Time to Take the Credit

Microfinance can work. The idea of providing microloans to those who have not previously had access to formal financial services has firmly taken root, supported initially by charities, and then through international financial institutions (IFIs), and has now moved into the realm of profitability. IFI’s have been focusing on providing capital to the same small group of top-tier institutions for quite some time now, although these top-tier micro finance institutions (MFIs) are now attractive to commercial investment. The achievements of these institutions with the support of IFIs are laudable, yet they have reached a point where private investment can take over as funding source, but haven’t widely done so this far. Continued financing through aid monies has been discouraging private investment, hampering the move to fully self-sustained for-profit operations, and limiting the reach of aid money. The microlending market could be more widely covered with investment through commercial monies, and the freeing up of aid monies to be redirected where most needed such as the smaller scale MFI’s.

Original article can be found in The Economist of March 17th, 2007!

Small Loans and Big Ambitions

With the advancement of microfinance institutions to a level of sustainability and even profitability, people have begun to raise questions of ethics regarding making money off of the poor. Counter to neo-liberal principles, various countries have imposed rules upon lending institutions such as interest-rate caps to regulate the industry, as well as proposals to step in with the offer of subsidized loans. Such moves have been coming together to inhibit its growth, and could possibly even put profitable microlenders out of business. For-profit investment from the private sector has been lacking due to the fear by international banks of attracting the negative stigma of profiting off of the poor, and international financial institutions (IFIS), which have made the microfinance revolution possible in the first place, are now seemingly inhibiting further development of the industry by crowding out commercial lenders. The question remains if the world of microfinance can successfully re-invent itself. Will it be able to attract for-profit investment, and reach the next stage of evolution by becoming a sustainable and profitable enterprise?

Original article can be found in The Economist of March 17th 2007!

IDB Fund to Invest in Microinsurance Venture

ParaLife, a new microinsurance venture, has become the beneficiary of an investment of US$ 3 million, through the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB). The money is to be geared towards providing life insurance to people with disabilities, low-income families and microentrepreneurs in Latin America.

The organization plans to establish itself in Mexico, from where it wants to expand throughout the region. According to IDB estimates 50 million people are with disabilities in the area and could greatly benefit from the services ParaLife proposes to provide.

For more information:
http://www.paralife.com/ingles/media_news3.htm

Micro Health Plans for Macro Benefit

With the recent rise of interest in micro-financing programs as a means of combating poverty have also arisen new creative approaches to the micro-scheme. Scott Atlas, professor at Stanford School of Medicine, is reporting on the emergence of micro-health plans, what he dubs as an essential compliment to microcredit. He notes that, “Microcredit did not always succeed in bringing people out of poverty, the major reason being the burden of out-of-pocket health-care payments. In the absence of health insurance, family illness was consuming any money earned.”

The Grameen Bank in Bangladesh provides its clients health insurance for $3 a year per family, thereby helping families avoid financial ruin in the wake of burdensome health expenses. Creative hybrid partnerships with medical clinics, physicians, and volunteers often enable the program, allowing good health to contribute to economic development.

For more info: http://washingtontimes.com/commentary/20070123-101929-1369r.htm

A Better Way to Wire Cash Home?

Microfinance International (MFIC) is an upstart headquartered in Washington D.C. attempting to challenge the dominance of Western Union in the remittance sector since 2003. Many Microfinance organizations, including partners of Katalysis have been offering this financial service, but Atsumasa Tochisako is adding a spin by implementing new software to facilitate the process. Formerly Japanese banker in Latin America, he is now heading this organization, in an attempt to prove that a financial service company can benefit the poor and still make money.
According to numbers from the Inter-American Development Bank [IADB], “Remittances sent to Latin America and the Caribbean from all parts of the world are expected to exceed $60 billion in 2006, surpassing both the amount of official development assistance and foreign direct investment to the region.” MFIC charges approximately $10 to transfer $200-$1500, whereas Western Union charges $50 for comparable services.
The most significant aspect of the service MFIC offers is that it allows for microfinance institutions in developing countries to process the remittances through a network developed through ARIAS software. This platform brings down the cost of transfer, extends formal finance services to a broader clientele, and all requires no more than a computer and the Internet.
Kai Schmitz, executive vice-president and chief operating officer of MFIC notes “becoming profitable quickly was important for us – to set a standard for other companies that would like to do this.” The company is looking to break even mid-2008.

