Microfinance Focus, February 29, 2012: This year’s third annual Mobile Money Americas conference and expo will be held from 26-29 march in Mexico City. The event is expected to gather American mobile money pioneers to share insights on launching, managing and expanding mobile money services into a number of key Latin American markets.

Mobile Network Operators, banks, microfinance institutions, regulators, retailers and m-wallet developers will participate in discussions on a range of issues including integrating mobile money with branchless banking, partnerships with banks, MFIs and card associations, cross border mobile money transfer service, distribution network and promotional strategies for unbanked clients.

During the event, International Finance Corporation (IFC) will be organizing a half day workshop on unlocking the one of the most challenging elements to a running a successful mobile money programme, the agent network.

In addition, USAID and Grameen Foundation will conduct Mobile Lifeline Seminars that will explore the most recent pioneering innovations in mHealth and mAgriculture throughout Latin America.

MicroSave is one of the supporters of the event.

Microfinance Focus, February 29, 2012: SKS Microfinance has issued a clarification on the recently released Associated Press report ‘Lender’s own probe links it to suicides’, saying that the allegations made in the report as baseless.

According to SKS, the report is a mere repetition of the charges made against the microfinance sector one and a half years back and a restatement of the earlier unsubstantiated allegations.

The Andhra Pradesh police investigation/ courts have exonerated the company in 14 out of 15 alleged suicide cases and trial is pending in one case, SKS claimed.

It also denies authorizing any private investigation into the alleged suicides in the later part of 2010 in the State of Andhra Pradesh.

The Board’s Minutes, signed by then Executive Chairman, Dr Vikram Akula, would confirm the fact that there was neither any study authorised by the Board nor did the Board ever discuss the alleged report, SKS said.

The Associated Press report, does not disclose any timelines with regard to the alleged reports, giving the impression that they are fresh insights. However, SKS says that the alleged suicides have been investigated and in almost all cases SKS employees have been exonerated already by Governmental agencies/ courts.

The company further informed that it has already announced in December 2011 its plans to integrate Customer Protection Principles into the business model of the Company and realign the employee incentive system by integrating customer protection into the KRAs.

It has capped its interest rates well below RBI rates and proposes to cap its Return on Asset in the core microfinance business. It has further appointed an Ombudsman for proactively handling customer approaches and complaints.

Microfinance Focus, February 29, 2012: Ratings and Research Company CRISIL has on Tuesday upgraded the ratings of microfinance institutions Ujjivan and Equitas to ‘CRISIL BBB/Stable’.

The rating was upgraded for the term loan of Ujjivan Financial Services, a Bangalore based non-banking financial company to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Stable’.

The rating upgrade reflects the significant amount of equity aggregating Rs.1.28 billion infused into Ujjivan in February 2012 which is expected to double the company’s net worth to around Rs.2.8 billion by March 2013 from the December 2011 levels.

CRISIL has upgraded its rating on the non-convertible debentures of Equitas Micro Finance India Pvt Ltd to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Positive’. The upgrade is based on CRISIL’s rating upgrade of the debt instruments of Singhivi Investment & Finance Pvt Ltd (SIFPL), a group entity.

Equitas has recently acquired SIFPL, a non-banking finance company. The Rs.500-million NCDs of Equitas will be transferred to SIFPL on completion of certain procedural requirements. After the transfer, Equitas will be renamed Equitas Holdings Pvt Ltd and SIFPL will be renamed Equitas Micro Finance India Pvt Ltd.

CRISIL has also revised its rating outlook on another Bangalore based NBFC-MFI, Janalakshmi’s non-convertible debentures to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘CRISIL BB+’.

According to CRISIL, Janalakshmi is well positioned to scale up its operations and that the company’s profitability will improve over the medium term. The company has raised incremental funds aggregating Rs.2.9 billion from various sources post the Andhra ordinance and has raised equity capital of Rs.530 million in June 2011.

CRISIL believes that fund flows to the microfinance sector have improved in recent months because of greater regulatory clarity and a stable operating environment. In particular, lenders have shown preference for large and well-managed microfinance institutions operating outside Andhra Pradesh.

Microfinance Focus, February 29, 2012: In his speech at the Social Enterprise Conference at Harvard on Sunday, Vikram Akula, the former Chairman of SKS Microfinance, broke his silence about the mistakes he made in his social venture.

“Professor Yunus was right” Akula said. “Bringing private capital into social enterprise was much harder than I anticipated.”

Akula, who stepped down from SKS in November last year acknowledged the legitimacy of the criticism he had received from Mohammad Yunus, 2006 Nobel Peace Prize Laureate Professor and Founder of Grameen Bank, who had long taken issue with SKS’s deployment of private capital in microfinance and its profit orientation.

Akula also stated tonight that he had focused on scaling SKS’ model and had not fully anticipated the potential downside of accessing the public market for social enterprise.

