EUROPEAN MICROFINANCE WEEK 2014 - DEVELOPING BETTER MARKETS CONFERENCE REPORT - E-MFP
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conference report European Microfinance Week 2014 Developing better markets 12th - 14th November 2014 Abbaye de Neumünster, Luxembourg
www.european-microfinance-week.eu Gold sponsors: Other sponsors: Media partners: With the support of:
conference report European Microfinance Week 2014 Developing better markets 12th - 14th November 2014 Abbaye de Neumünster, Luxembourg
conference report 2 – European Microfinance Week 2014
Foreword ________________________________________________________ 5
SessionS ___________________________________________________________ 7
Thursday 13th NOVEMBER 2014 Friday 14th NOVEMBER 2014
Welcome address _____________________________________________________ 7 Plenary: Managing overindebtedness –
speaking from experience __________________________________________ 43
Plenary: Balancing financial inclusion, market stability
and client protection _________________________________________________ 8 Lending services for agricultural microfinance _________________ 46
Investing in microfinance as a channel for other impact Responsible microfinance from a country point of view:
finance themes – challenges and opportunities ________________ 10 India ____________________________________________________________________ 48
Greening performance assessments: integrating Savings for the bottom of the pyramid: self-reliance
environmental impact into the mfi assessments standard __ 12 models _________________________________________________________________ 50
Microfinance and poverty __________________________________________ 14 Downscaling with commercial banks in Africa:
opportunities and challenges ______________________________________ 52
Microfinance in conflict zones ____________________________________ 16
Technology solutions and innovative delivery channels _______ 54
Investing in agricultural microfinance ____________________________ 18
Can financial innovations be structured to address
Green microfinance and energy access __________________________ 20 climate risk of smallholder farmers? _____________________________ 56
Microfinance institutions: drivers for formalization Client protection and regulation __________________________________ 58
of micro and small enterprises ____________________________________ 22
Savings for the bottom of the pyramid: institutional
Increasing youth economic opportunities through outreach _______________________________________________________________ 60
access to finance: how favorable regulatory environments
and youth focused services can shape better markets ________ 24 Digital finance: why does it work in Kenya and
opportunities for 7 African countries – results from
Social performance: cross-learning from north and south – an EIB/UNCDF study _________________________________________________ 62
forging together on the pathway forward ______________________ 26
Accelerating rural finance in Africa: initiatives from
Green microfinance and non-energy products _________________ 28 funders and support organizations _______________________________ 64
Developing a standardized approach to risk management: Social and financial performance: better together? ___________ 66
challenges and lessons learned from microfinance
risk experts ____________________________________________________________ 30 Local banking and inclusive finance ______________________________ 68
Exiting responsibly: the case of Sathapana ______________________ 32 Building green capacities in financial institutions ______________ 70
Clients at the center: from impact measurement Plenary: From e-waste to e-resource: poverty and
to management, e-mfp University Meets Microfinance resourcefulness in Agbogbloshie, Ghana _______________________ 72
Action Group _________________________________________________________ 34
Closing of European Microfinance Week 2014___________ 73
Enhancing client financial capability _____________________________ 36
Plenary: 5th European Microfinance Award on
List of participants _____________________________________ 75
microfinance and the environment _______________________________ 38
Feedback and Statistics _____________________________ 83
5th European Microfinance Award ceremony __________________ 40
European Microfinance Week 2014 – 3
foreword
© Yann Figuet
4 – European Microfinance Week 2014
financial institutions, practitioners, various markets, financial institutions
academics, NGOs, analysts, raters and from international commercial banks
industry commentators to present key down to small village NGOs and savings
innovations, challenges and also the groups, and of course the diversifying
work conducted in the previous year by range of entities involved in providing
e-MFP’s several dedicated Action inclusive financial services to the poor in
Groups. new – and better – markets. This
diversity, and the range of e-MFP’s
With this year’s attention on Developing members is reflected in the content of
European Microfinance Week is the Better Markets, 31 workshops covered European Microfinance Week – which
annual event of the European Microfi- subjects including social performance grows more varied and fascinating with
nance Platform (e-MFP), gathering its management, agri-finance, conflict every passing year.
diverse membership and other inter- zone financial services, digital and
ested professionals from related sectors technological innovations, green This report summarises the discussions,
to debate, exchange and share experi- microfinance, downscaling strategies, viewpoints and vitality of the event. We
ences on issues impacting microfinance responsible investment, and client-driv- wish you an enjoyable read, active
in developing countries. The 2014 event en product diversification. The title of exchanges among members in 2015
brought together from 56 countries the conference, Developing Better and we hope to welcome you to the
over 400 opinion-leaders, top manage- Markets, demands buy-in from a whole next European Microfinance Week,
ment of banks, funds and other range of stakeholders: regulators from 18th-20th November 2015.
Anne Contreras, Chairwoman
Christoph Pausch, Executive Secretary
European Microfinance Week 2014 – 5
sessions 6 – European Microfinance Week 2014
THURSDAY 13TH NOVEMBER 2014
WELCOME ADDRESS
Speakers Christoph PAUSCH, e-MFP
Scott BROWN, Microfinance CEO Working Group
client needs. Its three main areas of inter-
vention are advocacy to influential actors
and the press, industry strengthening by
developing industry performance stand-
ards, and institutional strengthening
through the implementation of best
practices, starting within their own or-
ganizations. He also mentioned the group
is supporting the uptake of three industry
initiatives; the Smart Campaign, MF Trans-
Christoph PAUSCH opened the European He also announced e-MFP’s cooperation parency and the Social Performance Task
Microfinance Week 2014 with a word of with the Microfinance CEO Working Force.
