Microfinance Focus May 2009

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www.microfinancefocus.com

May 2009

Microfinance
& Environment
Savings: Meeting this Essential Need Interview
Padma Bhushan Ela Bhatt
Advancement of technology
Institution Spotlight
Grameen Koota
Reinforce Securitization in Palestine
www.microfinancefocus.com Microfinance Focus [ May 2009 ] 1

Multiple Borrowing: Finding Solutions

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May 2009 Contents

Cover Story : Microfinance and Environment

19...Microfinance & the Environmental Bottom Line
- GreenMicrofinance and CGAP

22...World's First Cell-Phone-Based Carbon-Micro-Credits Implementation
- David A. Palella

24...Backyard BBQs Meet Improved Cook—stoves
Interview
28.. An Exclusive Interview with - Betsy Teutsch , GreenMicrofinance
Padma Bhushan Ela Bhatt ,
(Magsaysay laureate)

Horizon
12...Reinforce the Microfinance Securitization in Palestine with priority to
the Gaza Strip.
25...When the Buck Stops
-The Palestinian Network for Small and Microfinance
Grameen Koota: More than Just
Credit 14...Savings: Meeting this Essential Need of Poor in India

- By, Graham A. N. Wright
16..Multiple Borrowing: Finding Solutions
- Suresh K Krishna
41… News
29...First Person-New York Desk
06… Editorial—The US Desk
05... Editorial-India Desk Perspective

07...Advancement of technology:
Reduce the Cost and Maximize the Benefit to Client
Disclaimer By, Dr. Souren Ghosal
Views expressed in the article/s are au-
thor’s own views. It does not necessarily
represent those of Microfinance Focus .
Microfinance Focus does not take any re-
sponsibility of correctness of those data.
Reproduction in whole or in part without
written permission is prohibited .


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Our People

Team BOARD OF ADVISORS
India
Mrs. Frances Sinha
Managing Editor Mr. Sitaram Rao
Dr G. Gandhi
Vikash Kumar
EDITORIAL BOARD
Head—Knowledge Management
Dr. Souren Ghosal Dr. N Jeyaseelan
Dr. Amrit Patel
Associate Editor
Christina Weichselbaumer
GOVERNING BOARD
Marketing and Outreach Manager
Romain Testard
Mr. Suresh K Krishna , Chairman
Mr. Ashish Gupta , Member
Mr. M. V. Raman, Member
The US Vikash Kumar , Executive Director

Managing Editor—US
Jerome Peloquin Head Office
Microfinance Focus—India
Associate Editor Avalahalli, Anjanpura Post , Bangalore( India)-62
Pamela Faulkner P: +91.80.28436237 |f: +91.80.28436577
Email: info@microfinancefocus.com
Associate –Knowledge Management
Web: www.microfinancefocus.com
Raghunand Makonahalli

Correspondent : New York Branch office
Peter Burgess Microfinance Focus— The US
717 Lawrence Street, NE | Washington, DC,
Marketing & Technology Editor
20017
Bruce Meraviglia
Mobile +410.227.0498
Email: managingeditor_us@microfinancefocus.com
Correspondent : Nairobi [ Africa ]
Jastus Suchi Obadiah Web: www.microfinancefocus.com

Sponsors :

© copyright 2008-09 www.microfinancefocus.com ] 3
Microfinance Focus [ May 2009

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From India Desk Editorial

GO GREEN

Global warming is no longer just warning but is happening and therefore poses
many immediate and long term environmental threats It is our responsibility, a
collective as well as an individual to protect our environment from its onslaughts..
Microfinance sector is already well poised to alleviate poverty could also contrib-
ute significantly to help poor to acquire appropriate energy source and adopt or-
ganic farming to checkmate global warming. Here, I am stressing the need to high-
light another set of opportunity where this sector can contribute immensely and
keep not only global warming at bay but also poor people to have access to cheap
energy and fertilizer.

Role of small enterprise is largely a matter of evolving appropriate strategy to en-
able them to become not only sustainable but also to contribute in developing
healthy environment. In fact there are many wonderful outcomes could be possi-
ble from this sector if i collectively they take the responsibility towards the envi-
ronment protection. In fact it will add another social value contribution from the
MFIs and we should consider it one of the essential parameter for socially respon-
sible MFIs.

Impacting energy poverty by providing access to sustainable and eco-friendly
Vikash Kumar sources of energy is one of many initiative MFIs can promote. Many MFIs are al-
ready trying to promote non conventional energy sources like solar lamps, solar
Managing Editor—India
cooker, fuel saving stove etc. These all fuel efficient methodology and pollution
free renewable energy sources offsets “carbon”, and therefore there is huge op-
Write to the Editor
portunity for MFIs and its clients to en-cash its good work (by selling carbon credit)
vikash@microfinancefocus.com and contribute significantly to save environment from the growing warming
alarms. It would be further encouraging if .appropriate rewards are also
awarded to those who adopt these practices to reduce global warming.

Microfinance Institutions reach to entrepreneurs of Micro and small enterprises in
rural and urban areas are perhaps best positioned to give significant push to gen-
erate awareness and activities to halt global warming. Microenterprise mostly re-
late to non -organize sector and many of these enterprises are not following the
organic farming for one reason or the other. Here MFIs can play a crucial role spe-
cially educating theses entrepreneurs to adopt eco-friendly microenterprise, or-
ganic farming, and various sustainable industry standard practices that would help
slowing down of global warming.. Donors and investors could provide incentives
for adoption of such programs by MFIs and also could fund them or even create
institutions to undertake research to stimulate availability of pollution free energy
and farming practices. It is definitely going to be a big contribution towards halting
global warming and consequent climate change by Microfinance institutions. all
other stakeholders and no longer they would remain should not be just specta-
tors…

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From The US Desk Editorial

Can Microfinance Afford to be Green?

The real question is; Can Microfinance afford NOT to be green? Good environmental
practice is good business in general. Green business provides opportunity for all.
In Kenya, Village Power vendors borrow from local Microfinance to purchase their so-
lar lighting kits for powering reading lights and cell phone charges. Industries for Africa
has developed a tractor to be built, sold , and serviced in Africa, by African’s that uses a
multi bio-fuel engine and const only $2,000 USD. In Bangladesh, A Grameen Bank spin
off project has already installed more solar cell energy units and the whole United
States. These are all credible projects based upon micro lending and engaging every-
day people in sound environmental practice.

For some time now, The Microfinance Sector has been talking about the double bot-
tom line. The original, “bottom-line, of course meaning profitability. The second bot-
tom-line is Socially Responsibility where an one considers the social impact of business
operations. We here at The Microfinance Focus Magazine subscribe to the universal
standard adopted by the UN in 2007* With the ratification of the United Nations and
ICLEI TBL standard for urban and community accounting in early 2007, this became the
dominant approach to public sector full cost accounting. The Triple Bottom Line.
Jerome Peloquin
Managing Editor- US The addition of sound environmental practice to the double bottom line described
above provides the three elements of the The Triple Bottom Line.
Write to the Editor
1. Socially Responsible
managingedi-
tor_us@microfinancefocus.com 2. Environmentally Sound
3. Economically Viable

The application this UN standard is not only a good idea, It drives clear thinking that
will save all of us from ultimate poverty and possible ecological disaster. Global warm-
ing and the loss of low lying land is of particular concern to poor nations such as Bang-
ladesh and the Pacific Islands and archipelagos, this along with the rapid and impend-
ing loss of rain forest due to wood cutting for fuel by the poor present opportunity for
Microfinance to support new energy reduction businesses.

Our Microfinance Sector needs to move proactively to support this global crisis and to
generate new and engaging business possibilities for their clients. The rapid loss of
our environment hurts everyone but, as always, the poor are the most vulnerable of
all.