At the end of his speech, Akula expressed hope that future social entrepreneurs would learn from his experiences. “The mistakes I’ve made can help the rest of you” said Akula.

A recent report by Associated Press shows that SKS officials had information implicating company employees in some of the suicides by microfinance borrowers in Andhra Pradesh in 2010. SKS loan officers have reportedly used coercive loan recovery practices and harassed over-indebted borrowers.

According to the report, SKS launched a massive sales drive in December 2009. The “Incentives Galore” program ran through February 2010 — just one month before the company filed its IPO prospectus.

Agents won prizes worth up to 10 times their average monthly salary for signing huge numbers of new borrowers. One loan officer signed up 273 groups in a month. Under training protocols, the ideal number of groups formed per month is 12, the maximum is 36, according to field agents and reports written by Akula.

Six current and former SKS staffers with experience in the field told the AP they no longer had time to check a borrower’s assets or follow up and make sure a loan was put to productive use. They said that they were pressured to push more debt onto people than they could handle and that the number of days devoted to borrower training was cut in half.

Microfinance Focus, February 28, 2012: International Finance Corporation (IFC) has proposed to lend $50 million to Fullerton Credit, China, to increases financial access for the underserved micro and small business enterprises and the self-employed mass market.

The loan will be extended in local currency RMB to Fullerton Credit, Sichuan, Fullerton Credit, Chongqing and Fullerton Credit, Hubei.

The three companies together with a total of 22 branches across three provinces, are each headquartered in Chengdu, Chongqing and Wuhan respectively.

They are all fully owned by AF Management Service which is incorporated in Singapore and further 100 percent owned by Fullerton Financial Holdings, a fully-owned subsidiary of the Government of Singapore’s Temasek Holdings.

IFC believes that the companies have potential to become model institutions in China in serving the MSEs with a novel business model.

IFC is providing another $15 million to Costa Rican financial cooperative COOPENAE for expanding its operations in the country. IFC’s contribution is a part of an initiative supported by the Spanish Fund for Latin America and the Caribbean that will provide advisory services to help COOPENAE identify areas for improvement in its current micro and small enterprise credit operations.

Microfinance Focus, February 28, 2012: Rural Impulse Fund II, managed by Incofin Investment Management along with MicroVest II-A, managed by MicroVest Capital Management, and ASN-Novib Microcredit Fund, managed by Triple Jump recently took a stake in Kazakh microfinance institution Arnur Credit.

Together the new shareholders hold 45% of the company. They will be represented in the Board of Directors of Arnur Credit.

Since the start of its activities 10 years ago, Arnur Credit has been able to build a branch network of 38 sub-branches covering all areas in South Kazakhstan oblast. At the end of 2011, the company counts more than 6,500 clients of which 85% are living in rural regions.

Its product range currently includes five loan products: agricultural loans, group loans, entrepreneurial loans, express loans and consumer loans.

In the near future Arnur Credit intends to increase its outreach in Southern Kazakhstan, by opening new branches in Almaty, Kyzylorda and Zhambyl oblasts.

Arnur Credit has been awarded 5 diamonds by MixMarket. In 2010, the Italian rating agency Microfinanza Rating gave Arnur Credit a financial rating “B+, Prospect: positive”, and in 2011 a social rating of “BB”.

In 2006 Arnur Credit became a member of the Kazakh Association of microfinance organizations (AMFOK) and in 2010 it joined the Microfinance Centre for Central and Eastern Europe and CIS.

Microfinance Focus, February 28, 2012: Microfinance rating agency MicroRate and Microfinance Information Exchange (MIX) have today co-published a study ‘The Tipping Point: Over-indebtedness and investment in microfinance’, which examines whether investments contributed to recent microfinance repayment crises, and whether measures of investment activity might serve as early warning signals for future microfinance crises.

The study which is a part of the MicroBanking Bulletin series claims that while ambitious microfinance institution (MFI) outreach goals are commendable, overly zealous loan origination practices can lead to less rigorous credit standards and destructive, unintended consequences.

While the best deterrent to over-indebtedness will come from improved credit reporting systems at the individual and institutional level, the data presented in this study suggests that early warnings for these problems can be found by tracking the supply of credit to MFIs.

Microfinance markets with the most lenders and most competition for MFI clients have seen the highest increases in risk, and likely, client over-indebtedness.

Exploring the origins of crises in Morocco, Nicaragua, Bosnia and Pakistan, the study shows that portfolio quality in these countries began to decline following rapid increases in funding. By 2007, portfolio-at-risk (PAR > 30) levels began to deteriorate, with delinquency rates rising from between 1 and 3 percent to 7 to 13 percent in just two years.

