management teams in this sector would be able to put together different models operating in different culture and geographies”.
Mr. Vineet Rai from Avishkar said that a lot of value and efficiency can come from the mergers of balance sheets and was supported by Mr. Richard Weingarten, Managing Director, Norwegian Microfinance Initiative Frontier Fund who said, “Microfinance has a strong commonality and the basic fundamental structure is very same that will lead to consolidation. We are sure some great institutions will come together within 7 yrs and work for some great innovation.”
“Indian industry is in a high growth phase and has not seen any dip which could push consolidation. Maybe some slump in some area can drive it”, suggested Geeta Goel, Michael & Susan Dell Foundation
Microfinance Focus, June 24, 2010: Concluding the Microfinance Cracking the Capital Market Conference in New Delhi, its organizers briefed the audience about the ideas that emerged from the conference. Monica Brand of ACCION said, “I think microfinance is in some senses is constrained by factors which made it a success. As equity investors we invest in people, and we look for social passion and the passion to succeed. There is a lot more to do here in India, and I come away with a measured optimism about this perfect storm of successful entrepreneurs, professional management team and dynamic growth, but it has to move beyond good planning model to capitalize on the assets of the industry.”
Royston Braganza of Grameen Capital India said, “For me the key concerns are about how we can fund this growth and achieve scalability and sustainability. Essentially, we should see that what we are doing as an industry does not hurt the sector. We must ensure that the industry has enough capital to meet the immediate needs of growth. So there is immediate cause for us to come together and discuss the challenges that we need to overcome in the near future. We need to find a mechanism that can help us to make a definite next step. It is not all about tier 1 or 2 MFIs, but it’s also about getting the lower tier MFIs to cater to the market.”
The concluding remark came from Robert Annibale who said, “We’ve talked about risk, something that is importantly conveyed by analysts very closely. This industry comprises of a wide range of institutions with various missions, and not all are going to become huge. But they have a common need, which is for capital to spur growth. Specialized funds have been very important catalysts. I am generally very optimistic with what we’ve discussed about risks, valuations, consolidations over the time of this conference.”
