COMMENTARY

Peter Burgess

5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 1/33 Peter Burgess

Chuck Waterfield Mon, Apr 23, 2012 at 8:37 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MFP

Friends,

Today marks the five year anniversary of one of the most intense discussions that ever took place on MFP. In 2007, April 20 was a Friday, as it was this year. The Compartamos IPO took place, resulting in over US$2 billion in profit generated from a business making loans to women at greater than 100% interest rate. On Monday, 23 April 2007, I sent the email below, and we kicked off a discussion of the implications of excessive profit for our industry. That discussion broadened beyond MFP and went on for months, leading to some very important changes in microfinance.

For example, today I am participating in the 'Third Annual Responsible Finance Forum' at the IFC in Washington. Five years ago, we didn't even use the term 'responsible finance'. Now we have conferences about responsible finance.

Still, I believe we have much more to do in clarifying the industry's views on profiting off the poor. Five years of discussions have lead to a number of critical initiatives.. so many I can't even list them here as I would certainly leave a few out.

My hope is that as we start this sixth year of discussions, we succeed in increasing the specifics of our definitions and criteria for responsible practice. I look forward to each and every one of these events, as we continue to build broader understanding and consensus with each discussion we have.

For those interested in the discussions and debates of the first months after the IPO, I documented them in the following paper, financed by Ford Foundation, which is a compilation of the main points made by various leaders in the debate. It is organized by topic, and you can quickly find and read the areas that you find most of interest. I believe a quick skim of this paper is a useful way to gauge the evolution of our views and actions on this critical point over the past five years.

The Implications of Increased Commercialization of the Microfinance Industry: What can we learn from the discussions that followed the Compartamos IPO? http://www.microfinancegateway.org/p/site/m//template.rc/1.9.30269

And below is the original email from five years ago starting the original discussion: 'Is this where microfinance is going'?

Chuck Waterfield

From: Chuck Waterfield [mailto:waterfield@microfin.com] Sent: Monday, April 23, 2007 6:58 PM To: MicrofinancePractice@yahoogroups.com Subject: Is this where microfinance is going? 5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 2/33

Something very important for us to reflect on.

Personally, I’m stunned by this. I’ve seen this in the works for years now, but still stunned that it has really happened. Compartamos, working in Mexico, has created a very large operation. They work currently with 600,000 clients. They have kept their interest rates at over 100% for many years (effective interest rate is currently 105%, as stated on their own website). This is startlingly high to people inside of microfinance as well as outside of microfinance.

They have gotten very profitable. For the last several years, they have generated an ROE of over 50%. “Invest $100,000 and make $50,000 in return after one year…” You can see their financials at www.themix.org. As they reached profitability, their interest rates did not come down. They continued to keep them high and generate high profits. Last year they made $57 million in profits.

I’ve watched them over the years. I have worked in their offices, but that has been some years ago. Friday they went “public”. The board and key staff members have become multi-millionaires (valued in US dollars). They hold a considerable number of shares. 30% of the total Compartamos shares were sold on the market starting Friday. Details are in the Reuters news article below.

This is a non-profit institution started with grants. They got the first grant ever awarded by CGAP… $1M in 1997. They have gotten support from numerous donors and networks. They now are generating extremely high profits that now, as a publicly held institution, go to their share-holding board and staff and to their shareholders. Is this the future of microfinance? Is this where some other MFIs have already gone, and where other MFIs are hoping to go? Is this the “solution to poverty”? Do the “benefits” of this market-based approach outweigh any potential costs of such intentional and blatant moves that will inevitably draw the attention of the public? Will these actions cause at least some people concern about how the “deeds” of microfinance more-and-more appear to contradict the “words” we say? Will microfinance become the home of the profit-maximizing investors instead of the area that donors and non-profits use to effect beneficial economic and social change?

Please read the following article from Reuters. Think carefully about this subject. I strongly believe it is the most important current issue in microfinance. I believe it has been for years (as anyone who has attended my courses knows). I think it is time we stop avoiding this issue. I think we need to openly discuss this. I don’t believe it is necessary to “pick on Compartamos.” I think we should be looking at the bigger “philosophical” picture, of where microfinance is going. I think this is an essential issue for us to clarify. The world now knows about microfinance. The world will soon know about the “complexities” of microfinance. What will you say when people start to ask you about these issues? I look forward to your comments. Chuck Waterfield

By Noel Randewich REUTERS 12:03 p.m. April 20, 2007

MEXICO CITY – Shares of small Mexican bank Compartamos, which specializes in lending to mom-and-pop businesses, surged as much as 34 percent in their $407 million stock market debut Friday.

Owners of Banco Compartamos, which means ”let's share” in Spanish, sold about 30 percent of the bank, spokeswoman Luisa del Castillo told Reuters.

More than 80 percent of the offer was placed in New York, with the rest on Mexico's stock exchange, according to a company release.

Mexican shares of Compartamos jumped as high as 53.53 pesos after the company priced the offer at 40 pesos per share. In afternoon trading the stock eased back slightly to 52 pesos.

Compartamos said it sold 111,572,532 shares, with an over allotment provision of 16,735,880 shares. It was 5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 3/33 Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use

unclear whether banks managing the offer exercised the over allotment, worth about $61 million.

Compartamos, with profits of around $57 million last year, has just over 600,000 clients in rural and semi-urban regions of Mexico.

“We have clients who work in food, clothing, shoes and crafts,” Castillo said. “They're people with anything from a super-small business up to a corner store.”

Despite lending to customers with little credit history or collateral, Compartamos has kept past-due loans below 1 percent of its portfolio.

“The offer received a lot of demand from institutional and retail investors,” said one banker associated with the offer. ”This is a one-of-a-kind story in the market today, which is why there is so much interest.” Last year, Bangladeshi economics professor Muhammad Yunus received the Nobel Peace Prize for pioneering microlending as a way to create self-employment and escape poverty. The World Bank's International Finance Corporation, which backs private companies with an eye toward eliminating poverty in developing markets, is the third-largest shareholder in Compartamos. Mexico's government gave Compartamos a banking license last year, prior to which it had operated as a specialized lending firm. Mexico's mostly foreign big banks, led by Citigroup and BBVA, focus on a small but growing middle class, although they are beginning to design consumer products for lower-income clients. The big banks' branches are absent from many rural areas in Mexico, where one in two people live on less than $5 a day.

