[TC-I Call to Action]: Total Immersion Programme in Finance and Development Summer Internships

The Centre for Development Finance (CDF) announces some very exciting internship opportunities for this summer.  If you’re looking for something more long term, word has it that CDF will likely be releasing postings for BoP related full time positions in the coming weeks… check back for more information!

Total Immersion Programme in Finance and Development (TIP/FD) – Summer 2009

CDF invites internship applications for the Summer 2009 IFMR “Total Immersion Program in Finance and Development (TIP/FD).”

Description of the program follows and application requirements follow below and in this CDF TIP document, and to apply please use the following link.

The TIP F/D provides undergraduate and graduate students interested in microfinance, development finance, and economic development an opportunity to gain hands-on experience in working on issues relating to access to financial services for urban and rural poor in a developing country. Interns will participate in a structured, two-week course directed by leading researchers, IFMR Centre Research Associates, and practitioners from the Indian government, microfinance institutions (MFIs), and NGOs. The course will be followed by eight weeks of work on a CDF projects which will consist of either field-based research, policy/sector wide studies or data analysis.  Past interns have completed stand-alone projects or worked to initiate, implement, and scale-up existing projects or pilots at the Centre.

The list of summer internship projects can be found online here and in this CDF Project Descriptions document. Interns may also be placed on another of CDF’s ongoing projects.

Internships are unpaid, although CDF will assist with housing and food or provide a small stipend of up to Rs 10,000/month toward living expenses. All interns are encouraged to obtain funding to cover international travel and personal expenses during the internship period.

This year, the TIP/FD will take place between June 8 and August 14, 2009. Applications will be accepted until April 15, 2009, although we encourage interested applicants to apply as soon as possible to ensure the best matching of interests and skills.

Positions of Particular Interest to the TCI Readership: Continue reading

Why you should CARE about microinsurance

We have written about microinsurance before, including SKS’s Vikram Akula’s decision to develop a product for his customers. Now, Bajaj-Allianz and CARE India will be developing a product of their own. In an interesting partnership between the charity and a commercial company, this venture will aim to help individuals substantially improve livelihoods through the safety net insurance can provide. On Allianz’s site there is a great interview with RN Mohanty, Chief Operating Officer, CARE India, speaking to this new partnership. Here is an excerpt:

The biggest challenge was definitely educating people that risk protection is an important part of their lives. We do this because we want to inculcate a culture of savings with the community, not just insuring for the time being. The general mindset in rural India is that unless you get something out of it immediately it is not worth investing. If you look at our client list, close to 90 percent are first-time insurers.

The rest of the interview can be read here.

[TC-I Call to Action]: Programme Head, Centre for Micro Finance

Lakshmi Krishnan of the Centre for Micro Finance, IFMR writes to us about a new opening in the organization.   This is particularly exciting for anyone interested in microfinance, research, and traveling throughout India.  Several classmates in graduate school had worked with IFMR and came away with good experiences after participating in breakthrough research.

IFMR CMF is now hiring a Programme Head in Chennai to manage a portfolio of 4-6 projects with a variety of partners. Read about the IFMR CMF Programme Head position for further information and contact information.

Evaluating social returns on microfinance

Whether you are an individual investor, an institutional fund, or a microfinance organization, the issue of returns on social investment is always a concern.  The difference is usually in the approach that each stakeholder may take in measuring these returns.  The Grameen Foundation made a major stride in the effort to create an evaluation framework by releasing guidelines to evaluate social returns to investments.

As of 2006, socially-focused investors in the U.S. had channeled more than $663 million into microfinance. Most of these investors choose microfinance because they expect financial as well as social returns related to reducing poverty. Until recently, however, there were few tools to help them track how well their investments were achieving their goal of improving the lives of microfinance clients and how those “returns” compared to industry-wide performance benchmarks.

When I read about a new set of guidelines, I imagined some complex framework, or a laundry list of things to look for.  Instead, the guidelines are quite short and simple.  Maybe even the measurement of social returns follows Occam’s razor!

The guidelines are just a first step – some of the questions may need a little more teasing out.  For example,  a question listed for institutional investors to ask: How effective are the MFIs at alleviating poverty?  Investors may want a more elaborated approach in terms of what “effective” means.  At the same time, the strength of these guidelines is that they are flexible and realize that social investments, even in a field like microfinance, can vary.  Along with GF’s previous initiative, the Progress out of Poverty Index, which tracks microfinance institutions’ track records with poverty alleviation, the evaluation guidelines are a welcome development in the world of performance indices.

Round 2 with CGAP’s Gautam Ivatury

The ThinkChange India staff is committed to providing our readers with interviews with people we believe are at the brink of something special but have for the most part been overlooked by the mainstream media. Readers will be able to see other conversations under our TC-I Changemakers tag.