For full article: Business Week

MIX and REDCAMIF to release first-ever Microfinance Benchmarking Report for Guatemala

Microfinance Information eXchange, Inc. (MIX) and Red Centroamericana de Microfinanzas (REDCAMIF) are announcing the Benchmark Report for Guatemala, which is to survey the financial and operational performance of microfinance institutions operating in the area. The results used in the report are based on the results of 15 Guatemalan microfinance institutions, and are then compared to others throughout Central and South America, and the Caribbean. As of now the report is available in Spanish, an English version is to be published shortly.

For full article click:
http://www.mixmarket.org/en/news/guatemala_benchmarking.asp

Final Thoughts on Partnership Journey 2007

Looking back on the trip after after almost a month, I still feel the excitement. The faces and stories are both memories I can both see and hear. This trip that the group went on really was not your average vacation. We dove head first into the realities of life in Honduras. The group saw microcredit's impact on both the rural and urban populations. Also we visited with Journalists, Historians, and other experts to better understand the history, current challenges, and what we can hope for regarding the future of this country. I thought that sharing our itinerary might give people an overall sense of our trip. We really kept a jam-packed schedule as you can see. So thank you for reading the blog and we hope to see you next year. If you have any questions about next years trip please feel free to email us at information@katalysis.org


Katalysis Bootstrap Fund
Honduras Schedule: February 4 – 10, 2007
Center for Global Education Staff: Juan Carlos Lopez and Cesar Acevedo

Sunday, February 4

9:30am Arrive on TACA # 390
12:37 Arrive on Continental # 756
12:40 Arrive on American 953
2:30 Check in at Hotel Portal del Angel
Col. Palmira, Ave. Republica del Peru No. 2115, Tegucigalpa, Honduras. Tel. (504) 239-6538
4:30 Introduction, orientation and schedule review
5:00 Meet with Mario Argueta, presentation on Honduran history
6:30 Dinner

Monday, February 5

7:30am Breakfast
9:00 Meet with Anibal Montoya from FUNED and visit clients
in the Tegucigalpa area
Anibal_Montoya@wvi.org
Melvin Rodríguez – supervisor
Kathy Vasquez- Loan officer
Visited Mr. Miguel Angel Lopez in El Atillo
Visited a communal bank in Colonia 28 de marzo
Oralia Garcia- Loan officer
12:00pm Lunch
Johana Mejia Bonilla- Loan officer
Visited Colonia San Miguel and met with three clients
4:30 Meet with Thelma Mejia; presentation on the current Honduran Situation

6:30 Dinner

Tuesday, February 6

7:30pm Breakfast
8:30 Meet with Raul Sanchez and others representatives
12:00 Lunch
1:00 Depart for Valle de Angeles (shopping opportunity)
3:00 Meet with Mayra Falck; presentation on economic and gender issues in Honduras

6:30 Dinner
7:00 Group session

Wednesday, February 7

6:30 Breakfast
7:00 Depart for La Esperanza
10:00 Meet with Santa de Euceda from ODEF and visit clients in La Esperanza area
Met with the following clients: Graciela Clara, Sergio Giron and Reina Fernadez

12:00pm Lunch
3:00 Depart for San Pedro Sula
5:30 Check in at Gran Hotel Sula

6:30 Dinner

Thursday, February 8

8:00am Breakfast
9:00 Continues visit with Santa Euceda from ODEF in the San Pedro Sula area (same information as above)
12:00pm Lunch
3:00 Meet with Elvin Hernandez from Fe y Alegria in El Progreso; presentation on the present socio-economic situation in Honduras

6:00 Dinner
7:00 Group session

Friday, February 9

7:30am Breakfast
8:00 12:00pm Board of Directors’ meeting
12:30 Lunch
2:00 Final group session and written evaluation
6:00 Dinner out

Saturday, February 10

8:00am Breakfast
8:30 Depart for airport
10:30 Depart for Roatan on Isleña airline # 152
10:00 Depart for airport
1:00pm Depart for the US on Continental # 763
12:30pm Depart for airport
3:15 Depart for the US on American # 942