microfinancing in the developing world

Microfinancing the Developing World

Graeme Lamb

Microfinancing & Poverty1.2 billion people in the world live on less than $1 (£0.64) per day

World Health Organisation

Over 3 billion live on less than $2.50 (£1.61) per day

World Bank

What is Microfinancing?

Microfinance is a general term to describe financial services to low-income individuals or to those who do not have access to typical banking services.

What is Microfinancing?"Microfinance is the supply of loans, savings, and other basic financial services to the poor.“

CGAP (Consultative Group to Assist the Poor)

What is Microfinancing?

Microfinance is the idea that low-income individuals are capable of lifting themselves out of poverty if given access to financial services.

Microfinancing & Women

Microfinancing & Banks๏ Banks don’t lend to the poor because they can’t

make enough money.

๏ Managing client accounts costs money, small loans don’t allow large enough return

๏ Formal financial institutions were not designed to help those who don't already have financial assets - they were designed to help those who do.

Microfinancing & BanksSome banks do provide these services, however.

๏Grameen Bank in Bangladesh was formed out of a project providing small loans to women in the village of Jobra.

๏Bancosol, a commercial bank in Bolivia, is also a bank which provides microfinance services for the poor of Bolivia.

Microfinancing & BanksPoorer people often depend on friends/family & moneylenders

Informal survey of moneylender rates (14 developing countries, World Bank, 2001)

๏76% of rates more than 10% pcm

๏22% of rates more than 100% pcm

Microfinancing Organisations

Case Study

๏ Non-profit organisation

๏ Allows individuals to make loans from as little as $25 (approximately £16)

๏ 972,009 Kiva lenders

๏ $460,333,275 in loans

Case Study

๏ 98.99% Repayment rate

๏ 213 Field Partners

๏ 450 volunteers around the world

๏ 72 different countries

Case StudyMrs. Ret Aeth Village Bank Group (Cambodia)

๏Loan of $2650 (partnership with AMK, local institution)

๏Mrs Ret Aeth pig breeder, loan to buy more piglets

๏Also purchase fertilizer and hire farm labourers to grow rice

Case Study

๏ 93 lenders worldwide

๏ 14 months repayment terms

๏ 100% paid back in 11 months

Case StudySaid (Kenya) runs a retail shop and grocery store

๏Loan of $1425

๏Purpose of loan = add stock (flour, sugar, rice)

๏Also to buy hardware materials to open hardware store

Case Study

๏49 lenders worldwide

๏9 months repayment terms

๏100% paid back in 9 months

Microfinance ResultsNot perfect, but is making a difference

๏Vietnam – Save the Children clients reduced food deficit from three months to one month

๏Bangladesh – Grameen clients’ income 43% than non-Grameen clients in same village

๏Indonesia – income of local microfinance recipients increased by 112%, 90% of households graduated out of poverty

Microfinance ResultsAccess to financial service is improving the status of women

"Today I'm a very respected woman in the community. I have come out of the crowd of women who are looked down upon. Due to the loan that I received... you have made me to be a champion out of nobody."

Rose Athieno, Produce Reseller, Uganda

Other Options๏ Grants

๏ Infrastructure development (roads etc.)

๏ Employment programmes

๏ Functional skills (literacy, numeracy)

๏ Community programmes

๏ Legal & institutional reforms

Get Involved๏ Kiva – http://www.kiva.org

๏ Lend With Care – http://www.lendwithcare.org

๏ Grameen – http://www.grameenfoundation.org

๏ Opportunity International – http://www.opportunity.org.uk