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Tony Pell Mon, Apr 23, 2012 at 8:49 AM Reply-To: MicrofinancePractice@yahoogroups.com To: Microfinance Practice

Chuck, Many thanks for your 'reminder' and for the actions you have initiated and supported, before and after the Compartamos 'event' with regard to MFP. Tony

Chuck Waterfield wrote, On 4/23/12 8:37 AM: [Quoted text hidden]5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 4/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use __._,_.___ [Quoted text hidden] Messages in this topic (2) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___

Benoît Granger Mon, Apr 23, 2012 at 9:26 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com

Dear Chuck,

A good job ! but I cant agree with your sentence page 51 : “The material summarized in this paper is a small – but representative – portion of the material related to the Compartamos IPO that has appeared in the past year”.

“Representative” ? 95% of material is a discussion between American people. Interesting, but with this cultural handicap about the dominant conception of what is business, profit, fairness in lending, etc.

Of course, it would be hard to take into account views in Spanish, French or Portugese… but it would have add probably political, even philosophical differences in this debates.

Maybe the same job should be done starting with a comparison of Compartamos with the SKS IPO ? taking account of what did nt change at all between these two events : greed of the team, impact of external investors, weakness of public regulation, etc ? This could demonstrate how Transparency is necessary (congratulations to you !), but very inefficient, facing this 3 monsters ! A last question : Dean Karlan (Yale) was supposed to produce an evaluation on the impacts : no news ? What interest me would be : did the ladies borrowers became richer after the loan ? I want to mention the ladies indebted before 2005, not after !5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 5/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use All the best, with my constant admiration for your work ! Benoît Granger 33 (0) 6 71 61 21 72 De : MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] De la part de Chuck Waterfield Envoyé : lundi 23 avril 2012 14:37 À : MFP Objet : [MFP] Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (3) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ 2 attachments image001.jpg 1K image002.jpg 1K Chuck Waterfield Mon, Apr 23, 2012 at 10:38 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Thanks for your comments, Benoit, and I'm impressed you worked through the document so quickly! Much of the 'bias' of the paper was a result of the circumstances. In the first six months of discussion, virtually all of that discussion took place in English. Even Mexico and Latin America were not engaging in the dialogue, despite efforts to draw them in. In fact, the paper that Ford sponsored was co-published in Spanish in order to5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 6/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use activate more discussion of the event in Spanish. We invited Compartamos to submit additional material. They chose instead to publish their 'Letter to Our Peers' simultaneous with the Ford paper (and that Letter was their first public writing on the IPO). We also invited Alvaro Rodriguez, a board member of Compartamos (as well as Chair of the ACCION Board) to submit material. He did so, but he then later withdrew his material when he saw the final draft of the paper. Thus, there was a majority of 'western bias' to the discussion in the first six months. I would say that the *very* good news is that any summary of the discussions of responsible finance of the subsequent four years would be very broad-based, both geographically and culturally. We are having those discussions now, thankfully, and I agree with you that it would be useful to pull them together and see what agreements have been reached, and which issues need further discussion and clarification. Chuck [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (4) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Malcolm Harper Mon, Apr 23, 2012 at 10:30 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Please let me add to the congratulations. Chuck, you have done and continue to do a great job. But, Benoit, your question about impact assessment is important. There was talk of M-Cril doing a social rating of Compartamos, it came to nothing, and I think we are still waiting for any definitive or even partial evidence that not-for profit microfinance does any more good to its clients, or less harm, than for-profit microfinance. Interest rates are important, but the 'P' for 'Price' is only one of the 'four P's' of marketing (the others are Product, Place and Promotion), and the same principles apply to credit as to soft drinks. Malcolm [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (5)5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 7/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ N. Srinivasan Mon, Apr 23, 2012 at 1:44 PM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Dear Chuck, A timely reminder of the past and its continuing influence on the future. About the reference to responsible finance more than thre years back, you would find the same in my State of the Sector Report Microfinance India in 2008. 'http://www.microfinancegateway.org/p/site/m//template.rc/1.9.35121' Chapter 6 is named social performance and responsible finance. Some of what is there in the chapter borrows from compartamos discussions. In a maturing industry, newer tools, formats, slogans and institutions wanting to set the social agenda right are cropping up. There are quite a few who claim their primacy to certify the social relevance of MFIs. But in so doing with multiple tools and institutions, are empires being built that exclude good work done elsewhere. Does funding availability influence some of these initiatives that are small scale and do not even directly reach the MFIs that are supposed to implement. I am afraid that duplication and overlap, one-up-manship and competition for global leadership have taken over the social performance advocates. I wish a lot of these funds actually go to the MFIs directly instead of ratings, certifications and branding of do-good institutions. It is difficult to see how social performance advocacy could be so fractured and competitive as if it is like selling soaps with different names, brands, scents and packaging. If we can help MFIs to drop their funding costs, improve their operations through investments in cost effective technology solutions. There seem to be more people with ideas on what MFIs should do and funders of institutions that could advise, funders that invest in or lend to MFIs do not seem to walk the talk on social performance and responsible finance. My State of the Sector Report Microfinance India 2011 brings out some of these issues to the fore. Let me also refer to the CGAP blog 'http://microfinance.cgap.org/ 2011/10/05/mfis-should-do-responsible-finance-what-about-the-rest-of-us/' on the responsibility of those other than MFIs. We should work unify efforts in a smaller number of institution, if necessary in each region, pool funding and work with MFIs on the ground rather just in doing conferences and traning producing homilies. If donors mean qualitative and meaning social performance they would ignore the claim to credit that it all happened because of them. They would be happy that it happened. Best regards Srinivasan From: Chuck Waterfield To: MFP Sent: Monday, 23 April 2012 6:07 PM Subject: [MFP] Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (6)5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 8/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ ed2@nabard.org Tue, Apr 24, 2012 at 6:55 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Quoting 'N. Srinivasan' : Dear Sir Presently this email id: 'ed2@nabard.org' being a corporate email id is being used by Shri V. Ramakrishna Rao, Executive Director, NABARD. We request you to kindly address all the mails for our Chairman, Dr. Prakash Bakshi to the email id : chairman@nabard.org. Thanks for your time and attention. ED(VRR) Secretariat [Quoted text hidden] en_US###LANG_MARK ----- ------------------------------------ WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author!Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/MicrofinancePractice/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/MicrofinancePractice/join (Yahoo! ID required) <*> To change settings via email: MicrofinancePractice-digest@yahoogroups.com MicrofinancePractice-fullfeatured@yahoogroups.com <*> To unsubscribe from this group, send an email to: MicrofinancePractice-unsubscribe@yahoogroups.com5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 9/33 <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/ milford.bateman@email.t-com.hr Wed, Apr 25, 2012 at 7:31 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Chuck Excellent post as usual. Compartamos is a major issue in microfinance and your work on this has brilliantly exposed the many bad things that are represented by the Compartamos IPO. You also asked for information on the Compartamos NGO that was one of the main beneficiaries of the IPO process retaining 32% of the shares in Compartamos Banco. Has anyone contacted you to offer details of what they have been doing this last 5 years with this cash windfall? Has Compartamos NGO been in touch itself to provide details of what they have been doing? Or maybe Compartamos Banco have been in touch to offer details? Or ACCIOn who were very intimate with Compartamos for many years? I did check their website as you suggested, and I found nothing at all to explain what concrete projects they are involved in, who is doing it, etc. For an NGO with such huge resources this is very strange indeed. They seem to have redesigned their website since I last visited, probably because of your enquiry. Any information woudl be gratefully received. Milford --- In MicrofinancePractice@yahoogroups.com, Chuck Waterfield wrote: > > Friends, > > Today marks the five year anniversary of one of the most intense discussions that ever took place on MFP. > > In 2007, April 20 was a Friday, as it was this year. The Compartamos IPO took place, resulting in over US$2 billion in profit generated from a business making loans to women at greater than 100% interest rate. On Monday, 23 April 2007, I sent the email below, and we kicked off a discussion of the implications of excessive profit for our industry. That discussion broadened beyond MFP and went on for months, leading to some very important changes in microfinance. > > For example, today I am participating in the 'Third Annual Responsible Finance Forum' at the IFC in Washington. Five years ago, we didn't even use the term 'responsible finance'. Now we have conferences about responsible finance. > > Still, I believe we have much more to do in clarifying the industry's views on profiting off the poor. Five years of discussions have lead to a number of critical initiatives.. so many I can't even list them here as I would certainly leave a few out. > > My hope is that as we start this sixth year of discussions, we succeed in increasing the specifics of our definitions and criteria for responsible practice. I look forward to each and every one of these events, as we continue to build broader understanding and consensus with each discussion we have. > > For those interested in the discussions and debates of the first months after the IPO, I documented them in the following paper, financed by Ford Foundation, which is a compilation of the main points made by various leaders in the debate. It is organized by topic, and you can quickly find and read the areas that you find most of interest. I believe a quick skim of this paper is a useful way to gauge the evolution of our views and actions on this critical5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 10/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use point over the past five years. > > The Implications of Increased Commercialization of the Microfinance Industry: What can we learn from the discussions that followed the Compartamos IPO? > > http://www.microfinancegateway.org/p/site/m//template.rc/1.9.30269 > > And below is the original email from five years ago starting the original discussion: 'Is this where microfinance is going'? > > Chuck Waterfield > > From: Chuck Waterfield [mailto:waterfield@...] [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (8) RECENT ACTIVITY: New Members 3 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Chuck Waterfield Wed, Apr 25, 2012 at 10:05 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Hello Milford, I've been in dialogue with a lot of people after that posting that question on 2-Feb, about the Compartamos NGO (called 'Promotora Social Mexico'). But nobody from PSM, nobody from Compartamos, and nobody from ACCION got in touch with me. And none of those who did contact me had any information at all about what PSM does with the $800 million (or more? or less?) that they have. It seems to be quite a mystery..... And, yes, PSM did very recently replace their website. The website that was up there for years had very little information, not more than 1-2 pages of text, if you were to put it all in one document. The new website is much fancier. It has a lot more text. But it still is missing the information I was asking for: * there are no financial statements or annual reports * there are no names of board members or staff * I haven't see there yet any list of projects they are funding It is far, far from following transparency practices that are commonly followed by other NGOs that I deal with. I would like to agree with you, that the complete rework of their website was due to my drawing attention to the5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 11/33 incompleteness of their website. But they still have what is arguably a very incomplete website. The questions I raised still do not have answers. If the rest of you didn't see, or don't remember the previous thread, you may be able to see it here: http://finance.groups.yahoo.com/group/MicrofinancePractice/message/13847 I paste below the text of my initial post. MY ORIGINAL POST OF 2-FEB Here's a difficult question to ask, but I'm running out of options, so I am throwing it out there to see if anyone knows any thing. The Compartamos IPO was in April 2007 , five y ears ago. The parent-NGO made approximately US$800 million in the IPO. That's a lot of money for any NGO, let alone a single NGO working in a single country . All the documents written since, and all discussion written since has stated that since a large percentage of the IPO proceeds went to non-profits, we can expect that the money is being use for societal benefit. In fact, this point was made during the panel discussion 'IPOs: Salvation or Downfall?'held at the Micro Credit Summit in November. I was on that panel and stated that if there were transparency about the use of those funds, I would support that assumption. The parent NGO of Compartamos is called Promotora Social Mexico. Their website is www.psm.org.mx I've gone there for information, and as you can see if you visit the site, there is no financial information, no indication of any projects funded, no indication of any staff, and no indication of any board of directors. There do provide an email address (info@psm.org.mx) and a Mexico phone number. I've emailed them twice asking for information and have not received a reply . I then called them by phone and was told that nobody was available. I left a message, requested a return phone call and have not y et been contacted. I'm running out of options to find out any thing about PSM and the way s in which they are using the US$800 million to benefit Mexican society . In the US, there are legal requirements for public access to documents showing who is controlling NGO finances and showing how those funds are used. That requirement for transparency is important. I do not know what legal requirements NGOs have in Mexico for transparency . Does anyone know of the legal statutes in Mexico? Does anyone know of any board or staff of Promotora Social Mexico? Thanks for any assistance. Y ou can certainly email me privately if you wish. Chuck Waterfield [Quoted text hidden] __._,_.___ [Quoted text hidden]5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 12/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Messages in this topic (9) RECENT ACTIVITY: New Members 3 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ milford bateman Thu, Apr 26, 2012 at 12:12 PM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Chuck This is very worrying indeed and it sets the IPO in an even darker light than many of us believed could be possible. I wellremember that many microfinance advocates were supporting the IPO because they said that it would, among other things, capitalise Promatora SocialMexico which would be a major boon to the poor ofMexico. That we cannot now find out what happened to this massive amount of IPO cash represents a staggeringly adverse development for Mexico's poor, who, let us remember, are already being charged/exploited by 195% interest rates on their tiny microloans. Compartamos and all the supporters of the IPO process and Compartamos should explain to the public what is going on here. Otherwise, the impression that we are seeing here a Wal-Mart-like fraud and a Wal-Mart-like cover up will only grow and grow.... I'm surprised too that current and previous ACCION staff are not remotely interested to provide any details, or find out things and report back to the microfinance community. I guess those current and previous senior staff most involved with Compartamos and the IPO process are still too busy counting their resulting windfall bonuses and personalshareholdings to have the time to do anything right now..... Milford __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (10) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Flavian zeija Sun, Apr 29, 2012 at 8:49 AM5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 13/33 Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Thanks Chuck for this The issue of interest rate is actually a moral issue. I have witnessed situations in