thanks to all participants. This year, more Group to jointly work on issues that affect
than 400 participants attended the event, industry stakeholders across the globe. He He stressed the importance of dialogue
including many new organisations and explained, for example, their cooperation beyond their working group, which is
representatives. Pausch highlighted sev- on analysing microfinance’s information mostly based in North America. He
eral new elements to the European Micro- backbone and determining how it could mentioned an expanding relation with
finance Week (EMW) programme, focus- be strengthened in the future. Convergences, with whom they jointly
ing specifically on improving networking launched the Global Appeal. He also
opportunities among participants: a con- Scott BROWN, CEO of VisionFund Inter- underlined their keen interest to strength-
ference app to connect with fellow par- national continued by introducing the en cooperation with e-MFP. He sees excel-
ticipants, arrange meetings and follow Microfinance CEO Working Group to the lent opportunities to cooperate and learn
the Twitter feed; a new Meeting & Net- audience as a group of eight international from each other as both organisations
working lounge; and a new area, the organisations working in microfinance. share the same goal towards responsible
Agora for Plaza, coffee breaks and lunch Started in 2008, the group aims to reorient finance.
to accommodate EMW’s growing numbers. the microfinance sector towards meeting
European Microfinance Week 2014 – 7
PLENARY:
BALANCING FINANCIAL INCLUSION, MARKET STABILITY AND CLIENT PROTECTION
Moderator Antonique KONING, CGAP
Speakers Kim WILSON, Fletcher School at Tufts University
Narda SOTOMAYOR, SBS Peru
Armenuhi MKRTCHYAN, Central Bank of Armenia
PRESENTATIONS
Antonique KONING kicked off the Open-
ing Plenary by explaining the concept of
balancing “ISIP”: financial Inclusion, mar-
ket Stability, Integrity and client Protec-
tion. In her work for CGAP’s Work stream
Customer Empowerment, an enabling
environment which takes up issues related
to ‘ISIP’ is of vital importance. She also
asked her fellow panellists to explain how
their work relates to finding this balance.
Growing up in a rural area, Narda SOTO-
MAYOR learned at an early age how a
lack of access to finance makes people
vulnerable to risks and takes away their
ability to invest in their livelihoods. She
described her work at the Superintend-
ence of Banks of Peru (SBS Peru), improv- innovative solutions to imbalances in the Incentives for supply side development
ing microfinance regulation to achieve microfinance sector and its institutions. need to go hand in hand with transpar-
social impact and market stability, as a ency rules to ensure clients are well
balancing act in itself. As head of Con- Koning asked the audience to consider informed about financial products and
sumer Protection and Financial Education three statements. Half of the audi- services, their benefits and risks, and the
at the Central Bank of Armenia, Armen- ence agreed that “there is no trade-off terms and conditions agreed upon when
uhi MKRTCHYAN learned that supply-side between financial inclusion and financial contracting. When consumers understand
development of the financial sector is not stability”. One contribution was that their obligations, they are more likely to
sufficient for deep inclusion. Trust and when you provide financial services, honour them; thus supporting the institu-
understanding are needed to build the considering customer needs and protec- tion’s bottom line and the stability of the
demand side. Empowerment and financial tion will pay off in financial returns. On financial system as a whole. According to
literacy help consumers understand prod- the statement “by definition financial Mkrtchyan, it is financial exclusion which
ucts and take better decisions, benefiting inclusion implies consumer protection”, threatens financial stability and integrity
themselves, their financial service provid- a key insight from the audience was that since services remain out of supervisory
ers and the financial system as a whole. the definition does not always materialise regulation and control of the formal
Kim WILSON, the former head of Micro- in practice. Finally, the audience agreed financial system. She stressed the impor-
finance at Catholic Relief Services and unanimously on the statement that tance of bringing microfinance within
Faculty member at Tufts University closed “Financial education is an essential the scope of regulation. Wilson referred
the introduction round, mentioning that part of consumer protection”. to the Banana Skin Report, which marked
impacts of microfinance are not always volatility in household income as one of
positive. Without standards, regulatory Koning then asked the speakers to con- the main risks perceived by practitioners.
systems and impact measurement, practi- sider the synergies between financial She mentioned that when the MFI
tioners had to work by instinct to balance inclusion, market stability, integrity and is promoting household stability, it is
the system. In her current work at the client protection. Sotomayor explained also supporting its own stability.
Fletcher School Leadership programme how adequate policies to boost finan-
she trains the next generation of practi- cial inclusion and to improve consumer On possible trade-offs and challenges
tioners to think outside the box and find protection can reinforce market stability. Mkrtchyan cautioned policy makers not
8 – European Microfinance Week 2014to cap interest rates to protect consumers.
Instead, she proposed that the most effec-
tive way to decide on appropriate interest
rates is to leave it to the market. Soto-
mayor partly supported her, by adding that
interest caps introduced in Peru in the mid
80’s were actually hurting the people they
were supposed to help. Similarly, credit tar-
geting quotas led to a sub-optimal alloca- Discussion a strong consumer protection regulatory
tion of resources and mandated institutions framework. Regulators from around the
to serve (rural, bottom-of-the-pyramid, The discussion first turned to how to world visit Peru to learn from its experi-
remote) populations, they were not ready balance the ISIP principles in the case ences engaging with service providers.
to serve. These types of market interven- of insurance. Mkrtchyan explained how
tions hurt both the financial sustainability insurance is about perceptions and The discussion then turned back to the
and ability of MFIs to serve the poor. stressed the need for financial education. issue of interest rate caps. The panel
Without pay outs, many clients consider agreed that credit is diverse: differences
Wilson stressed the need to consider themselves taxed, instead of lucky that no exist between products, regions and mar-
interest rate caps in their context. As insurance event affected their household. kets, even within countries. Mkrtchyan
credit markets are not fully transparent, Therefore, the Central Bank introduced proposed to force financial institutions
caps can be suitable in certain cases, but compulsory motor vehicle insurance to to be transparent about the costs of their
need to be carefully considered. Soto- raise awareness of the merits of insur- products in order to reduce rates and
mayor cautioned that caps on interest ance. Against expectations, this did not fight the inefficiencies in markets. Wilson
rates for loans can also affect deposit tak- result in consumers buying voluntary agreed, adding that it is difficult to make
ing as financial institutions need to reduce insurance in other fields. Sotomayor MFIs comply with such caps when they
deposit rates to neutralize the reduction explained how allowing agents to act are put in place.
of their margins. In response, Mkrtchyan as a delivery channel for insurance and
proposed the alternative of subsidising allowing group insurance products show As a closing statement, Wilson stressed
interest for specific vulnerable populations promising results in Peru. that as regulators are different we need
instead of capping interest rates. to be aware of who is regulating whom.