This week, Vinay sat down (over the phone) with Gautam Ivatury of the global microfinance center CGAP, which works to expand poor people’s access to financial services. Such services include but are not limited to microcredit and branchless banking. This interview is a follow up to one conducted on May 4, 2008, which you can read here.

Vinay Ganti: Could you please review yourself on the following topics, which we discussed in our last conversation?

  • Reaching beyond MFIs:

Gautam Ivatury: This still continues to be a major focus of CGAP’s mission. Across all of CGAP’s work we continue to look for ways to partner with a range of institutions and providers, including but not limited to MFIs, to be able to massively expand financial services for poor people.

GI: With regard to branchless banking, we set out to accomplish a number of goals. Overall we have been happy with the results of CGAP’s work in this area over the last six months, despite the fact that it has taken longer than expected for our project partners (in countries like Pakistan, Kenya, Mongolia, South Africa and elsewhere) to roll-out the branchless banking channels we helped design and finance.

Since our last talk, CGAP has expanded its policy and regulatory diagnostic work in branchless banking. New markets analyzed have included Colombia, Argentina and Indonesia, and we’ve continued to maintain close dialogue with the Reserve Bank of India and regulators elsewhere.

Also, the actual awareness of mobile banking in the field, i.e. what is and how it can work, has increased dramatically in the past. Last May we co-organized the first major annual event on “Mobile Money” for the unbanked in Cairo with the GSM Association (the industry body for the world’s 700+ mobile operators), IFC and DFID. That event got more than 500 paid attendees, most from private industry. And this week at the GSM World Congress in Barcelona, GSMA and other private sector players will announce additional activities in the space. DFID announced its new FAST program to encourage branchless banking this week. Initiatives like these are critical to get widespread adoption of the concept and to achieve scale. Moreover, major consulting and research outfits like Aite, Monitor and McKinsey have started research and published reports on the topic.

At the same time, our seven branchless banking projects have been slower to launch than we all expected two years ago. There have been some notable achievements — our Philippines partner has entered three new rural provinces and signed up about 80,000 new mobile banking clients, and Telenor bought 51 percent of Tameer Bank (our partner in Pakistan) to jumpstart its mobile banking initiatives. But in general the implementation of mobile / branchless banking has been slower than anticipated.

VG: Why do you think this is? Continue reading

Transfer money after the beep

Here is an interesting approach to the technological hurdles of mobile banking. Called Cashnxt, this venture in Kerala, uses high-pitched sounds via mobile phones to encrypt and decrypt the secure data needed to perform a financial transaction. An article on ReadWriteWeb, explains it as such:

As a customer, if you and a vendor are a member of the Cashnxt network, you can conduct transactions using your mobile phones. The merchant dials CashNxt’s IVR number, enters their PIN and transaction amount, and then hears a high pitch sound on their mobile phone. The customer does the same – calls the IVR number, enters their PIN and hears a high pitch sound. The two phones are then brought together, held close enough for CashNxt to encrypt and decrypt the sounds. 

Go after the jump to see a youtube video of the process:

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Checking in on CGAP and Branchless Banking

When I heard that Gautam Ivatury of CGAP would be at NYU’s “From Innovation to Impact” Conference, I thought it would be a great time to follow up with my previous interview with him.  While he did not have time to talk today, we are going to schedule a follow up soon.  Nevertheless, I was able to listen to his presentation on what CGAP has been doing to help move the market to be more amenable to branchless or mobile banking.

Here are a couple highlights from his talk, but stay tuned for a more in depth interview in the coming weeks.

  • The most interesting point raised was the importance of centering the business plan around the potential agents.  In essence, branchless banking would operate in the same way people currently refill their cell phones throughout India.  A shopkeeper, authorized by a bank or cell phone company to accept withdrawals and deposits, would receive an SMS or some other communication from a customer’s phone and then either accept the deposit or disburse cash.  Ivatury emphasized that such models have only been successful when it is designed to ensure that it is profitable and worthwhile for these agents themselves — a point, while obvious, can be easily overlooked by a major player.
  • Ivatury also commented on the process of actually “moving the market” — or getting the greater financial community on board and outlined the process as such:
    1. Research and Information — first find the data that must be presented
    2. Synthesis — analyze the data in a way that is clear and concise
    3. Communicate — get mainstream media, like the Economist or Financial Times, to pick it up
    4. Influence — once major players are aware, bring them together through events to persuade them to adopt it
    5. Market Changes

Back to the drawing board? — A harsh look at microfinance

To start, I want to say that my mind has been racing despite sleep deprivation and jet lag since I touched down in Mumbai at 0135 IST this morning. This is the first I have set foot in India since 2005 and thus my first visit since the inception of TC-I, which makes the experience all the more exhilarating. But on to the post …

In the past, I have criticized microfinance’s shortcomings, particularly with regard to its inability to actually stimulate significant job creation. However, I also have recognized that despite its downfalls, microfinance still serves as a useful tool in the arsenal of a poverty alleviation strategy.