Africa, particularly in Uganda where some lenders charge interest rate at 10% per week. I have witnessed situations where the treasurers of SACCOs do not know how to calculate interest rate and they keep on telling the illiterate clients that money is still due until the client complains and they stop. No repayment schedules. Because of interest rates, clients cannot break even and they have resorted to multiple borrowing so that they use one loan from one institution to offset the other institution’s hence remaining in the cycle of indebtedness. Institutions ask for cash collateral of 10% and go ahead to charge interest on it yet the client has not taken the money. This collateral is not put on freeze. It is lent out to other borrowers and it earns interest. They are subjected to hidden costs like loan processing fees at 1% of the loan, insurance, application fees, loan monitoring fees which clients do not appreciate are part of the interest rate. The Compartamos IPO is therefore a smoke screen but in markets where there is a lot of illiteracy and less publicity, it is worse than Compartamos. Flavian Zeija Justice for Microfinance Consumers Limited(by Guarantee) P.O. Box 40285 Kampala Uganda Tel: +256-772-404896 +256-312-348000 Fax: +256-414-505921 The word 'impossible' does not exist in my Vocabulary Some of the world's greatest feats were accomplished by people not smart enough to know they were impossible. -- Doug Larson If intelligent men refuse to join politics, they must accept to be ruled by fools. -- Plato Injustice anywhere is a threat to justice everywhere. What affects one directly, affects all indirectly. -- Martin Luther King, Jr. 'Our lives begin to end the day we become silent about things that matter.' -- Martin Luther King, Jr. From: milford bateman To: 'MicrofinancePractice@yahoogroups.com' Sent: Thursday, 26 April 2012, 9:12 Subject: [MFP] Re: Is this where microfinance is going? Five years later....5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 14/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Chuck This is very worrying indeed and it sets the IPO in an even darker light than many of us believed could be possible. I wellremember that many microfinance advocates were supporting the IPO because they said that it would, among other things, capitalise Promatora SocialMexico which would be a major boon to the poor ofMexico. That we cannot now find out what happened to this massive amount of IPO cash represents a staggeringly adverse development for Mexico's poor, who, let us remember, are already being charged/exploited by 195% interest rates on their tiny microloans. Compartamos and all the supporters of the IPO process and Compartamos should explain to the public what is going on here. Otherwise, the impression that we are seeing here a Wal-Mart-like fraud and a Wal-Mart-like cover up will only grow and grow.... I'm surprised too that current and previous ACCION staff are not remotely interested to provide any details, or find out things and report back to the microfinance community. I guess those current and previous senior staff most involved with Compartamos and the IPO process are still too busy counting their resulting windfall bonuses and personalshareholdings to have the time to do anything right now..... Milford __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (11) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ jkaufmancds@aol.com Tue, May 1, 2012 at 8:29 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com The practice of charging extremely high interest rates is an economic justice issue. It is also a problem in the US. Pay Day loan companies in New Hampshire are allowed to charge 300% interest to their customers. When a country or region actually practices economic justice, it benefits the society-at-large. I'm taking the liberty to copy and paste below a definition of Economic Justice from the Internet. Judith Kaufman Community Development Services Defining Economic Justice5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 15/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Economic justice, which touches the individual person as well as the social order, encompasses the moral principles which guide us in designing our economic institutions. These institutions determine how each person earns a living, enters into contracts, exchanges goods and services with others and otherwise produces an independent materialfoundation for his or her economic sustenance. The ultimate purpose of economic justice is to free each person to engage creatively in the unlimited work beyond economics, that of the mind and the spirit. The Three Principles of Economic Justice Like every system, economic justice involves input, output, and feedback for restoring harmony or balance between input and output. Within the system of economic justice as defined by Louis Kelso and Mortimer Adler, there are three essential and interdependent principles:The Principle of Participation, The Principle of Distribution, and The Principle of Harmony. Like the legs of a three-legged stool, if any of these principles is weakened or missing, the system of economic justice will collapse. [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (12) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Chale Espinosa A Tue, May 1, 2012 at 10:23 AM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Cc: 'milfordbateman@yahoo.com' Dear Milford, Good morning, agree reason no one talks about ACCION and Compartamos or other NGO('s, MFI's is that Microfinance as Poverty Reduction tool was always a smoke screen to establish a new financial inter-mediation business, with funds from Aid Agencies, Multilateral Institutions that provided initial capital as loans at minimum rates 2% p.a with terms of 20 yrs while shareholder invested token amounts. Who really has benefited for Microfinance have been managers, shareholders and International NGO's that are in fact multinational financial intermediaries that have replaced the loan sharks. MFI's should should just come out and say, were are part of financial sector of all/any country and as such should be regulated by financial regulatory agencies of that country, pay taxes on5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 16/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use earnings, play by rules other financial intermediaries play and go about their business of financing. Don't include gilt as part of their funds collection campaign. Saludos cordiales Chale Espinosa A E-Mail: chalespinosa@gmail.com USA : 251-219-4808 Nic : 505-8-897-9897 Nic : 505-8-851-3355 Skype: chalespinosa twitter: @chalespinosa From: 'jkaufmancds@aol.com' To: MicrofinancePractice@yahoogroups.com Sent: Tuesday, May 1, 2012 6:29 AM Subject: Re: [MFP] Re: Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (14) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ oundoh Tue, May 1, 2012 at 10:05 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Flavian's description of Sacco practices (some) in Uganda makes for a very interesting reading (I laughed as I led through it). It is ridiculous (unthinkable) that some MFI outfits disburse loans without repayment schedules, that some loan officers do not know how the interest rate is arrived at and subsequently cannot tell when the client is supposed to have finished repaying the loan installments until the latter complains. One wishes it was a Microfinance April Fools joke - too late for that. This provides content for anyone who may be interested in writing on 'Microfinance Bad Practices' isn't it? Just so that practitioners arm themselves with outfits that spoil for everyone. But the message really is that MFIs need to be serious in investing in staff capacity (and that includes better5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 17/33 salaries). Unfortunately for most, this may not be the case. Anthony. --- In MicrofinancePractice@yahoogroups.com, Flavian zeija wrote: > > Thanks Chuck for this > The issue of interest > rate is actually a moral issue. I have witnessed situations in Africa, > particularly in Uganda where some lenders charge interest rate at 10% per week. > I have witnessed situations where the treasurers of SACCOs do not know how to > calculate interest rate and they keep on telling the illiterate clients that > money is still due until the client complains and they stop. No repayment > schedules. Because of interest rates, clients cannot break even and they have > resorted to multiple borrowing so that they use one loan from one institution to > offset the other institution’s hence remaining in the cycle of indebtedness. Institutions > ask for cash collateral of 10% and go ahead to charge interest on it yet the client > has not taken the money. This collateral is not put on freeze. It is lent out to > other borrowers and it earns interest. They are subjected to hidden costs like loan > processing fees at 1% of the loan, insurance, application fees, loan monitoring > fees which clients do not appreciate are part of the interest rate.  