The panel then considered the inter- Sotomayor reiterated the need for inter-
Sotomayor also mentioned false trade- national dialogue on client protec- action between industry and regulators.
offs. As Peruvian banks are moving into a tion between regulators. According Such interaction allows regulators to
still profitable microfinance market, MFIs to Mkrtchyan, there are initiatives to learn from private sector experiences and
are reaching further down the pyramid to establish best practice, for example World improves buy-in and compliance. Mkrtch-
more vulnerable and remote populations. Bank best practices on client protection yan added that a gap will remain between
On the one hand, this greatly improves and the Alliance for Financial Inclusion regulation, enforcement and implementa-
financial inclusion. On the other hand, guidelines on client protection. However, tion as the sector continues to develop.
it can also result in deteriorating port- no single global standard setting body Koning closed the session by stating that
folio quality if MFIs do not adjust their exists to address client protection. All there is always a cost to intervention. We
methodology to appropriately serve their such global protection efforts are part of can reduce trade-offs by cooperating,
new client base. Mkrtchyan added that other standard setting, regulating, fund- building synergies and by ensuring poli-
increasing competition can drive down ing and policy-making bodies. Vital in this cies and practices fit within the national
prices, but also result in over-selling and dialogue are the voices of financial service context and take continued development
extending loans to populations without providers that often are missing from such of the sector into consideration.
repayment capacities. Wilson underlined discussions. Sotomayor added that regula-
that by communicating, practitioners and tors exchange experiences in diverse fora,
regulators can stave-off trade-offs. assuring that Peru is recognized as having
European Microfinance Week 2014 – 9INVESTING IN MICROFINANCE AS A CHANNEL FOR OTHER IMPACT FINANCE THEMES –
CHALLENGES AND OPPORTUNITIES
Moderator Patrick GOODMAN, Innpact
Speakers Sylvia WISNIWSKI, Finance in Motion
Frederik Jan VAN DEN BOSCH, FMO
Tim RADJY, AlphaMundi
Guillaume BONNEL, Lombard Odier
Sachin VANKALAS, LuxFLAG
and low-income households, has a social Frederik Jan VAN DEN BOSCH supported
mission and is an expert in high volume Wisniwski’s view, adding that proper
– low value transactions. She wonders, support to MFIs is needed. He explained
however, whether mainstreaming has how FMO’s mission and vision towards
taken off some of the sector’s innova- impact investment, reducing ecological
tive edge needed to engage with other foot prints and green, inclusive growth is
impact investment themes such as water, pushing the organisation to re-think its
health, energy and education. Moreover, strategy towards MFIs. Out-of-the-box
addressing such topics often requires dif- thinking can help to leverage MFIs market
ferent skills, in terms of new partnerships, knowledge, networks and outreach to
different investment formats and different achieve wider impacts. It can also help
client profiles. She specifically mentioned to improve situations outside the normal
alternative funding streams, with subsi- sphere of influence of the financial sector,
dies for impact investment building on a and he mentioned the example of ship-
different tradition than debt and equity recycling in Bangladesh.
financing for microfinance. Moreover,
impact investments can be politically Making such new links between micro-
sensitive and bring MFIs under public or finance and other impact themes also
political scrutiny. Wisniwski concluded requires new partnerships. Van Den
that MFIs can do more, but we need be Bosch gave the example of agricultural
careful not to overburden MFIs. investments where agri-traders were
PRESENTATIONS now becoming small farmer financiers
by default and MFIs can play a role in
Patrick GOODMAN started the session
by asking whether microfinance can be
an appropriate channel for other impact
investment themes. While some investors
are exiting these types of investments
and moving to more direct impact invest-
ments, he is looking to find ways in which
the microfinance industry can also offer
investors a delivery channel.
Sylvia WISNIWSKI, as CEO of Finance
in Motion, brought in the perspective
of an impact assessment manager. Her
organisation focuses on microfinance,
SME finance and green finance, looking
at energy, water and organic agriculture.
She explained that microfinance seems
well-suited as a channel for impact invest-
ment: the sector focuses on the bottom-
of-the-pyramid, is close to both SMEs
10 – European Microfinance Week 2014financing their increasing working capital
needs. In conclusion, he believes MFIs can
act as a suitable channel, but require ‘an
additional layer’ of knowledge, networks,
technical skills and regulation.
Tim RADJY expressed a different view.
While agreeing that MFIs have proven
their value; most notably in demonstrat-
ing the poor are bankable, we now need
to move beyond MFIs if we want to
achieve impacts in other fields. In his view,
MFIs can only pay lip service to other
impact themes as going deeper requires
a different skills set. His impact invest-
ment fund takes a more direct investment
strategy focusing on dedicated suppliers
of impact-relevant services. He provided
three examples to support his view. Firstly,
he showed how dedicated student loan
providers in Mexico are better suited to DISCUSSION ent and can be manipulated. Wisniwski
service students as they can offer lower added that auditing firms are moving into
interest, longer grace periods and innova- The discussion first focussed on the issue impact measurement. As this field is still
tive partnerships with education providers of interest rates charged to microentre- emerging, Finance in Motion conducts its
(in this case a first-loss guarantee fund). preneurs. Radjy mentioned that in some own checks in the field. Impact measure-
A second example was from the Mexican cases this is difficult to control by inves- ment requires a new set of qualitative skills
mortgage market. In this case, dedicated tors. He proposes investors concerned which still need to be developed among
providers proved better suited to offer about high interest rates should focus on auditors, especially “to look beyond
appropriate products in terms of more MFIs that meet specific requirements in the figures”. Based on this discussion,
affordable interest rates, payment sched- terms of their interest rate policy, or to Sachin VANKALAS briefly explained about
ules and loan maturity. Lastly, he provided reduce capital costs to MFIs once certain LuxFLAG’s microfinance label and how
examples from the solar energy sector impact or operational requirements are met. labelling allows investment funds to be
where they helped a solar panel company transparent and credible to their investors.
