Hi all friends!
I am delighted to rejoin this group after a long while.
Thanks Jeff for your great input.
Recently having come back home to Malawi, I realise that the spread of savings groups in almost every village may be resulting in their fame and increased risk to exploitation. It is a pain such risk can go unattended for long and I see the answer lying in innovative solutions by new MFI entrants that can create safe saving products affordably and conveniently for the poor. Imagine a savings group treasurer collecting millions back from members just before a share out following a lot of sweat from members to ensure they have an annual lumpsum to fulfill their financial obligations....then the morning of the share out, members realise that the treasurer and his family have escaped to a neighboring country where he has relatives and cannot be held accountable. A 12 month investment belonging to 25 households lost in a day. Then you hear about several groups having formed recently in a certain community and as soon as a lending institution hears about them, comes to convince them to borrow a huge loan before the group even matures and undertakes the full curriculum. And the lending rates are prohibitive! What is the long term survival of those groups going to be?
How can we facilitate a safe saving place for these groups while allowing members to safeguard against exploitation autonomously from the start? Are we doing enough financial education for VSLAs? Is it not possible to more aggressively advocate for financial inclusion for all globally towards new MFI entrants focussed on last mile outreach with cost effective approaches plus capacity building processes on access to formal financial services and investments into viable innovative enterprises for the poor; their integration into the mainstream economy? How can we ensure scale up combined with quality and graduation into the formal and mainstream financial and business economy for informal VSLAs?
I love the discussions and hope I am not off topic. Just throwing in what I can....
By the way, if you hear of any job openings, let me know
Sent from Samsung Mobile
-------- Original message --------
From: "Narasimhan srinivasan shrin54@yahoo.co.in [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
Date: 18/09/2014 17:48 (GMT+02:00)
To: MicrofinancePractice@yahoogroups.com
Subject: Re: [MFP] Microfinance's position - Greed is good!
Dear Jeff,
Thanks for this nice post on a brand of microfinance that was not part of Chuck's map in his first post in the thread. The point on the impact MF on hunger is especially worth highlighting.
It is remarkable that the 'scholarly' discussion so far has mixed up several different versions of microfinance - the for profit, non-profit, commercial, non- commercial, community based and institution based and all. Each one (I too) pronounces the verdict on everything called microfinance without bothering to check their assumptions. This thread which started with Chuck's legitimate reaction to exploitative interest rates, has seen several old-timers trotting out tired arguments that have not changed very much. Instead of trying to convince others, let us proceed with what our conscience dictates - and do the ethically right thing that benefits vulnerable people. Unless we have viable alternatives let us not kill what exists - but seek to improve the existing ones in favour of the poor.
Regards
Srinivasan
On 18-Sep-2014, at 8:22 PM, jaashe@aol.com [MicrofinancePractice] wrote:
Dear Colleagues,
As one of those who has been involved in microfinance since the very beginning, I have seen that most MFIs make a major effort to reach their clients and few try to gouge them. It's a tough complicated business to reach those that banks have never served. We need to give thanks to the idealistic NGOs who began this business back in the 1980s (and even before) and blazed the trail for the commercial ventures that followed. Microfinance has become one more tool for the poor to manage their money - as is clearly described in "Portfolios of the Poor". The Grameen clients profiled in Chapter 6 of "Portfolios" say they appreciate the quality and consistency of the services they receive . Roodman's "Due Diligence: An impertinent inquiry into microfinance" concludes that one of the major outcomes has been to create the microfinance industry. Borrowing from an MFI leads to income smoothing and modest positive benefits with some using (but certainly not all) using their loans to advance their businesses.
Fourteen years ago I took a different path seeing that financial institutions could not reach the rural poor at any significant scale and embraced savings groups as one more tool the poor could use to manage their money. Savings groups are an improvement on traditional RoSCAS (savings clubs - tontines, tandas, etc). Unlike microfinance savings groups focus on savings not credit and the creation of self-managed groups not building financial institutions. The profits from lending the growing pool of savings among members return to them. Promotion costs are exceedingly low - a ratio of 1 staff to 2,000 group members is common during the promotion stage and increases to 1 to 7,000 or much more as the groups operate on their own and self-replicate. Recent research in Uganda shows that two new groups spring up spontaneously for every group trained by paid staff.
Additional advantages are that savings groups are reach those that microfinance has scarcely touched (except in densely populated Bangladesh, India and Indonesia) and that groups can be trained by local NGOs since the task is only to train groups not manage finances. Membership in savings groups has grown to 10 million members with groups already in place in 100,000 to 150,000 villages in 65 countries. With modest external support (less than 1% of what the 54 poorest countries receive in external assistance) this number could be increased to 100 million with groups in place in more than 1,000,000 villages. The methodology and institutional capacity are are in place to achieve this.
The short term impact, according to several RCTs, is a community wide decrease in chronic hunger, building assets and increased social capital along with viral replication within and between villages. Over time as more in each village join groups, and the amount saved and lent increases impact will also expected to increase and more of the poorest will join groups, although this is yet to be documented.
Microfinance opened the dialogue in the 1980s that led to savings groups in the 1990s and mobile banking over the past few years with all three having a role in improving how the poor manage their money. See my new book "In Their Own Hands: How Savings Groups are Revolutionizing Development." The book website in www.intheirownhands.com.
Let's continue the dialogue,
Jeff
-----Original Message-----
From: Chale Espinosa A chalespinosa@yahoo.com [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com>
To: MicrofinancePractice <MicrofinancePractice@yahoogroups.com>
Sent: Thu, Sep 18, 2014 9:19 am
Subject: Re: SV: [MFP] Microfinance's position - Greed is good!
Microfinance was sold as a way to reduce poverty. See how much money was given as a grant, low interest loan from IADB, WB, USAID, and Europeans and how much capital was invested by original shareholders. And, when user is charged in addition to high interest rates, commission for all sort of training that never took place and you added up, rates go throughout the roof and the poor clients get creamed. That is no innovation or wealth creation for the consumer. Yes. It is for the owners who probably never put up a dime and made lots of money when they sold their investments a return on capital almost infinite.My point is not that making a profit by MF to be a bad, if they are competitive, and there are regulations and price transparency fine. But Microfinance is not what it was intended to be another Money lender.USA : 251-219-4808Nic : 505-8-851-3355Skype: chalespinosatwitter: @chalespinosa
From: "clementwan@yahoo.com [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
To: MicrofinancePractice@yahoogroups.com
Sent: Wednesday, September 17, 2014 10:31 PM
Subject: Re: SV: [MFP] Microfinance's position - Greed is good!
When financial products aren't being created to avoid regulatory constraints, financial services are development tools. Being profit seeking is not incompatible with poverty reduction. Financial services are catalysts for wealth creation.Clement
---In MicrofinancePractice@yahoogroups.com, <chalespinosa@...> wrote :
Microfinance is not a development tool, it was originally sold as a way to reduce poverty and is not. The MF sector is another financial intermediary, profit driven, that competes with moneylenders in providing liquidity to its clients at interest rates that are higher than the regulated financial intermediaries and lower that moneylenders and are commensurate with risk taken.Its a financial business.Chale Espinosa A
E-Mail: chalespinosa@...chalespinosa@...BienesRaicesNicaragua@...USA : 251-219-4808Nic : 505-8-851-3355Skype: chalespinosatwitter: @chalespinosa
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