Now, microfinance has come under more scrutiny, as opponents argue that this financial product actually hurts the interests of the poor and that it can lead to the romanticization of the bottom of the pyramid, creating dangerous consequences. These new arguments further support my point that microfinance is relative to other approaches not an effective tool in combating poverty.

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Rang De: India’s First Microlending Site

Moneycontrol.com reports the launch of India’s first peer to peer microlending site, RangDe.org.  The site explains the driver behind an online forum for microloans:

Rang De is a unique platform for individuals to become Social Investors and connect with borrowers of microcredit by lending small sums of money.

Unique features of Rang De are:

  1. Mission to drive down interest rates and make microcredit accessible to all. Rang De will always remain non profit to ensure this happens.
  2. The only online microlending platform that does not use a payment gateway and still makes payments possible. Register and see how we make this possible.
  3. 30 day loan disbursal guarantee.

You may wonder what the difference is between this model and a regular MFI. According to Rang De, they are able to offer rates “at least lower by 4%” than traditional MFIs. This allows them to potentially reach populations that could not afford microcredit before. The model is very similar to Kiva.org, which connects entrepreneurs in developing countries with the rest of the world, except Rang De focuses exclusively on India.

Interested in getting in on the action? It’s easy enough, according to the Moneycontrol.com article, when you invest Rs 1000:

A Rang De Social Investor will get back this money at the end of the loan tenure and earn a return of 3.5% pa in addition to the social return of having made a sustainable difference.

At the time this post was written, 123 social investors have used Rang De to disburse Rs 1789000 worth of loans to 281 borrowers.

(IFMR) Trust Me

Editor’s note: In addition to being informative, this post also outlines what IFMR Trust is looking for in potential hires. If you would like to see that immediately, go after the jump.

Before Thanksgiving break I had the pleasure of sitting down at an informal roundtable with Dave Wallack, Senior Vice President of People to learn more about IFMR Trust‘s ambitious plans to provide financial inclusion to every person in India. Chaired by Dr Nachiket Mor, who is also the President of the ICICI Foundation for Inclusive Growth, the Trust’s mission is to “ensure that every individual and every enterprise has complete access to financial services.” In order to accomplish this goal, the Trust is looking at a rather unconventional business model that where the non-profit parent oversees multiple self-sufficient for-profit silos in various financial sectors.

The three ventures that the Trust has currently launched are the IFMR Trust Holding Company (ITHC), the IFMR Trust Advisory Services (ITAS) and the IFMR Trust Guarantee Company (ITGC). Each venture has a specific and distinct goal. The ITHC aims to build a network of Kshetriya Gramin Financial Services (KGFS) that will serve as low-cost, paperless branches providing access to financial products. According to Wallack, the goal is to have one of these branches for every 10,000 people or 2,000 households. Wallack emphasized the feasibility of such scale is due to the incredibly low-cost structure of each branch. By being completely paperless, transaction costs is on the scale of 20-30 rupees as opposed to $20 dollars. Wallack self-titled the initiative as the Starbucks of microfinance, as they are able to provide loans at only 11.5%, far less than the typical 20-30% charged by traditional MFIs.

The ITAS’ charge recognizes that microfinance is merely a stopgap or defensive measure and that more aggressive financial services will be needed to enable true inclusion. In order to do this, the ITAS has structured as essential a private equity firm and with the aim of raising $150 US. Utilizing this capital, ITAS will look at 14 different supply chains that reach the rural population and figure out ways of improving and fixing them through investments in operating companies along the product cycle. These investment strategies, organized as Network Enterprises, will operate in a for-profit fashion with the belief that the quest for profits will seek out the most efficient and effective ways to address the supply chain breakdowns.

One example is the current gap that exists between urban labor demand and rural supply. After some preliminary research, ITAS discovered that the major hurdle was that rurual workers could not afford to live anywhere in the city for their first 2 weeks, because they had yet to been paid. In order to resolve this ITAS partnered with a local temporary housing and staffing company in order to provide that stopgap housing for these workers.

Finally, the ITGC will focus on providing much needed debt capital to small and medium size enterprises throughout India to truly enable them to grow. Here, the organization is partnering with many existing financial providers to roll out their offerings more aggressively.

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Microfinance Process Excellence Awards

Nirantara Community Services, Arohan, and Sanghamithra Rural Financial Services have been announced winners of Royal Bank of Scotland and PlaNet Finance’s India’s Microfinance Process Excellence Awards .