to set up a pay-plan and partner with a The panel then focused on the issue He stated that with regulation entering
Mobile Network Operator (MNO), reach- of impact measurement. Wisniwski the field of impact reporting, labelling and
ing a vastly larger client base than when explained that their objectives in terms of auditing firms will be further pushed to
working through typical MFIs. Another impact are driven by their own investors. develop appropriate tools. Popular third-
solar investee has already sold more than Next to quantifiable indicators such as party impact assessment standards include
1 million solar lanterns in East Africa, a gender, type of product, urban/rural split Microrate and Planet Rating ratings for
scale which would be hard to achieve and penetration of low-income brackets, MFIs, the Global Impact Investing Rating
with most MFIs. they also look at qualitative aspects of System (GIIRS) used by AlphaMundi, the
performance through interviews and Social Return On Investments (SROI), the
Guillaume BONNEL provided the per- focus groups. Bonnel explained that it Progress out of Poverty Index (PPI) devel-
spective of a private bank. Lombard is important to build bridges to make oped by Grameen, and LuxFLAG.
Odier developed an innovative impact investors and especially bankers under-
investment fund to meet the demand stand social impacts. Van Den Bosch Lastly, the discussion turned to the
for impact investment opportunities. The supported this statement and added time frame before impact of projects is
fund is set up in two pockets, a core and that private funds can learn valuable measured. Wisniwski explained that this
satellite pocket, where the core focusses lessons from experienced impact inves- depends on the characteristics of the
on large-scale funds investing in microfi- tors such as FMO. It is important to clearly assets. Direct investments in service sup-
nance and the satellite focuses on impact define goals of investors, as this needs pliers and innovative approaches can have
investments requiring more innovative to translate in targets established in fund- a time horizon of up to 15 years. Van den
strategies with a higher performance ing agreements and efforts changed into Bosch mentioned the possibility of looking
potential. As such, capacities available in investments. back with clients and measuring retrospec-
the core pocket are leveraged for success tively. It is important to consider that while
and impact for the satellite pocket. Van Den Bosch also mentioned the impor- your impact will increase over time, you
tance of auditing non-financial reporting also need to consider whether it can still
of MFIs. Reporting is not always transpar- be fully attributed to your intervention.
European Microfinance Week 2014 – 11GREENING PERFORMANCE ASSESSMENTS:
INTEGRATING ENVIRONMENTAL IMPACT INTO THE MFI ASSESSMENTS STANDARD
Moderator Raluca DUMITRESCU, MicroEnergy International
Speakers Geert Jan SCHUITE, Enclude
Marion ALLET, PAMIGA
Hatem MAHBOULI, FMO
microfinance and banking sector. It was Dumitrescu, Innovative Banking and
developed building on existing tools Development Finance Consultant at
created by researchers and practitioners, MicroEnergy International, continued
as well as on the result of a survey with a presentation on integrating envi-
conducted by the Action group with ronmental impact into MFI assessment
36 microfinance practitioners to identify standards, using the insights gained dur-
the green microfinance practices most ing the green performance assessment of
relevant to assess. Allet continued by Contactar by MicroEnergy International.
explaining that the tool reflects all types This Colombian MFI has 70 thousand bor-
of environmental strategies that could be rowers and a gross loan portfolio of USD
adopted by an MFI. The index covers $61 million. Its green product is called
1) formalized environmental strategy, ConSuPlaneta, offering improved cooking
2) environmental risk management and stoves, biodigestors, solar crop dryers for
3) green opportunities. The tool is meant coffee, and water tanks and filters.
to be used in a pedagogical way, leaving
the user the option to pick some of these MicroEnergy International´s approach
strategies over others according to his consisted of five steps, starting with a sta-
context of intervention. Answering the tus quo assessment based on The Green
survey results in a graphic which shows Index that resulted in an evaluation. The
the MFI’s current position in relation to next steps in developing a new green
its desired position. Allet closed her pres- strategy for Contactar included the imple-
PRESENTATIONS entation mentioning that the tool is still mentation and promotion of a Green
a work in progress. The tool has already Strategy, which was based on five pillars.
Raluca DUMITRESCU welcomed the been included into the new version of The first pillar included its environmental
audience to the first session on green SPI4, but the Action Group invites the policy, which resulted in the inclusion
microfinance and introduced the session’s audience to give feedback in order to of Contactar’s green performance in its
topic of green microfinance tools. Marion improve it further. annual report and green profile for impact
ALLET, senior microfinance environment
practitioner for PAMIGA, presented an
initiative which was started two years
ago by the e-MFP Microfinance & Environ-
ment Action Group: The Green Index.
The Action Group is aiming for a clear
definition of green performance. The
tool is designed to help MFIs understand
where they stand in terms of environ-
mental management. It is also useful for
rating agencies and investors, since the
tool can also be used to identify the dif-
ferences in environmental sustainability
between MFIs. Additionally, NGOs can use
the tool to map the current situation for
a gap analysis and future strategy.
The elaboration of the tool was a collabo-
ration of multiple organizations from the
12 – European Microfinance Week 2014Together with the African Development
Bank and HIVOS, Schuite trained local
consultants to improve MFIs’ green
performances in East Africa, Indonesia
and Latin America. These programmes
showed parallel streams. Financial institu-
tions are more interested in risk manage-
ment compared to smaller MFIs. Schuite
defended that MFIs frequently struggle
with a lot of things already. They do
not have the capacity to include green
performance on their agenda. However,
MFI should keep in mind that donors and
investors are incentives to consider this
issue. Schuite pointed out that CEOs can
be the drivers behind a green strategy.