Here are the contacts for the pro environment business opportunities mentioned in this editorial

Industries for Africa - http://www.industriesforafrica.com/index.html
Village Power - Kenya - http://www.bioenergylists.org/stovesdoc/Karstad/canecoal/vpnchemelil.html
Grameen Bank - solar project - http://www.climatechangecorp.com/content.asp?ContentID=5283

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Perspective

Advancement of technology:
Reduce the Cost and Maximize the
Benefit to Client
MICROFINANCE INSTITUTIONS NEED TO SHED COMPLACENCY AND LOOK FOR HIGHER TECH-
NOLOGY & EXPERTISE TO SERVE THE POOR WITH MINIMUM COST AND MAXIMUM BENEFIT

Dr. Souren Ghosal , Head– Knowledge Management , Microfinance Focus

I
ndeed no institution can function without man with just average intelligence a distinction
acquiring necessary skill, expertise and at times has been made by some practitioners
knowledge to run the same. It is also true and consultants in between the concept of edu-
that there should be well honed processes, cation and learning. Since micro financing insti-
procedures, system and strategies evolved by tutions cater to the needs of masses it has be-
the institutions over a period of time, beside ex- come imperative for these institutions to develop
pertise and experience of people who have been strategies, systems, processes and procedures in
empowered to run the institution. Micro financing simple, transparent language as that would be
institutions are no exception to this universal re- easy to comprehend as well as to implement by
quirement for successfully running an institution. any one with average intelligence and minimum
It is well known fact that strategies and systems education. In fact micro financing institutions
as well as procedures and processes evolve over undertake mass banking and not class banking
a period of time and constantly come under re- that most of the modern commercial banks un-
view due to change in knowledge, expertise, dertake and therefore it has to develop strategy,
technology, culture, and environment both social processes and also communication language that
and physical. could be understood by poor people both in edu-
cation and wealth accumulation so that they
DEFINE THE PATH could avail the helping hand and fund of these
institutions with confidence that they are not
It is obvious therefore that there should well de- cheated and they could pursue sustainable busi-
fined path of learning for the people who man ness with confidence and necessary supportive
and run micro financing institutions. It has been expertise and funds of these institutions. It is
observed that to make the learning process sim- obvious therefore that these institutions not only
ple and easily understood and practiced by any fund the business of the poor but also supple-

Perspective : Advancement of Technology ...
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ment the lack of expertise both in technology and knowledge. Furthermore it has to be under-
and updated skill in the sphere of production and stood that no system, process or even strategy
also market intelligence with regard to marketing is permanent in this fast changing world as both
their products at best price and time. For all technology and knowledge with regard to tech-
these there is not only need to change the mind- niques and strategies are fast changing and
set of executives of these institutions but also to hence locking them to learn only the current
train and equip them with latest technology and processes and procedures would not help them
knowledge. to grow and sustain their interests as they would
miss the excitements and challenges that are
NEED HIGH LEVEL OF KNOWLEDGE continuously growing in this sphere of funding
the poor to run a sustainable business.
However it is interesting to note that to evolve
simple processes and procedures as well as NEED DYNAMIC EDUCATION RELATED LEARNING
strategies and systems generally need much PRACTISES
higher degree of intelligence, knowledge, and
passion to innovate and therefore it has been It would be necessary to educate them compre-
mostly seen that pioneers of these institutions hensively not only at their work places and on
are generally highly educated and enlightened their allotted work but also in management insti-
people and therefore they could develop sustain- tutions where new processes and practices are
able strategies and systems to make these insti- researched and put to practice as pilot project.
tutions deliver the objective of serving the ne- In fact education is no longer considered as
glected people of the society to help them to op- mugging of thoughts and deliberations of
erate as a successful farmer and or artisans. In enlightened people but as a tool to comprehend
fact their vision and comprehension of the com- its application in practical life. It is therefore in-
plex problem of poverty alleviation could help creasingly becoming a life or visualized case
them to develop institutions empowering the based teaching. In this regard it would be inter-
poor to stand on their own feet and run a sus- esting to refer to money game played by first
tainable business without looking for alms and year MBA students of Harvard Business School
aids from states. It is true it has not happened as referred by NIALL FERGUSON in his recent
everywhere but it cannot be denied that some book on THE ASCENT OF MONEY. He has ob-
visible transformation could be seen all around served that ‘it begins with a notional central
them to achieve the objectives laid down by the bank paying the professor $ 100 on behalf of the
pioneers. This is something that has encouraged government, for which he has done not very lu-
rapid growth of these institutions almost all over crative consulting. The professor takes the bank-
the world particularly where large numbers of notes to a bank notionally operated by one of his
poverty stricken people live. students and deposits them there, receiving a
deposit slip. Assuming, for the sake of simplicity,
EDUCATION AND LEARNING TO GO HAND IN that this bank operates at 10% reserve ratio
HAND (that is, it wishes to maintain a ratio of its re-
serves to its total liabilities at 10 %), it deposits
It is therefore imperative to understand the dis- $ 10 with the central bank and lends the other $
tinction in between education and learning that 90 to one of its clients. While the client decides
often seen to have been emphasized by some what to do with his loan, he deposits the money
professionals with a strong belief that merely in another bank. This bank also has a 10 per
learning processes and procedures would help cent reserve rule, so it also deposits $ 9 at the
executives to practice with ease and confidence central bank and lends out the remaining 81 to
to operate in their allotted fields of work even another of its clients. After several more rounds,
without having any knowledge of how and why the professor asks the class to compute the in-
such processes and procedures have been crease in supply of money.’ that is $ 271
evolved and considered best to optimize benefits ($100+90+81 dollar). Through such illustrative
to poor and also their earnings. It is needless to cases one could explain albeit in simple language
emphasize that such an approach would soon how modern fractional reserve banking allows
make them dull and mechanical and conse- the creation of credit and hence enhanced
quently averse to changing pattern of demands money power.
arising from growing revolution in technology


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CONCEPT CLARIFICATION changes the very sustainability of these institu-
tions would be at stake. In fact it is an estab-
It is therefore could be seen that the concept of lished fact that these institutions have to develop
broader money and its leverage though highly not only extension services to educate their bor-
complex and generally explained in exotic lan- rowers to hold their hands to give boost to their
guage however could also be brought out in a economic activities both in farming and crafts-
very simple language and also could be easily manship as generally these people are ill-
explained to executives of micro financing in equipped to run their business as commercial
what way this concept could be operated to venture. It would therefore be necessary to de-
maximize the velocity and use of money and velop adequate knowledge of markets and men
consequently their own earning as well as that of with whom they have been operating. It would
borrowers. No one would therefore question the therefore helpful if executives of micro financing
need of such knowledge for dealing with money institutions have adequate knowledge and ex-
and credit. It is obvious therefore that education perience in farming and craftsmanship so that
and learning could go hand in hand and that too way they can extend their helping hand and
with the desired level of simple conversational mind to their borrowers both in field and market.
language and avoiding jarring exotic language.
In fact distinction in between education and SHORT TERM OPERATION
learning is fast fading with the growth of empha-
sis in case based teaching instead of giving It is unfortunate that most of these institutions
stress to mugging and memorizing. It is the ap- give stress on lending for short term purposes
plication of knowledge in economic and social and collect repayment on weekly basis. It is true
activities that is increasingly looked for. that there is definite gap even in this area as
most of the artisans, traders and farmers do not
NEED COMPREHENSIVE KNOWLEDGE always get their short-term funds from the bank-
ing system and hence largely depend upon usuri-
It would be imperative for all executives of finan- ous money lenders and therefore the assistance
cial institutions obviously including micro financ- offered by micro financing institutions in this
ing institutions to acquire comprehensive knowl- area on better terms as compared to money
edge with regard to all types of money creation lenders obviously has been welcomed by such
and application and therefore they should clearly borrowers. But if one takes objective view of
understand the concept of broad and narrow such development there would be not even an
money and its leverage capability. In fact this iota of doubt that these institutions are also ex-
would help them to develop appropriate strategy ploiting the weakness of bargaining capacity of
to maximize the turnover of money and revenue artisans, traders and farmers as the interest
as well as benefit large number of borrowers. It rates and terms are not what normally charged/
is therefore obvious that education with live and practiced by banks and even by NBFC. Obviously
imagined case studies equip the executives with this approach and strategy could never be sus-
not only to frame policy, procedures and prac- tainable and therefore it would be necessary to
tices to operate and serve poor people better as focus attention to this growing menace and de-
they would be able to comprehend and assess velop appropriate strategy to educate/ learn the
their needs better and also have adequate game to become an appropriate agency to allevi-
knowledge with regard to operation to make it ate the poverty of poor people and transform
applicable to their target group of people. them as vibrant, active agent to transform their
economic condition by enabling them to pursue
AVOIDING HIDE BOUND POLICIES viable and sustainable economic pursuits in vil-
lages and towns.
Moreover learning simply the processes and pro-
cedures that are practiced by the financial insti- NEED TRANSFORMATION OF PESENT ADHOC
tutions including micro financing will make them LENDING
rule based executives. But the economic and so-
cial environment is becoming highly dynamic and Such transformation would require highly moti-
therefore hide-bound system and policy would vated and enlightened institutions with vision
not help them to develop innovation in their and passion to build a society where people how-
strategy, system and service and without such soever poor and uneducated could acquire nec-


