Paris Microfinance Network

Water and Microfinance

In many developed countries, easily available items are often taken for granted, such as water. But in developing countries safe water is a rare commodity, over a billion people suffer from lack of access to safe water. Approximately 5-7 million people (primarily in Sub-Saharan Africa and countries like India & Bangladesh) are dying annually - mainly children - due to water-born diseases. Furthermore, the costs incurred for rural communities to access safe water can be 10-15 times higher than costs for urban dwellers connected to cleaner water systems. These issues affect the health & economic productivity of rural communities.

An interesting approach, applying microfinance principles, was launched by the organization 'Water Partners international' with an initiative called the WaterCredit Initiative that we believe provides a hopeful unique model. By making small loans to communities and individuals who do not have access to traditional credit markets, WaterCredit helps finance the upfront cost of water and sanitation systems. Giving people the credit tools they need and allowing them to repay the loans over time empowers them to solve their own water supply needs now instead of having to wait for years for a grant that might never come.

A working example: in India, WaterPartners provided $105K in loans for safe drinking water and household toilet facilities for urban slum residents. Loans were disbursed by WaterPartners’ local implementing partner in India, Gramalaya. Gramalaya teamed up with BASIX, a local micro-finance institution, in order to develop the infrastructure they needed to make the loan distributions. BASIX educated Gramalaya on the qualifications for loan eligibility and helped them to develop financial systems to process the loans. Check out this interesting & successful case & another in Kenya.

Another promising water initiative was announced yesterday; the U.S. Agency for International Development (USAID) & The Coca-Cola Company announced a $7 million joint investment in 9 new water projects in Africa. It's pleasing to hear this news because these much needed collaborations between private sector & NGO-development organizations, beneficially team private funding & business best practices with local developing country knowledge & expertise.

The projects will be located in Angola, Ethiopia, Kenya, Mozambique, Nigeria, Tanzania, Uganda and Ghana/Ivory Coast. These new projects (Coca Cola & USAID have been working together since November 2005, with activities in Bolivia, Mali, Indonesia, Malawi, Egypt, Thailand, Uganda and South Africa.) provide locally-driven solutions to address the global water crisis, growing the global partnership’s investments from $3 million to $10 million.

Omidyar's new Managing Director

Matt Bannick, who was heading up eBay's Corporate Philanthropy group since March 2006, has now been recruited as Managing Director of Omidyar's Network. Smart move by Omidyar - Bannick brings a wealth of experience from his role as former president of eBay International & general manager of PayPal plus his recent work heading up Corporate Philanthropy.

Bannick will lead Omidyar Network's expansion beyond for-profit and nonprofit investments into public policy and other areas that enhance the organization's reach and impact.

CGAP Virtual Conference

CGAP, the Consultative Group to Assist the Poor, a global resource center for microfinance standards, hosted a Virtual Conference last week entitled, "Vision 2015: What Does the Future of Microfinance Hold?" The conference was held from February 26th - March 2nd starting with a discussion within the ambit of global forces affecting microfinance, and succeeded daily with a different sub-topic – technology, government role, funding. On the last day, CGAP sought participants' input on the future role they believed CGAP should play in working towards universal access, this topic is still open for final comments.

We found each daily discussion to be quite lively and included valuable feedback & ideas from a wide variety of practitioners in the sector. For example, in the Technology discussion there was much focus on advanced distribution channels such as mobile banking, Biometrics and POS technology. However, a pertinent theme of the discussion focused on the need for MFIs to firstly develop a core IT foundation that is stable & efficiently delivers upon the MFIs business strategies & needs (such as efficient enterprise software systems) before launching into additional technology channels.

Day 4's funding discussion touched upon the need for private investors to diversify their investments rather than continuing to focus on the same top MFIs. Additionally, we discussed the idea that perhaps the donor investment organizations should focus more on the least developed MFIs in need of funding for basic growth capacity building?

The online discussions were facilitated by microfinance industry experts and writers of CGAP’s paper, “Four Scenarios for the Future of Microfinance,” Elizabeth Littlefield, David Porteous, and Brigit Helms.

Citigroup Grant supports Asian MF

Asia's microfinance industry will benefit from a new regional program announced today by Citigroup Foundation, the Foundation for Development Cooperation (FDC), and the Banking with the Poor Network (BWTP).

A grant worth US$570K from the Citigroup Foundation will be used by FDC and BWTP to expand the provision of microfinance services across 10 Asian countries including India, Indonesia, Philippines, Sri Lanka and Vietnam. The two-year program will promote public-private partnerships and industry best practices that will help existing microfinance providers to expand the reach and range of services delivered to the poor. These efforts are also aimed at stimulating the development of more internationally recognized and commercially viable microfinance providers in Asia such as ASA, BRAC and Grameen Bank in Bangladesh.

South Asia is generally viewed as the birthplace of microfinance, and thousands of microfinance institutions (MFIs) are now operating in Asia, but the Asian Development Bank estimates that around 200 million poor and low-income households in the Asia region may not have access to financial services. To reach more microfinance clients, many Asian MFIs need to build their capacity through partnerships and strategic alliances, and by adopting best practices.

Opportunity Int'l secures $15.4mil from Gates Foundation

The Gates Foundation has given a $5.4mil grant and a $10mil loan, to be repaid over 10 years at 1% interest, to Opportunity International, one of the largest global microfinance organisations. This is wonderful news for Opportunity International because this funding will allow them to deepen their current impact in poverty alleviation in Africa. They plan to use these funds to build a network of start-up microfinance banks in Rwanda, Uganda, Kenya and the Democratic Republic of the Congo (DRC), as well as expansion of their operations in Ghana.

Opportunity International was founded in 1971 with it's first program in Latin America. They initially focused on supporting local programs offering loans to help poor entrepreneurs create or expand their own businesses. In the early '90s they launched the Trust Bank - a group lending program allowing poor entrepreneurs (primarily women) to form borrowing groups & hence build community spirit. According to OI's website, since 1992, Trust Bank clients have maintained an average repayment rate of 98%. Opportunity developed partners in various regions around the world called the Opportunity International Network - they now number 42 organizations in 28 developing countries. In 2000, Opportunity began establishing formal financial institutions to broaden the financial services it can provide. These institutions are like commercial banks, development banks or credit unions and can accept deposits, borrow money and take investments. Opportunity aims to serve 2 million customers by 2010.

SEEP Network '06 Conference

Seep Network held their annual conference in October in DC bringing together 100's of MFI leaders to discuss important topics such as Social performance, Consumer protection & Market Development. Simultaneously, the Omidyar Network hosted an Investor Roundtable with many of the top investment leaders to discuss topics such as Capacity Building & Funding segmentation.

A serious effort is needed from the Investment community to enhance capacity building for MFI to ensure funding is as far reaching as possible. Can these MFIVs be less risk averse?

You can check out the presentations from the week to learn more.