ICTs and Microfinance : June 2009 Issue by i4d magazine

Vol. VII No. 6

June 2009

The first monthly magazine on ICT4D

Microfinance: Leveraging ICTs ICTs for Microfinance

One billion opportunities Banking the Unbanked Globally Information for development

w w w. i 4 d o n l i n e . n e t

Microfinancing Ghana Microfinance Sector in Ghana

ISSN 0972 - 804X

ICTs and Microfinance

Microfinance : The Road to Self-sufficiency

knowledge for change

Contents

Vol. VII No. 6

Features 5

Editorial

ICTs for Microfinance

Fueling the growth

Banking the Unbanked Globally

Microfinance in India

26 29 32 34

Mail box Rendezvous 43

Microfinance: Leveraging ICTs Sabyasachi Kashyap

June 2009

One billion opportunities Gautam Bandyopadhyay

Microfinance: A bigger picture Ritu Srivastava

e-Cashbook in Orissa panchayats Shreemanta Kumar Samal, Sanjay Prakash Sahoo

Microfinance and Gender Equity

Interview Soni, 10 Rita Senior Vice-President, YES BANK Inclusion through innovation

Columns 45 46

Whatâ&#x20AC;&#x2122;s on In Fact Microfacts about microfinance

Money for women by women Ritu Srivastava

Development initiatives Loknath Panda

Snapshots of microfinance solutions

Best Microfinance Institutions Forbes magazineâ&#x20AC;&#x2122;s top 50 MFIs

FAO-GTZ Microbanking System

National Bank for Agriculture and Rural Development (NABARD), India

Technology for microfinancing

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Microfinance News India News

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World News

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The i4d magazine is an extremely useful resource for those of us who are practitioners in the field of ICT for D. It is well produced, and has informative and enlightening content which is very helpful for us to keep up with changes and developments in the field. Many congratulations to the team! Prashant Sharma Deputy Executive Secretary and Communications Manager Mountain Forum Secretariat, ICIMOD, Nepal prashant@mtnforum.org I have been reading the two previous issues of your magazine and found them really very informative. I would like to thank your team for such a valuable magazine on ICT4D. Mahendranath Busgopaul Internet Child Safety Foundation, Mauritius mahen@icsfonline.org I take this opportunity to thank for the whole i4d team for the wonderful edition of the community multimedia Gender and ICTs.

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Exploring the impact of microfinance Dinoj Kumar Upadhyay

Microfinance Sector in Ghana Microfinancing Ghana Veronica Agodoa Kitti

Accounting System in Orissa Panchayats

Global Conference on Financing the Poor: Moving Beyond Inclusion, 29 December, 2009, New Delhi, India

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i4d Editorial Calendar 2009 Month

Theme

January

Rural BPOs

Feburary

e-Agriculture

March

ICT in Climate Change

April

ePanchayat

May

ICTs in Elections

June

ICTs and Microfinance

July

Agriculture

August

Mobiles for Development

i4d | June 2009

Editorial Fueling the growth

Advisory Board Dr M P Narayanan, Chairman, i4d Chin Saik Yoon Southbound Publications, Malaysia Karl Harmsen United Nations University Kenneth Keniston Massachusetts Institute of Technology, USA Nagy Hanna e-Leadership Academy, University of Maryland, USA Richard Fuchs IDRC, Singapore Walter Fust Global Humanitarian Forum, Switzerland Wijayananda Jayaweera UNESCO, France EDITORIAL BOARD Akhtar Badshah, Frederick Noronha EDITORIAL TEAM Editor-in-Chief Dr Ravi Gupta Assistant Editor Sandeep Budki

Now that it has been widely accepted that microfinancing does not have to be an enterprise that runs on a not-forprofit basis, the challenge that faces us today is to make microfinance more accessible, customised, and effective while ensuring sustainable growth of the sector as a whole. It has been rightly said that sound microfinancing strategies have the potential to alleviate global poverty. But to do so, we have to find ways to reach the millions of unbanked and under-banked households who desperately need this support to get out of poverty and stay above the poverty line. Several questions need to be answered and a similar number of challenges have to be overcome to reach our goals. With the aid of modern ICT tools it is possible to reach the last mile and also serve the population living in remote areas. But technology is just one of the components of this intervention with connectivity taking the lead among the related loops that need to be closed, apart from the capacity building needs for the population to be served. Equally important is the creation of enabling policies that allow and, if required, incentivize the setting up of Microfinance Institutions (MFIs). Also imperative is strong regulation and monitoring of these MFIs to curb the incidences of MFI operators running away with the savings of their victims. Since the target demography has probably never been exposed to banking services, they also require financial education.

Research Assistant Subir Dey Sr. Graphic Designer Bishwajeet Kumar Singh Graphic Designers Om Prakash Thakur, Shyam Kishore Web Programmer Zia Salahuddin i4d G-4 Sector 39, NOIDA, UP, 201 301, India Phone +91 120 250 2181-85 Fax +91 120 250 0060 Email info@i4donline.net Web www.i4donline.net Printed at R P Printers, Noida, India

None of these issues can be taken in isolation and have to go hand in hand to provide succour from poverty to the disadvantaged citizens of the world. In this issue, we have tried to bring to you varied perspectives of how different countries, organisations and government agencies are combating poverty through financial inclusion with an eye on gender equity. We hope you find this issue informative and thought provoking enabling us all to find new ways to meet the challenges that lie ahead.

i4d is a monthly publication. It is intended for those interested and involved in the use of Information and Commnication Technologies for development of underserved communities. It is hoped that it will serve to foster a growing network by keeping the community up to date on many activities in this wide and exciting field. i4d does not necessarily subscribe to the views expressed in this publication. All views expressed in this magazine are those of the contributors. i4d is not responsible or accountable for any loss incurred directly or indirectly as a result of the information provided.

Dr Ravi Gupta Ravi.Gupta@csdms.in Centre for Science, Development and Media Studies, 2008 Except where otherwise noted, this work is licensed under a Creative Commons Attribution 2.5 License

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ICTS FOR MICROFINANCE

Microfinance: Leveraging ICTs This article suggests the ways through which the existing ICT tools and technologies can bring the poorer section of the society in the ambit of the microfinance services

Sabyasachi Kashyap sabyasachi@telecentremagazine.net

Over the last decade or so, the world seemed to have woken up to the reality that to empower the rural marginalised communities and to alleviate the poverty scenario in the world, they need to be given opportunities to save, borrow and repay loans. Till a few years back, banking institutions, for the purpose of offering banking services to the marginalised, experimented with subsidised credit which affected the overall performance of the banks and contributed to the rise in Non-Performing Assets (NPA). Thus subsidised credit as an option gradually lost its popularity among banks. Moreover more than the cost of credit, it was access to credit which was considered as the major barrier for the poor. With little or no means to afford the collaterals/mortgages, the poorer section of the society had to resort to unscrupulous moneylenders for loans which pushed them further into the vicious cycle of indebtedness. The reason behind this was access or the lack of it and not interest rate. Microfinance has come to be recognised as the most viable, efficient and resultoriented mode of financially empowering the poor. For Robinson â&#x20AC;&#x153;Microfinance refers to small scale financial services for both credits and deposits â&#x20AC;&#x201C; that are provided to people who farm or fish or herd; operate small or microenterprises where goods are produced, recycled, repaired, or traded; provide services; work for wages or commissions; gain income from renting out small amounts of lands; vehicles, draft animals, or machinery and tools; and to other individuals and local groups in developing countries, in both rural and urban areasâ&#x20AC;?.1 Microfinance also entails the condition of sustainably delivering the services and is not merely confined to credit (microcredit) but encompasses in its range savings, insurance,

and fund transfers. In the last few years of its existence, many organisations have jumped onto the microfinance bandwagon which includes not-for profit NGOs, development professionals, corporates, commercial banks, international donor agencies, etc. The reasons for the enthusiasm varies from the belief that microfinance offers a good developmental alternative to the belief, especially among the commercial banks, who have opened microfinance branches for their microfinance operations, that microfinance offers a good, sound banking option. The government has also routed various developmental schemes through microfinance. Microfinance leaders are gaining prominence and it is said that some of the leaders, particularly women, have been taking a more active role in other social spheres, including contesting elections for the panchayat and so on2. The microfinance sector has grown exponentially over the past few years and the World Bank estimates that there are now over 7000 Microfinance Institutions (MFIs), serving some 16 million poor people in developing countries. The total cash turnover of MFIs worldwide is estimated at US$2.5 billion and the potential for new growth is outstanding. It is estimated that worldwide, there are 13 million microcredit borrowers, with USD 7 billion in outstanding loans, and generating repayment rates of 97 percent. It has been growing at a rate of 30 percent annual growth3. However, several issues and impediments to the success of microfinance as an industry have cropped up, the primary of them being: scalability and sustainiblity of MFIs, and outreach and impact of the microfinance initiatives. Thousands of MFIs around the globe are realising that the solution for the scaling up, and ensuring maximum outreach and sustainability of i4d | June 2009

palmtop computers is typically uploaded to the MIS at the end of the day, either directly in the branch office or via a remote communications link. Furthermore, the roll-out of wireless broadband infrastructure will enable these systems to be always online resulting in true real-time data collection and monitoring of the loan portfolio at branch and institutional levels.

Photo Credit: CARE India

MFIs lies in leveraging the benefits of technology, more specifically information and communication technologies (ICTs). ICTs have opened new window of opportunities for the MFIs to reach out to more people, controlling the risks making the business sustainable, and bringing down the costs of operation. With new softwares specially designed to cater to the needs of the MFIs, mobile phones, efficient Management Information Systems, among others, technology can and will in the near future bring about a paradigm shift in the domain of microfinance.

ICT usage for MFIs The current discourse on and practice of microfinance has inevitably redirected itself through the ICT route for maximising outreach and ensuring sustainability. Adoption of ICTs also brings about business processes re-engineering because they povice efficient, transparent and cost-effective mechanisms to run the business of MFIs. MFIs have readily adopted ICTs for they have been looking for a change agent that will harness the benefits of ICT tools for best possible management and reduce costs, time and efforts. Management Information Systems (MIS) To monitor the quality, sustainability, and efficiency of the loan portfolio, to measure its development impact, and properly manage the administration tasks of an MFI, computerised Management Information Systems comes in very handy. MIS are the most fundamental aspect of an MFI’s hi-tech infrastructure and it is difficult for an MFI to upscale significantly and maintain the accuracy and transparency of its loan portfolio without an MIS that can grow with the institution. There is no denying the fact that an appropriate backoffice MIS is the backbone of ICT innovation for the delivery of microfinance services. However, for MIS to really contribute to the efficiency of the MFI, it has to be accurate, and up to date. MFIs find it difficult to maintain updated records as they have their offices in remote locations which rely on manual data-entry and paper based transaction records. ICT innovations like mobile computing applications and palmtops at the hands of the loan officers who can directly record the transaction into the MIS can make this system more efficient and up to date. The data entered into the June 2009 | www.i4donline.net

Correspondent banking One of the key challenges for MFIs is providing financial services to clients in remote areas including rural areas where the population density is low, the market is smaller and providing service entails high costs. Correspondent Banking – whereby a bank links itself with third party merchants located in remote areas – has emerged as a solution for this problem of outreach. Correspondents manage transactions on behalf of the partner institution and are remunerated on a fee-for-service basis. Bank Correspondents are expected to be having long-term businesses, and should be respected and trusted in their communities. The Bank Correspondents should also be ‘ICT-enabled’; generally equipped with equipments such as an Electronic Funds Transfer at Point of Sale (EFTPOS) device, barcode readers and/or keypads, a personal computer, etc. They are linked to the partner institution’s servers using a telephone line, cable or satellite link. Post offices, supermarkets, general stores, grocery stores, telecentres, etc, are good examples of Banking Correspondents. In India, commercial banking entities like State Bank of India, HDFC, have tied up with the respective Service Centre Agencies(SCAs) in the states under the framework of National eGovernance Plan (NeGP) to provide Banking Correspondent status to the Common Service Centres (CSCs) equipped with ICT infrastructure and provide microfinance services through them. Credit cards, and ATMs In today’s world of banking, consumer credit cards are an indispensable part of the bouquet of services offered by a financial institution. Some of the advantages of consumer credit cards are reduced costs associated with small transaction lending, unsecured credit, small transactions, and pre-defined credit limits. Other salient features of credit cards include on-demand borrowing, re-draw facility, and repayment flexibility within pre-defined guidelines. Since these services address the needs of small borrowers also due to their potential to relieve them from their dependency on moneylenders for the same set of services that are not provided by MFIs. Due to this utility of credit cards the concept of Microcredit Cards have emerged and with more opportunities. A credit card enabled MFI can implement microfinance tuned credit-scoring alogrithm which ensures that clients who have proved their credit worthiness over time through successful business transactions with MFIs can have their credit limit increased and be given access to additional sources of credit. Smart cards have an embedded computer chip that can store client and transaction data, as well as process information. Smart cards function as electronic passbooks, thereby reducing reliance on printed receipts. However, the introduction of card based services would demand setting up of EFTPOS functionality and/or Automatic Teller Machines (ATMs). Because all relevant client data is stored on the card,

the options because of the ubiquity of its use and popularity even among the poorer section of the society. It is estimated there will be three billion mobile subscribers in the world by 2010. World GSM Association, further adds that mobile phone is the first and only communication technology to have more users in developing countries than in developed countries. Mobile phones have become mobile wallets by facilitating electronic payments in exchange for goods and services. m-Commerce has assumed tremendous significance under the circumstances and this development in m-commerce has positively affected the microfinance industry also with usages like facilitating savings deposits, loan repayments and other funds transfers. For the cost of sending an SMS message, the phone user/microfinance client uses an application stored on his mobile phone to initiate a transfer from his mobile phone account to his bank account.