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essary skill, information, and opportunity to un- 7. heuristic effect where pre-conceived value
dertake viable and sustainable business proposi- judgment affect decision making;
tion- farms and or firms. This is perhaps easier
8. neglect scope where no adjustment is made
to think and even propose or promise but need
to avoid possible harms that may arise from the
genuine passion and active interest of enlight-
decision;
ened people to translate this into action.
9. overconfidence in calibrations which leads to
BUILD SMOOTH PATH OF LEARNING under estimate the confidence interval levels;
Apathy of bystander which leads to abdication of
The path of learning has to be smooth so that no individual responsibility when in a crowd.
one tumbles while treading the path. But
smoothness depends much on the preparation CONCLUSION
and application of latest technology and knowl-
edge. It would be therefore necessary to visual- It would be helpful therefore to build the path of
ize the aspiration level of people and the extent learning avoiding the above traps and creating a
of present knowledge and technology could help good cocktail of knowledge and practice that
them to attain their dreams. It is obviously diffi- would attract executives to learn and practice
cult task and therefore needs application of best with ease and efficiency. It is obvious therefore
available technology and knowledge and also that the path of learning should be built on latest
passion and dedication to deliver the same to knowledge base, with cases both live and visual-
people. Learning curve is also not static but dy- ized to illustrate the application of knowledge in
namic and therefore strategies and systems also practical life by building sound strategy and sys-
move along with that. To make the learning path tem; policy and procedure to create a sound and
smooth and straight it would be necessary to most convenient delivery model for products and
develop an appropriate dynamic plan that would services at least cost and inconvenience. In this
not only teach processes and procedures but regard prime need is to know your customers in
also bring out knowledge base of such policies as great details as feasible and thereafter get
and help developing and incorporating the acquainted with the market, its nuances, and
changes that are feasible and provide high de- mood and hence contents of learning should deal
gree of satisfaction to their clients- borrowers with these in simple but exhaustive manner so
and depositors. It would also be necessary to that even common people could easily compre-
avoid opaque policies and strategies and maxi- hend. Obviously this needs thorough under-
mize transparency in product and service deliv- standing of men and market and that would not
ery cost and time. be feasible as one time exercise as these are
highly complex institution and require detailed
COGNITIVE TRAPS and continuous study. Hence learning is one time
exercise but should be provided regularly.
In fact some cognitive traps as has been men-
tioned by NIALL FERGUSON in his latest book ******************
‘THE ASCENT OF MONEY ‘would perhaps help to
develop a smooth path for learning. These traps
are:
1. availability bias where decisions are taken on About the Author:
available memories;
2. hindsight bias where decisions are based on Dr. Sourendra Nath Ghosal holds a PhD in Finance and holds
probabilities of events; Master degrees in both commerce and Economics. He has
3. induction problem where policies and rules experience taught for 18 years in colleges and university of
are framed on insufficient information; Jodhpur Rajasthan; Worked as principal cooperative training
4. conjunction fallacy where an overestimate is college for about 2 years at kalyani w. b. He worked with
preferred due to optimism; United Bank of India FOR 22 years and retired AS G.M. credit.
5. confrontation bias where one looks for con- He has also authored several books and Papers published in
firming evidence for their hypothesis; several national and International journals & newspaper. You
6. contamination effect where irrelevant but may reached him at souren@microfinancefocus.com
proximate information influence a decision;


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Samvad: A Dialogue on Microfinance
A MICROFINANCE CONFERENCE
Organized by Grameen Koota
30th May 2009 at Bangalore
Samvad: A Dialogue on Microfinance has been designed Microfinance Focus ,
to encourage an open discussion of the issues that the
sector must currently address. Over the course of the day
an official media Partner of
-long conference, slated for the 30th of May (Saturday) at the Event
The Capitol (Rajbhavan Road), discussions will revolve will
around transparency & client protection, microfinance & provide you “real time Up-
financial inclusion, convergence of Government schemes
and MFI services and microfinance & millennium develop- date” of the conference
ment goals. through live blog
Conference Objectives
Stay Updated
 An understanding of the initiatives by microfinance providers for the
appropriateness to low-income clients. Visit :
 Identification of implementation tools and certification standards that www.microfinancefocus.com/events
ensure pro-consumer practices.
 Assessment of the impact of competition among MFIs on microfinance
sustainability and client protection.
 Development of ways and means to converge Government Schemes
and MFI services.
About Grameen Koota
 Examination of a balance between social and financial sustainability in
the Microfinance sector. Since 1999, Grameen Koota has created
development opportunities for communi-
ties through financial inclusion. Apart from
Conference Structure credit services, the company has also ac-
tively brought a host of non-credit offer-
The conference will consist of an inaugural session followed by four technical
sessions, of various themes, concluding with a valedictory session. Each session
ings ranging from literacy programs to re-
will have a panel of speakers who will deliver their thoughts on the given theme; lief activities. Grameen Koota currently
an open house discussion will follow each of these sessions. The speakers bring caters to 2.6 lakh clients, across Karnataka
rich experience and insight from rural development, corporations, banks, microfi- and Maharashtra, with plans to reach 2
nance, academic institutions, NGOs and CBOs. million poor and low-income households
by 2013 with micro financial and capacity
Note : Participation is by invitation only.
building services.

Visit : www.grameenkoota.org
Microfinance Focus [ May 2009 ] 11

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Horizon

Reinforce
the
Microfinance
Securitiza-
tion
in
Palestine The Palestinian Network for Small and Microfinance
(hereinafter: Sharakeh) is a non-profit non-

with governmental organization. Established in 2002,
Sharakeh represents a forum of micro finance non-
profit institutions and programs (hereinafter: MFIs)
that aim at providing financial services to small enter-

priority prises, and focuses its efforts on the growth of microfi-
nance industry in the West Bank and Gaza Strip; par-
ticularly that micro financing is considered one of the

to the strongest tools for economic development consistent
with Palestinian economy needs.

Sharakeh represented nine active members when es-

Gaza Strip. tablished, but expanded its representation of the sector
with four additional associate members; Currently, the
13 Micro Finance programs and Institutions members
of Sharakeh serve approximately 30,000 micro-
entrepreneurs, with a portfolio of over 37 million US
Dollars. (As of September 2008).