Clients can also be drivers since they are,
according to Schuite, often impacted by
environmental issues.
investors. The second pillar consisted of facility are in place. High scores for green
non-financial services, emphasizing the strategy in the index show that manage- DISCUSSION
environmental and economic benefits ment is committed to use the green facil-
of green technologies and the use of ity. Environmental and social risk manage- The discussion started with the question
preferential credit conditions for clients ment is nice to have, but not a necessity on whether MFIs that pursue the Green
mitigating environmental risks. Ecologi- from an investor’s perspective. It shows Index are offered additional benefits.
cal footprint, the third pillar, included a that systems are in place for expansion Mahbouli responded by mentioning that
methodology for measuring the internal into riskier clients. Mahbouli concluded preferably green financial products are
footprint and the reduction of water and that The Green Index is a good tool to kept commercial, but technical assistance
electricity use and waste. The fourth pil- raise awareness amongst MFIs and their is often offered at a reduced rate. The
lar was formed by an environmental risk partners, but questioned the need for discussion then turned to the issue of
assessment of clients’ activities. The last standardization of the tool. In addition, weighting questions in the survey of the
pillar of Contactar’s strategy promoted he also put some remarks forward for The Green Index. The audience asked the
the improvement of the green credit line Green Index, raising the question on how panel whether some issues were more
by standardizing the technologies, inter- much green portfolio is needed. Mahbouli important than others. Allet responded
nal capacity building and promotion. also noted that the closed questions in the that MFIs should not look at the scor-
survey do not leave much room for MFIs ing of the survey on its own, and should
Hatem MAHBOULI was asked to share to express their ambition and potential. look at qualitative information as equally
the investor’s perspective on the Green important. Weighting is currently not
Index. As an investment officer at FMO, Geert Jan SCHUITE from Enclude pro- feasible due to the closed questions in
the Netherlands Development Finance vided the case of the Green Performance the survey of the Green Index but may be
Company, he explained that green finan- Agenda, which was developed together considered in an updated version.
cial inclusion fits the bank’s strategy and with HIVOS. The initiative developed
finance ambitions. This has resulted in a list of what MFIs can do to become Another question revolved around the
‘green lines’: credit line for on-lending more conscious of their impact on the continuation of funding for the Green
to investments producing environmen- environment. Schuite stressed that MFIs Index. Mahbouli answered that continu-
tal benefits. Mahbouli explained FMO’s cannot do everything, forcing them to ation of funding is still unclear, as green
approach to green microfinance, using make choices by developing an agenda. performance assessments are still in an
a set of criteria to identify the product’s The tool developed by the initiative has infancy phase. However, he stressed that
potential. Mahbouli stressed that it has a 5-step approach: The approach starts it needs to become a core business. The
to be a win-win for financial institutions, with identifying the need followed by final discussion was about the certifica-
suppliers and end clients, consisting of a ‘speaking the green language’ and the tion of green finance products. The
clear business case. internalisation of the concept of green panellists agreed that certification is pres-
performance. This is then turned into ently not a priority because the current
Mahbouli explained that The Green Index action planning and evaluation to further tool focuses on creating awareness more
helps investors. A high result for green improve performance. than providing facts and numbers on the
opportunities is appealing for investors, actual green performance.
as it proves that the systems for a green
European Microfinance Week 2014 – 13MICROFINANCE AND POVERTY
Moderator Scott BROWN, VisionFund International
Speakers JD BERGERON, Truelift
Julie PEACHEY, Grameen Foundation
Aldo MOAURO, MicroFinanza Rating
data is collected and analysed. Develop-
ment organisations should understand
that there is a business case for collecting
and using poverty data. Data brings value
to the organizations and at the end of the
day positively impacts the bottom line. The
better you understand your clients, the
more effectively an organisation can serve
them, the better it will perform financially.
Peachey closed her presentation with a
call for action warning that the sector is
at risk of losing the PPI. If investors, lend-
ers, and donors do not demand a data-
driven approach to decision making and
business management, and if there is no
support given to MFIs to collect, analyse
and use the data, then the momentum
will be lost. The PPI requires continuous
updating in order to remain accurate
and relevant. However, the PPI is a public
PRESENTATIONS The PPI is most commonly used to report good and there is a risk that funding will
on the poverty outreach of an organiza- not be continued.
Scott BROWN opened this session by tion or program. Organizations with a
thanking the audience for showing inter- mission to serve the poor can prove they Aldo MOAURO supported Peachey’s views
est with their presence and he introduced are doing so by publishing the poverty and warned against reputational risk for
the panellists by briefly explaining their rate of their client base. In addition, the those organizations aiming to reach the
involvement with the sector. PPI can be used to: target or screen cli- poor but who cannot track their evolution.
ents and areas of operations, track pov- He pointed out that organizations first
Julie PEACHEY from Grameen Foundation erty movement over time, evaluate the need to understand their capacity if they
talked about social performance meas- effectiveness of programs vis-à-vis one want to put their mission into practice.
urement, data quality and analysis. She another, develop products through cus- According to Moauro, social ratings are
mentioned that many international devel- tomer research by poverty levels, and dis- important as they give an opinion about
opment organisations are using data as cover the behaviour and needs of clients the capacity of an MFI to reach its social
an accounting function, but not in order across poverty levels. Peachey emphasized goals. Moauro presented the findings of a
to improve their programs, educate them- that the PPI is relevant to any organization comprehensive social rating of a sample of
selves about the lives of the people they or program that works with the poor. MFIs which was carried out in the period
are trying to engage or to deliver custom- 2009-2013. According to these findings,
ized services. Peachey explained how the Although there are now hundreds of only 20% of the total clientele of these
Progress out of Poverty Index (PPI) tool organizations using the PPI across differ- MFIs were below the 2$PPP/day poverty
addresses the need for MFIs to under- ent sectors, many of them are not yet line, showing that outreach in depth is
stand their customers as well as their able to use the data meaningfully. This limited. Moauro mentioned that this offers
outreach to poor clients. The PPI is a sim- may be due to insufficient capacity in the a transparency opportunity, as the pov-
ple, cost-effective method allowing MFIs organization, challenges with the manage- erty outreach message communicated by
and other organizations to measure the ment information system (MIS) systems, the industry may not always be reflected
poverty level of their clients and provides and lack of commitment from leadership in reality. Deeper outreach results are
estimates of whether a certain household or follow through on using results when achieved by poverty oriented MFIs.
lives below recognized poverty lines.
