Transcript Challenges to the field and solutions University of Greenwich Microfinance Conference, 19th November 2011 Anton Simanowitz ([email protected])

Challenges to
the field and
solutions
University of Greenwich
Microfinance Conference, 19th
November 2011
Anton Simanowitz ([email protected])
What is success?
Microfinance under attack
My messages today
Past 15 years focus on numbers not impact
Need for greater client focus
Not all microfinance is the same – it’s the details that matter
Three key areas for improvement:
Creating value for clients
Deepening financial inclusion
Client protection
What is microfinance?
Access to financial
services??
Creating value for clients
Investing in an economic opportunity
Small business, farming etc
-credit
- business training,
marketing etc
Creating value for clients
Money management and consumption smoothing
Small irregular incomes ->
pay for anticipated needs
eg. school fees, buying
food)
- savings, credit,
remittances
- financial education etc
Creating value for clients
Coping with the unexpected
Illness, death, floods,
theft etc etc
(poor are vulnerable)
- savings, insurance
- flexible products
- group solidarity/support
Creating value for clients
Empowerment
- groups, training etc
Creating value for clients
Providing, or linking
to other services eg.
health, education etc
- Reduce risk
- Improve capabilities
related to other goals
- Leverage outreach
to bring other benefits
Deepening financial inclusion
Common practices lead to exclusion
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Geographic focus (easy to reach areas)
Enterprise focus
Physical barriers (office location, meeting timing)
Collateral or land deeds exclude women
Registration fees or minimum fees
Staff prejudices or incentives
Client self-perception
Inappropriate products/services
MLF poverty outreach
120.0%
100.0%
80.0%
New Standard loan clients
New Chiyambi loan clients
National poverty average
60.0%
40.0%
20.0%
0.0%
Likelihood of being below the $1.25/day poverty
line
Likelihood of being below the $2.50/day poverty
line
Staff incentives
Most MFIs incentivise
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Number of new clients
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Portfolio size
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Portfolio at risk
Zero tolerance to late repayment
“The practice of banks and MFIs realising security in
the developing world happens for the same reasons
that banks pursue these remedies in the developed
world – to contain credit losses and to maintain a
sense of commitment and discipline in their
borrowers.” (CEO from International MFI)
Solutions: 1. Balance social and financial
performance
Focus on only growth and efficiency lead to...
Mission drift: easiest/most profitable targeted
MFI systems and internal controls stretched and staff are trained
and promoted too quickly
Staff-client relationships deteriorate as systems stream-lined.
Value for clients undermined as processes are simplified and
products and services standardised
Multiple lending and pressure to lend -> over-indebtedness
- Focus on what creates value for client not just profit for MFI
- Innovate to push boundaries
Solutions: 2. Managing to improve social
performance
Quality and effectiveness
Do what you say you do and do it well
HR – staff recruitment, incentives
Performance management & incentives
Quality management systems
Risk management
Etc
See Imp-Act Guidelines for SPM
Solutions: 3. Responding to client needs
Products and services designed for economic investment,
smoothing, emergencies, empowerment
Savings as well as credit
Not just enterprise credit
Opportunities for non-financial services
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Opportunity not prescription
Apply what is already known
Actions…
MFI Managers
Products, services, systems and staff management
Boards
Strategy based on client needs
Performance assess on social and financial
Investors and donors
give tangible weight to financial inclusion, value for clients and
client protection in their investment decisions
Regulators and policy-makers
Client protection
Avoid negative influence
SPM Network
Resources
Training
Technical
support
SPM
assessment
www.Imp-Act.org