Microfinance in the Gaza Strip

From: The Palestinian Network for Small Historically, the microfinance activity in the Gaza Strip
and Microfinance (GS) exceeded similar activities in the West Bank (WB).
Poverty rates were higher, resources were fewer and


Horizon: Reinforce the Microfinance Securitization in Palestine
`

the continuous political aggression and siege tribute to the national poverty reduction ef-
against the GS contributed profoundly in in- forts.
creasing poverty rates and reducing potential
opportunities for economic advancement. A Credit Guarantee Scheme to address
Contextual Risk for Microfinance
Since 2006, the microfinance sector in general
and in the GS in particular, faced a huge drop Contextual risk has become structural for Pal-
in size of activities and considerable increase in estinian MFIs as they are under a tremendous
PAR.. Due to post elections donors’ decision to pressure whereby the effects of the violent, il-
seize injection of financial aid to the public sec- legal and illegitimate occupation of West Bank
tor, and the political pressure imposed on Pal- and the permanent locking of GAZA make it
estinians; microfinance institutions (MFIs) were difficult for MFIs to implement their mission to
forced to reduce activities in the GS while in- promote financial services in a normal manner.
crease it in the WB. Although this shift was wit- This risk is broadly known.
nessed, MFIs focused on client retention in the
GS using different methodologies; re- In order to address this specific risk, SIDI
scheduling, re-financing and other. (Solidarité Internationale pour le Développe-
ment & l’Investissement, France) and ACAD
On December 27, 2008, an Israeli operations (The Arab Center for Agricultural Development)
against Hammas in the Gaza Strip started, have been designing a Credit Guarantee
causing extreme infrastructure destruction, as Scheme (CGS) which has been operational
well as severe human losses. since January 1st 2008 in order to secure
Despite the continuous need, the Israeli Siege ACAD’s loan portfolio. The scheme, endowed
on GS starting 2006 and following the Palestin- already with 200,000 Euros by SIDI (France)
ian Legislative Council elections and the public and Caixa Catalunya (Spain) has just received
servants salary crisis, and the following political the commitment of the French Development
and economical obstacles imposed on both in- Agency for another 100,000 €, is about to be
dividuals and microfinance institutions in GS, a opened up to other Palestinian MFI’s.
significant drop of activities there were antici-
pated. SIDI and ACAD decided to open up the scheme
for all MFI’s and the instrument to be institu-
At the end of 2007, only 20% of the microfi- tionalized under SHARAKEH as a substantial
nance activities in the oPT was within the Gaza input for the sector.
Strip. With continuous efforts from MFIs to sur-
vive the crisis, by re-scheduling, writing off Appeal to the donor community
loans, and client retention efforts, MFIs in the
Gaza Strip managed to slightly raise the per- Sharakeh's appeal to the donor community re-
centage of activities in Gaza to 25% in the first volves around the preservation of the role of
quarter. Although number of loans in the strip microfinance for economic development in
slightly increased during the first three quarters structural crisis. Where it is in fact the goal is
of 2008, (819 in Q1, 998 in Q2, and 1250 in to create Credit Guarantee Scheme to serve
Q3) their percentage of total loans disbursed in the microfinance industry in general, relying on
the oPT dropped to 18% at the end of Septem- the tested Scheme.
ber 2008.
Sharakeh aims at establishing a three (3) mil-
MFIs suffered a great deal of losses while lion Euro scheme to initiate the fund and sup-
struggling the continuous deterioration on the port MFIs, with a priority of Gaza Strip. Cur-
political situation and the intensive aggression rently secured is the total amount of 300,000
of the Israeli forces, throughout the past three Euros.
years. Sharakeh has been examining the po-
tential and possibilities to provide assistance to
the MFIs in order to (1) Maintain their out- ********************
standing portfolio in the Gaza Strip, (2) Retain
quality relationship with clients, and (3) con-


`
Horizon

Savings: Meeting this
Essential Need of Poor
in India

By, Graham A. N. Wright | Programme Director | MicroSave

E vidence from across the world, clearly demonstrates that savings are
the most commonly sought after financial product sought by the poor.
Poor people want and do save in response to a wide variety of risks/needs
including those driven by life-cycle events, crises, macro-level structural
events, consumption smoothing and of course, responding to opportunities.
However, most low-income people in India and elsewhere have no access to
secure savings, let alone a choice of savings products. Thus, their choice is
only between extreme risk in the informal sector where they lose a large per-
centage of their savings, and unsatisfied savings-demand.

Responding to these needs, the Government of India and Reserve Bank of In-
dia clearly and fully committed to “Financial Inclusion” … and also to protect-
ing poor people’s savings. These two commitments have set up a conflict of
priorities and approaches (different departments in RBI responsible for finan-
cial inclusion and prudential regulation.)

The micro-savings-agenda in India has so far been dominated by the motive
of protection of savings. Financial inclusion has taken the backseat. Conse-
quently, the access of the poor to savings products has remained extremely

Horizon: Savings –meeting the essential need...
`

restricted: protection of savings and financial inclusion. In
the short run, it is preferable to give poor peo-
• SHGs: There is growing evidence that SHG ple the choice rather than drive or strand them
members are saving only limited amounts in in the high risk saving environments with which
the group, typically only Rs.50-100pcm and they are currently faced. We must however,
that the group fund is typically liquidated and seek to inform that choice – options might be
distributed before it reaches any serious scale provision of well-focused financial education,
(Wright 2008). SHGs leave very limited money transparency norms for MFIs, and enforcing a
in banks – only enough to under write and lev- minimum standard for risk management sys-
erage their loans. Why is this? SHG members tems within all MFIs, regardless of their legal
seem to fear of off-setting loans against their form.
savings and often do not trust SHGs as a place
to save because they are unsure of the ac- The recommendations of the “Raghu-Rajan-
counting/leadership etc. committee” (CFSR 2008) constitute an excel-
lent basis for putting financial inclusion into the
• E-/M-Banking: E-/M-banking is acknowledged drivers’ seat. Opening the banking correspon-
to have huge potential to create massive finan- dent route to NBFCs would eventually give rise
cial inclusion and has taken off in Brazil, Philip- to a real choice of savings products – among
pines, Kenya etc. Here in India the Banking which flexible life insurance-based schemes
Correspondent model outlined in the RBI circu- (e.g. LIC/Max), micro-mutual schemes and
lar of January 2006, opened the door for India variations of asset-backed borrowing to save
to realise this potential … but excluded NBFCs schemes might be the most obvious, particu-
(and thus most large MFIs) from acting as cor- larly useful for long term asset accumulation.
respondents. However, the recent requirement The beauty of these latter examples is: MFIs
for a branch within 5/15km may close that door can pursue them already under today’s regula-
– or at least restrict competition and new re- tory framework.
strictions also place on both balances and
amounts transmitted. In common with some of References:
the international experience, initial rollouts in
Andhra Pradesh have, however, seen large- CFSR (2008): Draft Report of the Committee
scale dormancy of accounts. on Financial Sector Reforms, High Level Com-
mittee chaired by Shri Raghuram G. Rajan,
No-Frills-Accounts could principally be a flexible Government of India Planning Commission,
(save for prohibitive distances to the next bank New Delhi.
branch in rural areas) option for poor people to
save. Banks are being required to open No Mutesasira, L. K. / Wright, G. A. N. (2002) It Is
Frills Accounts by the RBI but these accounts Expensive to Be Poor: Losses Suffered by Peo-
are intrinsically loss-making for banks so they ple Saving in Uganda, under:
are often poorly publicised/ marketed by banks www.MicroSave.org (Study Programme sec-
and a limited number of accounts are opened. tion) [21.11.2008]
Of those accounts opened, many/most dormant
(except for pensions/National Rural Employ- Wright, G. A. N. (2008): Remembering Sav-
ment Guarantee Scheme payments). And over- ings: The Forgotten Half Microfinance in India,
all the service quality offered to No Frills Ac- presentation at the Microfinance Summit, 12th
count holders is very poor – not least of all be- Nov. 2008, New Delhi, under: http://
cause of the costs associated with offering a www.microfinanceindia.org/annual -
good service. But it is worth noting that such microfinance-india-summit-current.php#prez.
approaches have worked in South Africa where
banks are permitted to charge limited fees, do
not have to pay interest etc. and so it is a cost
effective business opportunity for them.

