Mobile technology has definitely become a major part of our daily lives. A majority of us carry cell phones, smart phones, or laptops with us every single day. Phones have become so sophisticated they are being considered tiny computers. This mobile technology is not as prevalent in many countries. But now companies are finding innovative ways of using the limited resources in poor countries to provide cheap, easy, secure access to banking services. This is vitally important to microfinance all over the world. If these various experimental initiatives become successful it will be a great way for the banking neglected to make money transfers and do daily banking activities. There are a couple of examples that I would like to highlight where mobile technology is helping people get access to banking.
Cambodia is a country of few luxuries. It is a struggling country that have many people in poverty. According to the Consultative Group to Assist the Poor, about 80% of the population live in rural areas and about 35% live beneath the World Bank poverty line. Only about 3 million of the 14 million living in the country own a phone. Only about 500,000 people have a bank account in Cambodia. There is basically almost no electronic banking in Cambodia. In fact, there is only about 200 ATMs in the whole country. Many banks will not make an effort to have any rural branches because the people are not able to reach any of the banks minimum requirements to use the banks services. It is why this project is so important. The project is called WING. It has been started by a top global bank called ANZ. It was launched early 2009 and has been making serious progress. WING has been able to open 150 points of representation in almost all of the provinces in Cambodia. Their core target group are the bank neglected citizens of Cambodia that do not have the means to use a conventional bank. They hope to educate the rural families of the benefits of this type of banking. Many rural families have family members that travel to work in urban areas in garment factories and other industries. They usually use unsafe and costly options for money transfers. But with WING it is much more convenient and secure. They also hope to target students in major urban areas to use this as an easy way to get money. They have also targeted employers to use this electronic service as a way to distribute the payroll.
There are some challenges that WING faces. One of my biggest worries for this project is the lack of mobile phones in the country. This is why they have focused on opening branches and points of contact in rural areas where people need person to person contact. They also want to reach out to the villages that may be sharing phones and have developed technology that allows individuals to bank safely even on a shared phone. Furthermore, since many of the phones that do exist in the country are not up-to-date they have had to adjust the technology for easy usage. Moreover, they have had to make the technology easy for the English illiterate. They have also been working with public officials to have more regulations for electronic payments so that their customers can be protected. It sounds like they have really done much work after their launch on January 21, 2009. They are very optimistic of their project and how they will be able to grow in the future. This is definitely something that will help the microfinance community as a whole and could be used as a model in the future.
The second example is from South Africa. This pilot program is focused on the microentrepreneurs of the country. The service is being provided by WIZZIT Bank in South Africa. They are offering a service that will greatly benefit the average small business owner. It will keep the business owner from carrying all large amounts of money around and worry about getting robbed. Also, it will be more convenient for them to settle their accounts and payments electronically rather than taking time of a business day to travel places to do so. This service will offer mobile banking payment service for the major wholesalers that supply many of the microentrepreneurs of Motherwell, South Africa. This will also allow for easy account opening with one of the biggest clothing wholesalers in the country at a discount. People that are interested can sign up at South African post offices. This is not only offering new convenient technology to shop owners but also helping them expand their options through partnerships with wholesalers. I believe this is a great idea. I think it will open many doors for the shop owners in this tourist area and eventually all of South Africa.
We understand the importance of technology because we live with it everyday. We have the world at our fingertips, as they say. Shouldn't the rest of the world have the opportunity to have that too? I believe so. I think it is important not only to offer banking services but new ways of conducting business for the poorer countries in the world, the bank neglected. We know how technology has made our lives more convenient and that is why technology must be used in places it will help the most.
Thursday, April 30, 2009
Saturday, April 25, 2009
Highlight: Phones for Loans!
Today, I am writing my first highlight piece for this blog. From this point on highlight posts will contain an organization, group, tactic, or tool that I believe is making a real difference in the world. The highlights will focus on particularly interesting or unique ideas that are out there in the realm of microfinance.