They were the third annual awards and the winners for the awards were selected from a pool of 67 nominees, which were shortlisted after receiving applications from the initial pool of applicants. The award winners were announced at the Microfinance India Summit 2008, held Nov. 11th to 13th in New Delhi. National winners for the three categories of awards were Nirantara Community ServicesArohan, andSanghamithra.

[Source: Microcapital.org]

Evolution of microfinance through lens of human resources

One of the most recognizable names in Indian microfinance has decided to step down from his role as CEO. Vikram Akula, the visionary founder and leader of SKS Microfinance will step down.

Mr. Akula says that this change will allow him to focus on a new initiative – microinsurance.  As MicroCapital reported earlier this year, SKS partnered with Bajaj Allianz Life Insurance Company to offer insurance products toclients.  This announcement comes amid rapid growth in the company. Suresh Gurumani, Director, Barclays Bank, will take over as SKS Microfinance’s CEO.  An official transition date was not given.  

This event marks a point of evolution for the microfinance industry at large as entrepreneurs are now looking to the next big financial product to develop for their contstituencies. As microfinance becomes increasingly commoditized and regulated, risk-takers like Akula are now pushing the envelope further to find other services that are in need. TC-I wishes Akuka the best in his new endeavor(s).

[Source: Microcapital.org]

[Guest Post]: Financial Literacy and Microfinance – New Research

Editor’s Note: Aparna Dalal works with the Financial Access Initiative, a research consortium between New York University, Harvard, Yale, and Innovations for Poverty Action. FAI is focused on finding answers to how financial services can better meet the needs of poor households. FAI aims to provide rigorous research on the impacts of financial access and on innovative ways to improve access. Aparna previously guest posted on health microinsurance models.

Last week I attended a conference on cutting-edge research in microfinance.  Philanthropy Action live-blog presents in-depth coverage of the entire conference (see posts on Oct 17-18).  Many projects were based in India covering areas like credit, savings, insurance, product design and impact.

One panel revolved around financial literacy and its impact on savings.  With everyone, from the World Bank, to Citigroup, to Freedom from Hunger to IFC talking about financial literacy, it is important to understand what financial literacy really means. Does financial literacy mean teaching someone how to create a budget?  Does it mean teaching someone how to cut back on unnecessary expenses?  Does it mean teaching someone how to compare an interest rate and an APR?  Does it mean teaching someone how to read a rainfall gauge to determine their insurance payout?

The idea of whether the poor need financial literacy has generated considerable debate within the industry.  Muhammad Yunus (and others) argue that poor are good money managers with great financial acumen.  Others argue that the past three decades of experience suggest that education programs could play an important role in helping households better manage their financial lives.  Persistent borrowing, low saving, dealing with frequent emergencies are all indicators of poor financial planning skills – skills that could be improved through well-designed education programs.

It is difficult to tease out the exact effect of these programs, which makes this type of research all the more challenging.  Further, the diverse nature of the programs (as indicated in the questions above) makes understanding the components and structures of the programs critical.

TC-I Fundwatch: Madura Micro Finance to get $4.52 million from Unitus

Madura Micro Finance has received an investment by Unitus Equity Fund to ramp up their offerings to women self help groups (SHGs) in rural India.

Madura Micro Finance will use UEF’s funding to increase its management bandwidth and institutional capacity as well as continue to expand its customer base, which is comprised primarily of women.  The firm’s central financing product is a group loan to self help groups (SHGs) which are formed and trained through its partner organization, Microcredit Foundation of India. These SHGs undergo training in good financial practice and business skills before being considered eligible for MMFLs loans. Madura does not post to the MIX database. It reported USD 35 million in disbursements in 2007, and an SHG member base of 500,000.

[Source: Microcapital.org]

Soundbites from Nancy Barry, former President and CEO of Women’s World Banking

Last night I had the good fortune of sitting in on a talk given by Nancy Barry, a pioneer in the field of creating private, market-based solutions to poverty alleviation for women across the globe. Her talk was very powerful and on many points, spot on accurate in my opinion.

A veteran of the World Bank, she was the second president of of Women’s World Banking from 1990 to 2006. In the fall of 2006, Nancy started launched Nancy Barry Associates–Enterprise Solutions to Poverty, which works with major corporations, emerging entrepreneurs, and leading business schools to build business models that engage low income producers as suppliers, distributors and consumers of products that build income and assets. Simply put, her views come from a career of practice knowledge and her points should be taken with great seriousness.

Below are some highlights from her speech, which was titled “Microfinance and Beyond: Enterprise Solutions to Poverty,” and some of my own disagreements.

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