It is time to recalibrate the balance between


`

Horizon

Multiple Borrowing: Finding Solutions
- Suresh K Krishna, Managing Director (Grameen Koota)

Microfinance has accomplished what several of tiple borrowing persists and is now threatens
it’s detractors thought it never would – 100% considerable damage to the sector.
loan utilization and, most importantly, recov-
ery. The earnest and well-founded hope for a Areas of Concern
better life motivates women to enter into the
contract of microfinance; business successes 1. Aiming to increase business volumes, some
among borrowers only strengthens this faith in MFIs either inadequately check or ignore client
the institution of microfinance and draws more borrowing habits. Multiple borrowings springing
clients, who would otherwise have no access to from such a situation adversely affect the qual-
credit, into the system. However, it has been ity of the loan portfolio as clients put them-
noticed that some clients, in an effort to pro- selves at a higher default risk.
cure the maximum possible funds, borrow from 2. In some areas, clients borrow from more
all available MFI sources. Despite efforts by than 7 MFIs at once. The absorption capability
some MFIs to educate clients on the mainte- is not assessed; consequently, loans are misdi-
nance of stable cash-flow, the problem of mul- rected, i.e. not used for the productive/income


Horizon: Multiple Borrowings...
`

“A client’s ability to absorb credit and repay debts must be
analyzed before loans are disbursed. Discrete inquiries regard-
ing borrowings can also be made to determing whether cash
generation meets existing repayment commitments.”
generating purposes stated in the loan applica- more than Rs 50,000 from the microfinance
tion data. sector.
3. With increasing debts and misdirected funds, 4. A client’s ability to absorb credit and repay
clients turn to informal sources (friends, rela- debts must be analyzed before loans are
tives, money lenders etc) for further credit, fur- disbursed. Discrete inquiries regarding bor-
ther aggravating the debt trap. Several in this rowings can also be made to determing
situation have held distress sales of movable whether cash generation meets existing
assets. In extreme cases, mental depression repayment commitments.
resulting from the financial pressure causes 5. In areas of high MFI density, all MFI’s can
some to commit suicide. These situations taint impose maximum sealing on the loan size
the image of an otherwise honorable sector. all loans, regardless of the loan cycle.
4. Some clients have sought the intervention of 6. Regular Loan Utilization Checks must be
religious leaders, political representatives and a conducted to confirm the appropriate use of
-political individuals. Dictats issues by these funds and also to determine the total bor-
parties to either delay or stop repayments, is rowings and utilization of funds.
disadvantageous to the microfinance structure. 7. Raise awareness in the field staff and mem-
5. Non-repayments and delayed repayments bers about the drawbacks and ill-effects of
adversely affect the PAR of MFI. If the impact multiple borrowing. This will result in finan-
moves beyond acceptance levels, lenders will cially aware and disciplined members as
rethink their future investments, making it diffi- well as a quality loan portfolio. Non credit
cult for MFIs to access credit. services should also be highlighted.
A well-rounded understanding of the situation
and coordinated efforts of MFIs can draw out While, like every other sector, microfinance too
viable solutions to address this situation from faces regular challenges, these hurdles are not
aggregating. These steps will, in the long run, insurmountable. Harnessing the knowledge and
enable microfinance to continue to service the experience of the individual MFIs can result in
credit needs of the poor. effective remedial measures that will serve to
strengthen the sector and it’s impact on pov-
Recommendations to MFIs erty.

1. Multiple borrowing is not uncontrollable and ***********************
can be tackled by the collaborated efforts of
MFIs through a common platform.
2. A thorough mapping of wards and villages
within the state and a subsequent allocation
of areas to MFIs can help in better planning
of activity. A similar strategy was adopted
Read Microfinance Focus
by the RBI through the Service Area Ap-
proach, which eliminated multiple financing Every Month
by commercial banks in rural areas.
3. At present, some members have over bor-
rowed from multiple MFI sources. By shar- www.microfinancefocus.com
ing information, these institutions can en-
sure that no individual member receives


`

Cover Story

Microfinance
& Environment

“We have to take the hard decision ! We and each one of us must take a
decision on this planet. And also we should inculcate among our chil-
dren a simple way of living. We should not live in a way, that it harms
another person. Once you take this decision, everything will be solved.
We have no right to live a life which is harming anybody else. It is like
traffic laws: You can't have a car and knock everybody off the road.
There's a rule you have to drive safely, so that you don't harm anybody.
Same thing is for living on this planet. We are sharing with each other.”

Prof. Yunus on “Environment and Climate change”

` Cover Story

Microfinance
&
the Environmental
Bottom Line
By : GreenMicrofinance and CGAP

C
an microfinance and environmental and social and environmental investors. Build-
sustainability go hand-in-hand? Some ing capacity for green microfinance may in fact
in the industry say it’s not only possi- be a smart way to prepare for shifting funding
ble, but essential that microfinance priorities and inevitable changes in environ-
works to prevent environmental damage. It is mental regulation.
becoming increasingly clear that the impacts of
climate change, pollution, poor waste manage- How can microfinance help to address environ-
ment, and other environmental problems must mental issues? Conservation and environmental
be part of the long-term approach to economic protection are global issues, and much of the
development. Otherwise, we risk destroying responsibility for addressing them rests in the
natural resources that are essential for contin- industrialized world. However, there is growing
ued economic growth, as well as endangering interest in “green microfinance,” which includes
public health and safety. programs that encourage eco-friendly microen-
terprises and support microfinance clients’ use
Environmental impacts are gaining prominence of renewable energy. The development of car-
in the global development agenda and becom- bon-credit aggregation strategies also creates a
ing a concern for some national governments


Cover Story : Microfinance & the Environmental Bottom Line
`

new opportunity to include smaller enterprises  Protect the health of communities
in a green agenda.  Lower overhead for microenterprises
Donors and investors can build capacity for
 Enable MFIs to invest in a growing market
green microfinance by providing necessary that meshes well with the agendas of triple-
technical assistance and by supporting environ- bottom line investors.
mentally sustainable microfinance projects. For
example, the Netherlands Development Finance Renewable energy entrepreneurship
Company (FMO) has developed evaluation cri-
teria and tools to help MFI's assess and man- Microfinance clients often use fossil fuels like
age the social and environmental impacts and natural gas and petroleum as sources of en-
risks of microenterprises. CIDA has also pro- ergy. These fuel sources contribute to the
duced an Environmental Sourcebook for MFIs. greenhouse gas problem, the degradation of
IFC, Triodos, Calvert, Shell Foundation, and local ecosystems, and cause health problems.
EBRD are among other donors who are includ- Implementing renewable energy systems, like
ing the environmental bottom line on their solar, wind, and biogas can offer great cost
agenda. savings, as well as health benefits. MFIs offer-
ing personal consumption “energy loans” can
In this article, we explore some of the eco- help microfinance clients leverage these re-
microfinance initiatives promoted today, such sources for their homes and businesses.
as:
Renewable energy can also be a source of in-
come for a new class of business – renewable
 Green microenterprises
energy microenterprises. Social and environ-
 Renewable energy entrepreneurship mental entrepreneurs from the industrialized
 Carbon credit aggregation world are helping to create this micro entrepre-
 Green microenterprises neurship opportunity. For example, Barefoot
Power is a socially-conscious business that em-
Eco-friendly microenterprises can provide sus- ploys micro entrepreneurs to distribute solar-
tainable sources of income to microfinance cli- powered products and systems in the develop-
ents, including the production of organic fertil- ing world.
izers and biomass charcoal briquettes, clean
energy cook stove fabrication, and handicrafts Grameen Shakti is a nonprofit with the mission
made from sustainably sourced materials. Vari- of eliminating energy poverty with renewable-
ous industry standards, from groups like the energy entrepreneurs. They support programs
Forest Stewardship Council, provide guidelines in solar energy, biogas, and improved cook-
on “sustainable sourcing.” stoves, which include training and capacity
building for entrepreneurs who promote the
MFIs that deal with agricultural clients can seek systems, as well as financial products tailored
partners that will help clients adapt to evolving for renewable energy uptake. In the micro-
conditions through the adoption of environmen- utility model, one entrepreneur will install a so-
tally-friendly farming techniques. Organiza- lar system and sell power to those in the com-
tions, such as Sustainable Harvest Interna- munity who cannot yet afford to invest in their
tional, help by providing key technical support. own.
Subsidy can also play a positive role as clients
shift their approach to a more eco-friendly Carbon credit aggregation
standard.
Carbon credit aggregators, like MicroEnergy
Engaging in environmentally sound busi- Credits and E + Co, work with MFIs that pro-
ness practices can: vide renewable energy loans to clients. Each
loan can be translated into a small carbon
 Help microentrepreneurs preserve and pro- credit. Though these credits are too small to be
tect their long-term income traded on the multi-million or billion dollar car-
bon markets created by the Kyoto Protocol, ag-