This first highlight will be on RTEP, Recycle to Eradicate Poverty. This grassroots organization is trying to get more people involved during this year's Earth Week. Recycle to Eradicate Poverty is an initiative started by The Chiapas Project in 2007. The Chiapas Project was started by a few young college students in 2007 at the University of North Texas. This small group was formed as a fundraising partnership between a non-profit microfinance fund and a for profit recylcing plant to provide loans to small businesses in Latin America.
RTEP's claim to fame is their idea to collect old cell phones to get recycled. It has been calculated that about 170 million cell phones are retired each year. Only about 20% of those retired cell phones will be safely recycled. The rest will sit in people's houses collecting dust or in landfills creating pollution due to the materials in the cell phone. RTEP has been able to create a new and unique way of getting people involved and get them to recylce their cell phones. RTEP has collected about 14,000 cell phones but to this point. This achievement was noticed by many including the Clinton Global Initiative University. The Clinton Global Initiative University rewards grants to the most innovative, high impact work that will have lasting positive effects and change. This grant has allowed the RTEP initiative to flourish to what it is now. Currently, RTEP has a website that allows people to join in on the work of this initiative for free. Anyone can go on the site and order as many pre paid postage baggies. Each baggie can contain up to five cell phones. These baggies are collected by RTEP and given to the their recycling plant, Phoneraiser. The cell phone with value can also be refurbished and sold at a small margin in regions where cell phones are too expensive to buy. RTEP has partnered with many schools in their region and many local businesses. They hope to be able to collect 1 million phones or more eventually. They believe this will save about 350 trillion gallons of water from pollution and make changes in 100,000 lives in Latin America. They will use the proceeds from recylcing and resale of the phones to give out small loans to women in Latin America looking to start a small business to get out of poverty.
I believe this a great way to make a difference in the world. They are making a difference in the enviornment by recycling but they are also making a difference in individual lives by giving small loans in the form of microfinance. I hope more people become familiar with this initiative and start to recycle more of their cell phones. I think it would be great to start competitions in schools to see which kid or class can collect the most cell phones. I hope they will get more national attention and more people can get involved. I know I will be sending them my next cell phone.
This first highlight will be on RTEP, Recycle to Eradicate Poverty. This grassroots organization is trying to get more people involved during this year's Earth Week. Recycle to Eradicate Poverty is an initiative started by The Chiapas Project in 2007. The Chiapas Project was started by a few young college students in 2007 at the University of North Texas. This small group was formed as a fundraising partnership between a non-profit microfinance fund and a for profit recylcing plant to provide loans to small businesses in Latin America.
RTEP's claim to fame is their idea to collect old cell phones to get recycled. It has been calculated that about 170 million cell phones are retired each year. Only about 20% of those retired cell phones will be safely recycled. The rest will sit in people's houses collecting dust or in landfills creating pollution due to the materials in the cell phone. RTEP has been able to create a new and unique way of getting people involved and get them to recylce their cell phones. RTEP has collected about 14,000 cell phones but to this point. This achievement was noticed by many including the Clinton Global Initiative University. The Clinton Global Initiative University rewards grants to the most innovative, high impact work that will have lasting positive effects and change. This grant has allowed the RTEP initiative to flourish to what it is now. Currently, RTEP has a website that allows people to join in on the work of this initiative for free. Anyone can go on the site and order as many pre paid postage baggies. Each baggie can contain up to five cell phones. These baggies are collected by RTEP and given to the their recycling plant, Phoneraiser. The cell phone with value can also be refurbished and sold at a small margin in regions where cell phones are too expensive to buy. RTEP has partnered with many schools in their region and many local businesses. They hope to be able to collect 1 million phones or more eventually. They believe this will save about 350 trillion gallons of water from pollution and make changes in 100,000 lives in Latin America. They will use the proceeds from recylcing and resale of the phones to give out small loans to women in Latin America looking to start a small business to get out of poverty.