14 – European Microfinance Week 2014Moauro concluded his presentation by
suggesting actions based on these find-
ings. There is a need to improve the
capacity of MFIs on measuring and track-
ing poverty level. In order to minimize
and manage reputational risk, the sector
needs to introduce effective incentives to
collect and analyse and use the data. This
can be done for example through regula-
tions, investment covenants, or self-reg- He concluded his presentation by stating Another discussion point revolved around
ulation by networks. Finally consolidation that through the use of data and conclu- economic activities of the MFI clients
on specific industry norms and standards, sions drawn from it, the MFI is able to and whether the MFIs should focus on
like the PPI and Truelift is important. monitor the progress of poor clients, and measuring it. Brown explained that peo-
think strategically about further adding ple below the 2$PPP/day poverty line
JD BERGERON opened his presentation value. Findings should be used to: assist earn income from trade that could not
by stating that social businesses need to board and senior management make be done before becoming an MFI client.
be accountable for their actions. To date specific decisions; plan and respond to If we are not measuring job creation for
we have tracked financial accountability any weaknesses found; improve specific the poor then perhaps MFIs are missing
in great detail but the social side is often products; add skills and services. out on reporting some of the impact
measured by a few stories and some of microfinance. Patricia Richter stated
photos. This is relevant for marketing that according to research by ILO, self-
purposes but not for stakeholders. DISCUSSION employed clients of MFIs create on
He explained Truelift’s framework which average two jobs in their businesses.
is based on three Pro-Poor Principles: The first question from the audience chal-
1) Purposeful outreach to people living in lenged the capability of PPI to measure Brown concluded by summarizing its
poverty, 2) Design of products and ser- poverty. Poverty is dynamic, i.e. people main outcomes. PPI is proven to be suc-
vices that meet the needs of poor clients, move in and out of poverty, while PPI is cessful in helping target and track poverty
3) Tracking progress of poor clients. He a static tool. Peachey talked about how impact. Analysis and decision making
emphasized that being robust and con- some organizations, such as Vision Fund, should be based on the findings. Having
sistent on how you measure and collect are tracking changes in poverty likelihoods a strategy of social performance is not
data is a good start but it is not enough. of the same clients over period of time. enough; organizations should be able
This needs to be coupled with useful Peachey also emphasized that the PPI to measure its evolution. Management
analysis that leads to lessons learned and could be used together with other tools should be informed of the outcomes of
change. Social data should be considered to measure various aspects of poverty. social data and ready to make decisions.
as critical as monetary data. Client satis-
faction and feedback reports are equally
important to capture information on the
results achieved.
European Microfinance Week 2014 – 15MICROFINANCE IN CONFLICT ZONES
Moderator Willemien LIBOIS, Frankfurt School of Finance & Management
Speakers Michaël KNAUTE, OXUS Development Network / e-MFP
Major David BESKOW, US Military Academy – Commander’s Emergency Response Program
Adeeb SHARAF, First Microfinance Institution Syria
Microfinance Institution since 2010. He
explained that, despite the conflicts affect-
ing the country, First Microfinance has
been able to successfully overcome and
mitigate risks. Sharaf also reaffirmed First
Microfinance Institution’s long-term com-
mitment to reach its social mission and
contribute to sustainable development.
Libois then addressed the panellists with
some key questions. Her first question
was directed to Knaute, concerning the
ethical dilemma of using a commercial
approach to microfinance in conflict
zones, where populations are most vul-
nerable. In response to this question,
Knaute clarified that the implementation
of such activities is not unethical, and
that microfinance can be done anywhere.
He further explained that conflicts zones
PRESENTATIONS as Afghanistan and DRC, and that he also have markets and economic activity,
expects to be challenged on this point but that it is highly important to carefully
Willemien LIBOIS introduced the topic during the session. select the populations which are served.
- lessons learned and good practices in As such, a diagnostic phase is essential in
the implementation of microfinance in Major David BESKOW explained that his order to identify areas which are acces-
conflict zones. She called attention to the experience in conflict zones essentially sible and safe for the staff, as well as to
fact that conflicts occur on a permanent comes from a thirteen-year career in the identify the existence of market demand
basis all over the world. Libois reminded USA Military, during which he served in and infrastructure.
the audience that individual conflicts countries such as Afghanistan and Iraq.
have different characteristics and stages, Most recently, Beskow was involved in Libois’ next question was directed to
thus requiring diverse approaches from a Commander’s Emergency Response Beskow, revolving around the mecha-
a microfinance perspective. Following Program in East Baghdad, designed to nisms to guarantee that micro grants are
Libois’ lead, each panellist briefly shared implement a number of projects, one of put to good use. Beskow clarified that
their experiences with microfinance in them covering economic development. there is indeed an existing concern that
conflict zones, which was followed by an Within this project, micro grants rang- the micro grants may not be well spent,
extensive discussion and interaction with ing from USD $500 to USD $5,000 were which is why potential beneficiaries go
the audience. provided for beneficiaries in sectors such through an application process to estab-
as retail, industry and agriculture, funded lish the type of grant. In order to avoid
Michaël KNAUTE briefly introduced the by both the USA and the Iraqi govern- this risk, the existing database of the Coa-
work of OXUS, a French network of MFIs. ments. This project also keeps a dataset lition Forces is consulted before giving out
He explained that OXUS is currently active on the investment of local funds which micro grants. In addition, district councils
in countries such as Tajikistan, Kyrgyzstan, can be accessed globally by commanders, are directly involved in the selection pro-
Afghanistan and the Democratic Republic and which can contribute to a long-term cess, which also guarantees the safety
of Congo (DRC), which have experienced economic development. of beneficiaries. The grants also have a
or are currently experiencing conflict. follow-up component, where an audit on
Knaute acknowledged that OXUS takes Adeeb SHARAF shared his experience in the use of the funds is conducted toge
a commercial approach in countries such Syria, where he has been working for First ther with Iraqi police forces.
