Poor borrowers prefer Equity to micro-financiers

Latest from Microfinance in Kenya

The article below caught my attention.

 http://www.standardmedia.co.ke/business/article/2000164091/


There is definitely room for more debate.

Central Bank of Kenya Licenses Choice Microfinance Bank - Choice MFB

Latest from Microfinance in Kenya

The Central Bank of Kenya (CBK), has licensed the 11th Microfinance Bank in Kenya. Choice Microfinance Bank (Choice MFB) becomes the latest entrant to join the very competitive low end financial services sector. Choice MFB will be operating in Kajiado North and especially targeting the fast growing Rongai town and its environs.

As an industry and practitioners we welcome Choice MFB to the industry. Kenyans will be better and for sure they will have a " choice". For more please read below;

http://www.standardmedia.co.ke/business/article/2000163283/cbk-licenses-choice-microfinance-bank

MICROFINANCE SUMMIT IN KENYA- WHAT DOES IT MEAN FOR AFRICA?

MICROFINANCE SUMMIT IN KENYA- WHAT DOES IT MEAN FOR AFRICA?

April 7th to 10th, 2010, the microfinance player’s world over gather together in Nairobi for the Africa Middle East micro credit summit. The summit, first time to be held in Kenya will be a great honor to the country for its pioneering work in the microfinance sector in Africa. From the late 80s and early 90s, Kenya Rural Enterprise Program (now KREP bank) led the way in the provision of innovative financial services targeting the poor and the unbankable. In the late 90s, Equity bank, a Kenyan owned and managed financial institution sprung out to take a desired, rightful position in resuscitating micro and small entrepreneurs hitherto lacking access to finance. The bank downscaled and re-engineered a banking revolution that has energized the global microfinance sector and in particular Kenya. Equity bank has in the recent past been a recipient of many microfinance awards world over for its innovation and commitment to end poverty through provision of well designed and need based financial services.

In Kenya, the microfinance sector has evolved for the last 20 years, and has recorded notable gains. The sector has transformed itself from an insignificant player in the national and international psyche, to its current level of innovation, sophistication and acceptability. To tap the potential the industry has and extend the depth and breadth of outreach, the Government of Kenya mainstreamed and transformed the sector by setting aside funds to reach the marginalized youth and women through the Youth and the Women Enterprise funds respectively. The government has further enacted the microfinance act. The act brings on board a regulatory environment that hitherto has been missing in the past leading to collapse and defrauding of many Kenyans by these institutions.

The Micro credit summit therefore, will be held on a backdrop of many challenges that continue to trouble the sector in Africa. Key among the challenges include: conflicts in many parts of Africa, government policies that discourage entrepreneurship, corruption, poor infrastructure, unethical financial service providers, lack of innovation and creativity leading to one size fits all kind of financial products all in a sector that thrives in replication without putting into perspective a peoples culture. These among others, are the challenges the participants must face head-on.

The theme of the summit is “committed to ending poverty”. This is spot-on and especially in sub Saharan Africa, where poverty looms large. Research has now proved that microfinance when properly designed, innovatively delivered and target clientele properly defined has the potential of graduating so many out of poverty. This is what the delegates must crack in four days – failure to do this, would reduce the summit to just another outing and a holiday for some. It’s in the delegate’s interest therefore, to ensure the resolutions that come out of the meeting will help end extreme poverty that our people continue to live through.

Over 2500 delegates from over 40 countries are expected to attend the 2010 Africa Middle East micro credit summit in Nairobi. The four day event brings together government, regulators, investors, donors and microfinance practitioners to discuss the role of financial services in poverty alleviation. Among the Key participants are the great of the microfinance sector such as Muhammad Yunus founder and president of Grameen Bank who together with his institution (Grameen bank) were awarded the 2006 Nobel peace prize for their pioneering work on microcredit. He is also a recipient of the 2009 US presidential Medal of Freedom. This is the highest civilian honor in the United States. He, among others is the genius behind the innovative co-guarantee mechanism that has relegated traditional collaterals to the peripheral of lending. You no longer need land or any other collateral that the poor lack – but rather your social standing in the community is enough to secure the much needed capital. The lending innovation has drastically reduced the gap between the rich and the poor and deepened financial services access in the developing world.

With this, the organizers, Association for Microfinance Institutions (AMFI), the host of the summit must ensure we prove to the doubting world the Kenya is not about politics and impunity. We have more to offer the world than the violence we witnessed two years ago. For the 4 days, that the spotlight will be on Kenya, the organizers must ensure the world see the other side of Kenya, the beautiful Kenya with lovely people who no matter the hardships, drought and selfish politics, have hope, dream for a better tomorrow and work hard for it. That is the Kenya the world does not know, yet the microcredit summit organizers should make them see.