MFIs can utilise EFTPOS systems and ATMs that do not need to be always online. This is a significant advantage in areas where telecommunication services are unreliable and/or expensive. One more value addition to the services of MFIs are the use of biometric technology (such as fingerprint scanners) which ensure client identification as well as privacy and data security. Internet banking Internet Banking, in many ways, has revolutionised the banking scenario as it provides clients with real-time information about their accounts, and the ability to transfer funds between their accounts. It has become an integral part of the banking operations and by giving clients the liberty of using their own convenient time to bank, and that too without having to visit the bank, it has become an empowering tool. MFIs, however, face the challenge of limited or more often than not no access to Internet services of their clients. The rural telecentre network, being rolled out across the developing world, could come in handy here too, by providing access to the clients. Mobile banking Cellular phones, especially with GSM backbone, due to its accessibility and affordability are becoming an indispensable communication tool for the poor in the developing countries. As per the World GSM Association report, during the year 2003-2006, more than 800 million mobile phones were sold in developing countries. Mobile phones in today’s scenario have become the only option for communication from being one of

Microfinance softwares In tune with the emergence of service delivery technologies, various softwares have also been developed by technology innovators helping the microfinance industry to tackle challenges associated with efficiency, transparency, outreach and sustainability. The softwares and tools like, FINO (Financial Information Network and Operations), SafalFin, etc., vary in their nature and function. However, their utility to the smooth functioning of the operations are subject to speculation as some of the softwares come with high investments which a startup MFI may not be in a position to afford. However, low cost solutions like Computer Munshi System developed by an Indian NGO named Pradaan has promised to address this issue of affordability for MFIs. Built at low cost, this software aims to improve book keeping of the Self Help Groups (SHGs) as also to improve transparency, equity and longevity of its groups. The model basically aims to improve the accounting and book keeping of the SHGs.4

Conclusion In a nutshell, various experiments for integrating microfinance and ICT have been undertaken and even more numbers are going to come in the future. The issue however, is to enable the MFIs to meet their goals by helping them have maximum outreach, be sustainable and be transparent in their business and processes. ICT can only be an enabler, and not the driver, and the real success of MFIs has to be measured vis-a-vis their social performance and not by their ICT/technology readiness and preparedness. References: 1.

2. 3. 4.

Robinson, Marguerite S, ‘Microfinance: the Paradigm Shift from Credit Delivery to Sustainable Financial Intermediation’, in Mwangi S Kimenyi, Robert C Wieland and J D Von Pischke (eds), 1998, Strategic Issues in Microfinance, Ashgate Publishing: Aldershot Microfinance: An Introduction by R Srinivaan and M S Sriram in Round Table, IIMB Management Review, June 2003, (Pg-52-53) Hari Srinivas, The Global Development Research Centre (GDRC),http://www. gdrc.org/icm/data/d-snapshot.html accessed on 29-05-2009 Report of the Steering Committee on Microfinance and Poverty Alleviation, The Eleventh Five Year Plan, (2007-08 - 2011-12), Development Policy Division, Planning Commission, New Delhi, May - 2007, Pg-28 i4d | June 2009

te r Disas ent gem Mana ICTs using

Security and Cybercrim e

So Net cial wor ks in Inte rnet

Environmental Concerns: eWaste ICT and peace Initiatives

Giving Voices and Assertive R ights: Sexual and Reproductive R ights

The O Move pen ment

HIV/AIDS

Community Radio

ICT Statistics

ICTs for MSMEs

The Fuel Crisis and Climate Change

Learning for Grassroots Innovations

ols 0 t o it y . 2 Web ommun nt e C for owerm p Em

c Civi / l a Ts ion osit and IC p p O itics Pol

g s tin ICT udge ing r B am nde instre e in Gd Ma an

Safe Drinking Water and Sanitation

Ne w g nin Lear ys Wa

ICTs and Food Security

Internet Governance

Another year of i4d is here. A host of issues are to be talked about. Do you work on any of these areas ? Do you have a project that should be covered ? Are you an expert on any of the themes ? Are you interested to collaborate ? Write to us at: subir@csdms.in

INTERVIEW: RITA SONI, SENIOR VICE PRESIDENT AND COUNTRY HEAD - RESPONSIBLE BANKING, YES BANK,

Inclusion through innovation

Rita Soni

www.yesbank.in

In an interview with Sabyasachi Kashyap from CSDMS, Rita Soni talks about YES BANK’s foray into financial inclusion by banking and microfinancing through the Internet, ATMs, debit cards and mobile channels.

Senior Vice President and Country Head-Responsible Banking, YES BANK

As per the latest census, almost one fourth of the population in India lives Below Poverty Line. What role do you see banking institutions like YES BANK playing here? At YES BANK, we are working towards sustainable solutions to poverty through financial interventions by mainstream banking activities. Utilising sustainable and mainstream approaches allows us to reach the scale which is necessary to reach the 800 million Indians living on less than US$2 per day. In our young bank, we have chosen to focus on ‘Responsible Banking’, promoting financial inclusion and business solutions to social issues. Where does financial inclusion fit into YES BANK’s scheme of “Responsible Banking”? YES BANK is committed to creating equal financial opportunities and enabling financial inclusion, but it is our emphasis on innovation which is making the real impact. For instance, in microfinance the vision is to go beyond offering plain vanilla banking to providing the industry access to the mainstream capital markets. This approach helps MFIs achieve scale at a lower cost of funds, thereby resulting in affordable financial products for the Base of the Pyramid (BOP). YES BANK has a two-pronged microfinance strategy to provide easy access to suitable financial

products and services to un-banked/under-banked, low-income communities across urban and rural India. As of March 2009, Wholesale Lending stood at USD 60 million with 16 MFIs, covering an estimated 500,000 clients in over 1000+ villages. YES BANK offers a comprehensive package of banking and advisory services, dovetailed with the expertise of relevant business units within the Bank to use structured capital market products to help MFIs leverage access to cost-effective funds from a broader pool of sophisticated investors. The Bank works as a holistic financial solutions provider working with different stakeholders, i.e., mainstream investors, rating agencies, policymakers and technology vendors resulting in an aggregation of services, cutting-edge innovation and thought leadership required to create a conducive environment for growth of the industry. YES BANK also stands out for its focus on urban poverty using individual lending methodology in a market that has largely executed group lending to rural women. One of the ground breaking features of our model is the fact that in setting up the first institutionally sponsored direct intervention model for microfinance, the Bank has created a benchmark institution that i4d | June 2009

becomes the reference point for what our wholesale practice strives for in terms of helping transform partner MFIs into commercially viable financial services providers for the BOP. Direct Lending is accomplished through YES SAMPANN (Hindi for fulfillment), currently in its pilot phase with a portfolio of 2000+ microentrepreneurs. The business is projected to reach a client base of a 1,000,000 with a portfolio size in excess of USD 100 million in 5 years offering products such as micro loans for working capital, insurance and savings schemes. Across the world, there is widespread recognition that information and communication technologies (ICTs) have tremendous potential in facilitating the inclusion of the underserved/un-banked population into the banking network. Can you share your views about this? Bridging the technology gap between the urban and rural population through ICT is undeniably a step in the right direction, however YES BANK feels that unless discrepancies in the content, standards and delivery of basic, primary/secondary education and vocational training programmes are proactively addressed, the effectiveness of ICT led initiatives will be greatly hindered. This opinion and mode of thinking has spurred YES BANK to begin forging working relationships with NGOs and social businesses currently working in the education and ICT space to develop effective educational content, especially in the realms of financial literacy, in order to enhance the national curriculum and skills development programmes in rural and urban India. What are YES BANK’s initiatives in providing banking facilities to the underserved population in the rural areas? In addition to the microfinance initiatives already mentioned, YES BANK also has a dedicated focus in the area of ‘Farmer Financing’. The Agri-Business, Rural and Social Banking (ARSB) team develops innovative financial models, which leverage the outreach of various stakeholders in the Agri Value Chain to address ‘last mile’ issues. In the last year, the Bank has disbursed approximately INR 700 crores in direct farmer financing, impacting approximately 140,000 farmers. ARSB works closely with Swiss Re and Agriculture Insurance Company of India (AIC) to facilitate the development and distribution of need-based insurance products for the agriculture sector, such as weather insurance for grapes in the Nashik region. As an example, YES BANK recently announced its partnership with Zameen Organic, a farmer-owned producer company aimed at closer collaboration between farmers and companies to fortify inclusive and sustainable growth while building a transparent supply chain. This alliance intends to create equal opportunities for producers and workers who have been economically marginalised because of the conventional trading system. The business model empowers 6500 farmers to have effective and end-to-end control on the ‘Fair Trade Organic Cotton’ supply chain which has resulted in improved economic condition of farmers from the Adilabad (Andhra Pradesh) and Vidharbha (Maharashtra) region. Could you elaborate a bit more about your experiences in the rural areas? Within the Responsible Banking framework, YES BANK has June 2009 | www.i4donline.net

a vision to address issues of rural India through the previously mentioned innovative financial interventions, complemented with expert advisory services and thought leadership. These practices in microfinance, ARSB, advisory and thought leadership go beyond the banking sector regulator, Reserve Bank of India’s (RBI) directed credit policy mandated through its Priority Sector Lending (PSL) requirement, and adopts the spirit of addressing poverty to the core. Below are specific examples where this combination approach has yielded results: In 2008, YES BANK worked with Jain Irrigation Systems Ltd. (JISL) to reach nearly 50,000 small and marginal farmers across India. As a testament to this ‘business solution to social issue’, the BANK conducted a comprehensive sustainability report for JISL, outlining both the manner in which they operate as well as specific social and environmental initiatives. Another important rural client is Buldana Urban Credit Cooperative Society. The financing from YES BANK reaches approximately 8,000 rural households across western Maharashtra. The Cooperative has a unique approach of ‘social banking’ which has built the institution and met the needs of its members. In addition to these financial services, the Bank conducted a detailed study of the approach, uncovering a gamut of best practices that can be applied by urban and rural banks. The Bank also plays the role of thought leader in several areas including poverty issues. As an example, YES BANK and the American India Foundation jointly wrote a report highlighting the social and economic issues surrounding rural to urban migration in the country. A key feature of the report ‘Managing the Exodus’ is ways to provide rural populations employment opportunities and social services through the public private partnership model in a bid to mitigate their migration to urban areas. In addition to financing Shriram Transport Finance Company Ltd. (STFCL), YES BANK facilitated an HIV/AIDS awareness programme for their trucker clients. This programme brought the Bank forward to form knowledge partnerships and synergies with the Clinton HIV/AIDS Initiative (CHAI) and the Red Cross. The programme has reached out to 14 locations, 10 states and over 10,000 truckers who have been sensitized since this project began in October 2007. Are the branches operating in the rural areas providing ‘anytime anywhere banking’ facilities? If yes, could you share your experiences with this? A standard feature in all our branches, urban and rural, we offer ‘Anytime Anywhere Banking’ through the Internet, ATM, Debit Card and Mobile Channels. Customers can also transfer funds at their convenience, from home or office, to over 53,000 bank branches across the country using the NEFT and RTGS facility. They are also given complimentary multi-city payable at par cheque books for ease of payments. Under the aegis of the ‘One Branch’ model, customers can access their account from any of the 117 state-of-the-art YES BANK branches, at no extra charge. We were also one of the first few banks to offer complimentary access to over 32,000 ATMs in the country. Our technology edge imparts ‘reach and easy’ access to our rural branches and our ‘anytime anywhere’ facilities have received encouraging response in rural areas.

