Microfinance Focus, October 31, 2011: Bangalore based NBFC-Microfinance Institution Ujjivan Financial Services Ltd. has been assigned an MFI grading of ‘mfR3’ by CRISIL. The grading is a current opinion on the ability of an MFI to conduct its operations in a scalable and sustainable manner. The grading is assigned on an eight point scale, mfR8 being the lowest.

Ujjivan is a leading urban microfinance organisation with over one million customers across twenty states & union territories but has no operations or loan exposure in Andhra Pradesh.

Managing Director, Samit Ghosh said, “Ujjivan continues to enjoy strong business operations across India, good portfolio quality, and liquidity. This grading is one of the highest for any MFI in India. It is a reflection of our management’s and Board’s successful steering of the business in the period of crisis and the pro-active changes being undertaken post-crisis. ”

“We continued to receive fresh funding from institutions both in India and overseas and have not been significantly affected by the industry crisis. We have consistently met all loan servicing requirements to all our lenders on or before due date”, added Ms.Sudha Suresh, Chief Financial Officer.

Present in 20 states, Ujjivan has disbursed loans of over Rs.2700 Crores to urban and semi-urban poor customers with a repayment rate above 98%. It is among India’s top 25 Best Companies to work for and ranked #1 in the microfinance industry. Ujjivan won the Srijan MFI Transparency Award and the Gold Award in Social Performance Reporting.

Microfinance Focus, October 31, 2011: A microfinance investment vehicle managed by the Developing World Markets Group (DWM) has recently made a USD 2 million investment in Georgian microfinance organization JSC MFO “Crystal”. With this investment, DWM investment vehicle became the largest shareholder of Crystal.

Crystal reported to Microfinance Focus that it will use the investment to strengthen corporate governance and management systems. It intends to become a leading provider of microfinance services to Georgia’s SMEs and agro-businesses in the way which takes into account social and environmental objectives.

DWM’s equity investment will allow Crystal to attract more external funding in order to increase concentration and expand its activities into new regions by targeting greater number of clients. Crystal’s further growth will be based on new products, use of technology as well as strong focus on long-term relationship with customers.

Commenting on the transaction, Brad Swanson, Partner for Private Equity at DWM, said: “DWM could not be more pleased about becoming a shareholder in Crystal. DWM has worked with Crystal for over four years and this transaction confirms DWM’s commitment to supporting the achievement of Crystal’s financial and social goals, in order to support thousands of low-income entrepreneurs across Georgia”.

“We are pleased that one of the largest international microfinance investors has invested in Crystal. We consider this deal a tremendous success as it brings to Crystal not only the financial support but invaluable expertise as well as best microfinance industry standards. We are empowered and confident to become a leading microfinance provider in Georgia” said Malkhaz Dzadzua, CEO of Crystal.

JSC MFO Crystal is one of the leading Georgian MFIs supporting micro and small business development and working towards poverty reduction and sustainable economic development. Starting as a microfinance project in 1998, currently Crystal manages a gross loan portfolio of USD 11 million and serves more than 10,500 active clients (45% of which are rural). It operates across 5 regions of Georgia through the network of 15 offices.

Crystal is the winner of Smart Campaign’s call for “Plain language loan contract”. The company was also awarded with Certificate of Merit by CGAP for Financial Transparency and has a silver prize from MIX Market for Social Performance reporting.

Microfinance Focus, October 31, 2011: The Cabinet of the Republic of Sudan, approved recommendations presented in a report by Dr. Mohamed Khair Al-Zubair, Governor of the Central Bank of Sudan. Some of these recommendations include the issue of guarantees such as the salary, the retirement pension and the personal guarantee as well as granting preferential advantage to microfinance projects. The Cabinet approved to establish the Supreme Council to develop and follow-up policies to create a robust microfinance industry in Sudan.