Charles Njoroge

The next banking revolution - Commentary: Microfinance is not just about loans

LateBy Elisabeth Rhyne

WASHINGTON (MarketWatch) -- The world is in the midst of a banking revolution that has nothing to do with exotic financial engineering. It's in microfinance, or the provision of financial services to poor people worldwide.

Source:http://www.marketwatch.com/story/the-next-banking-revolution

To most people, microfinance means microcredit, or lending to the owners of very small businesses in the developing world. In recent years, though, efforts to extend a wider range of financial services to reach the nearly three-quarters of the world's population with per-capita incomes below $3,000 -- the so-called "base of the pyramid" -- have gained significant traction.
Since the first microloan was dispensed in Brazil in 1973, microlending pioneers such as Accion International and Grameen Bank -- the latter founded by Nobel laureate Muhammad Yunus -- have proven that the poor, served responsibly, are excellent credit risks and prudent users of financial services.

A surge of experimentation in the last five years, fueled by an influx of investment capital, has demonstrated an equally strong demand from the base for savings, insurance and tools such as bank cards and cell phones to facilitate payments.

New York Times columnist Paul Krugman has said that we should "make banking boring again." If "boring" means returning to the basics of relationship banking, strong underwriting and transparent products, he's right. But there is nothing boring about extending service based on those principles to the base.

$5 trillion in purchasing power

That's the long-term challenge for the financial industry, from multinational banks looking for new sources of sustainable growth to small microfinance organizations seeking to extend their reach and diversify their services. Statistics show the base's collective purchasing power currently stands at $5 trillion.

Scaling microfinance up presents daunting challenges. Chief among them are the high costs of reaching deep into rural backwaters and inner-city slums, and of servicing very small transactions. Meeting these challenges requires creative alliances and cultural insight as well as technical innovation.

Some recent successes:

-- Partnerships for last-mile delivery: In 2001, Brazilian banking authorities introduced the banking correspondent model, a regulatory innovation that has radically transformed access to financial services in Brazil and is being adopted, with regional variations, across Latin America and to a limited degree in India. Brazil allows any enterprise, including supermarkets, lottery kiosks, pharmacies and post offices to act as an agent to one or several banks.
In Brazil today, 95,000 agents are conduits for services such as new accounts, deposits, withdrawals and bill payments. Before the banking agent revolution, almost a third of Brazil's municipalities had no banking services; now they all do. At least 13 million new savings accounts have been opened.

The agent model may be the single most powerful means of localizing banking services. Banking authorities in Peru report that a bank branch costs about $200,000 to set up, while an agent costs just $5,000.

-- Technology: One engine of the agent model is the pre-paid bank card and the humble point-of-sale machine, the device that reads your card at the supermarket checkout counter. A point-of-sale machine typically costs less than $100 vs. thousands for an ATM. Customers can use cards at locations with the point-of-sale machine to make deposits, withdraw cash and pay bills as well as make purchases.

The pre-paid card model avoids risks of over-indebtedness and the problems of complex fees currently bedeviling the U.S. market. For poor people, liberation from the need to pay every bill in cash and in person at the bank branch saves a tremendous amount of time, cost and risk.
An even more flexible and user-centered payment device has taken off in parts of Africa and Asia: the cell phone. In Kenya, the Philippines and South Africa, millions of cell-phone customers use text messaging to withdraw and deposit cash at the same retail outlets where they buy airtime for their phones. They also use the phones to receive their salary, pay off loans and store money, as well as make retail purchases.

-- Product design: Microinsurance providers have proved especially creative in designing products tailored to specific cultural needs. In Latin America, many women balk at buying life insurance because they don't want to enrich their husband's imagined second wife. "Education life" policies therefore provide benefits in the form of school vouchers. Other policies pay out vouchers for food at large grocery chains.

Often, major insurers seeking to crack the low-income market rely on microfinance or microinsurance specialists to design and distribute products that they underwrite. Zurich Financial Services recently announced a partnership with microfinance group Women's World Banking to offer "caregiver insurance," covering a range of expenses arising from a woman's hospitalization.
Progress on all of these fronts is mutually reinforcing. New technologies help enable new kinds of partnerships, such as those between financial institutions and retailers, which in turn enable delivery of a wider range of services, spurring providers to get creative.

The core vision of microfinance pioneers -- to help the poor help themselves -- has broadened to the concept of inclusive finance: delivering to the world's poor the basic financial infrastructure that is a foundation of wealth development and risk management.

Elisabeth Rhyne is managing director of the Washington, D.C.-based Center for Financial Inclusion at Accion International. Portions of this article were adapted from her forthcoming book, "Microfinance for Bankers and Investors: Understanding the Opportunity at the Bottom of the Pyramid." st from Microfinance in Kenya

UNEP report reccommends Microfinance to address food crisi

The UN Environment Programme has unveiled an ambitious seven-point plan to feed the world without polluting it further by making better use of resources and cutting down on massive waste. This is contained in a survey document entitled 'The environmental food crisis: environment's role in averting future food crises' and can be accessed at www.unep.org or at www.grida.no.