The Compartamos IPO is therefore a smoke > screen but in markets where there is a lot of illiteracy and less publicity, it > is worse than Compartamos. >  > Flavian Zeija > Justice for Microfinance Consumers Limited(by Guarantee) > P.O. Box 40285 Kampala > Uganda > Tel: +256-772-404896 > +256-312-348000 > Fax: +256-414-505921 > > > The word 'impossible' does not exist in my Vocabulary > > > Some of the world's greatest feats were accomplished by people not smart enough to know they were impossible. -- Doug Larson > > > If intelligent men refuse to join politics, they must accept to be ruled by fools. -- Plato > > > Injustice anywhere is a threat to justice everywhere. What affects one directly, affects all indirectly. -- Martin Luther King, Jr. > > > 'Our lives begin to end the day we become silent about things that matter.' -- Martin Luther King, Jr. > > > ________________________________ > From: milford bateman > To: 'MicrofinancePractice@yahoogroups.com' > Sent: Thursday, 26 April 2012, 9:12 > Subject: [MFP] Re: Is this where microfinance is going? Five years later.... > >5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 18/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use >  > Chuck >  > This is very worrying indeed and it sets the IPO in an even darker light than many of us believed could be possible. I well remember that many microfinance advocates were supporting the IPO because they said that it would, among other things, capitalise Promatora Social Mexico which would be a major boon to the poor of Mexico. That we cannot now find out what happened to this massive amount of IPO cash represents a staggeringly adverse development for Mexico's poor, who, let us remember, are already being charged/exploited by 195% interest rates on their tiny microloans. Compartamos and all the supporters of the IPO process and Compartamos should explain to the public what is going on here. Otherwise, the impression that we are seeing here a Wal-Mart-like fraud and a Wal-Mart-like cover up will only grow and grow.... I'm surprised too that current and previous ACCION staff are not remotely interested to provide any details, or find out > things and report back to the microfinance community. I guess those current and previous senior staff most involved with Compartamos and the IPO process are still too busy counting their resulting windfall bonuses and personal shareholdings to have the time to do anything right now..... >  > Milford > __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (13) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Hugh Allen Wed, May 2, 2012 at 4:59 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com I agree with the general drift of Anthony’s commentary, but have a query. What is sacrosanct about a loan repayment schedule? SafeSave in Bangladesh does not impose one and is making money hand over fist (at reasonable rates). Why do I use the word ‘impose?’ It’s because most recipients of microfinance loans don’t have a regular income and can’t therefore pay fixed instalments – so they often go to the moneylender to service their MFI loans and pay interest twice. It’s amazing to me that so many MFIs treat African farmers like salaried employees and until we get rid of the idea that regular equal instalments are a gold standard (instead of a formal sector imposition designed to make loan administration simple and certain to make repayment a burden) we won’t do very well in informal market places. Hugh5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 19/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of oundoh Sent: 01 May 2012 16:06 To: MicrofinancePractice@yahoogroups.com [Quoted text hidden] [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (15) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ 2 attachments image003.jpg 1K image004.jpg 1K Hélia DezimahataLory Wed, May 2, 2012 at 6:36 AM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Good day Indeed a repayment schedule is necessary no matter if the repayment is monthly , one off or another kind of repayment. This is an important document because it makes clear what the client owes to the MFI and when it should be repaid, it has to do with transparency. In Mozambique we have MFI's that provide agriculture loans, or loans for construction companies (that also shows sazonalities due to their construction projects) and they have repayment schedules that fits to their clients cash flows, one thing has nothing to do with other. Thanks, Helia Nsthandoca De: Hugh Allen Para: MicrofinancePractice@yahoogroups.com5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 20/33 Enviado: Miércoles 2 de Mayo de 2012 10:59 Asunto: RE: [MFP] Re: Is this where microfinance is going? Five years later.... [Quoted text hidden] Kim Wilson Wed, May 2, 2012 at 7:21 AM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Yes. Hugh. I agree and am alway baffled by the mandated regular payments into VSLAs and the sharehouts. Clearly these are plusses for providers yearning for best practices, but not so clear for farmers. It would make sense to start VSLAs just after harvest (putting in a heap of funds as they do in Assam) and then letting groups manage them as they wish. The whole thing has gotten a bit ''Dungeons and Dragons' and could be simplified,. E.g. no reason for three keys, one will do. And in a future, two sims should suffice. From: Hugh Allen To: MicrofinancePractice@yahoogroups.com Sent: Wednesday, May 2, 2012 4:59 AM Subject: RE: [MFP] Re: Is this where microfinance is going? Five years later.... [Quoted text hidden] Hugh Allen Wed, May 2, 2012 at 10:18 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Touché Kim. Except that there are no mandated regular payments into a VSLA. It is entirely at the members discretion to save or not to save, which is not to say that there isn’t a certain expectation that they should do so. Equally, VSLAs, in principle, allow for the members to withdraw their money at any time and in any amount: the founding set of principles are, increasingly, based on what all of us would like from a service provider: to be able to save when you want and in varying amounts; to withdraw when you want and in any amount and to borrow what you need and repay when you can (so long as you do repay). There is also provision for VSLAs to allow a one-time ‘dump’ of funds such as after harvest and to allow for the rollover of capital from one cycle to the next – and groups often choose to time their cycles to take advantage of this. As for the share outs, the founding reason was that there was a need to demonstrate (by getting your money back with profits) that the system was safe. Especially true when Ponzi schemes are rife. The follow-up to this was that people were glad to get their hands on that pesky lump sum at a time of the year (Christmas, Tabasci or the planting season) when there’s a general need for investment capital. Now, however, rolling over a proportion of the funds is getting to be popular (and completely permissible). Most VSL programmes have only insisted on the share out at the end of the first cycle as proof positive that you didn’t get robbed: what happens after that is entirely in the group’s hands.5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 21/33 A lot of what you refer to has changed a great deal in the last 3-4 years and mainly in the light of what the market (i.e. the members) have been demonstrating. The system is extremely flexible but is implemented, I agree, in a somewhat paint-by-numbers fashion in order to make is easily replicable. Maybe it’s my military background, but I tend to think that a structured approach does no-one any harm, so long as it changes in the light of the evidence, stays focused on efficiency and contributes to transparency and competent management. VSL Associates Neuenkamper Strasse 27 42657 Solingen Germany Tel: 49 (0)212 247 2435 Fax: 49 (0)212 818091 Web: www.vsla.net From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Kim Wilson Sent: mercredi 2 mai 2012 13:22 To: MicrofinancePractice@yahoogroups.com Subject: Re: [MFP] Re: Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (18) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author!5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 22/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use . __,_._,___ MALCOLM HARPER Wed, May 2, 2012 at 10:54 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Thank you, Hugh and others who are much better informed from 'the field' than I am about the realities of VSLAs. I have one point on 'rolling over' savings, though. Indian self-help groups (SHGs) are in principle the same as VSLAs, except for the critical difference that they are promoted by banks as a route to loans from the bank; hence savings are usually seen as a means to qualify for such loans, not as the groups' main source of funds. Partly for that reason, and because banks like to have longer term clients, SHGs do not 'cash-out', and are encouraged to last for ever. In my frequent meetings with SHGs which have disputes, or with ex-members of groups which have collapsed in disarray or are merely moribund, I have noticed that as the groups get older tensions grow, interests diverge and disputes fester. Hence I like cashing-out, and I suspect that when members know that their group will not cash out properly, they may sweep disputes and