BANKING THE UNBANKED GLOBALLY

One billion opportunities Introduction Look and you’ll see an exciting landscape emerging in the banking arena. One where there is a billion-strong market actively seeking financial services but remains largely unattended to. These globally distributed prospective customers represent enormous earning potential for banks, but constitute the unbanked. The unbanked are those who do not utilise banking services and have limited banking needs. The unbanked are not the poorest of the poor. However, they certainly include those whom banks need to serve but cannot do so profitably in the existing banking environment. Though these consumers need access to banking for savings, loans and microfinance, they do not have bank accounts. The reasons for this are compelling. • Lack of steady and substantial income leading to a fear of insufficient funds for an account • Limited access to banks, especially in remote areas • Lack of formal employment that precludes a financial history • Poor financial literacy • Psychological factors such as mistrust of financial institutions This unbanked billion is not outside the banking sector by choice. An important reason for their predicament is that banks do not offer them suitable products tailored to their needs. In effect, they have been excluded by the banks’ inability to understand their requirements and the unwillingness to adopt innovative models to serve them. However, this billion also constitutes an enormous opportunity – if banks are willing to accept the challenge of including them with an eye on the bigger picture. This paper provides a regional perspective to this issue and examines

what banks can do to capitalise on this opportunity.

How to bank the unbanked In China and India only about a third of the population participates in the formal banking sector. In Africa the number is just 25 percent. India has the second-highest number of financially excluded households in the world – 135 million – after China’s 263 million. Africa as a whole has 230 million unbanked households, and Central and Eastern Europe and Latin America have 19 million and 42 million, respectively. But irrespective of where in the world they might be, this unbanked section of society has similar needs for financial services. Apart from the obvious requirements of savings, loans, transactions, and investments, the unbanked have certain special needs, which are: • Flexibility in savings and repayment schedules owing to a lack of steady income

This paper aims to educate the banking sector to reach out to the unbanked masses around the world by giving examples from across the globe about initiatives of some enterprising banking entities

Simplicity and speed in processing Small product sizes when it comes to loans and low-balance savings accounts • Proximity and ease of access • Ba s i c f i n a n c i a l e d u c a t i o n o r information since the unbanked may not understand even elementary concepts of banking Most banks find it difficult to meet these needs because of the high economic cost of servicing these demands. However, a little out-of-the box thinking in devising products that are simple and accessible can help ensure inclusive growth. Some of these measures could include tying up with an NGO or with a retailer and using village residents and empowerment groups as representatives. These can lower customer acquisition costs and increase customer base, thus helping banks overcome the high cost challenge. Such groups also help banks mitigate risks associated with dealing with the unbanked. An estimated 2.6 million self-help groups in India are linked to banks, giving financial institutions access to 40 million households. It is important that the products are downsized without being downgraded to match the unbanked population’s smaller requirements by offering low installments and flexible repayment options. Banks also require performance metrics and regulatory conditions that are more suited to including the unbanked in the financial mainstream. Some banks are using inter-industry partnerships to increase financial inclusion. For example, banks in Brazil have added 100,000 point-of-sale locations to distribute products by tying up with retailers. Not only are these channels cheaper for banks but they are also more convenient for consumers. • •

i4d | June 2009

Banks must realise – and they are seeing the light – that since the unbanked have remained unaddressed by traditional financial institutions, they will not hesitate to choose newer players for basic banking services such as payment and deposit transactions. Collaborating with telecom players, adding a mobile channel, and utilising cross-selling opportunities will go a long way in meeting the needs of the unbanked. In many emerging economies, mobile consumers are growing at a much faster rate than bank customers. Mobile banking is taking off because it is convenient, fast, simple, and secure. Moreover, it is a cost-effective option for banks. Gartner has estimated that there will be 33 million mobile payment users worldwide in 2008, with the Asia Pacific taking the lead. Gartner expects this number to triple to 103.9 million users in 2011. Other forms of branchless banking and e-payment gateways such as payment cards and the Internet can also help banks increase their outreach. Banks need to experiment and include the next billion consumers not merely for the socio-economic assistance they will gain. The step will also have a strong business imperative for banks. Not only will a bank increase its customer base, but it will also ensure increasing numbers of future customers as incomes increase. Let us examine how banks are reaching the unbanked in various parts of the world, namely, India, China, Eastern Europe, parts of Africa, and Latin America.

India The Indian banking market is zooming, with assets expected to reach $1 trillion by 2010. An expanding economy, a growing middle class, and technological innovations are contributory factors, according to a Celent report, ‘Overview of Indian Banking Market’. The industry is focusing on the retail side of the market, with a Compound Annual Growth Rate (CAGR) of 23 percent in the past five years. However, despite this thrust on retail banking, banks will have to come up with creative and simple solutions to make money in India. This is because India has a huge unbanked population and unless this is included, neither will banks prosper, nor the country. Banks have also realised the potential of this market and have come up with innovative means of reaching it. They are going back to rural pockets for financial inclusion. State Bank of India is drawing up plans to reach out to 100,000 villages. In September 2007, ABN Amro Bank announced its microfinance division had provided basic financial support to some 500,000 underprivileged households. Building more branches in the countryside may not always be cost-effective. So banks need to explore other options by developing a better understanding of what rural households need and offer new products and distribution networks to suit them. Providing banking services through ‘Banking Correspondents’ represented by self-help groups, NGOs and other approved organisations is one branchless banking mechanism. Touch-points may be set up by such organisations at places commonly visited by the unbanked, such as the village markets or schools. This may be supplemented by outreach teams equipped with hand-held devices on which simple banking transactions can be performed. June 2009 | www.i4donline.net

Mobile banking is another way of reaching out to such customers and is also a huge opportunity for banks in India. According to a TRAI report, the total number of mobile subscribers by March 31, 2008 was 261.08 million as against last year’s 165.09 million (an increase of 58.14 percent). This figure shows that in just three years, the number of mobile subscribers has grown over 4.5 times. India is adding more subscribers per month than any other country. According to the GSM Association (Global Association for GSM Providers), the next billion subscribers will come from the BOP (Bottom of the Pyramid) market, of which India will have the largest share. The growth of mobile phone subscribers is outpacing the growth of banking customers as also PC and Internet users in India. In 2006, banks were allowed to take the help of NGOs and microfinance institutions as intermediaries in offering banking services through the use of correspondents. This was perhaps a factor for many banks that opened six million no frills accounts with low or zero minimum balances between March 2006 and 2007. ICICI Bank, HDFC Bank and Citibank have launched their own microfinance programmes. HDFC Bank thus has tied up with NGOs in Andhra Pradesh and Tamil Nadu to make financial services accessible to the rural poor. Citibank has linked up with NGOs. Standard Chartered plans to lend $100 million for micro-financing by 2008, up from current commitments of $40 million. Banks are looking at technology to provide banking services at low cost – and this includes rural banking too. Citi has set up a bio-metric ATM as a part of its ‘no frills’ Pragati account for the under-banked. The ATM recognises the customer through their thumb impression and can interact in regional languages.

China Estimates about the numbers of unbanked Chinese vary. The People’s Bank of China (PBC) estimates that only 36 percent of Chinese rural households have access to financial services. As one indicator of demand, the informal finance market has been estimated at anywhere between CNY 1 trillion ($132 billion) to CNY 2 or 3 trillion. But the bigger Chinese banks have for many years now been moving out of rural areas, goaded by commercialisation and competitive pressures. According to the State Council Development Research Centre (DRC), the four big state banks have reduced their presence in rural areas by over 43 percent in ten years, closing 30,000 branches in the last five years alone. The Chinese government has launched several initiatives to test out new forms of rural financial service providers. Among them: • The People’s Bank of China in December 2005 launched a pilot initiative to establish Microcredit Companies using commercial licensing • The China Banking Regulatory Commission in December 2006 introduced their own pilot, creating new types of licenses for rural financial institutions McKinsey believes that given the reliance on cash in rural China and that additional ATMs do not appear to be the answer,

the existing mobile Short Message Service network could quickly and cheaply provide an SMS-based payment system in rural areas. Since the most expensive parts of the infrastructure — the network and phones — are in place, this solution would be relatively low in cost, between $40 million and $60 million. By forming a partnership, banks, network operators and merchants could unlock spending. The Chinese largely rely on cash payments, thus increasing the importance of the cash-based e-payment channel. Some leading third-party payment providers are adding cash-based and nonbank based payment options to their offerings. These include: 1. Cash remittance: Alipay is a third-party payment provider, allowing users to top up accounts with cash through China’s postal service. This service was launched in March 2007 in selected China Post branches throughout China. 2. Mobile toll stations: Smartpay, China’s leading mobile topup company, has formed a network of approximately 30,000 dealers. Smartpay dealers allow users with bank accounts to easily use Smartpay’s services, which in turn gives Smartpay access to a much wider range of potential users. 3. Targeting the unbanked with pre-paid cards: e-payment player IPS uses mobile and telephone prepaid cards in order to reach unbanked users. This service takes advantage of the popularity of prepaid top-up cards used for phone bills, online games, and virtual currencies in China. The cards are usually purchased with cash at newspaper kiosks, small shops, and internet cafes. IPS operates a service called Ipay.

banking options. This also offers banks a channel for growth. Similarly, post offices, which constitute more than 50 percent of the physical infrastructure for access to the financial sector, could provide an innovative POS alternative to reach out to the unbanked. According to the August 2003 Datamonitor report, banks in the region are looking to move beyond branch-centric distribution. This includes extending ATM networks and looking at online and phone banking. The highest growth in IT spending was expected to come from Romania and Bulgaria.

Africa According to the IMF, African countries are enjoying their best period of sustained economic expansion since attaining independence. Real GDP growth is expected to rise from 5.7 percent in 2006 to 6.8 percent in 2008. Still, only 20 percent of families in Africa have bank accounts.

Eastern Europe In Poland, only 50 percent of the country’s population has a bank account, according to ING Group. Banking penetration was 69 percent in Hungary at the end of 2003. Many East European (EE) residents avoid setting up bank accounts because they lack confidence in the banking system. This mindset is gradually changing as governments encourage salary payments directly into bank accounts. Austria’s Erste Bank has the largest network in the region and intends to target the unbanked in Hungary, the Czech Republic, Croatia, Serbia and Romania. Western banks in EE are focusing on meeting the needs of the younger population. In Poland, only 49 percent of people over the age of 15 have a bank account, according to Polish research company Pentor. Almost 40 percent of Poles who participated in a recent banking survey attributed the low level of banking penetration to their lack of savings. Only 5 percent of Polish people use Internet banking, against an average of 24 percent in Europe as a whole; 4 percent of Poles use telephone banking services compared with 7 percent in Europe, according to Forrester Research. To make it easier for Poles to access banking products, ING Bank Slaski, the Polish operation of ING Group, has simplified some products. The new offerings include a savings account which offers one flat interest rate and a low-interest credit card. Plastic card technology is expected to present the banking industry with an important means of tapping the unbanked market. Moreover, according to Global Insight, electronic payments are expected to grow from $3.8 billion in 1999 to $25.8 billion in 2009, thus indicating greater use of non-traditional

Katimba market, Central Kampala, Uganda. Credit sln.org.uk

Ethopia has less than one bank branch per 100,000 people – a developed nation like Spain has an average of 96 branches. Even in South Africa, where the sector is more sophisticated, only 40 percent of adults have bank accounts. But there is a huge demand for bank services. Finding this demand unfulfilled, millions of Africans turn to informal services or invest in cattle. But banks are increasingly adopting innovative methods. South Africa has physically taken branches to the unbanked, either as prefabricated units, or in vans that make visits to under-served areas. In remote areas, machines have been installed in shops where customers print out a slip and present it to the shopkeeper, who provides the cash. Some rural branches and ATMs rely on solar energy and satellite phone. The ‘Big Four’ banks of South Africa (ABSA, First National Bank, Nedbank Group and Standard Bank) and the government developed the innovative Mzansi account in 2003 which is a low-cost transaction account. It enables banks to cover at least 70 percent of the unbanked market in a relatively short time. The government provided a small subsidy to cover the cost. It is targeted at people who earn less than R2,000 (US$264) a month. It now has more than 4 million subscribers. Studies conducted by Genesis Analytics for the Finmark Trust in 2004 have suggested that point-of-sale (POS) facilities can play i4d | June 2009

an increasingly important role in providing the unbanked access to basic financial services in South Africa. West African financial services biggies Zenith Bank and Ecobank and multinationals Citibank and the International Finance Corporation have set up the Acción Microfinance Bank in Nigeria. It aims to provide low income earners and entrepreneurs with credit facilities and finance. Mobile banking seems to be the most promising option in Africa. Few Africans may have bank accounts, but many have mobile phones. Wizzit (a financial services provider), First National Bank (FNB) and MTN Banking (a joint venture between Standard Bank and a mobile-phone network), are targeting the 14 million unbanked South Africans. In Kenya and Botswana, 17 percent of the unbanked own a mobile phone, according to the FinMark Trust. In Kenya, Vodafone and Safaricom, Kenya’s leading mobile operator, launched an m-commerce payment service, M-PESA, aimed at the unbanked in March 2006. Within three months, it had 150,000 customers, with 2,500 new users signing up each day. First Bank linked-up with Nigeria’s second biggest mobile operator, Globacom. The partners introduced the GloFirst card in conjunction with the switching company Interswitch. GloFirst can be used to withdraw money, check card balance, print mini statements, change the Personal Identification Number (PIN) and transfer money to another cash card or bank account.