The survey reccomends among many measures:

- "Reallocate cereals used in animal feed to human consumption by developing alternative feeds based on new technology, waste and discards. This could feed nearly the entire projected population growth" (to an estimated nine billion people overall by 2050).
- "Support small-scale farmers by a global fund for micro-finance in developing diversified and resilient ecoagriculture and intercropping systems.
- "Increase trade and market access by improving infrastructure, reducing trade barriers, enhancing government subsidies and safety nets, as well as reducing armed conflict and corruption."

The question remains:

Is Microfinance as implemented in Kenya able to respond to Agriculture?

Charles

Africa Microfinance Bank of the Year Award 2008

Equity Bank, the innovative Kenyan microfinance bank has been shortlisted for the African Microfinance bank of the year for this year's prestigious African Bankers Awards, 2008 to be held at Washington DC, USA.

Our dear Equity is currently the biggest bank in Kenya in terms of accounts-over 2.8 million accounting for over 48% percent of all bank accounts in Kenya. The bank infrustructure is supported by an 88 branch network, 350 VISA ATMs and 2500 Points of Sales. We at MicrofinanceKenya Blogspot wish them the best of luck.

Kenyans are not mediocre - we are olympic champions, our own has won Nobel prize etc - Equity keep the flag high. We are proud of how you have transformed microfinance landscape in Kenya.


Charles

Record bank expansion strikes chord with savers

Business Daily

http://www.bdafrica.com/index.php?option=com_content&task=view&id=9837&Itemid=5812 Written by Washington Gikunju

Graphic illustration: Conrad Karume September 5, 2008: In possibly the most rapid take-off in the provision of financial services the world has ever seen, the number of Kenyans with bank and savings accounts tripled last year, from 3.3 million to 10.1 million. Banking industry players attribute the growth, which took place in the last 18 months, to aggressive marketing of credit, greater availability of banking facilities and the introduction of a series of new products targeting low-income groups. As a result, 27 per cent of Kenyans now hold accounts compared with nine per cent a year ago, according to the Central Bank. Such growth has represented a windfall for the country’s financial institutions, attracting the attention of foreign banks shopping for acquisitions in the market. Last year, for instance, Barclays Plc reported that its Kenyan subsidiary had realised the greatest profit growth of all its international operations. On the homefront, rising interest in the formal financial services sector among Kenyans in the low income bracket has sent operators rushing to cash in on the growth. This battle for control of the market saw the total number of bank branches increase from 575 to 740 in just 12 months, creating more than 8,000 banking jobs last year. More critical to those hunting for possible avenues of entry into the Kenyan financial market is that this boom saw total banking assets increase by 26 per cent to 951.2 billion, while deposits rose by 18 per cent to 705.2 billion, riding on the wave of robust earnings from trade and tourism as well as external donor inflows to non-governmental organizations and the Government. Total profits in the sector rose to Sh35.6 billion from Sh27.1 billion in 2006 and Sh20.6 billion in 2005. The CBK says new university graduates as well as the more experienced management, supervisory and clerical staff benefited from this jobs market expansion representing a 39 per cent increase to the 21,675 jobs that the industry had in the previous year. Banking industry statistics also show that this growth is driving a quiet maturity revolution that has seen the number of support staff decline to 292 from 1,102 in 2006. Business Daily graphics Industry players say the decline is due to the growing popularity of outsourcing support services in the last four years and the adoption by most players of technology-based methods of doing business. Access to financial services is seen as a key catalyst to overall economic growth because of its role in facilitating business transactions. CBK says that a financial access survey conducted last year revealed that 38 per cent of the adult Kenyan population lacked access to financial services because of the high cost of maintaining savings accounts and other barriers to entry. Yet access to financial services is seen as key to the achievement of the Vision 2030 development agenda that aims at making Kenya a middle income country and a regional financial services hub. Read more on this story from Business Daily, Kenya http://www.bdafrica.com/index.php?option=com_content&task=view&id=9837&Itemid=5812

Nobel winner slams for-profit microfinance

July 28, 2008: 03:45 AM EST

NEW YORK (Associated Press)

When Nobel Peace Prize winner Muhammad Yunus began making $27 loans to women in Bangladesh three decades ago, he never dreamed of initial public offerings, return on equity and securitization. Those terms weigh heavily on his mind today, as the once-charitable field of microfinance has become increasingly commercialized.

"Poor people should not be considered an opportunity to make yourself rich," Yunus said by phone from Bali, Indonesia, where he is attending a microcredit conference, which opened Monday.

More on: http://money.cnn.com/news/newsfeeds/articles/apwire/722afa5689e6f4a87b804f72b8ae1e84.htm