The report showed that development in the microfinance sector did not exceed 3% in the year 2002, and continued rising until it reached 12%, in the year 2011. The report addressed the issue of guarantees. Taking into consideration, that customers are often from vulnerable groups where microfinance policies tend to facilitate these guarantees by accepting personal guarantees and community-based and collaborative guarantees in many transactions.

The Cabinet approved the recommendations forwarded by the Central Bank of Sudan, which include facilitating the guarantees and considering the salary, the retirement pension and the personal guarantee as guarantees for the financing as well as granting preferential advantages to microfinance projects besides allocating compounds and markets places for the products of microfinance projects together with the establishing specialized centers for the development of small projects.

The Cabinet also decided to establish the Supreme Council for the care of the microfinance industry that should develop policies and follow-up their enforcement in order to achieve the desired objectives of this program to increase the national income, increase employment rate and combat poverty.

The current fiscal year plan includes funding of 100 thousand farmers through loan amounting to 45 million SDGs (Sudanese Pound) for the cultivation of more than 630 thousand Feddns, unit area. The plan also includes a project for the indigenization of small-scale industries to encourage these industries to replace a large proportion of imports.

Dr. Abdur-Rahman Al Khadhir, Khartoum State Governor, shared the experience of the Khartoum State in the field of microfinance, which indicated considerable success of that experience in terms of reflecting the recovery rates, which have raised, reaching 96% of the volume of the loans, which amounted to 29 million SDGs this year.

The Cabinet also listened to the experiences applied in the Youth Organization for Microfinance and North Darfur State. The Minister of Finance explained that the funding available for micro-finance has reached about 3 billion SDGs. He appealed to the States’ governors to create organs and mechanisms that regulate micro-finance to benefit from this substantial funding available for targeted groups.

Microfinance Focus, October 29, 2011: Global payment services provider Western Union has activated a limited-time ‘No Transfer Fee’ program for money-transfers sent to Turkey earthquake zone city of Van, from participating Western Union Agent locations around the world.

The ‘No Transfer Fee’ program to Turkey Earthquake Zone city of Van is available from October 27, 2011 through, November 25, 2011 and is subject to network, service and currency availability.

The Western Union Foundation also donated $50,000 to the Turkish Red Crescent in support of disaster relief efforts. The Western Union Foundation will match registered employee donations to the Foundation designated for the Turkish Red Crescent, on a two-to-one match for U.S. employees and three-to-one match for employees outside the U.S., up to $100,000 per employee.

Additionally, for individuals and corporations wishing to donate to disaster relief efforts in Turkey, the Western Union Foundation has set-up an account where payments can be sent globally in locations equipped with the Western Union Quick PaySM, Quick Collect, or Payments service.

Microfinance Focus, October 28, 2011: Fifteen investment funds have committed to GIIRS ratings, representing over $550 million in new capital. These funds target entrepreneurs across developed, emerging, and frontier markets. They join twenty-five previously-announced funds, bringing to forty the total number of GIIRS Pioneer Funds. GIIRS has also released the first set of GIIRS Fund Impact Ratings for its original Pioneer Funds and Companies.

The 15 new GIIRS Pioneer Funds represent a diverse range of investment vehicles, ranging from early-stage equity to long-term debt funding. They include: Adobe Social Mezzanine Fund I LP, Bellwether Microfinance Fund, Catalyst Microfinance Investors, Greenmont Capital II, IIP India Health Fund I, India Financial Inclusion Fund, InReturn I, Investeco Sustainable Food Fund, L.P., Mergence I, Paradox Fund, Próspero Microfinanzas Fund, SJF III, SocialAlpha-Bastion, Vox Impact Investing Fund I, and WillowTree Fund.

GIIRS will be issuing the first Company and Fund Impact Ratings this month. Nine Pioneer Funds and 50 Companies have completed the rigorous GIIRS Ratings process. In the coming months, the remainder of the original 25 Pioneer Funds and 200 Companies will complete the rating process. Ratings information will be available from rated companies and funds directly, and to subscribers of GIIRS Analytics, which is set to launch at the end of 2011.