Cover Story : Microfinance & the Environmental Bottom Line
`

gregators bundle these credits and then sell have to be the case. MFIs can contribute, along
them on the voluntary carbon market to net with their clients, to solving the crises we face
polluters. Carbon credit aggregation offers: today. Microfinance clients continue to be im-
Financial rewards for MFIs that provide energy pacted by global climate change and environ-
loans, creating an incentive to continue green- mental degradation, but we are also seeing
ing products that they can be part of the way forward.

A better standard of living, and more control ********************************
over energy resources, for clients who switch to
renewable sources of energy for their homes or To Know more about Microfinance Gateway
businesses Business opportunities for micro en-
trepreneurs who supply renewable energy ser- http://www.microfinancegateway.org
vices or systems

Conclusion To Know more about GreenMicrofinance

The conventional path of economic develop- http://ww.greenmicrofinance.org
ment has tied greater prosperity to increased
energy consumption, with its corresponding
negative environmental impact. This does not

Read Our Previous Issues

Download at



`
Cover Story

World's First Cell-Phone-
Based Carbon-Micro-Credits
Implementation

David A. Palella , Founder, CARBON MANNA UNLIMITED
Carbon Manna Unlimited is implementing the world's first cell-phone-based Car-
bon Micro Credit or Carbon Micro Profit-Sharing system in the Mbeere and Siaya
Districts of Kenya, to include the town of Kogelo, President Barack Obama's an-
cestral home town. The enrollment target for this pilot program is 5,000 fami-
lies.

The cell-phone-based Carbon Micro Credit system employs SMS (simple message
service) and unique identifiers to potentially allow millions of families in Kenya
and other countries in the Developing World to claim on a bi-weekly or monthly
basis the carbon offsets they produce by using more efficient cooking methods
such as a modern charcoal stove or solar cooker, instead of an inefficient open-
pit fire burning biomass. As a result, each family is able to monetize directly its
own contribution to mitigating global warming, while also reducing nationwide
rates of deforestation and desertification.
To Know more about his ini-
tiative :- Each family that cooks more efficiently may claim approximately 3 tons of CO2
offsets/year, which is worth about US$ 15 - 30 when sold in Europe on a regu-
Visit lated or voluntary carbon-offset market. The family also saves far more on fuel -
http://www.carbonmanna.org/
- from US$ 70 - 150/year. For individuals living on less than US$ 1 - 2/day,
these earnings and savings are very significant.

Pre-selling tens or hundreds of thousands of tons of bundled Carbon Micro Cred-
its provides the start-up capital needed to buy stoves and cell phones for the
participating families, thus making the system self-funding and markets-
based. Later the offsets are crowd-sourced in arrears by the tens of thousands
of families participating in the program. Lastly, validation and auditing protocols


Cover Story : World's First Cell-Phone-Based Carbon-Micro-Credits Implementation
`

will ensure that the offsets were indeed pro- Moreover, this same cell-phone-based system
duced. may be applied to, among other uses, the claim-
ing, aggregating, tracking, monetizing and au-
Invented in April 2008, Carbon Micro Credits diting of personal emission reductions or CO2
(CMCs) are NOT a form of debt-based microfi- offsets produced by planting trees to sequester
nance; rather, they provide immediate micro carbon, installing solar panels for lighting in
PROFITS to the poor and are therefore similar in place of kerosene lamps or diesel generators,
concept to frequent flyer miles. They are an as- conversion of inefficient-combustion 2-stroke
set, not a liability. And like frequent flyer miles, motorcycle engines to direct fuel-injection, or
they are a fungible, universal currency and non- biomethane capture and combustion.
inflatable store-of-value.
Finally, once implemented, the installed base of
Carbon Micro Credits may take any “currency” cell phones in a Carbon Manna program also
form, depending on the sophistication level of a provides a channel for applications in micro-
country’s mobile carriers, banking network, and healthcare (public health messages), micro-
mobile money transfer systems. Possible ava- medicine (individual patient diagnosis & treat-
tars of Carbon Micro Credits include e-money ment), micro-education, and dissemination of
(electronic reward points), cell-phone minutes, business information (crop prices, market &
or cash. In Kenya and Tanzania, Carbon Micro weather conditions, etc.) In 2010, the cell-
Credits may be converted into cash and with- phone-based Carbon Micro Profit-Sharing Sys-
drawn via cell phone at 1,000s of locations tem will be expanded to other East African coun-
(stores or banks) using the Safaricom M-Pesa or tries, starting with Tanzania, Malawi and
Zain ZAP mobile money transfer networks. In Rwanda.
short, every cell phone is an ATM.
********************


`
Cover Story

Backyard BBQs Meet Improved
Betsy Teutsch , Green Microfinance

Last Sunday’s supplement ran an ad which really recreati onal warm
stuck with me -- so much that a few days later, I weather backyard barbe-
went back to my recycled newspapers to confirm ques. The indoor range,
my recollection: Walmart is selling spiffy, stainless gas or electric, serves
steel backyard BBQ gas grills for $298. Such grills that duty.
have long been a suburban status symbol of ma-
cho domesticity, much evolved from the little ket- One breakthrough for
tle-style charcoal burning versions of my child- perpetually impoverished
hood. My first shock was that they’re so cheap developing world house-
(thank you, China) that all elite symbolism has holds is improved cook-
passed. Now average people with backyards who stoves, paired with gas
shop at discount stores can afford this luxury and produced by a family’s biodigester. A slightly
fuel it with a tank of propane gas, advertised for higher-tech version of composting, these cisterns
$17.82. have a seal so the waste which is dumped into
them is processed anaerobically. Within a month
My second reaction is looking at this snazzy item or so, the biodigester yields methane gas along
through the lens of third-world cooking; in my role with very rich fertilizer. There are hundreds of
as Director of Communications for GreenMicrofi- different types of stoves being designed and mar-
nance, I have learned a great deal about life with- keted in the developing world. While very simple,
out the infrastructures we in North America take they accomplish a great many improvements.
for granted. GMf’s mission is to bring clean en- They consume less fuel, making them less expen-
ergy, environmental benefit and poverty allevia- sive to run. They utilize locally produced gas
tion to the world’s two billion people without ac- (ideally the “in-house” product!), eliminating the
cess to modern energy systems. Most of these time required foraging for wood and dung. And
households cook over foraged wood or dung in since they are more efficient, they produce less
open fires; given population expansion, this re- pollution, resulting in improved health.
quires ever more time to gather since close-by
supplies are exhausted. This is not exactly Martha The cost of a typical improved cookstove which
Stewart’s domain. Not only is the direct burning can provide so many beneficial health, environ-
of wood, dung and crop residue extremely ineffi- mental and economic impacts? About $20 -- be-
cient, it is highly polluting, resulting in respiratory yond the budget of most Bottom of the Pyramid
disease as well as black carbon emission. It’s ex- households…
actly the kind of outdoor “campfire” that in the *****************
affluent world has been replaced first by kettle
barbeques and, as we all became more affluent, About the author :
gas grills. Betsy Teutsch serves as Director of Communications at
Greenmicrofinance (www.greenmicrofinance.org) and blogs
Slightly better-off families in the developing world about socially responsible investing and consuming at Mon-
can afford LP, liquid petroleum – generally all im- eyChangesThings. The mission of GreenMicrofi-
ported and way beyond the means of a Bottom of nance, catalyzing green microenterprise and clean energy
the Pyramid family. So the type of grill Walmart is generation for the Bottom of the Pyramid, is an excit-
selling is actually a high-end third-world stove. ing pairing of Teutsch's interests in eco-sustainability and
The irony, of course, is that for Walmart’s custom- poverty eradication.
ers, this is not a primary cookstove. It is just for