Latin America Chile reports the highest penetration and the lowest percentage of its population living below the poverty level. It is followed by Brazil, where the majority of households have checking accounts because most payrolls in the formal economy are disbursed electronically. Until recently, 40 million Brazilians had no access to banking services. Nonetheless, access to consumer credit in Brazil is mostly limited to the middle and upper class, and even foreign banks target primarily customers with an annual income of at least $20,000. In Mexico, the formal banking sector has targeted only the top 15 percent of the population, while the other 85 percent is considered too risky and unprofitable. Now, however, more foreign banks in the sector have begun to pay closer attention to the retail credit card business and other remittance-linked products. In Colombia, where 55 percent of the population lives under poverty level, access to bank credit is low at 23 percent. Therefore, Latin America’s huge unbanked population offers an enormous opportunity for banks recognising their potential. To serve the banking needs of a relatively low-income economy with low penetration requires innovative and imaginative non-branch solutions. Microfinance and IT are enabling banks to serve the excluded at relatively lower costs. Banks are also helping create financial literacy with the help of community leaders. Bancomer, one of Mexico’s nationalised banks, is reaching out to the lower-income segment by offering simplified and more accessible products, such as pre-paid credit cards or cards with fixed monthly payments. To cultivate a culture of savings in Mexico, Bancomer has made available a savings account-debit card combo for a minimum deposit of about $70. Santander Banespa, a Spanish-backed bank in Brazil, manages June 2009 | www.i4donline.net

El Alto Market. Credit fellowsblog.kiva.org

about 5.1 million customers and 1800 branches. It has grown steadily in recent years by concentrating on personal lending, car financing, insurance, and investment funds. It helps that local interest rates are dropping and that Brazil’s government has introduced incentives to increase credit. For example, payroll loans, whereby installments are debited from paychecks are now permitted. In Brazil, banks are using nonbanking outlets, such as kiosks and even supermarkets, to reach customers. However, the central bank’s efforts in the way of promoting community representatives or agents and microfinance efforts are slowly bringing more of the unbanked into the mainstream. However, obstacles remain: agent-handled accounts are subject to transaction limitations, interest rate caps render microcredit unprofitable and credit information is scanty. Electronic payments in Latin America are slowly taking off, but are hampered by factors such as low income and lack of banking penetration. Banks are trying to keep the reform momentum going. For example, Mexico has launched a three-year publicprivate initiative to expand the number of chip-enabled point of sale terminals. The goal is to divert the use of cash taken from ATMs to POS debit-card transactions in its continuing battle to suppress the informal economy.

Conclusion The numbers involved in meeting the needs of the unbanked may seem daunting, but in reality they represent a billion-strong opportunity for banks. By paying greater attention to their wants and developing sensitivity to their needs, banks will be able to develop customised products and include the unbanked in their scheme of things. Banks may do well to remember that they have a business imperative in converting the periphery into the mainstream. Gautam Bandyopadhyay Principal Consultant at Infosys Technologies

References: Research by Boston Consulting Group Research by Celent McKinsey Quarterly The Economist The Financial Express

MICROFINANCE IN INDIA

Microfinance: A bigger picture The term, ‘Microfinance’ refers to the provision of a broad range of financial services to low-income households and their microenterprises. Financial services generally include microsavings, microcredit, money transfer vehicles and microinsurance. Microfinance services are generally provided by formal institutions, such as rural banks and cooperatives, semiformal institutions such as non-government organisations; and informal sources like money lenders and shopkeepers.

Need of microfinance in India

services. Some major initiatives include the bank linkage programme under the guidance and supervision of the National Bank for Agriculture and Rural Development (NABARD) in 1992, the setting of the Rashtriya Mahila Kosh to re-finance microfinance activities of NGOs in 1993 and the establishment of Small Industries Development Bank of India (SIDBI) Foundation for Micro-Credit (SFMC) as a financier of Microfinance Institutions (MFIs). On the policy front, RBI has come out with directives on various aspects of microfinance provision. Releasing the fact that Self-Help Groups (SHGs) and NGOs are a priority sector, RBI engaged them in microfinance business by registering them as NonBanking Financial Companies (NBFCs). As a result, commercial banks, regional rural banks (RRBs) and cooperative banks have also emerged as important channels of microfinance provision. Through the RBI (Amendment) Act, 1997, RBI made it obligatory for NBFCs to apply to RBI for certificate of registration. One of the conditions for application was

that the NFBC must have a minimum US$ 46,511.6 Net Owned Funds (NOF) that will make it eligible to accept public deposits. RBI introduced a new regulatory framework for the NBFCs in 1998, focused on NFBC accepting public deposits with a view to safeguarding the interests of the depositors. RBI also established a Micro Credit Special Cell in 1999-2000 to suggest measures for augmenting flow of microcredit. In the same year, NABARD established the Task Force on Supportive Policy and Regulatory Framework for Micro Credit. Based on the recommendations of the Advisory Committee on Flow of Credit to Agriculture and Related Activities from the Banking System, in its Annual Policy Statement for the year 2004-05, RBI stated, in view of the need to protect the interests of depositors, MFIs would not be permitted to accept public deposits unless they complied with the extant regulatory framework of the Reserve Bank. T h e Mi c ro Fi n a n c i a l Se c t o r (Development and Regulation) Bill, 2007, was introduced in March 2007 which applies only to three categories of

Statistics from the World Bank estimates that more than 87 percent of India’s poor can not access credit from formal sources and therefore have to depend on money lenders who charge them exorbitant interest rates ranging from 48% to 120% per annum or even higher. This shows that the potential market of small money lenders, who can lend money according to the demand for financial services for this section of the society. The provision of such services, if implemented correctly, could have a significant impact on the poor. Releasing this Table 1: Growth of linked SHG’s in the regions fact, under the Reserve Region Beneficiaries Bank of India Act, 1934, % March March March March increase between RBI undertook regulation 2004 2005 2005-06 2007 2006 and supervision of all the banks promoting and doing North 52,396 86018 6% 133097 182018 microfinance. North 12278 34238 3% 62517 91754

Regulatory framework of microfinance in India In early 1990s, there have been many significant state initiatives in the institutional and policy spheres to enable the poor access financial

% increase between Share of Share of BPL 2006-07 population population 6%

13%

East East

158237

265628

394351 525881

18%

22%

29%

Central

127009

197365

267915 332729

12%

11%

25%

32%

West

54815

96266

15%

14% 15% 100%

166254 270447

South

674356

939941

1214431 1522144

54%

52%

21%

All India

1079091

1618456 2238565 2924973

100%

Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, March, 2007 i4d | June 2009

not-for-profit MFIs: societies, trusts and cooperatives. These are collectively referred to in the bill as Micro Finance Organisations (MFOs).

Progress under the SHG Bank Linkage Programme (SBLP) India has seen an average annual growth rate of 82 percent in providing microfinance services through SHGs in the period from March 1993 to March 2006, in relation to a 110 percent growth rate in terms of credit amount. SHG Bank Linkage Programme has proved to be the major supplementary credit delivery system with wide acceptance by banks, NGOs and various government departments. During the financial year 2005-2006, around 620,109 SHGs were linked under the SHG Bank Linkage Programme, it incorporates more than nine million households into the financial sector. According to the NABARD Annual Report 2007, the western region of India has experienced 63 percent of growth in its entire region. Table 1 shows that the growth rate in eastern region was 33 percent and in central region, the growth rate was 24 percent. The figures also show that the southern region is leading in the programme. During the financial year 2005-2006, Andhra Pradesh had further consolidated its role as the leading state in the size of SHG movement by holding 279 households participating in SHGs for every 1,000 households. During this period, the number of new loans in Andhra Pradesh, remained about the same but the number of repeat loans increased by 31 percent/year. Himachal Pradesh, Kerala, Assam, Rajasthan, West Bengal and Maharashtra formed an intermediate group with 94, 85, 82, 65, 61 and 56 households participating in SHGs for every 1,000 households, respectively. In Uttaranchal and Jharkhand there were less than thirty-two households participating in SHGs for every 1,000. In Jammu and Kashmir, Haryana, Punjab and Arunachal Pradesh there were less than ten households participating in SHGs for every 1,000 of the total households.

Table 2: Region-wise growth in outreach in 2003-04 and 2004-05 Outreach - FY Annual Growth Annual Growth 2005 (%) in outreach (%) in outreach FY 2004 FY 2005

MFIs by regional distribution

No. of MFIs

East

332476

61.12

32.68

West

6,738

31.4

42.15

North

91317

11.34

19.5

South

1710323

67.5

51.73

Total

2140854

62.86

45.94

Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, March, 2007

Table 2 shows that growth is concentrated in two regions, the South and East, which already account for about 95 percent of membership. The 31 percent growth was recorded in the West, on an extremely small base, while only 11 percent growth was registered in the North, among a larger base. With financial support from government for SHG programmes the establishment of a large number of MFIs following the SHG model has been registered. From the perspective of the legal framework (Fig 1), the proposed new microfinance law does not cover nearly 80% of these clients since 73% are served by NBFCs or MFIs on the verge of transformation to NBFCs and another 6% by Section 25 (not for profit) companies. Such institutions fall outside the ambit of the proposed law.

MFI performance: Efficiency with growth The MFI model in India is characterised by a diversity of institutional and legal forms. The first and most well known MFI, SEWA, was incorporated as an urban cooperative bank in 1974 and demonstrated that poor people were bankable. In the 1980s, a number of registered societies and trusts commenced group-based savings and credit activities on the basis of grant funds from donors. MFIs of all legal forms have their own funds or are built up mainly from; (i) donor grants in the case of societies and trusts, (ii) equity investments and promoters’ capital in the case of companies, (iii) shareholdings in the case of cooperatives, as well as (iv) retained earnings in the case of all three categories, the main source of funds is debt, borrowed from the banks and apex financial institutions. In the last decade, the MFI model has seen a series of critical developments in the Indian MFI sector. According to the estimates of 2006 Annual Report by Microfinance India, joint effort of Care, Ford Foundation and Swiss Agency for Development and Cooperation (SDC), Large MFIs are more efficient in the disbursal of funds with 81 percent of total assets held as loans, as against 75 percent in the case of medium and small MFIs. June 2009 | www.i4donline.net

Source: Poverty Estimates for 2004-05, PIB, Government of India, New Delhi, March, 2007

Progress under social performance MFIs and those who work for MFIs like banks, investors, and donors are social enterprise. For any MFI, financial sustainability is important. An MFI that can cover its costs - has good financial performance - can grow to serve more clients in more areas. Social performance in microfinance is defined as “the translation of mission into practice in line with accepted social goals”: These social goals relate to: • Reaching the poor or excluded clients • Improving the quality and appropriateness of financial

Poverty Audit

Social Rating South • • • • •

Bullock-Cart Workers Development Association (BWDA) ASP BASIX Acts Mahila Mutually Aided Coop Thrift Society (AMMACTS ) SWAWS Credit Corporation India Ltd. (SWAWS)

• • •

ASA Model SKS Microfinance Payakaraopeta Women’s Mutually Aided Co-operative Thrift and Credit Society (PWMACS)

•

Rashtriya Gramin Vikas Nidhi (RGVN) Nav Bharat Jagriti Kendra (NBJK)

North • •

CASHPOR Financial and Technical Services (CFTS) Bandhan Microfinance

•

services Contributing to employment and enterprise growth Improving the economic and social conditions of clients and their households • Ensuring social responsibility to clients, to staff and to the communities they operate in In 2006, M-CRIL (Micro-Credit Ratings International Limited) conducted social ratings among MFIs in India with support from the Friends of Women’s World Banking (FWWB) and the Ford Foundation. In its rating, twelve MFIs, eight from the south, four from the north, are providing microfinance services as one aspect of their social performance. Out of these twelve, five follow the Grameen model, three the SHG model, three are Cooperatives (MACS) and one follows the individual model. • •

Progress through commercial banking Most MFIs usually devote their energies in dealing with the uncertainty of loans. The rapid expansion of the MFI model in the last decade has been driven by private commercial banks. Initially the private banks were motivated by priority sector obligations since they did not have any rural branch networks. But after seeing perfect repayment rates the banks have realised that investment in MFIs is a profitable activity.