GIIRS is a comprehensive and transparent system for assessing the social and environmental impact of developed and emerging market companies and funds with a ratings and analytics approach analogous to Morningstar investment rankings and Capital IQ financial analytics.

Microfinance Focus, October 28, 2011: In a workshop organized under the Fiji Financial Education Curriculum Development (FinED Fiji) Project, about 30 teachers from Lautoka, Fiji, went through professional development training on personal money management and investment on Thursday.

The FinED Fiji Project involves the integration and strengthening of financial education within the school curriculum from Class 1 to Form 6.

The FinED Fiji Project’s first professional development workshop for primary regional champion teachers was held earlier this year. During this earlier workshop, 13 primary teachers from three school divisions in Fiji were exposed to financial education, learning outcomes, methods of integrating the management of money and investing. These teachers were trained in the use of financial education student resources and teaching and assessment materials within the Class 3 and Class 4 curricula.

The Curriculum Advisory Services Division of the Ministry of Education is leading the Ministry’s FinED Fiji efforts. The Division has worked with the regional champion teachers since early this year.  Regional champion teachers are the pioneer teachers leading the introduction of FinED in schools and responsible for the training on the use of the resources.

By 2013, it is expected that on an annual basis, 197,000 students will have exposure to financial education at all schooling levels from Class 1 through to Form 6.  The FinED Fiji Project is funded by the Australian Aid Program in Fiji and is jointly managed by the Ministry of Education and the Pacific Financial Inclusion Programme. Young Enterprise Trust of New Zealand, are the providers of specialist and technical services to the Project.

Microfinance Focus, October 28, 2011: The Asian Development Bank (ADB) revised its Public Communications Policy to expand and speed up access to information to the public. The changes in the policy are meant to help the ADB achieve increased transparency and accountability.

The policy changes incorporate feedback from over 500 stakeholders in ADB member countries, including governments, the private sector, development partners, civil society, those affected by ADB’s projects, academics and the media. The updated policy will take effect on 2 April 2012.

While the basic tenets of the 2005 policy remains, the changes further ADB’s aim of proactive disclosure. The key changes includes earlier disclosure of core ADB documents, such as final proposals for country partnership strategies and sovereign project loans, subject to country consent. Also ADB will translate the summary project information into relevant national languages and release project financial statements of borrowers for ADB-financed sovereign projects.

The updated policy will strengthen in-country communications to give the public more information about projects and other ADB activities that could affect their lives. In addition, there will be independent appeals panel with three international experts to review information requests denied by ADB. It will also increase dissemination of knowledge products—online and in hard copy—to support the development of knowledge-based economies in the region.

The revised policy hopes to strengthen ADB’s communications and engagement with affected people, including women, the poor, and other vulnerable groups. It recognizes that more traditional methods of communication must be applied to reach large groups of stakeholders who do not have access to technology.

ADB’s Public Communications Policy acknowledges the public’s right to know about its work and recognizes that transparency is critical for it to be an effective and trustworthy organization. At the same time, it aims to strike a balance between access to information and any potential harm disclosure may cause to particular parties.

Microfinance Focus, October 28, 2011: PepsiCo Foundation, the philanthropic arm of PepsiCo, in partnership with Water.org , a nonprofit development aid organization, expands commitment to scale WaterCredit. WaterCredit is a market-driven model that will provide micro loans to families throughout India. In this partnership, the PepsiCo Foundation is contributing a $8 million grant -the largest contribution by the Foundation in its 50-year history.

This expansion is expected to enable approximately 800,000 people to access safe water by March 2016. Indra Nooyi, Chairman and CEO of PepsiCo said “We are pleased to extend our partnership with Water.org to expand proven and innovative strategies that will bring clean water and sanitation solutions to hundreds of thousands in India, and help enable a sustainable business in the future for PepsiCo.”