uncertainties under the mat (or more often the old sacks), to fester and in due course to explode. Does this happen with VSLAs whose members for good reasons don't want to cash out, what means have evolved to stop it happening, and how can India's seven million SHGs learn from this ? Malcolm --- On Wed, 2/5/12, Hugh Allen wrote: From: Hugh Allen Subject: RE: [MFP] Re: Is this where microfinance is going? Five years later.... To: MicrofinancePractice@yahoogroups.com Date: Wednesday, 2 May, 2012, 15:18 [Quoted text hidden] Hugh Allen Wed, May 2, 2012 at 11:28 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Malcolm. To be honest I don’t know. I hear anecdotally that some individual groups don’t want to cash out, but it doesn’t seem to be a general trend and often raises hackles. I know if someone had suggested to my mother that she should roll over her Christmas club money for the next year, the exchange would have been colourful, but that’s a single case. The only thing I can refer to is the longevity of these groups when they operate independently. If it’s true (and our panel study of 332 groups in 6 countries will shed light on this), then there seems to be a general satisfaction with the approach and that sharing out does not seem to be a major irritant. What will happen in the longterm as groups become more ambitious is speculation, but I suspect that in places that are relatively better off they won‘t stay the same and will begin to make serious investments that mature over a5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 23/33 longer period of time. Nairobi’s middle-class ‘investment clubs’ seem to bear this out. In answer to your query about what India’s 7 million SHGs should do, it’s hard to disassociate keeping the money tied up in the group from the relationship with the parent bank. It is possible, however, that SHGs could experiment with a VSL product that works independent of this relationship. AKF has done very well with VSL (which they call CBSGs) in India and is reported to be readily accepted, even in areas with a high density of SHGs. VSL Associates Neuenkamper Strasse 27 42657 Solingen Germany Tel: 49 (0)212 247 2435 Fax: 49 (0)212 818091 Web: www.vsla.net From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of MALCOLM HARPER Sent: mercredi 2 mai 2012 16:55 To: MicrofinancePractice@yahoogroups.com [Quoted text hidden] [Quoted text hidden] __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (20) RECENT ACTIVITY: New Members 45/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 24/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Malcolm Harper Wed, May 2, 2012 at 2:32 PM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Thanks for your honesty, Hugh, most unusual in the development community. Does cashing out not inhibit longer term lending, and thus investing, and thus the beginning of an escape from poverty ? It would be interesting to find out how it is done, whether members who cannot liquidate their loans at cashout (my spellchecker says 'washout'; I hope not) time borrow from elsewhere to repay them, even for a few days. Lots of other questions; why, with all the myriad of PhDs about microfinance, are there still so many unanswered and important questions ? But that's quite another subject, the mismatch between 'academic' research and the reality of practice. Malcolm ----- Original Message ----- From: Hugh Allen To: MicrofinancePractice@yahoogroups.com [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (21) RECENT ACTIVITY: New Members 4 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___ Flavian zeija Thu, May 3, 2012 at 4:56 AM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com' Malcolm5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 25/33 The Mismatch between academics and practice is indeed a topical issue. I once read through a PhD thesis awarded by one University in London. As an academic and a practitioner as well, I do not know what I would have done if I was on the Viva panel. It was completely out of touch with reality, notwithstanding that data was collected from the field. Flavian Zeija Justice for Consumers Limited(by Guarantee) P.O. Box 40285 Kampala Uganda Tel: +256-772-404896 +256-312-348000 Fax: +256-414-505921 The word 'impossible' does not exist in my Vocabulary Some of the world's greatest feats were accomplished by people not smart enough to know they were impossible. -- Doug Larson If intelligent men refuse to join politics, they must accept to be ruled by fools. -- Plato Injustice anywhere is a threat to justice everywhere. What affects one directly, affects all indirectly. -- Martin Luther King, Jr. 'Our lives begin to end the day we become silent about things that matter.' -- Martin Luther King, Jr. From: Malcolm Harper To: MicrofinancePractice@yahoogroups.com Sent: Wednesday, 2 May 2012, 20:32 [Quoted text hidden] [Quoted text hidden] Hugh Allen Thu, May 3, 2012 at 6:11 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com Yes Malcolm. It’s not only the cash out that inhibits longer term lending but the internally decided interest rates. What we are finding on the SAVIX is that the average group uses only about half of its available funds in the loan portfolio (while, happily, making a simple RoA that averages 30% or more). This doesn’t necessarily indicate a negligible demand for loans: more probably that the type of loan on offer is great for petty trade and household cash-flow management but not much good for longer-term investments, and maybe that’s OK when the challenges of managing longer-term investments are daunting and the penalties for failure extremely damaging, if not catastrophic. I am5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 26/33 very reticent when it comes to predicting where all of this will go, but there does appear to be evidence that many groups invest their surplus cash in storage and commodity trading and there is a tendency for these to be medium-term investments. The savvy ones in Nairobi wait for the next IPO on the stock exchange. From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Malcolm Harper Sent: mercredi 2 mai 2012 20:33 To: MicrofinancePractice@yahoogroups.com Subject: Re: [MFP] Re: Is this where microfinance is going? Five years later.... Thanks for your honesty, Hugh, most unusual in the development community. Does cashing out not inhibit longer term lending, and thus investing, and thus the beginning of an escape from poverty ? It would be interesting to find out how it is done, whether members who cannot liquidate their loans at cashout (my spellchecker says 'washout'; I hope not) time borrow from elsewhere to repay them, even for a few days. Lots of other questions; why, with all the myriad of PhDs about microfinance, are there still so many unanswered and important questions ? But that's quite another subject, the mismatch between 'academic' research and the reality of practice. Malcolm ----- Original Message ----- From: Hugh Allen To: MicrofinancePractice@yahoogroups.com Sent: Wednesday, May 02, 2012 4:28 PM Subject: RE: [MFP] Re: Is this where microfinance is going? Five years later.... Malcolm. To be honest I don’t know. I hear anecdotally that some individual groups don’t want to cash out, but it doesn’t seem to be a general trend and often raises hackles. I know if someone had suggested to my mother that she should roll over her Christmas club money for the next year, the exchange would have been colourful, but that’s a single case. The only thing I can refer to is the longevity of these groups when5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 27/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use they operate independently. If it’s true (and our panel study of 332 groups in 6 countries will shed light on this), then there seems to be a general satisfaction with the approach and that sharing out does not seem to be a major irritant. What will happen in the longterm as groups become more ambitious is speculation, but I suspect that in places that are relatively better off they won‘t stay the same and will begin to make serious investments that mature over a longer period of time. Nairobi’s middle-class ‘investment clubs’ seem to bear this out. In answer to your query about what India’s 7 million SHGs should do, it’s hard to disassociate keeping the money tied up in the group from the relationship with the parent bank. It is possible, however, that SHGs could experiment with a VSL product that works independent of this relationship. AKF has done very well with VSL (which they call CBSGs) in India and is reported to be readily accepted, even in areas with a high density of SHGs. VSL Associates Neuenkamper Strasse 27 42657 Solingen Germany Tel: 49 (0)212 247 2435 Fax: 49 (0)212 818091 Web: www.vsla.net [Quoted text hidden] [Quoted text hidden] [Quoted text hidden] __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (23) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! .5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 28/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use __,_._,___ 2 attachments image007.jpg 1K image008.jpg 1K Malcolm Harper Thu, May 3, 2012 at 6:39 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com