The estimates from the 2006 Annual Report of NABARD, show that commercial bank lending for the MFI sector has doubled every year for the last three years. Most of the banks have dedicated microfinance units. Lending has been concentrated in the South but since the agrarian crisis in Andhra Pradesh most banks are expediting their efforts to expand to other locations too. According to these estimates, about 60 percent of ICICI Bank’s microfinance lending consists of loans to MFIs under the partnership MFI model. Under the partnership MFI model, major banks like ICICI Bank are leading the way by partnering with SHARE and Basix that enabled MFIs to expand lending the same amount. Banks like Axis, ABN AMRO, ING Vysya, Standard Chartered and HSBC have supported 40, 19, 19, 12 and 8 MFIs, respectively. Citibank is providing core funding for the Indian School of Microfinance, which is part of the SEWA family of institutions in Ahmedabad, and ICICI bank is supporting training and incubation initiatives by Basix, CASHE-CARE, and MicroSave.

Conclusion Though the government proposed the Microfinance Bill in 2005 but there are two important areas of reform that would have a more immediate impact on financial inclusion, at least with respect to credit services. MFIs most often are subject to misunderstanding by the public, suspicion by local politicians, and destructive and ill-informed rumours from competing MFIs. It becomes critical to understand the reputation of MFIs among various stakeholders, to what extent this reputation is negative, and why these reputations are formed. It is also critical that MFIs improve transparency, streamline their operations and develop their communications skills to develop a sound reputation and protect themselves against defamation and misinformation. As the sector grows and competition increases, over-indebtedness of clients becomes a concern. There is a need to find out the extent and patterns of competition, the extent of multiple borrowing, and whether this is bad or not. There is also a need to think of ways to manage competition so that competition affects clients positively. Ritu Srivastava

Gates Foundation gives $20 million to World Bank The Bill and Melinda Gates Foundation is giving $20 million to the World Bank for a programme to provide financial services in developing countries. The World Bank will use the Gates funding to establish what it calls the Agriculture Finance Support Facility. The programme’s mission is to increase access to financial services, such as savings, credit, payments and insurance, in rural areas in developing countries as profitable business lines.

It will make grants to banks and other institutions. The global economic crisis means access to financial ser vices has become even more difficult for small farmers and rural entrepreneurs. In microfinance, the World Bank Group’s biggest investor is the IFC, a profit-oriented financial institution. The IFC had a microfinance portfolio of $498 million in 2007 and planned to double its investment to $1.2 billion by fiscal year 2010, which would

make IFC the largest investor in the microfinance industry. The World Bank said its data shows that 69 percent of small farmers in India did not have credit with formal financial institutions. In Honduras, Nicaragua and Peru nearly 40 percent of agricultural producers are “creditconstrained,” and less than 1 percent of farmers in Zambia and less than 2 percent of the rural population in Nigeria have access to credit from formal institutions. i4d | June 2009

MICROFINANCE SECTOR IN GHANA

Microfinancing Ghana The microfinance sector in Ghana is a fast growing industry. Financial Non Governmental Organisations (FNGOs) whose activities are mostly in rural and urban centres directed their efforts towards the productive poor. The mother organisation for FNGOs is the Association for Financial Non-Governmental Organisations (ASSFIN). Some Rural Banks undertake microfinance projects. Rural Banks are licensed and regulated by the Central Bank of Ghana through the ARB Apex Bank which is a mini Central Bank in Ghana for the Rural/Community Banks. The regulatory frameworks of the Rural Banks limit their expansion into certain geographical areas outside their catchmentâ&#x20AC;&#x2122;s boundaries. Financial Service Companies, Savings and Loans Companies, and some Commercial Banks have made an entry into the microfinance industry. Their microfinance operations are mostly confined within the urban centres for commercial reasons. Credit unions also engage in microfinance. The apex body of all Credit Unions is Credit Union Association of Ghana (CUA Ghana). Credit Unions are owned by its members or clients. Traditional Susu (daily savings) Collectors under auspices of the Susu Collectors Associations dominate the urban and rural areas. Despite tough regulation of this category of microfinance service providers, operators often run away with the savings of their victims. The government of Ghana through the Central Bank is re-tightening the regulation of this category of microfinance service providers. Other informal sector initiatives are Self Help Groups and Associations who undertake rotating savings and credit to their members on systematic basis. The Government has been setting up microfinance projects in collaboration with development organisations for certain sectors and/or deprived communities for the past few years. In Ghana, only Banks and Savings and Loans Companies can accept deposits June 2009 | www.i4donline.net

from the general public. Therefore, the inability t o r a i s e l ow i n t e r e s t liability through deposit mobilisation is a limiting factor in microfinance funding. The regulatory framework does not permit certain microfinance services such as insurance for clients by the microfinance institutions themselves. Insurance, for instance, have to be done through registered Insurance Companies. The regulatory restrictions are to forestall instability in the money market and the economy of Ghana. The 2002 population census of Ghana indicated 20 million people in Ghana. Apart from constituting a higher proportion of the overall population (51%), women also dominate agriculture, producing 70% of the national crop Sale of Mobile phone accessories has become a business in the villages output, as well as in trading where 24.7% of the 80.7% employed are females, compared to As such, Ghana has seen a significant 7.4% of the 84% employed males. A increase in the number of MFIs attempting higher proportion of these women are to provide financial services to the subsistence level farmers and traders. productive poor. Given the background that women form a greater proportion of the population, The genesis of ASA Initiative the potential microfinance market in After working for six years in the Ghana is dominated by women. The high microfinance sector at various positions unemployment rate for the (15-24) age ranging from Manager, University of group requires enterprise development and Cape Coast Credit Union to Director financing package to support individuals in (Microfinance), CRAN Microfinance, the category, particularly the females who the author instituted ASA Initiative Microfinance Ghana. During her eventful are more vulnerable. It is clear from the analysis above that a career, she has been succesful in the significant proportion of the economically implementation of the microfinance active population is engaged in agriculture projects for the Government of Ghana and the informal sector. These enterprises under the Economic and Social Recovery lack access to institutionalised credit. Programme (ESRP) of five districts in the

western region of the country and Social investment Projects in the Abura Aseibu Amankessie district in central Ghana. She was selected to join a team of five Practitioner Institutions for a study tour of the best five Microfinance institutions in Ethiopia and Bangladesh. The purpose of the study tour was to enhance the participating organisations’ potential for effective contribution to poverty reduction through microfinance in Ghana. As a result of the lessons learnt from the study, she returned and started ASA Initiative after analysing the research done about the operations and strategies adopted by the other institutions and adapting them to the Ghanaian milieu. Over time she has been working with women groups, youth and the productive poor, to enhance their capacity

Challenges The microfinance activity began with a loan of US$ 1,000 from her younger sister Vivian Tseyi (her lifetime susu savings) which Kitti lent to the first 10 women in 2006. In the same year the company was able to source a loan of US$100,000 from a local investment company to support the microfinance business. Timely loan repayment led to the approval of additional US$900,000 in 2007. However, the high domestic interest rate of 31% which is currently at 39% has negatively impacted the reserves of the initiative and it’s capacity in making clients’ business successful. The high domestic interest rate has, therefore, limited the ability of the initiative to expand its activities and reach the larger underserved population. Coupled with the high interest rate is the low capitalisation on lending to the microfinance clients. Lack of adequate funding has become a limiting factor in reaching out to the deprived communities who are still out of reach of these microfinancing institutions. To tackle this, ASA Initiative has started to look outside of the domestic funding market to garner adequate funds. The organisation has been contacting potential low interest fund providers/financers to help expand its funding capacity to reach out to many more rural and urban poor households through microfinance to improve their livelihood opportunities. ICT for development and computerisation of the operations for efficiency called for heavy initial investment. This was a big challenge and through careful planning Loan Performer software was purchased in the year 2008 from Crystal Clear Software, Uganda to computerise operations. For full computerisation and branch networking to take place, a bigger office building was needed where the head office would be set up. The initiative was able to acquire a two storey building of which renovation would be completed in the year 2010. Another challenge was attracting quality human resource. Initially as a young company, professionals were not attracted because of fear of job and income security. However, as the initiative began to offer remunerations slightly higher than that of the Commercial Banks, it has now attracted graduates from the universities and polytechnics, some of whom were earlier working with the Commercial Banks.

through microfinance with training to reduce women and youth unemployment and underemployment in the rural and urban centres.

ICTs for microfinance in Ghana In Ghana, Rural Banks and other Microfinance Institutions are linked to the big commercial banks. Computerisation and competition has lead to the search for efficient ways of serving clients. Commercial banks have computerised their systems and network with their branches. This has reduced the risks associated with the transport of money over long distances. Microfinance Institutions keep their reserve money accounts with commercial banks and rural banks in the villages. The use of Apex cheque by all rural banks in the country and the fast clearing system facilitate the institutions’ outreach to the microfinance clients nationwide. Rural electrification project of the Ghana Government has facilitated the extension of Internet connectivity in the remotest rural areas. Access to solar power in Ghana has complemented the efforts of electrifying remote places in Ghana for effective ICT usage. This has greatly facilitated the smooth functioning of offices and mobile micro financing in almost every part of the country. Mobile phone networks have been extended to almost all the villages in the rural areas of Ghana. With the influx of foreign telecommunication companies, there is high competition among the players hence cordless home mobile phone sets, Kasapa Home and Office Phones, were provided free to households as a strategy of connecting all homes and offices with mobile phones. Because of the free and low-cost handsets (ranging between US$4 - US$10), the use of mobile phones has helped extension of microfinance to rural communities in Ghana. Loan officers communicate effectively with group members at anytime and anywhere, even in the farms. Head office and branch offices are in contact with officers on the field all the time through mobile phone network. For instance, communication from Tigo (a popular cellular service provider in Ghana) to Tigo network cost less than US$1 (US$ 0.7) from 6.00am to 6.00pm. The Internet can be accessed on mobile phones and in ASA Initiative for example, all microfinance loans for approval are confined in one page credit memoir report and the soft copy is sent through email to all the members within the approval committee who are based out of different offices and towns. Through Internet conferencing within a minimum of 5 to 30 minutes loans approvals are given and feedback sent through email for loan disbursement. This has reduced a lot of paper work, also reduced the time taken for loan approval and made the entire system faster and flexible to reach out to many rural and urban clients within the shortest possible time.

Using ICTs to reach the unreached It is not always easy to connect all remote and rural areas. The advent of cost effective ICT solutions will enhance the coverage of microfinance to the underserved masses in Ghana, who mostly reside in remote rural areas. A clear manifestation of this has been seen in the case of the economical and sometimes free availability of mobile communication systems and their impact on Ghanaian microfinance. ICT tools can be employed to collect i4d | June 2009

loan repayments and savings on the field and all the related data entry work can be computerised to decrease the transaction entry time and costs. Even the above-mentioned change in transaction initiation and completion can go a long way in reducing staff and operational costs incurred in extending microfinancing services to the masses. The lower operating costs will translate into the ability to serve more people.