In 2008, the PepsiCo Foundation contributed $4.1 million to Water.org resulting, to date, in more than 250,000 people accessing improved water and/or sanitation through initiatives funded by microfinance loans. Since then, Water.org and its partners in India have used the power of WaterCredit to impact twice the number of people than could have been reached using other, more traditional approaches, all while reducing the philanthropic cost per person served by nearly 50 percent.

Water stewardship is a central part of Performance with Purpose, PepsiCo’s mission to deliver sustainable growth by investing in a healthier future for people and our planet. As part of PepsiCo’s commitment to global water stewardship, it has pledge to provide access to safe water to three million people in developing countries by the end of 2015, improve water use efficiency by 20 percent per unit of production by 2015 and strive for “positive water balance” in water-distressed areas.

Matt Damon, actor and co-founder of Water.org, said “There will never be enough charity in the world to solve this problem. What we need to do is double down on smart solutions like WaterCredit which can rapidly scale safe water and sanitation access for families that are in desperate need right now.”

PepsiCo and the PepsiCo Foundation have pledged nearly $34 million to safe water and sanitation initiatives in developing countries since 2005, in partnership with organizations, including the Inter-American Development Bank’s AquaFund, Safe Water Network, China Women’s Development Fund, Save the Children, International Rescue Committee, Earth Institute at Columbia University and The Energy Resources Institute.

Microfinance Focus, October 28, 2011: The Smart Campaign, received a grant of US$350,000 from the International Finance Corporation (IFC). The grant will fund training, on-site assessments, and tools to foster adherence to Client Protection Principles at leading Indian microfinance institutions.

The Campaign will work with Indian MFIs to develop the tools and resources they need to deliver transparent and prudent financial services to all clients.

The Campaign will conduct eight training sessions, each to be attended by staff from eight to ten MFIs, focused on building the Client Protection Principles into company policy and practice.

It will seek to engage 75 MFIs in self-assessments, enabling participants to identify their vulnerabilities, strengths and weaknesses on the client protection front. These assessments highlight the degree to which their current practices foster client protection.

The Campaign will conduct week-long, on-site “Smart Assessments” of client interaction at 19 MFIs, evaluating institutional policies and practices with respect to the Client Protection Principles.

Based on the recommendations from the Smart Assessments, seven MFIs will choose a specific area to improve (e.g. collections practices).  The Campaign will then work with each MFI to design a client protection pilot project to be monitored on a quarterly basis.

Headquartered at the Center for Financial Inclusion (CFI) at ACCION International, Smart Campaign is a global campaign committed to embedding client protection practices into the institutional culture and operations of the microfinance industry.

Microfinance Focus, October 27, 2011: Widespread adoption of the declining balance interest rate calculation method is better for microfinance borrowers, and the market as a whole. According to MFTransparency paper ‘Flat vs Declining Balance Interest Rates: What is the Difference?’, a borrower only pays interest on the actual money he or she has in hand at any given time, when interest is calculated using declining balance method.

Declining balance interest calculation method is based on the outstanding loan balance, the balance of money that remains in the borrower’s hands as the loan is repaid during the loan term. As the borrower repays instalments, the remaining loan balance declines over time. Interest is then charged only on the loan amount that the borrower still holds.

However the flat rate calculation method is widely used by micro lenders which charges interest on the full original loan amount throughout the loan term, rather than on the money that the borrower actually has in her hands.

In Africa, about 70% of loan products include interest calculated using the flat rate method as compared to just 5% in Latin America. In Burkina Faso and India, the percentages are as high as 86% and 57% respectively.

Prices calculated using flat interest payments sound much lower than those using declining balance interest rates. It is an easy way for institutions to increase their income without giving clients the impression that their prices are more expensive.

However, the declining balance calculation method is more transparent because the figure communicated to the client is closer to the figure representing the actual percentage of the loan amount paid in interest.

It is very difficult for borrowers to compare a loan with a 15% flat interest rate to a 25% declining balance rate. If all institutions used the same calculation method then borrowers would be able to make more informed decisions.

This paper is the first in a new series of resources “MFTransparency Pricing Fundamentals”, available on MFTransparency website.