I believe this a great way to make a difference in the world. They are making a difference in the enviornment by recycling but they are also making a difference in individual lives by giving small loans in the form of microfinance. I hope more people become familiar with this initiative and start to recycle more of their cell phones. I think it would be great to start competitions in schools to see which kid or class can collect the most cell phones. I hope they will get more national attention and more people can get involved. I know I will be sending them my next cell phone.
Obama and Microfinance
http://www.reuters.com/article/bondsNews/idUSN1833100020090418
Recently, Barack Obama announced a $100 million microfinance fund during his visit to Trinidad and Tobago on April 18th. The new fund was one of the main points that Obama pushed along with energy, security, and climate change. The fund will be used to help with medium and long term finance for microfinance funds and microfinance vehicles. According to Reuters there has been about $9 billion to 9 million microfinance entrepreneurs made by 565 million microfinance funds around the Americas. Microfinance provides many of the jobs in the southern hemisphere. This kind of funding is extremely important during times like these. Due to the world wide recession many people have been losing their jobs. The recession is also causing a reduction in funds for microfinance projects for the many people that depend on them in the Caribbean and South America. This is evidence that Obama must believe that microfinance is a good way of helping people out of poverty especially in these hard times. It is also true that Obama is one of the first presidents to ever consider the idea of funding any kind of microfinance activity. Obama may be more open to the idea because his mother was so deeply involved in microfinance in Indonesia. Ann Durham worked closely with Bank Rakyat Indonesia and their microcredit branch. This is was one of the earliest and largest microfinance banks in the world. Furthermore, in her time at the University of Hawaii she wrote her dissertation on the peasant blacksmiths of Indonesia and how they survived and thrived. I am sure that this is part of the reason why Barack Obama is more open to the idea of microfinance and is more aware of the benefits that microfinance can hold for many people living in poverty.
The details of the fund is still being worked out but I will give the best report as possible as of now. The fund will be managed in partnership with the Multilateral Investment Fund(MIF) at the Inter-American Development Bank(IBD). The IBD is one of the premiere banks to provide solutions to development challenges in countries in Latin America and the Caribbean. They use partnerships with governments, companies, and civil societies to provide loans and grants to various projects in those nations. Other partners in this venture are the U.S Overseas Private Investment Corporation and the Inter-American Investment Corporation. The initial $100 million dollar investment will come from a mix of debt and equity determined by the boards of each of the partners. The MIF will begin to structure this fund and find new investors. They hope to eventually reach a goal of $250 million invested by private and public players. The actual fund named The Microfinance Growth Fund will be developed as a limited partnership in Delaware, and will be able to provide loans to microfinance institutions, microfinance investment vehicles, and other financial intermediaries that provide money to entrepreneurs. The market they are trying to fulfill is quite large as I mentioned before. As the world financial crisis continues to affect microfinance funds the deficit in the coming years could be around $750 million dollars according to the White House website. The funds will be given to various organizations even extremely small ones that have limited access to international investment. Obama and his administration believe this will provide a strong start to helping the microfinance cause in Latin America and the Caribbean.
I am impressed by this announcement by Barack Obama. I never would have thought that an idea like this would be brought up with everything else that is affecting the world. Obama is so focused on creating jobs in the states, providing clean energy, and getting our troops at Iraq that I did not think that microfinance would be an option for the US government to be involved in. But, it does not hurt that his mother was so involved over the years with microfinance projects all over the world especially in Indonesia. I am sure that Obama has been able to see first hand the kind of things that microfinance can provide for some people. I also think that Obama is using this fund as a kind of experiment. I think he is making this small investment in microfinance in Latin America to see if it will realy improve conditions so that he may expand it and possible create a new fund in the United States. I hope to see more of this from President Obama as his term continues. So far, so good, at least in the world of microfinance.