`


When the Buck Stops
Grameen Koota: More than Just Credit

I
generating activities (trading, animal husbandry,
agricultural production and transportation)
n 1997, a year after his work Give Us through a wide range of credit products. Clients
Credit was published, Alex Counts set up earn access to higher loan values as they build a
the Grameen Foundation with a modest $6,000 steady credit history, a common indication of re-
in seed capital and a charge from Dr Yunus. Si- liability in the microfinance circuit.
multaneously, during this time, Give Us Credit
set the wheels of micro credit turning in another Initially offering services to women around
part of the world. Vinatha M Reddy poured over Avalahalli (a village near Bangalore), Grameen
the pages of the book at her house in Bangalore, Koota now operates in 23 districts with 80
India. Surely, in this book lay the future of the branch offices. Operations were recently
poor. Suresh K Krishna thought so too. Together, launched in a second state – Maharashtra. The
they were able to source seed capital from repayment rate is almost perfect (fluctuating
Grameen Trust in Bangladesh and thus, in 1999, fractionally from month to month), and the cur-
began the microfinance work of Grameen Koota. rent portfolio totals in excess of Rs. 180 crores
($36 million).
A 2008 Access Report indicates that microfinance
currently reaches over 300 million India's poor However, Dr Yunus's primary objective of social
households. 13 million of them reside in parts of development through microfinance has not been
Grameen Koota's home state– Karnataka. Fig- overshadowed by impressive performance and
ures, as of March 2009, show that the MFI outreach figures. Grameen Koota is exemplary of
(Grameen Koota) services 0.26 clients through responsible MFIs aiming to use micro credit ser-
it's group lending program. The collective efforts vices as a tool to promote non-credit services
of MFIs in the region has only just scratched the and facilities.
surface, but is committed to penetrating deeper
and providing need-based credit. The company's Socio-Economic Development
(SED) Workshops are conducted regularly in
Typically a woman earning less than or between various districts of operation, reaching not just
INR 42 – 84 a day (USD 1 – 2 per day), the clients and their families, but also the community
Grameen Koota client is able to begin income at large. Subject experts are engaged to raise


`Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit

awareness on a range of subjects from health to
law. Separate interactive sessions are organized Operational Snapshot
for the husbands of clients – an insightful move
that helps maintain the delicate domestic equilib- Districts 23
rium by involving the family member that con- Branches 80
ventional microfinance technically excludes. To- Centers 8,902
gether with The Indian School of Microfinance for Members 255,410
Women (Ahmadabad) and AKMI (Association of Active Borrowers 210,602
Karnataka Microfinance Institutions, a state-level
governing council whose establishment was initi- Current portfolio Rs 179.98 Cr
ated by Grameen Koota), the MFI delivered fi- $ 36.00 m
nancial literacy programs. Currently, the Govern- Own portfolio Rs 114.06 Cr
ment of India and the Reserve Bank of India are $ 22.82 m
the driving forces behind such programs nation- Managed portfolio Rs 65.92 Cr
ally. $ 13.18 m

Client education is a primary focus for most Repayment Rate 99.97%
MFIs. In South America, Accion International has
successfully developed a micro entrepreneurial Envirofit launched a range of clean burning bio-
training program that caters to a wide clientèle mass cook stoves that reduce toxic emissions by
range. Grameen Koota, in association with Ac- as much as 80% while using 50% less fuel. Con-
cion International, launched a pilot project of the sequently, the cooking cycle drops by 40%.
very same program – Dialogue on Business. The Grameen Koota works with Envirfit and Selco In-
highly interactive modules have been adapted to dia to provide these stoves to clients at nominal
the context of the Indian entrepreneur. Project rates.
proposals reveal that the Grameen Koota explo-
ration of the education space is not yet com- Grameen Koota currently works with 13 banking
plete. A functional literacy program is in the partners. With an equity base of Rs 18 crores
pipeline. ($3.6 million) as on 28th Feb-09, the company
will be seeking investments of upto Rs 80 crore
While the focus in the rural centres remain within ($16 million) this year. A sound financial founda-
the realms of education and awareness, that in tion allows MFIs like Grameen Koota to reamin
urban and peri-urban areas has been on technol- actively involved in effective social development,
ogy. One of the Grameen Koota branches even at the micro level of need. Grameen Koota
(Eijipura) in Bangalore is currently refining a mo- conducted a pilot project in collaboration with
bile banking service for clients. With logistical HDFC Bank that encouraged the construction of a
support from mChek, clients are able to conduct basic hygiene facility – toilets. A loan product of
cashless transactions, eliminating the security Rs. 4, 000 ($80) per client (payable in 2 years)
risks that come with transporting large sums of was offered. The pilot results show promising
money. In another strategic partnership, potential for the activity on a larger scale.
Grameen Koota and MoneyGram offer further
monetary services to clients. MoneyGram pay- The Access Report (2008) focuses on the impor-
ment systems provide financial institutions, such tance of providing need-based credit products.
as banks, thrifts and credit unions, with payment The challenges involved in tailor-made products,
processing services, primarily for official checks, including operational and technological expenses,
and with money orders for sale to their consum- cannot be ignored. However, some MFIs have
ers. Grameen Koota is proposing to offer these been able to reinterpret the directive so as to
services to customers. still provide timely services based on need.
These services, though, are non-credit. Grameen
While it currently seems to throb with enough Koota does well to advance it's stand in the
energy, the social development activity list has credit-based space of microfinance while simulta-
been designed to encompass more than just the neously building brand loyalty through non-credit
obvious. Considerations have been expansive initiatives. A good example here would be the
enough to include environmental responsibility. relief activity in Madhugiri (Karnataka). Tragi-


`Institution Spotlight: When the Buck Stops, Grameen Koota: More than Just Credit

cally, 24 huts were razed to the ground in a fire time, still more attention will be given to the
that broke out in a village. While some of the Grameen-prescribed PPI (Progress out of Poverty
victims were Grameen Koota clients, relief was Index), which serves as a measure of the impact
not restricted to them alone. All those affected of micro credit and non-credit work.
were provided with mats, food and basic necessi-
ties. In a separate initiative, Grameen Koota Much will continue to be written about the credit
made available a 'Livelihoods Kit' – a package of services offered and the financial advancements
food at wholesale prices, resulting in a reduction made by Grameen Koota, but the company's
in the overall expenses of a household. management continues to maintain that the pri-
mary objective is aligned with the vision of Dr
In the months to come, Grameen Koota has a Yunus – poverty alleviation.
roll out of activities designed for the benefit of
communities. After the initial experimental entry When Grameen Koota touches 50 lakh clients (5
into the area of health and hygiene, a far more million) in the coming years and publications can
determined and impactful project will be write about nothing but the enormous success of
launched to make basic health care accessible the Grameen Koota health care project, then
and affordable in rural areas. Government there will be some sense of real social change.
schemes have been relatively untapped by the
microfinance sector. Methods to effectively inte- *********************************
grate the two are currently being considered at
the Grameen Koota Head Office. During this

Read an Exclusive Interview
with Dr. Yunus

www.microfinancefocus.com/events


`
Interview
MF Focus: Founding SEWA helped practically so
An Exclusive Interview many women getting out of poverty and becom
with ing more self-confident. What about the political
impact?
Padma Bhushan Ela Bhatt ,
Bhatt: This is part of the game, SEWA has grown large
(Magsaysay laureate) and has its presence. We are dealing in the mainstream
economy and we are bound to shed up the power struc-
tures: With the moneylenders, in our homes and villages
and of course move to the government. We need to be
better organized, based on our values.