16 – European Microfinance Week 2014DISCUSSION The discussion also showed that micro-
finance in conflict zones does not offer
The first discussion point revolved around room for insurance products. Knaute
the perception that conflict zones face clarified that there is no clear demand
dramatic population moves and how for such products, and prices would be
that would present an essential shortcom- too high. Sharaf agreed, and elaborated
ing for microfinance activities. Beskow that clients need more physical products
reacted to this comment by mentioning to support them, something which insur-
that, at the time of the project, the popu- ances do not offer. In fact, he mentioned
lation of East Baghdad was not in transit. that insurance would only be functional
He also explained that beneficiaries need to cover loans.
to be present for at least twelve months
to go through a compulsory audit. Knaute The audience also questioned whether
then mentioned that microfinance is there is any room for investors in micro-
highly sensitive to major population finance in conflict zones. In his response,
moves, and further explained that this Knaute clarified that investor inter-
occurs in very specific contexts, such as est varies from country to country. In
natural disasters. In addition, he men- Afghanistan, for instance, most funds are
tioned that, during a conflict, populations from public institutions such as the World
in rural areas move more often than those Bank. As for the DRC, which is a post-
in urban areas. Sharaf reinforced this conflict area, there are more opportunities
Libois asked Sharaf on the extent to point by mentioning that the security situ- for private investors who are looking into
which his institution’s social aspect is ation is better in large Syrian cities, where diversifying their portfolios.
incorporated into its operational model. there are currently no military operations.
Sharaf reacted by reiterating First Micro- Libois concluded by emphasizing that
finance Institution’s commitment to carry Another member of the audience the implementation of microfinance in
out its social goals, and that its services addressed Knaute with the theme of sav- conflict zones presents a number of risks
and activities are complementing efforts ings, namely on how to convince clients which are essentially operational rather
to support sustainable development that their deposits are secured with the than credit-related. She also mentioned
in Syria. In addition, he explained that given MFI. Knaute explained that OXUS that operating successfully in conflicts
operating in Syria always brings an unex- is usually seen as a foreign bank, which zones creates a strong need to under-
pected risk, which is why the MFI adopts tends to create client trust more easily. stand the market and offer appropriate
certain steps such as proper assessment This is especially true in countries such conditions to the right beneficiaries. As
of clients, branch control on any lend- as the DRC, whereas it is more difficult a closing remark, Libois commented that
ing activities and a comprehensive bonus among populations which have had bad private investors are exceptional in such
system for the staff. He also mentioned experiences with banks, such as in Tajik- initiatives, and usually have a social char-
the institution’s risk management model istan and Kyrgyzstan. acter and long-term vision.
which, in coordination with the local
team, guarantees the security and acces-
sibility of clients.
Knaute also reacted to Libois’ question on
how to manage access to grants vs. loans,
so as to avoid confusion for clients in
conflict zones. He explained that people
who need grants are different from peo-
ple who need loans, which is why Oxus
specifically identifies beneficiaries with
capacity, skills and potential to re-pay and
be a client. Beneficiaries of grants or loans
are two separate target groups which
should not be confused.
European Microfinance Week 2014 – 17INVESTING IN AGRICULTURAL MICROFINANCE
Moderator Jürgen HAMMER, Grameen Crédit Agricole Microfinance Foundation
Speakers Zacchaeus I. SYENGO, Rafiki Kenya
Irina EICHENAUER, KfW Development Bank
Caterina GIORDANO, Alterfin
PRESENTATIONS
Jürgen HAMMER introduced the session
by explaining how agricultural microfi-
nance became mainstream as financial
institutions and MFIs were searching for
new markets during the crisis of 2008.
Agricultural microfinance has proved to
be fundamental for impact, as 80% of the
people in developing markets live in rural
areas. Nevertheless, only 30% of MFIs are
dedicated to agricultural microfinance.
Hammer continued by asking the panel-
lists to answer the questions on why a
specific session on agricultural microfi-
nance is necessary and what makes it dif-
ferent. Caterina GIORDANO replied that
agricultural microfinance requires more
adaptation by MFIs, while systemic risks
are evidently linked to the product. Irina she mentioned, related to human Hammer asked the panellists about their
EICHENAUER added that rural areas have resources and higher training costs: it is role in supporting agricultural finance.
the challenge of low population density challenging to recruit well qualified staff in Eichenauer stated that KfW’s approach
and poor infrastructure (roads, communi- rural areas and loan officers need financial to agriculture finance can be presented
cation, etc.), resulting in higher transac- and agricultural skills. Zaccheus SYENGO along three pillars. The first pillar is a tra-
tion costs for MFIs. Another challenge, also pointed out that the agricultural sec- ditional financial intermediary approach:
tor is not well-structured, which is shown KfW provides credit lines and training
by gaps in the value chain. Another issue measures to local MFIs for refinancing
according to Syengo is related to seasonal lending to agriculture. The second pillar
weather externalities. consists of the value chain approach:
KfW invests in funds that provide financ-
Hammer asked the opinion of the panel- ing and technical assistance to agricultural
lists on the role of technology. Syengo producer organisations, SMEs and other
stressed the importance of mobile bank- chain actors. The third pillar is agro-insur-
ing. Mobile banking attracts new people ance, which has the goal of expanding
to agriculture. Syengo related mobile agricultural microfinance by reducing the
banking to the current problem that many credit risks through e.g. weather-index-
studies on smallholder farmers show: based insurance.
although smallholders are responsible for
most of the food production in develop- Giordano answered the question by men-
ing markets, challenges are found in the tioning that Alterfin is an investor which
traditional patterns in smallholder farm- attracts funds from the North to invest
ing. They do not appreciate new technol- in the South. The total portfolio is EUR
ogies and associated agricultural improve- 60 million, of which 60% is invested in
ments. However, mobile banking products agricultural finance. Alterfin’s approach
opened up opportunities for young farm- to agricultural finance consists of two
ers, helping them to mitigate risks. pillars. Firstly, Alterfin directly finances
18 – European Microfinance Week 2014ture portfolio consists of coffee. Systemic
risks, such as price fluctuations and cli-
mate shocks can be solved through geo-
graphical and product diversification. This
new strategy led to a continued growth in
the loan portfolio, while at the same time
operational self-sufficiency was reduced.