The road ahead An additional one hundred thousand households will be covered in each of the ten regions of Ghana with microfinance in the near future. ASA Initiative intends to have itâ&#x20AC;&#x2122;s microfinancing activities affect the whole community and the macro economy of Ghana. The organisation believes that in order to make the entire system more effective microfinance initiatives should be linked to the positive impact and development of the clients, the communities that the poor are part of and the economy within which they live. This has a give and take effect. Positive development has a multiplier effect on the economic and social lives of the affected communities and the economy as a whole. Establishment of Light Industrial Area As part of its microfinance project, ASA Initiative is collaborating with the local Government to establish Light Industrial Area for one of its main market segments, Forum for Small Scale Business Association (FOSBA). The light industrial sector is a new community all together which is going to be developed. 153 acres of land has been acquired near a village called Mpeasem. The land has been surveyed and registered with the Local Government. The demarcation, construction of roads, extension of electricity, water, clinic and other social amenities are ongoing projects to be funded by the Central Government through the Local Government. This has been done to reduce the cost of land per client. Further development work has been delegated to ASA Initiative. Workshops, stores, office buildings and residential buildings would be constructed to economically establish the productive poor from the rural areas and poor migrants from the city centres. The very poor or the poorest of the poor would be assisted with microfinance to own a residential house(s) to generate sustainable rent income for living. Microfinance plus business establishment would be the focal step. ASA Initiativeâ&#x20AC;&#x2122;s microfinance branch would be at the centre of the site to cater to the needs of the clients. The philosophy is based on focusing on the success of the clients. It is expected that the pilot project would be replicated in all the other nine regions of Ghana. This will positively contribute to the new community in terms of jobs, improvement of economic condition and overall well-being of the target group. The ultimate goal would be positive contribution to the GDP annually. Cultivation of cash crops for export and domestic industry About 70% of the population of 20 million Ghanaians are engaged in agriculture and most are at the subsistence level and they reside in rural areas. They are under the grip of poverty and its concomitants on the livelihood of these households. The break of the poverty chain is in the mirror of developing the economic June 2009 | www.i4donline.net

potentials and opportunities within their settlements. The rural clients would be assisted through ASA Initiative Cash Crop Project to acquire land of sizeable dimensions to cultivate cash crops for long term sustainable income generation. Traditional and non traditional cash crops would be cultivated for export and as raw material for domestic industry. The plan will begin with a coconut plantation project from the coastal areas of the Western, Central and Volta regions of Ghana. This initiative has been instituted in collaboration with the University of Cape Coast (Ghana) and University of Udine (Italy). Lack of adequate funding is still a hurdle here. Investment in information capital - computerisation and networking of ASA Initiativeâ&#x20AC;&#x2122;s branches Current and future microfinancing branches of ASA Initiative would be computerised for effective MIS and loan tracking. Growth challenges would be overcome through the establishment of robust MIS therefore the quality and the base of information capital would be expanded for effective, efficient and economical microfinance delivery to cover the ten Regions of Ghana. Quality management and human capital development Proactive development of human capital base of the initiative is crucial to achieving professionalism. ASA Initiative is committed to continue with the strategy of attracting, maintaining and motivating quality human calibre to combine with other corporate resources in achieving maximum economy of scale for the benefit of clients and other stakeholders. Pension plan for microfinance clients Liaising with investment companies to establish pension savings for clients is next on the agenda of the Initiative. Discussions have been ongoing with Data Bank Group, a large investment company in Ghana, to establish a quasi long-term mutual investment fund for microfinance clients into which small monthly savings/ investments, as a security for their old age would be contributed into. This initiative would begin during the last quarter of 2009 to cushion clients living during the time of their life when they have retired from active business.

Future of the microfinance sector in Ghana A majority of productive Ghanaian women have meagre incomes and live in abject poverty, ignorance and struggle for one square meal a day, lack clothing, shelter and other basic necessities. Even though it is expensive for financial institutions to maintain electronic accounts for them, they are bankable provided an effective methodology is employed. However, these poor productive households normally rely on the mercy of local money lenders who charge exorbitant interest rates ranging between 10% to 100% per month. The resultant effect is the perpetuation of debt burden which finally erodes their businesses and thereby increasing the poverty burden on the households. Microfinance has now become a household word in Ghana. Every household is talking about microfinance as a means of achieving sustainable livelihood. Hence, it is clear to see that there exists a large market for microfinance which is yet to be reached.

The Government of Ghana has identified microfinance as one of the main tools for poverty reduction, in promoting Small and Micro Enterprises and private entrepreneurs into middle income level by the year 2020. The Government has therefore been creating enabling legal and regulatory framework to enhance future operation of microfinance activities in the country. This would augment ASA Initiative’s activities in poverty alleviation and economic development. As part of its vision 2020 and poverty alleviation strategies the Government often collaborates with local microfinance institutions, mostly FNGO’s and Rural Banks to implement Government initiated microfinance activities for some sections of the deprived populace. Some of these projects include Microfinance and Small Loans Centre (MASLOC), Emergency Social Relief Programme (ESRP), Poverty Alleviation Fund, Local Initiative Fund etc. The goodwill of the Government of Ghana in embracing microfinance as major tool for poverty reduction has mirrored a very bright future for the industry. The industry is a fast growing one with large numbers of people underserved due to low capital base of the players of the industry. The umbrella organisation of microfinance, Ghana Microfinance Institutions Network (GHAMFIN), has been undertaking structural reorganisation to effectively oversee the activities of

member organisations. GHAMFIN has set up a sub-unit ASSFIN as part of it’s effort to gradually improving its capacity to support the member micro-finance institutions effectively. This came up as a result of commercial financial service providers such as Financial Service Companies, Savings and Loans Companies and some Rural Banks entering into the microfinance arena. An effective leadership is crucial to the future of microfinance in Ghana. With the introduction of microfinance as a diploma and degree courses at the University of Cape Coast, Ghana, more research work would be undertaken in microfinance in the near future which aim to serve as a basis of industry growth and improvement. Integration of ICTs in microfinance is envisaged to boost the future growth of microfinance initiatives as a whole.

Veronica Agodoa Kitti Managing Director ASA Initiative Ghana asainitiative@yahoo.com

RBI goes rural with SHGs Reserve Bank of India (RBI) plans to engage self help groups (SHGs) and primary agriculture credit societies (PACs) as business correspondents (BCs) to ensure greater banking penetration in the country’s interior rural belt. The banking regulator has decided to make use of the banking correspondent model extensively to provide banking facility to some 1 lakh unbanked villages of population in excess of 2,000. RBI Deputy Governor Usha Thorat recently said the central bank would have like banks to achieve the target by 2011. Besides trying to fulfil the target in time, RBI said the focus would also be kept on maintaining quality of banking services. Banking penetration doesn’t mean merely opening of bank accounts. Banks need to ensure that account holders use their bank accounts purposefully. We would also like banks to offer credit facility, insurance cover and remittance facility to rural account holders, Ms Thorat has recently said.

Incidentally, although PACs are in principal allowed to work as business correspondents, they are not being used for this purpose. Concerted efforts may be made for using PACS as BCs where such PACS are functioning

reasonably well, the RBI has recently said in its draft report on lead bank scheme. Likewise, the report observed that SHGs which have been successfully linked to

the banks have proven their ability to manage accounts and handle money. The local flavour of the SHGs and their intimate knowledge of the areas in which they operate as also their association with banks make them a good choice to act as business correspondents, the report said, adding that RBI might consider allowing banks to use mature SHG group leaders as BCs with IT solutions in place to ensure requisite safeguards. At present, banks are treading with caution in using business correspondents widely. Some quarters have voiced concerns over the safety features and possible misuse of this model. In this light, the banking regulator in its annual policy review of 2009-10 has announced that it would form a group to review the eligibility of persons who can act as BCs. It has underscored the need to take into account the experience of a few large BCs, the need to facilitate recycling of cash, apart from the regulatory and consumer protection perspectives. i4d | June 2009

Microfinance News

Information for development www.i4donline.net

Farm credit likely to be enhanced in India With inclusive growth as the buzzword, the Government of India is likely to enhance farm credit by nearly Rs 50,000 crore, enlarging the scope of subsidised credit to over 5 crore farmers across the country. During a meeting of Finance Minister Pranab Mukherjee with heads of public sector banks, the former emphasised that banks should increase spending on labourintensive sectors such as agriculture to boost the purchasing power of people. Though the Minister remained tightlipped on sectoral targets for banks, sources said farm credit would go up by more than 16% this year bringing under its cover an additional 50,000 people from 4.5 crore earlier. In the 2008-09 fiscal ending March 31, total farm credit was Rs 2.80 lakh crore which is expected to go beyond Rs 3.25 lakh crore this year. It is believed that the Congress-led UPA government would bring down the existing rate of interest for agriculture credit hovering around 9%. Even after a 2% government subsidy, the rate is still at a high of 7%.

RBI asks banks to review MSME lending policy Speaking at the one-day conference on ‘Learning from recession, saving an economy: Towards an MSME agenda’, Usha Thorat, deputy governor, RBI, asked the banks to review their credit policy towards micro, small and medium enterprises (MSMEs). Acknowledging the importance of sector, she said, “About 12.8 million MSMEs provide jobs to over 300 million people and account for 39 per cent of the manufacturing sector output and 33 per cent of exports.” Thorat reasoned that MSMEs have been badly hit by economic June 2009 | www.i4donline.net

downturn. “MSMEs are facing a slump in demand for exports and services, besides a build-up of large inventory, delayed payments and slowdown in remittances. She also pointed that MSMEs are the “worst sufferers” when a disaster strikes. Hence, these sectors must be provided relief on the lines of the National Equity Fund as recommended by the Chakraborty Committee. Indicating the government’s initiatives towards the same, Usha said, “RBI had taken unprecedented’ measures to ensure liquidity and credit flow to MSMEs to help the sector during the recessionary period now and a special refinance facility under Section 17 (3B) has also been extended to them.” Thorat also indicated that the regulator has granted in-principle approval for setting up to four credit information agencies to ensure better credit disbursal and monitoring. As per RBI guidelines, it is mandatory for domestic commercial banks (public and private sector) to provide 40 percent of Adjusted Net Bank Credit (ANBC) to priority sector, which includes agriculture and micro, small and medium enterprises. A recent finding revealed that major banks failed in achieving agri-advance targets until November 2009. The list includes major banks - Bank of Baroda, Oriental Bank of Commerce, United Bank of India, Corporation Bank, Union Bank, Punjab and Sind Bank and Syndicate Bank.

New government bringing in new hope for MSMEs The MSME sector in the country might get fiscal aid from the government soon. The newly formed government, led by the United Progressive Alliance (UPA), is focused on addressing the credit requirements of this cash-strapped sector. In the next few months, the government hopes to evolve mechanisms and structures to ease credit access to the MSME sector which is largely unorganised. It has proposed a separate fund for enterprises in the unorganised segment which the Ministry of MSME would push for in the coming months. In a bid to help MSMEs further, the ministry would also propose a ‘Procurement Policy’. Once this policy is implemented, targets would be set for the government departments and organisations to source

their requirements from the MSME sector. The ministry is likely to hold meetings with the government in the near future to discuss various issues and problems faced by small and micro units in the country. “About 42 million people are employed in the MSME sector in India, contributing heavily to the country’s total industrial output and exports. Evidently, the segment plays a major role in the economic growth of the country. With the government planning to take measures to provide support to the MSME sector, growth of the national economy is likely to get a boost,” says H Shivdas, proprietor of a small-scale apparel exporting firm in Trivandrum, Architha Exports. The government is also planning to bring about reforms in the Khadi sector, which has significant MSME presence. Furthermore, it intends to launch the different schemes recommended by the National Manufacturing Competitiveness Council (NMCC) to enhance productivity of MSMEs.

Sage India launches payroll software for SMEs Software solutions provider Sage India launched its payroll software designed for small and medium businesses to help companies with their salaryrelated operations. The Payroll software, ‘Sage Pocket’ comes in two versions — professional and premium — along with online modules available as add-ons. The Sage Pocket Professional solution is configurable and allows the user to set statutory regulations, calculate income tax, track reimbursements and generate pay slips. Employee master details can be maintained with the option to upload all the necessary documents. Sage Pocket has been simplified for Partner network of Sage to easily sell and implement it for their customers Further, the Sage Pocket Premium solution is an advanced version for multiuser, multi-firm and for up to 1,000 employees. With a starting price of Rs 25,000, Sage Pocket is now available with all authorised partners of Sage. Meanwhile, Sage Pocket’s set of modules available online enable employees to have an online access to information relating to human resources, leaves and claims.