Recently, Barack Obama announced a $100 million microfinance fund during his visit to Trinidad and Tobago on April 18th. The new fund was one of the main points that Obama pushed along with energy, security, and climate change. The fund will be used to help with medium and long term finance for microfinance funds and microfinance vehicles. According to Reuters there has been about $9 billion to 9 million microfinance entrepreneurs made by 565 million microfinance funds around the Americas. Microfinance provides many of the jobs in the southern hemisphere. This kind of funding is extremely important during times like these. Due to the world wide recession many people have been losing their jobs. The recession is also causing a reduction in funds for microfinance projects for the many people that depend on them in the Caribbean and South America. This is evidence that Obama must believe that microfinance is a good way of helping people out of poverty especially in these hard times. It is also true that Obama is one of the first presidents to ever consider the idea of funding any kind of microfinance activity. Obama may be more open to the idea because his mother was so deeply involved in microfinance in Indonesia. Ann Durham worked closely with Bank Rakyat Indonesia and their microcredit branch. This is was one of the earliest and largest microfinance banks in the world. Furthermore, in her time at the University of Hawaii she wrote her dissertation on the peasant blacksmiths of Indonesia and how they survived and thrived. I am sure that this is part of the reason why Barack Obama is more open to the idea of microfinance and is more aware of the benefits that microfinance can hold for many people living in poverty.
The details of the fund is still being worked out but I will give the best report as possible as of now. The fund will be managed in partnership with the Multilateral Investment Fund(MIF) at the Inter-American Development Bank(IBD). The IBD is one of the premiere banks to provide solutions to development challenges in countries in Latin America and the Caribbean. They use partnerships with governments, companies, and civil societies to provide loans and grants to various projects in those nations. Other partners in this venture are the U.S Overseas Private Investment Corporation and the Inter-American Investment Corporation. The initial $100 million dollar investment will come from a mix of debt and equity determined by the boards of each of the partners. The MIF will begin to structure this fund and find new investors. They hope to eventually reach a goal of $250 million invested by private and public players. The actual fund named The Microfinance Growth Fund will be developed as a limited partnership in Delaware, and will be able to provide loans to microfinance institutions, microfinance investment vehicles, and other financial intermediaries that provide money to entrepreneurs. The market they are trying to fulfill is quite large as I mentioned before. As the world financial crisis continues to affect microfinance funds the deficit in the coming years could be around $750 million dollars according to the White House website. The funds will be given to various organizations even extremely small ones that have limited access to international investment. Obama and his administration believe this will provide a strong start to helping the microfinance cause in Latin America and the Caribbean.
I am impressed by this announcement by Barack Obama. I never would have thought that an idea like this would be brought up with everything else that is affecting the world. Obama is so focused on creating jobs in the states, providing clean energy, and getting our troops at Iraq that I did not think that microfinance would be an option for the US government to be involved in. But, it does not hurt that his mother was so involved over the years with microfinance projects all over the world especially in Indonesia. I am sure that Obama has been able to see first hand the kind of things that microfinance can provide for some people. I also think that Obama is using this fund as a kind of experiment. I think he is making this small investment in microfinance in Latin America to see if it will realy improve conditions so that he may expand it and possible create a new fund in the United States. I hope to see more of this from President Obama as his term continues. So far, so good, at least in the world of microfinance.
Tuesday, April 21, 2009
What is microfinance/microcredit? Cont'd
As I mentioned before microcredit is a portion of the work done in microfinance. Microcredit is the idea of loaning small amounts of money to people so they can have the opportunity to begin to pull themselves out of poverty. The loans are given with an interest rate but usually at a very reasonable rate that will not overwhelm the borrower. Although there are some companies that do this to solely make a profit and they may charge a higher interest rate but I will wait for another post to address that way of business. As I began to tell you in the previous post microcredit is an extremely important part of microfinance, and in the 1970s a few experimental programs were really seeing success. The main one I plan to focus your attention to is The Grameen Bank in Bangladesh. This bank was able to find great success with the way they approached the idea of microcredit.