By 2010, local sources (primarily banks) provided the majority of funding – most notably in India. After peaking at 3.2 billion USD in 2009, investment funds represent the second largest source of debt funding, followed by Development Financial Institutions.

Further, the study shows that countries that had more lenders providing debt financing to MFIs in 2007 saw increasing risk over the next four years. These countries include India, Bosnia, Nicaragua, Morocco – that have seen crises or the threat of crises in recent times.

The study also reveals a considerable concentration of MIV (Microfinance Investment Vehicle) funding among the top MFIs. Fifty percent of total MIV funding (almost 5 billion USD) is concentrated in 33 MFIs. The top 100 MFIs receive seventy-five percent of the funding, while 90 percent of funding goes to the top 200 MFIs – the remaining 10 percent is allocated to an additional 400 MFIs around the world.

The complete study can be found here

Microfinance Focus, February 27, 2012: Kolkata based microfinance company, Bandhan Financial Services has securitized Rs. 550 crore ($112 million) of its farm loan portfolio with IDBI Bank, Axis Bank and Development Credit Bank.

“We have securitised Rs 500-crore worth farm loans with IDBI Bank and Rs 25 crore each with Axis Bank and Development Credit Bank,” the company Chairman and Managing Director, Mr Chandra Shekhar Ghosh has reportedly said.

Mr. Ghosh further disclosed the company’s plan to securitize another Rs. 100 crore within next fifteen days.

Bandhan is a non-banking financial company with presence in 18 states in India. As of January, Bandhan’s total farm loan portfolio stood at Rs 5,360 crore to 3.5 million customers and its capital base stood at Rs 650 crore.

This is the third major securitization deal completed this month by microfinance institutions. SKS Microfinance securitized Rs. 243 crore of receivables earlier this month and today it securitized another Rs. 354 crore with a public sector bank.

Microfinance Focus, February 27, 2012: Within a month of securitizing Rs 243 crore of receivables, SKS Microfinance, India’s largest and only listed microfinance institution has securitized another Rs 354 crore ($72 million) with a major public sector bank. The portfolio is rated as CARE A1 + SO (Highest Safety) by CARE rating agency.

“The Rs 354 crore transaction demonstrates that funding concerns raised post the AP MFI Act are behind the Company”, said Mr Dilli Raj, Chief Financial Officer, SKS Microfinance.

SKS has already drawn down the first tranche of Rs 78.7 crore comprising receivables from micro women borrowers from the weaker sections, as defined by the Reserve Bank of India. Pool receivables are identified from 18 non-Andhra Pradesh states where SKS Microfinance Limited operates.

Instruments with a CARE A1+ (SO) rating are considered to have a strong capacity for timely payment of short-term debt obligations and carry the lowest credit risk.

“Rated pool assignment is an excellent instrument of confluence which achieves the amalgamation of the funding capabilities of the banking system and the credit delivery skills of microfinance companies. This sort of confluence may well be the real answer for financial inclusion”, Mr S Dilli Raj said.

Earlier this month, SKS completed another rated pool assignment transaction for Rs 243 crore. The present transaction is SKS Microfinance Limited’s eighth assignment/ securitization transaction post the AP MFI Act.

SKS however dropped nearly 5 percent on the Bombay Stock Exchange and closed at Rs. 122 today.

Microfinance Focus, February 25, 2012: In a recent survey conducted by CGAP to understand the current and potential role of microfinance institutions with regard to serving small enterprises, 40 percent of the reporting MFIs said that less than 10 percent of their microenterprise clients grow to become small enterprises.

More than 350 MFIs from 69 countries participated in the survey and most of them claimed that serving small enterprises is part of their business strategy.

While small enterprises are more formal than micro, informality is widespread in all regions with the exception of Eastern Europe and Central Asia (ECA).

Compared to micro enterprises, small enterprises are less often led by women, especially in MENA (Middle East and North Africa) and ECA, where only about 20 percent of small enterprises are led by women.

According to the survey, MFIs’ small enterprise portfolio is increasing and the highest increase is recorded in EAP, Latin America and the Caribbean and Sub-Saharan African region.

Business growth opportunities and following micro clients over time were sighted as the two main reasons for microfinance institutions to serve small enterprises.

Although commercial banks, credit unions, and microfinance banks have separate methodology for small enterprise risk assessment, NGOs, NBFIs and rural banks don’t have a separate one.

Moreover, 44 percent of MFIs do not monitor micro and small enterprise portfolio separately and most MFIs do not have dedicated staff/department to serve small enterprises.

Lack of appropriate risk assessment methodology, high competition from banks and other providers and lack of financial statements are the top three internal, external and enterprise-level challenges respectively that MFIs come across in serving small enterprises

However, MFIs feel that client-focused approach, commitment from top management and dedicated staff, strong risk management, flexible products and delivery are the key success factors for successfully serving small enterprises.