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Snapshots of micro

Mahila Sphurthi Developed by: CoOptions A scalable product cum solution for banks, NBFCs, NGOs and private enterpreneurs who are in the space of micro-finance. http://www.cooptionstech.com/Mahila%20Sphurthi.aspx

Mahakalasm MIS Developed by: Ekgaon Technologies The MIS will allow central tracking of the accounts, financial position, loan repayment performance and related information for a community of SHGs. http://www.ekgaon.com/MIS

Financial Accounting and Management Information System (FAMIS) Developed by: BASIXâ&#x20AC;&#x2122;s software partner, Sathguru Management Consultants It was designed to be a comprehensive solution for accounting and management information needs. http://www.sathguru.com/index.php

i4d | June 2009

oďŹ nance solutions Banksoft Developed by: Processware Systems, Bangalore A software that enables branch automation, head office consolidation, and inter-branch reconciliation. A user-friendly software package, BankSoft provides integrity, flexibility and security to the user. http://www.processwaresystems.com/banksoft_main.htm

MIFOS Developed by: Grameen Foundationâ&#x20AC;&#x2122;s Technology Centre Mifos is a centralized management information system (MIS) platform featuring a user-friendly browser-based web interface running on top of a robust MySQL database. The open source framework allows microfinance institutions to select local developers to assist with the customisation, implementation and maintenance of their software http://www.mifos.org/

Financial Information Network and Operations (FINO) Promoted by: ICICI Bank FINO is a biometric enabled multi-function card for end users which can be part of a portable system. It will offer the advantages of a smart card, point of sales terminal advantages for the front end services, banking, software performance and reporting MIS for back-end as well as information services to all MFIs. http://www.icicifoundation.org/cs_fino.html

June 2009 | www.i4donline.net

ACCOUNTING SYSTEM IN ORISSA PANCHAYATS

e-Cashbook in Orissa panchayats Computerisation has been introduced in District Rural Development Agency (DRDA) and Block Panchayat level to maintain transparency and accountability in administration and finance. To start with the process a small tool namely PRIAsoft (Panchayati Raj Institutions Accounting Software) was developed by National Informatics Centre, Orissa State unit. It captures the month-wise/scheme-wise accounts inflow and outflow in shape of cash, bank, treasury and advance of the 3-tier Panchayati Raj Institutions i.e. Gram Panchayat, Block Panchayat and Zilla Panchayat. As a result, at the end of each month the funds flow statement of 3-tier PRIs is available. After the successful deployment of PRIAsoft, further needbased projects were taken up within the availability of funds for better benefit of the rural poor. This exercise was started during 200304 by computerising the Block Panchayat. Two desktops and a Computer Programmer having B.E and MCA qualification were

deployed in each Block Panchayat. Usage audit of the system confirmed that the system was prone to wrong entries by the semi-skilled Block Cashier. In order to plug the loophole in the system and to prevent incorrect entries an Enterprise-level double entry accounting package was envisaged. This application was also mandated to capture the daily financial transaction and prepare the abstract report for monitoring a number of anti-poverty schemes/ programmes. Therefore, it was decided to use accounting software available in the market. These accounting packages are targeted at small trading, manufacturing units. Apart from accounting, they offer features such as costing, sales and inventory management. However, there are hardly any solutions available for Non-Profit/ Government organisations like Block and DRDA. During this process, Xavier Institute of Management, Bhubaneswar offered a solution to provide an application namely PAMIS (Project Accounting and Monitoring Information System)

for Block and DRDA. PAMIS is a tool for Non-Profit organisations engaged in development work. PAMIS helps Non-Profit Government organisations to implement their projects and programmes in a timely manner and within the available budget. PAMIS, also helps the Project Directors plan and monitor all aspects of their projects and their programmes. Designed to manage core financial and physical aspects, PAMIS is easy to install and implement. PAMIS manages all accounting needs of an organisation effectively. All routine features of accounting are built into the software. To maintain the daily financial transaction at the Block and DRDA level, PAMIS has been implemented in all the 344 block and DRDA locations and the manual Cash Book has been replaced by Computerised Cash Book. The software can be operated in the following environment Operating environment: Server operating system: Any operating • system that supports Oracle database • Database: Oracle RDBMS • Client operating system: Windows 98, Me, 2000 or xp • Graphic User Interface: Developer 2000 runtime Platform: • Online Web-based version deployed • Offline batch processed Standalone version deployed

What is PAMIS?

PAMIS Training Programme in Sundergarh District

The version of PAMIS used by the Department of Panchayati Raj is called Panchayat Accounts Monitoring Information System. It is capable of capturing daily financial transaction of DRDA/Block based on the double entry i4d | June 2009

accounting system. To start with PAMIS, Master Data for Accounts, Budgets and Projects are to be initialised, which was initially bundled in the software by Panchayati Raj Department, Govt. of Orissa before installation in the Blocks and DRDAs. Then daily financial transactions are entered in 3 types of vouchers designed by Panchayati Raj Department, Govt. of Orissa. These 3 types of vouchers are Receipt, Payment and Journal. For ease of use, the manual vouchers have been colourcoded, green for receipt, red for payment and yellow for journal (advance adjustment) vouchers. Block Cashier prepares the manual vouchers based on the daily financial transaction and enters the data into the package. Then the software takes care of the generation of cashbook, journals, consolidated cashbook of Panchayat Samiti (Schemes) and Government (Salaries including Teachers’ salary), separate cashbook for Panchayat Samiti and Government, subsidiary cashbook for all schemes under Panchayat Samiti, advance ledger, balance sheet, receipt payment statement, income expenditure statement and so on.

PAMIS is implemented in Phulbani Block of Kandhamal District

• Financial performance monitoring Impact analysis: Currently, PAMIS is operational in 314 Block Panchayats and 30 Zilla Panchayats in Orissa. • PAMIS generated cash-bank book is official. • There is no manual cashbook in Block or DRDA of the State. • PAMIS generated reports are Comptroller and Auditor General compliant. • Chartered Accountants, Auditors are using PAMIS-generated receipt payment statement for making audit reports of Blocks and DRDAs. • It is also developed in accordance with the Panchayat Samiti Accounting Procedure Rule of the Government of Orissa.

Implementation procedure PAMIS Screenshot

Functional features of PAMIS are enumerated below: • PAMIS is an accounting software • PAMIS is a project planning software • PAMIS finds true expenses for a project not it’s allocated costs. • PAMIS treats a project as a complete accounting entity not merely a cost centre. • PAMIS monitors project financials • PAMIS monitors physical activities of projects • PAMIS ensures transparency, accountability and responsibility • PAMIS is a tool to obtain success in project planning, monitoring and execution Modules of PAMIS are as follows: • Double entry accounting • Project-based accounting • Location-based accounting • Physical activity monitoring • Financial budgeting June 2009 | www.i4donline.net

The chief architect of PAMIS is Professor Gopal Krishna Nayak Director, IIIT (Ex-professor of XIM, Bhubaneswar) who never thought that a semi-skilled Block Cashier will implement this software by understanding the Golden Rule of Accounting Panchayati Raj, Orissa Simplification of Accounting Procedure in PAMIS

Accounts Head Asset Liability Income Expenditure

Debit (Dr) Increase ( ) Decrease ( ) Decrease ( ) Increase ( )

Credit (Cr) Decrease ( ) Increase ( ) Increase ( ) Decrease ( )

Procedure. According to him “PAMIS is a dream project for us, the challenges of getting accounts done by non-accountants, getting a transparent system accepted by block-level functionaries, usage of technology by non- technocrats are stupendous. However, when PAMIS was used by all Blocks and DRDAs in Orissa, it became Golden Rule of Accounting Procedure incorporated in PAMIS Rule 1 : Debit what comes in, Credit what goes out Rule 2 : Debit the receiver, Credit the giver Rule 3 : Debit all expenses/losses, Credit all incomes and gains

the very first enterprise software that was rolled out on such a large scale in the government sector.” He devised a simple procedure and advised all Block Cashiers to keep this procedure beneath their table glass and keep it in their mind while preparing manual vouchers before entering the data into the computer. Gaining from his vast experience and strong willingness of high-level Administrators at the State Panchayati Raj Department, a training calendar was made and trainings were conducted at District Headquarters with separate resource persons having expertise in IT and Accounts. Cost Accountants, Chartered Accountants, IT Specialists travelled throughout the State and imparted training to officials starting from Project Directors, DRDA, Block Development Officers, Head Clerks, Computer Programmers to Cashiers. Hands-on training to generate cashbook from PAMIS was imparted to these officials. Special Features of PAMIS : The PAMIS software has three dimensions i.e. Accounts, Projects and Location. • It has the capability to consolidate block-wise data to prepare district-wise accounting reports and structured MIS reports. • Besides three types of transactions i.e Receipt (either Bank or Cash), Payment (either Bank or Cash), Journal, two new types of transactions were innovated. One is Receipt Mixture (RC) that captures both cash and bank receipts in one transaction. The other one being, Payment Mixture (PM), which captures the financial transactions involving both bank and cash disbursement and adjustment of advances. • The consolidated cashbook in PRIASoft format is generated through PAMIS at the end of each month and is transmitted to the PRIASoft portal of National Informatics Centre through file transfer protocol (ftp) from the stand alone desktop computers of Blocks and DRDAs.

•

Once this data is uploaded on to the PRIASoft portal, the citizen-centric reports are available in the public domain. Once PAMIS is uploaded online for all Blocks and DRDAs, at the end of each day anybody can analyse the progress made of each block. However, on pilot basis, some blocks of Cuttack District and Kandhamal District are implementing PAMIS in online mode. After success of this pilot, the same will be rolled out for all Blocks and DRDAs. These facilities are not available in the accounting softwares available in the market.

Conclusion This mammoth task is operating successfully at Block and DRDA level with the help of all stakeholders of Panchayati Raj Department, Government of Orissa starting from Gram Panchayat, Block Panchayat, Zilla Panchayat to State. The recognition of e-Cashbook as the official cashbook of the state of Orissa has created a desire among all stakeholders to accomplish its requirement for efficient and desired benefit of rural India in time.

Shreemanta Kumar Samal IT Specialist and MIS Nodal Officer, NREGS Cell, Panchayati Raj Department, Govt. of Orissa

Sanjay Prakash Sahoo Vice-President (Operations) CSM Technologies Ltd.

atom technologies signs up with Sahayata atom technologies, an Indian mobile payments service provider has joined Sahayata, a Micro-finance Institution (MFI) headquartered in Udaipur city in Rajasthan, India, recognised for working in the area of socio-economic development of women from weak economic backgrounds. atom’s mCollections solution model will provide Sahayata with a fully developed mobile solution for distributing loans and managing collections of loan repayments. Sahayata provides micro loans to rural women with an aim to help

women become self-employed and operate small businesses to support their livelihood. Since these women are located in remote rural areas it often

becomes difficult for Sahayata to reach them for disbursal tracking and loan

repayment collection. atom’s mobile based m-Collections solution provides better reach to these geographical locations by using mobile connectivity. Sahayata’s employees carry Java MIDP 2.0 mobile handsets with mcollection application loaded in it. This application helps them to connect directly with the backend operations of Sahayata on real-time basis to fetch the customer data for providing efficient and cost effective service. This has been possible because these remote locations are well connected with mobile coverage.

i4d | June 2009

MICROFINANCE AND GENDER EQUITY

Money for women by women This article looks into the role of MFIs in empowering women to get out of poverty and enable them to contribute in the nation’s development

Ritu Srivastava

June 2009 | www.i4donline.net

Why target women? Traditionally, women have been facing discrimination in access to credit and other financial services. Commercial banks often focus on men and formal businesses and neglect women who make up a large and growing segment of the informal economy. On the other hand, microfinance often targets women as 85 percent of their clients are women. Therefore, targeting women borrowers makes more sense from the public policy standpoint. From a business point of view, it has been observed that women clients register higher repayment rates. They even contribute larger portions of their income to household consumption than their male counterparts.

The global scenario The Microcredit Summit Campaign 2006 reported that more than 14.2 million among the world’s poorest women had access to financial services. Around 74 percent of the 19.3 million poorest women are served microfinance services. More than 3,300 Microfinance Institutions (MFIs) have reached 133 million clients by providing microloans in 2006. Out of these 133 million clients, 93 million were among the poorest when they took their first loan and 85 percent of these poorest clients were women. According to this report, 99.3 percent female clients are using solidarity lending methodology and 51 percent female clients use individual lending from MFIs. By December 2007, the Campaign counted 3,552 MFIs were reaching more than 154 million clients with ongoing loans. Out of these, 106 million beneficiaries were among the poorest and 83.4 percent (88.7 million) were women. According to the Microcredit Summit Campaign Report 2007, of the 3,316 microfinance institutions that were

covered in the report, 970 are in SubSaharan Africa, 1,677 are in Asia and the Pacific, and 579 are in Latin America and the Caribbeans.