MF Focus: You are still convinced about using the
method of civil disobedience?

Bhatt: Itself civil disobedience is a protest and whatever
is unjust, you have to do something. There are several
ways and civil disobedience is one, we should use when
necessary.

MF Focus: What is important and what can be
done, to abandon the lack of women’s self-
confidence?

Bhatt: The most important thing is coming together. Those who are alone are weak and more vulnerable, they are more
often poor. We need to rely on certain inclusive values and our mission. The members should own an manage their corpo-
rates. This is a fluent process which empowers. Women have to start facing the reality and start taking initiative.

MF Focus: In a few days the election will begin in India…
Bhatt: We have our own manifesto and sent it to the candidates, trying to influence them. Nobody of the candidates has
women as economic active agents in his/her programme.

MF Focus: What do you expect from the international level, industrialized countries for fighting poverty
and improving women’s situation?

Bhatt: All these theoretical concepts and models for development and management are coming from undustrialised coun-
tries. And they failed, they created gaps, even farmers are hungry. All these systems and models should be devastated.
All this has to change, we need a totally new thinking and women are the solution. We need to be aware of nature and rely
on women. This is the answer.

“ The most important thing is coming together. Those who are alone are weak and more
vulnerable, they are more often poor. We need to rely on certain inclusive values and our
mission. The members should own an manage their corporate. This is a fluent process
which empowers. Women have to start facing the reality and start taking initiative..”

`

From New York Desk First Person :Howard Finkelstein
Peter Burgess, Correspondent , New York

I had an informal conversation with Howard Finkelstein in a constraints. More grants would help ... but there was a very
cafŽ not far from Wall Street last week. I have been aware of clear limit to this growth. He acknowledged that savings ...
Howard's work with microfinance for some time ... his work client savings accounts ... was a good way for an MFI to fund
as a lawyer helping to structure some of the first deals to itself ... but reminded me that banking rules and regulations
bring capital market money into the microfinance industry ... to safeguard depositors made this very difficult for most
but I did not have much idea of the context and motivation MFIs in most countries.
that he was bringing to this work.
He noted that bilateral and multilateral development agen-
Howard has worked closely with many organizations that cies had had a big role in funding MFIs and NGOs doing mi-
make institutional investment and is able to point to the stel- crofinance, they were still a big source of funds, especially
lar record of the microfinance industry in delivering on its IFC of the World Bank group and KFW (Germany). There was,
promises ... something that cannot be said for other asset however, a limit to the expansion of this source of funding.
classes including supposedly safe mortgage backed securities
and the like. Howard sees the big opportunity to be to get institutional
investors to become engaged with microfinance ... where
I am not sure how Howard first became interested in microfi- safe, modest returns are possible ... and the impact on client
nance ... but it was several years ago way before microfi- lives can be huge. This has started.
nance got onto the broader financial radar. What struck me Slowly the financing infrastructure is emerging for this ...
about Howard was that key idea that microfinance can de- microfinance investment vehicles (MIVs) are being created to
liver value to clients at a low cost in ways that other parts of serve as a link between institutional investors and MFIs. They
the banking and finance sector cannot is still central to his are absolutely needed to bridge the gaps between the essen-
view of microfinance. He was very clear that the unique tial culture of the successful MFI and the culture of inves-
value of the microfinance industry was the person to person tors ... and needed to help ensure that the MFI remains true
nature of the business. This is paramount within the borrow- to social purpose as well as financial sustainability.
ing groups and between the borrowers and the branch loan
officers. Will profiteering take over the microfinance sector if capital
When I suggested that microfinance could enhance its value market investment becomes the main financing source for
to society by expanding into bigger loans to small enter- the sector? Howard did not seem to think that this would
prises ... the SME sector ... Howard pointed out that this naturally follow ... rather microfinance would be a place in
needed a very different approach to lending and managing the financial system where return and social responsibility
the portfolio, and the skill set did not exists in most MFIs. could coexist for a true win-win.
Howard acknowledged that the SME sector needed better Will the microfinance industry get distorted by institutional
financial services ... but this would not be achieved success- financing so that only the financially big grow while the small
fully by having existing MFIs operating scaling to these but socially essential wither and die? The answer to this is
quot;biggerquot; loans. Rather, Howard pointed out that expansion of not clear yet ... the microfinance industry financing infra-
the microfinance industry was needed to serve all those structure is not fully developed ... the rating systems are way
within the very poor bottom of the pyramid that could bene- better than they were, but have a long way to go, for exam-
fit from access to microfinance. The statistics suggest that ple.
there has been progress in reaching the BoP with microfi-
nance ... according to the MicroFinance Summit more than I came away from the conversation impressed with the clar-
100 million microfinance clients in 2007 and a tenfold in- ity and logic of Howard's views of the industry. The industry
crease in just a few years ... but there are still perhaps a bil- is not perfect ... but it is pretty good ... and the potential for
lion people who are not reached by microfinance. it to grow and do a lot of good in the next few years can be
achieved with responsible institutional investment.
I asked Howard how this huge growth could come about.
How does the industry access the capital it needs? Howard *******************
started by observing that absolutely superb microfinance Write to the Editor peterbnyc@gmail.com
operations operating on a not-for-profit model were doing
greatwww.microfinancefocus.com Microfinance Focus [ May 2009 ] 29
work, but could not grow because of their financing

`

News

Equitas Fine-tunes Processes Using Newgen’s ductivity.
Document Management Solution
Ethiopia: Microfinance Institutions Loan Portfolio
Newgen Software Technologies Limited, a market Stands at 4.6 bln Birr (USD 415 ml)
leader in Business Process Management (BPM) and
Enterprise Document Management, today an- The microfinance institutions operating across the
nounced the successful implementation of its suite nation have reached over 2.2 million active bor-
of DMS products at Equitas, a Chennai-based, Mi- rowers with an outstanding loan portfolio of ap-
crofinance Company to streamline the existing proximately 4.6 billion birr, the Association of
processes leading to increased productivity. Equi- Ethiopian Microfinance Institutions (AEMFI) said.
tas, a leading microfinance company, has over 700
employees and operates out of 90 locations. With In connection with its 10th year anniversary, which
Newgen’s solution, Equitas wanted to improve will be celebrated starting from May 18 with vari-
scalability and increase productivity by eliminating ous events, the association said that the microfi-
document movement, anywhere access, distrib- nance institutions were moreover able to mobilize
uted capture and automatic data extraction. New- 1.6 billion birr in savings respectively. The 10th an-
gen, with its vast experience in business process niversary of the association is a unique opportunity
automation, was selected by Equitas to streamline to celebrate the success of the industry as a whole,
its entire gamut of Microfinance operations, it said. Currently, the network has 29 member mi-
backed by a completely automated system that crofinance institutions and associate members.
minimizes the physical documents and reduces Plans are under way during the anniversary to con-
manpower requirements while ensuring high product regional network workshops, present the as-

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