Thank you, I know very well what I would have done if I had been on the viva panel, and I do it from time to time, sometimes at rather prestigious places, and they sometimes don't ask me to examine again ! But it's usually not the fault of the student; it's the fault of the institution and the supervisors whom they appoint to guide the students.

I think it's wonderful when students study obscure and 'useless' things, in the humanities and so on. But when they are studying microfinance, as a part of 'development', often with generous support from donor or other funds intended for the public good, surely someone should ask 'what is this for ?'.

Malcolm [Quoted text hidden] __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (24) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___

Hugh Allen Thu, May 3, 2012 at 6:17 AM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com

Yes Malcolm. It’s not only the cash out that inhibits longer term lending but the internally decided interest rates. What we are finding on the SAVIX is that the average group uses only about half of its available funds in the loan portfolio (while, happily, making a simple RoA that averages 30% or more). This doesn’t necessarily indicate a negligible demand for loans: more probably that the type5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 29/33 of loan on offer is great for petty trade and household cash-flow management but not much good for longer-term investments, and maybe that’s OK when the challenges of managing longer-term investments are daunting and the penalties for failure extremely damaging, if not catastrophic. I am very reticent when it comes to predicting where all of this will go, but there does appear to be evidence that many groups invest their surplus cash in storage and commodity trading and there is a tendency for these to be medium-term investments. The savvy ones in Nairobi wait for the next IPO on the stock exchange.