The Grameen Bank was founded by Professor Muhammad Yunus. The story goes that he went that in 1974 during a terrible famine Professor Yunus visited a nearby village named Jorba. There he was astonished to find how $27 can change the lives of 42 people (Microplace). He let them borrow $27 out of his pocket that day so that they could buy the bamboo for the stools that they produced to make money. After he realized the power microcredit had in helping people make their way out of poverty he began to think of a more formal way of doing business. He founded the Grameen Bank in 1983 and it has grown quickly since then. According to the Grameen Bank website they were able to make many loans by implementing new strategies in microlending. One of their most important principles is to work with their borrowers when making loans. They work out repayment plans with what may work best with their borrower. They may choose to pay back weekly, bi-weekly, monthly, or whatever is most convenient. Also, when the borrower is struggling to make payments officials from the bank will reschedule their payments to make it easier without making the borrower feel like they have done something wrong (Grameen). They also believe that interest should never be more than the amount of the loan. The point of the loan is not to make money on the loan and cause stress but it is to help people with their struggles in poverty. The Grameen Bank also makes loans to women. This is very different for a country that is male dominant like Bangladesh. The bank says that women are more likely to pay back the loan and have better entrepreneurial ideas that will ultimately help their family. That is why most of the loans made by the bank are made to women. Lastly, the bank does not allow loans to be made unless they are part of a group of borrowers. The group only is allowed more loans if previous loans are paid back. This is to help ensure a better repayment record from the borrowers. Grameen Bank has been very innovative in the way they have taken on this challenge. They led the way in microcredit and are still prospering. This is just a single example of many that are making a difference.
But microfinance and microcredit is not all positive experiences. It is difficult for many of these MFIs (Microfinance Institutions) to make enough money to cover their operating costs. This will cause many MFIs to start to consider harsher requirements for their borrowers and will start to deteriorate the real motive behind microfinance. Although MFIs still face many challenges they have been flourishing. There are now international conferences for MFIs held around the world with thousands of MFIs that participate. Even large conventional banks like Citigroup are now offering microcredit investment options for their clients. High net worth people are also beginning to invest in microfinance opportunities around the world and making a real difference.
Now that you know what microfinance please stay tuned for more posts on upcoming events, news, and highlights on companies and tactics used by MFIs.
The Grameen Bank was founded by Professor Muhammad Yunus. The story goes that he went that in 1974 during a terrible famine Professor Yunus visited a nearby village named Jorba. There he was astonished to find how $27 can change the lives of 42 people (Microplace). He let them borrow $27 out of his pocket that day so that they could buy the bamboo for the stools that they produced to make money. After he realized the power microcredit had in helping people make their way out of poverty he began to think of a more formal way of doing business. He founded the Grameen Bank in 1983 and it has grown quickly since then. According to the Grameen Bank website they were able to make many loans by implementing new strategies in microlending. One of their most important principles is to work with their borrowers when making loans. They work out repayment plans with what may work best with their borrower. They may choose to pay back weekly, bi-weekly, monthly, or whatever is most convenient. Also, when the borrower is struggling to make payments officials from the bank will reschedule their payments to make it easier without making the borrower feel like they have done something wrong (Grameen). They also believe that interest should never be more than the amount of the loan. The point of the loan is not to make money on the loan and cause stress but it is to help people with their struggles in poverty. The Grameen Bank also makes loans to women. This is very different for a country that is male dominant like Bangladesh. The bank says that women are more likely to pay back the loan and have better entrepreneurial ideas that will ultimately help their family. That is why most of the loans made by the bank are made to women. Lastly, the bank does not allow loans to be made unless they are part of a group of borrowers. The group only is allowed more loans if previous loans are paid back. This is to help ensure a better repayment record from the borrowers. Grameen Bank has been very innovative in the way they have taken on this challenge. They led the way in microcredit and are still prospering. This is just a single example of many that are making a difference.
