microfinancing in the developing world

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Microfinancing the Developing World Graeme Lamb

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A short 5-minute presentation on how microfinancing is bringing people out of poverty in the developing world, using Kiva as a case study, written for Ignite Liverpool 15, 15th August 2013

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Page 1: Microfinancing in the Developing World

Microfinancing the Developing World

Graeme Lamb

Page 2: Microfinancing in the Developing World

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

Page 3: Microfinancing in the Developing World

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.

Page 4: Microfinancing in the Developing World

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)

Page 5: Microfinancing in the Developing World

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.

Page 6: Microfinancing in the Developing World

Microfinancing & Women

Page 7: Microfinancing in the Developing World

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.

Page 8: Microfinancing in the Developing World

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.

Page 9: Microfinancing in the Developing World

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

Page 10: Microfinancing in the Developing World

Microfinancing Organisations

Page 11: Microfinancing in the Developing World

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

Page 12: Microfinancing in the Developing World

Case Study

๏ 98.99% Repayment rate

๏ 213 Field Partners

๏ 450 volunteers around the world

๏ 72 different countries

Page 13: Microfinancing in the Developing World

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

Page 14: Microfinancing in the Developing World

Case Study

๏ 93 lenders worldwide

๏ 14 months repayment terms

๏ 100% paid back in 11 months

Page 15: Microfinancing in the Developing World

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

Page 16: Microfinancing in the Developing World

Case Study

๏49 lenders worldwide

๏9 months repayment terms

๏100% paid back in 9 months

Page 17: Microfinancing in the Developing World

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

Page 18: Microfinancing in the Developing World

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

Page 19: Microfinancing in the Developing World

Other Options๏ Grants

๏ Infrastructure development (roads etc.)

๏ Employment programmes

๏ Functional skills (literacy, numeracy)

๏ Community programmes

๏ Legal & institutional reforms

Page 20: Microfinancing in the Developing World

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