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Malcolm Harper Sent: mercredi 2 mai 2012 20:33 To: MicrofinancePractice@yahoogroups.com Subject: Re: [MFP] Re: Is this where microfinance is going? Five years later....

Thanks for your honesty, Hugh, most unusual in the development community.

Does cashing out not inhibit longer term lending, and thus investing, and thus the beginning of an escape from poverty ? It would be interesting to find out how it is done, whether members who cannot liquidate their loans at cashout (my spellchecker says 'washout'; I hope not) time borrow from elsewhere to repay them, even for a few days.

Lots of other questions; why, with all the myriad of PhDs about microfinance, are there still so many unanswered and important questions ? But that's quite another subject, the mismatch between 'academic' research and the reality of practice.

Malcolm ----- Original Message ----- From: Hugh Allen To: MicrofinancePractice@yahoogroups.com Sent: Wednesday, May 02, 2012 4:28 PM Subject: RE: [MFP] Re: Is this where microfinance is going? Five years later....

Malcolm. To be honest I don’t know. I hear anecdotally that some individual groups don’t want to cash out, but it doesn’t seem to be a general trend and often raises5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 30/33 hackles. I know if someone had suggested to my mother that she should roll over her Christmas club money for the next year, the exchange would have been colourful, but that’s a single case. The only thing I can refer to is the longevity of these groups when they operate independently. If it’s true (and our panel study of 332 groups in 6 countries will shed light on this), then there seems to be a general satisfaction with the approach and that sharing out does not seem to be a major irritant. What will happen in the longterm as groups become more ambitious is speculation, but I suspect that in places that are relatively better off they won‘t stay the same and will begin to make serious investments that mature over a longer period of time. Nairobi’s middle-class ‘investment clubs’ seem to bear this out.

In answer to your query about what India’s 7 million SHGs should do, it’s hard to disassociate keeping the money tied up in the group from the relationship with the parent bank. It is possible, however, that SHGs could experiment with a VSL product that works independent of this relationship. AKF has done very well with VSL (which they call CBSGs) in India and is reported to be readily accepted, even in areas with a high density of SHGs.

VSL Associates Neuenkamper Strasse 27 42657 Solingen Germany Tel: 49 (0)212 247 2435 Fax: 49 (0)212 818091 Web: www.vsla.net [Quoted text hidden] [Quoted text hidden] [Quoted text hidden]

Hendricks, Lauren Fri, May 4, 2012 at 5:21 AM Reply-To: MicrofinancePractice@yahoogroups.com To: 'MicrofinancePractice@yahoogroups.com'

Whoa Kim. Actually, a lot of these practices within VSLA have evolved for good reason, a couple of examples:

1. Regular weekly savings. There has been significant research over the past few years that commitment savings accounts (essentially what VSLA is) are some of the most appropriate accounts for the poorest households, and the most valued. Savings small amounts on a regular basis teaches important savings skills, and allows the poorest households to start to accumulate assets building upon very small sums.

2. The three keys are actually critical components of the VSLA system, not for security but for transparency. The three keys ensure that no one person can access the box outside of a group meeting. For am informal system like VSLA that trust that comes with transparency is critically important to the success of the venture.

3. The annual share out serves two critical purposes. First, it is an action audit. It is a time when all the funds come back and are counted by the group and they can verify that the money is still there. The problems caused by the lack of these “action audits” in the Indian SHG movement has been well documented. The other reason for the share out is that people are actually saving for a purpose. And that purpose isn’t just to access credit. People have savings goals, and they know when share out comes they can use those funds to meet their goals. Sometimes the goal is productive, like a piece of livestock, and sometimes it’s more household oriented, like a new roof. But it is important that VSLA members be able to access and use their savings. In many groups, particularly older groups, they may decide to take part of their share out and recapitalize the new cycle, but that is their choice, as the savings is theirs.

Of course, each of these features of VSLA comes with drawbacks and tradeoffs. But that doesn’t mean that they aren’t in place for a reason. They are. And usually that reason outweighs the drawbacks, otherwise the groups would have changed feature.5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 32/33 Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use

Lauren

Lauren Hendricks Executive Director, Access Africa CARE USA +255 784 348474 Skype: lauren_hendricks

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of Kim Wilson Sent: Wednesday, May 02, 2012 2:22 PM To: MicrofinancePractice@yahoogroups.com Subject: Re: [MFP] Re: Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (26) RECENT ACTIVITY: New Members 2 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___

Chris Linder (Yahoo) Tue, May 8, 2012 at 1:18 PM Reply-To: MicrofinancePractice@yahoogroups.com To: MicrofinancePractice@yahoogroups.com

FYI – I saw this article off Symbiotics newsletter from Forbes.

Mexico's Credit Card Not on Compartamos – but a competitor I suppose. 5/8/12 Gmail - [MFP] Is this where microfinance is going? Five years later.... https://mail.google.com/mail/?ui=2&ik=dccde4df7a&view=pt&search=inbox&th=136df34b8e778d02 33/33 Sw itch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use Chris Linder Rome

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com] On Behalf Of N. Srinivasan Sent: Monday, April 23, 2012 7:45 PM To: MicrofinancePractice@yahoogroups.com Subject: Re: [MFP] Is this where microfinance is going? Five years later.... [Quoted text hidden] __._,_.___ [Quoted text hidden] Messages in this topic (27) RECENT ACTIVITY: New Members 5 Visit Your Group WARNING! If you hit REPLY, your message will go to the entire listserve, not just the original author! . __,_._,___