The last case study presented by Syengo
was the successful pilot of Kilimo
Advance, a strategic partnership between
farmers, milk processors, technology
partners and the Rafiki Bank. The main
challenges included slow information
flow, errors leading to double payments
and late payments due to market cir-
cumstances. Success factors include the
ability to access USD $15 million worth
of credit served beyond the 19 branches.
Furthermore, the pilot worked with more
international value chains, such as coffee The session then continued with the than 60 cooperatives and 87 thousand
and cocoa. Secondly, the organisation presentation of three case studies by farmers.
finances local value chains by providing the panellists. Eichenauer introduced the
working capital investment, asset finance KfW Development Bank and the Fairtrade
and rural finance. Alterfin uses tripartite Access Fund, which is a social investment DISCUSSION
agreements between local partners, farm- fund, designed to support smallholder
ers and buyers to mitigate risks in the farmer cooperatives and associations in The discussion started with a question on
value chain. Latin America, Africa and Asia. The fund the plot size of the farmers. The panellists
is a joint investment with Fairtrade Label- agreed with the audience that it is tricky
The Rafiki Bank has a more practical ling Organisation International, Grameen to access subsistence farmers through
approach, working directly with farmers. Foundation and Incofin cvso. KfW cur- agricultural finance. They are often more
The services consist of four components: rently has an equity investment of EUR dependent on traditional microfinance
savings facilities, credit facilities, insur- 2 million for refinancing smallholder tailored to flexible needs of those farmers.
ance and value addition through technical cooperatives and a new proposal The discussion then moved to the inter-
assistance and creating market linkages. for expansion to Africa is underway. est of young people in farming. Syengo
Syengo stressed that Rafiki’s loan book Eichenauer stressed that the challenges noted that the Kenyan government,
consists of: 20% of smallholder farm- and risks faced by smallholder farmers banks and private sector are promoting
ers and 17% of agribusinesses. Rafiki require a farming amongst the youth, and provided
expressed that he is proud to support holistic approach. This approach includes the example of a performance artist,
the people that feed the nation. a combination of financing (e.g. long- who grew up in a rural part of Kenya, as
term loans for business development, ambassador for farming. Syengo closed
Hammer carried on by asking the panel- working capital loans and trade finance) the discussion agreeing on a question
lists about their experience with micro- and technical assistance (e.g. organiza- about the competitive environment in
insurance. Syengo highlighted the main tional capacity building or mobile infor- agricultural microfinance. He provided the
difficulties for Rafiki Bank. Affordability mation services). example of his own bank which did not
is still a challenge due to the 6% inter- exist three years ago.
est rate. Distribution is another challenge Giordano presented her case study on an
which Rafiki Bank was able to overcome MFI in Northern Peru which mostly serves
by opening 19 branches. The final chal- the agricultural sector. The MFI was cre-
lenge posed by Syengo was trust. This ated by coffee and cocoa cooperatives to
issue was dealt with by incorporating provide adapted loans both for working
a third party which was trusted by the capital and asset financing. She expressed
farmers. the risk of concentration: 70% of agricul-
European Microfinance Week 2014 – 19GREEN MICROFINANCE AND ENERGY ACCESS
Moderator Marion ALLET, Pamiga
Speakers Hadley TAYLOR, MicroEnergy International
Carla PALOMARES, ADA
Patrick REICHERT, CERMi
Bold MAGVAN, XacBank Mongolia
PRESENTATIONS clients spent up to 50% of their incomes far. In this case, a national apex body was
on energy during Mongolia’s harsh win- set up to manage the Solar Home Sys-
Marion ALLET underlined the importance ters, jeopardizing their livelihoods and tems programme. The apex body works
of energy access by providing some the financial stability of the institution. with partner organisations (POs), both
stunning figures: 1.3 billion people lack In addition, older heating stoves were MFIs and accredited technical providers
access to electricity and 2.6 billion people jeopardizing family health and added to to implement the programme. Certifica-
lack access to clean cooking facilities, the massive pollution plaguing the capital. tion of technical providers, either separate
especially in rural areas. This severely To amend this situation, XacBank started enterprises (two-hand model) or technical
curtails local development and negatively a project through which it offered energy subsidiaries of the bigger MFIs (one-hand
impacts livelihoods and the environment. efficient and low-emission stoves to the model) is done according to quality stand-
Although technical solutions are avail- urban population. In a multi-stakeholder ards established in the programme. The
able, outreach to populations in need effort, the bank developed financial programme has proven particularly suc-
and overcoming financial barriers of high products to finance the stoves, while the cessful due to the competition between
initial costs requires appropriate delivery government helped register households MFIs which greatly reduced costs to end
channels and financing mechanisms. This who might be in need of stoves. XacBank users. Moreover, non-performing POs are
session looked at the possibilities microfi- also worked with donors and NGOs for not refinanced in consecutive rounds,
nance offers, with their frequent access to funding and accessing carbon credit mar- ensuring partners keep up quality stand-
low-income clients. It uncovered lessons kets to reduce costs. Finally, the institu- ards. After such success in Bangladesh,
learned and identified opportunities to tion worked with technical providers to the challenge at hand is now replicating
scale up initiatives. develop suitable stoves. this model, which Allet added requires a
strong government buy-in.
Bold MAGVAN of XacBank explained how Hadley TAYLOR added to our understand-
there is a clear link between his institu- ing of possible impacts and partnership Carla PALOMARES provided insights from
tion’s social mission and clean energy. models by providing us with best prac- ADA’s experiences with green energy in
Engaging with energy was a necessity tices from Bangladesh where 3.2 million Africa. ADA strives to develop win-win
from different perspectives. XacBank solar home systems have been installed so scenarios between financial services
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