But microfinance and microcredit is not all positive experiences. It is difficult for many of these MFIs (Microfinance Institutions) to make enough money to cover their operating costs. This will cause many MFIs to start to consider harsher requirements for their borrowers and will start to deteriorate the real motive behind microfinance. Although MFIs still face many challenges they have been flourishing. There are now international conferences for MFIs held around the world with thousands of MFIs that participate. Even large conventional banks like Citigroup are now offering microcredit investment options for their clients. High net worth people are also beginning to invest in microfinance opportunities around the world and making a real difference.
Now that you know what microfinance please stay tuned for more posts on upcoming events, news, and highlights on companies and tactics used by MFIs.
Sunday, April 19, 2009
What is microfinance?
This seems like the most obvious place to start my blog named "The Vast World of Microfinance". Microfinance is giving permanent access to a full range of financial services from savings, loans, and money transfers to the poor. This was mainly developed because many conventional banks do not allow the poor to use any of their services because they do not own anything to use as collateral for loans or have enough money to start a savings account. Before microfinance took off in the 1970s the poor were mainly using loansharks and local collectors for their financial services needs. These local players would charge huge interest rates and fee for their services. These informal relationships put many of the people involved at risk of losing all of their money or being exploited. That is why it is vitally important for formal organizations and companies offer these financial services to the people that desperately need it.
But microfinance is not a new concept. There have been local funds and cooperatives that date back to the 1700s. The Irish Loan Fund system was one of the earliest signs of banking for the poor rural people of Ireland. It started off very slowly but by 1894 it had over 300 funds across Ireland and their main purpose was to give small loans at a low interest rate for short periods of time (Global Envision). Throughout history there were many more examples of these funds created mostly by the rural and urban poor. By the late 1800s there were many examples of microfinance in all over the world from Europe to Asia. One of the most prominent microfinance institution during that time was the Indonesian People's Credit Banks that had close to 9000 units across all parts of Indonesia. Microfinance has a rich history and it has evolved over the centuries into the buzz word in the present.
Many times microcredit is taken as the same thing as microfinance. Microcredit is just a part of microfinance but in my opinion the most important part. Many microfinance banks start from microcredit and process of lending small amounts of money to the poor. In fact that is how the modern version of microfinance began in many parts of the world in the 1970s. Around the 1970s a few countries had experimental programs to try to use microcredit to help people get out of poverty. The three main projects that paved the road in the 1970s were ACCION International, SEWA Bank, and the Grameen Bank. The projects were based in Nicaragua, India, and Bangladesh respectively. Let us take a deeper look into one of the best known projects, the Grameen Bank in my following post. Till then please keep checking back.
But microfinance is not a new concept. There have been local funds and cooperatives that date back to the 1700s. The Irish Loan Fund system was one of the earliest signs of banking for the poor rural people of Ireland. It started off very slowly but by 1894 it had over 300 funds across Ireland and their main purpose was to give small loans at a low interest rate for short periods of time (Global Envision). Throughout history there were many more examples of these funds created mostly by the rural and urban poor. By the late 1800s there were many examples of microfinance in all over the world from Europe to Asia. One of the most prominent microfinance institution during that time was the Indonesian People's Credit Banks that had close to 9000 units across all parts of Indonesia. Microfinance has a rich history and it has evolved over the centuries into the buzz word in the present.
Many times microcredit is taken as the same thing as microfinance. Microcredit is just a part of microfinance but in my opinion the most important part. Many microfinance banks start from microcredit and process of lending small amounts of money to the poor. In fact that is how the modern version of microfinance began in many parts of the world in the 1970s. Around the 1970s a few countries had experimental programs to try to use microcredit to help people get out of poverty. The three main projects that paved the road in the 1970s were ACCION International, SEWA Bank, and the Grameen Bank. The projects were based in Nicaragua, India, and Bangladesh respectively. Let us take a deeper look into one of the best known projects, the Grameen Bank in my following post. Till then please keep checking back.
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