Africa According to the World Bank’s International Finance Corporation (IFC), women own about 48 per cent of all enterprises in Africa. Around 61 per cent of borrowers among the reporting MFIs in Africa are women. Unregulated MFIs serve the highest percentage of women borrowers who represent just over 50 percent of borrowers from African cooperatives, 63 percent of borrowers from regulated MFIs, and 69 percent of borrowers from unregulated MFIs. Among almost half of the reporting unregulated MFIs, more than 70 percent of the borrowers are women. One explanation for the variation is that unregulated MFIs include NGOs and projects that specifically target women. Most of the MFIs target clients groups that are most vulnerable such as women and or people with very low incomes. Some of the MFIs who changed the lives of women in Africa are: Kenya Women Finance Trust (KWFT; http://www.kwft.org) In 1981, a group of women came together and formed the Kenya Women Finance Trust (KWFT), a microfinance lender dedicated to women. Initially, KWFT relied on limited donor funds and loans from commercial banks. Now it has become the largest microfinance institution for women in East and Central Africa. In 2006 alone, KWFT disbursed $52 million in loans to its clients, managed $16 million in member savings and had more than 200,000 accounts in seven of Kenya’s eight provinces. KWFT also provides medical insurance programme for its clients and

Regional Breakdown of Microfinance Data Region

Number of programmes reporting

Number of total clients in 2005

Number of total clients in 2006

Number of poorest clients in 2005

Number of poorest clients in 2006

Number of poorest women clients in 2005

Number of poorest women clients in 2006

Sub-Saharan

970

7429730

8411416

5380680

6182812

3422825

4036017

Africa Asia and

1677

96689252

112714909

74330516

83755659

63934812

72934477

the Pacific Latin America

579

4409093

6755569

1760405

1978145

1258668

1384338

& Caribbean Middle East

1287318

1722274

387951

755682

321004

621111

& North Africa Developing

3256

109815393

129604168

81859552

92672298

68937309

78975943

World Totals North America

55707

54466

13318

25265

7862

11765

& Western Europe Eastern Europe

3390290

3372280

76166

225011

47856

142873

and Central Asia Industrialised

3445997

3426746

89484

250276

55718

154638

World Totals Global Totals

3316

113261390

133030913

81949036

92922574

68993027

79130581

Source:: Microcredit Summit Campaign Report 2007

their families. For a yearly payment of about $60, KWFT clients get policies to cover inpatient, personal accident and funeral expenses. Pankop Women Farmers Forum The Pankop Women Farmers Forum reflects the new face of microfinance in Africa. Pilda Modjadji, founder of the Pankop Women Farmers Forum, started out with the goal of growing fruits collectively and using the proceeds to supplement family diet, raise incomes and pay school tuition fees,. Today they are a group of 300 members who are determined to create an alternative source of employment in the village. The women, with agreement and support of traditional chiefs and municipal authorities, set up a fruit and vegetable dehydration plant. The group got the funds from local commercial banks because Thembani International Guarantee Fund, a South African organisation created in 1996 by the US non-profit Shared Interest and the Swiss-based Recherchés et Applications de Financements Alternatifs au Développement (RAFAD), put up $70,000 in loan guarantees. With these funds, the women plan to meet European Union health and safety standards and start exporting their produce. Small Enterprise Foundation (SEF; http://www.sef.co.za) Founded in 1992, SEF is a not-for-profit, pro-poor microfinance institution based in the Limpopo province of South Africa. SEF aims to work towards the elimination of poverty and unemployment. This is accomplished through two programmes, the Microcredit Programme (MCP) and the Tšhomišano Credit Programme (TCP). MCP focuses on existing, but generally marginal micro-enterprises and provides them with microloans.

On the other hand, TCP strictly targets women who live below the poverty line. Both of SEF’s operations, MCP and TCP, utilise a methodology that has been adapted from that of the Grameen Bank of Bangladesh. As of December 2007, MCP had 15,677 active clients whereas TCP had served 30,063 clients. A vast majority of their clients have been women. Typical enterprises include hawkers of fruits and vegetables and new or used clothing, small convenience shops, and dressmakers. On average, each business employs 1.4 individuals, including the owner, on a full-time or part-time basis. By the end of March 2008, the programme had served 47,560 self-employed clients with a principal outstanding of 57 million Rands. Since inception, SEF has disbursed 437,064 loans for self-employment, to the value of 572 million Rands.

Asia and the Pacific The microfinance structure in Asia varies significantly across the countries, depending on the stage of financial development; the financial development and the economical development and the policy development. The International Finance Corporation (IFC) 2007 report states that the demand of financial services among poor people is extensive in Asia. The microfinance movement in Asia is more focused on women; 98% of borrowers were women in Asia in 2006, as compared to 66% in Africa and 61.8% in Latin America. It manages some of the lowest average loan balance worldwide, with a stronger social focus on the poor, presenting lower loan average values than in other regions; USD 151 in Asia in 2006, USD 183 in Africa and USD 671 in Latin America. Grameen Bank in Bangladesh, Friends of Women’s World Banking, India (FWWB-I) and Sadhan in India, Tianjin Women’s i4d | June 2009

Federation in China are some of the major MFIs initiated by women entrepreneurs. Friends of Women’s World Banking, India (FWWB-I; http:// fwwbindia.org) In 1982, Friends of Women’s World Banking, India (FWWB-I) was created as one of the first few affiliates of Women’s World Banking. For the first seven years of its operations from 1982 to 1989, WWB’s activities were limited to providing loan guarantees for poor women in the state of Gujarat. After modifying the byelaws in 1989, FWWB expanded its financial services for poor women beyond the state of Gujarat. The scope of its activities in microfinance, as well as its geographical coverage, increased to 91 organisations in 12 states as on March 2006. FWWB India has adopted a ‘Credit Plus’ approach and its current activities include two broad programme areas. FWWB India has a Revolving Loan Fund, which serves to refinance partner organisations that provide financial services to the poor. FWWB India also supports these partner organisations through the provision of institutional development programmes to expand their capacity to manage credit and savings activities. In addition to the above, FWWB has also been involved in micro insurance, supporting innovations in microfinance, etc. Tianjin Women’s Federation (http://www.tjwbi.com/english/ aboutus) The Tianjin Women’s Business Incubator (TWBI), a non-profit business incubator located in Tianjin, China, is dedicated to promoting the growth and development of women-owned businesses of all types in Tianjin. While there are over 400 business incubators in China, TWBI is the only one which is focused on employment creation and empowerment of a disadvantaged community. The core mission of the centre is to provide longterm sustainable opportunity of employment for women. TWBI believes that the best way to help women entrepreneurs and women employees to have good opportunity of employment is to provide assistance and help women enterprises that are in the infancy and development stage. In Tianjin, more than 50 laid-off women have carved out their own businesses with the centre’s help. Recently, the centre received a donation of USD 200,000 from the World Bank to equip the centre with information communication technology (ICT) tools.

Latin America and the Caribbeans By the end of the financial year 2005, microfinance in Latin America including the Caribbeans maintained its steady pace both in terms of scale and outreach while MFIs kept their commitment to serve the lowest income sectors. In 2004 and 2005, the outreach of microfinance institutions were increased by 20 percent of total and 5.2 million borrowers with loan worth approximately US$ 5 billion. According to the Microfinance Information Exchange, Inc.’s (MIX) report ‘Benchmarking Latin American Microfinance 2005’, 40 percent of women are actively participating in microfinnace activities. In 2007, 34% Latin Americans were poor and 13% lived in extreme poverty. Pro mujer and FUNBODEM (La Fundación Boliviana para el Desarrollo de la Mujer) are two major MFIs working for women empowerment. June 2009 | www.i4donline.net

Pro - Mujer (https://promujer.org) Pro Mujer is an international microfinance and women’s development network, who’s mission is to provide Latin America’s poorest women with the means to build livelihoods for themselves and futures for their families through microfinance, business training, and healthcare support. The network also links women and their families with existing resources and services in their communities. The group has its network in Argentina, Bolivia, Peru, Mexico and Nicaragua. In 2007, the group provided credit, healthcare and business training to 193,000 Latin American women and offered healthcare to approximately 965,000 children and extended family members. Pro Mujer also organises women into community banks of 20 to 30 women each who can apply for loans as a group, disburse the money to members, and collect loan payments and savings deposits.The group offers a range of loan products to meet the needs of poor women entrepreneurs. The most common are working capital loans, which range from US$50 to US$1,500 with a repayment term of four to six months. Loans start small, US$50 to $100, and those women who repay the loan on time qualify for larger loans. Pro Mujer recently developed the Star Product (Producto Estrella) in Mexico, which gives larger loans to longtime Pro Mujer borrowers, enabling them to scale up their businesses more effectively. La Fundación Boliviana para el Desarollo de la Mujer (FUNBODEM; http://www.funbodem.org) FUNBODEM is an affiliate of Women’s World Banking and a member of the unregulated MFI association, FINRURAL. FUNBODEM is a non-governmental, non-profit organisation that was founded on July 15, 1987 - an initiative of a group of women willing to support the provision of financial services to help the low-income women of Bolivia come out of poverty. The foundation’s objective is to improve the earning capacity of women and to enhance their role in society. FUNBODEM only loans to women, and they require all clients to put their savings into guaranteed deposits.

Conclusion Realising the fact that a high percentage of women are among the poorest of the poor. Microfinance could be one of the solutions to help them expand their horizon and offer them social recognition and empowerment. The question is not whether we should focus on women or men. Both play a vital role in generating income and managing the social economy. Their capacity for innovation stimulates general economic growth. Microfinance programmes should be accessible to both genders and offer adequate access to financial services, training and technical assistance. Short-term assistance programmes like providing credit, technology and skills enhancement training programmes, etc., will increase the productivity of women’s labour. Which will, in turn, increase their longterm productivity and access to productive resources, creating social, technological and economical mechanisms to reduce conflicts between women’s productive and reproductive roles. An ideal microfinance programme should consider women in a broader context, as the nucleus of a family, that is vital for societal improvement and progess.

ZERO MASS FOUNDATION

Development initiatives ZERO Microfinance and Savings Support Foundation (ZERO MASS Foundation/ZMF) has been a pioneer in the field of Financial Inclusion space as a Business Correspondent (BC) to 25 Banks in India including the State Bank of India (SBI). ZMF helps banks increase their outreach in ‘Rural Unbanked India’ through its Customer Service Points (CSPs) working as village branches using the Branchless Banking technology. A.Little.World Pvt. Ltd. (ALW) is the technology provider for all the banks who have engaged ZMF as a BC. ALW provides the technology as a service to Banks under its brand “ZERO”. ZMF creates the last mile operations network in villages, under pre-defined service agreements with Banks and front-ends the delivery of full-featured transactional services on behalf of Banks for Financial Inclusion on the ground. ZMF, a Section 25 Company closely affiliated to ALW provides field operations for the ZERO platform. ZMF manages the field force, account creation, appointment of Customer Service Points (CSPs), management of cash and other logistics at the last mile. ZMF in turn collaborates with strongly placed local organisations, district and state administration to ensure smooth deployment and operations. As per a typical agreement between ZMF and a bank, ZMF’s scope of services include: • Enrolment of customers for no-frills zero-balance savings accounts and other account types that may be specified by the Bank. • Enrolling, training and equipping of Customer Service Points (CSPs) in villages to provide various kinds of transaction services including but not limited to cash deposit, cash withdrawal, transfer of money, payment of utility bills, disbursal of loans, collection of loan instalments, and cashless payments at local and remote merchant establishments. • Engaging the CSPs to provide enrolment services for opening no-frills account • Engaging the CSPs to provide various kinds of transaction services including but not limited to cash deposit, cash withdrawal, transfer of money, payment of utility bills, and disbursal of loans and collection of loan installments. • 3rd party cash collection • Cashless payments at local and remote merchant establishments. • Management of cash • Lending activities on behalf of the Bank (as an MFI) Other service as may be advised by the Bank in writing to ZMF, and which ZMF agrees to perform

The ZERO platform is based on new generation mobile phones and Fingerprint authentication which converts new generation low-cost NFC (Near Field Communication) mobile phones with large storage capacities as a secure, self-sufficient bank branch, with biometrics based customer ID, for customer enrollments for no-frills accounts and all types of transactions in the village with the local Customer Service Point operator acting as a Teller. Existing Mobile communications networks are used for all transaction uploads, downloads and application updates. The platform ensures that Banking facility is provided to the right people at the right time and the right amount of money is transacted. The CSPs are equipped with a mobile phone and a Fingerprint Scanner cum Receipt Printer to carry out Banking and Payment transactions (i.e. Cash Deposit, Cash Withdrawal, Account to Account Transfer, Balance Enquiry, Mini Statements, etc.) using both online connectivity to Banks and in an offline mode (with daily batch settlements). The main features of the ZERO platform are: • Mobile phone as core Bank branch • Smart cards not needed for biometric authentication in local service area • Mobile phone used for opening accounts on-the-spot by local CSP • Voice prompts during enrolment and transactions • Printout of each transaction The platform employs biometrics based ID, RFID smart cards, and NFC (Near Field Communication) mobile phones as acceptance and enabling devices (with merchants, field forces of MFIs and as cashless ATMs). The ZERO platform can be easily deployed for the following services: • Biometric Identity • Cash deposit • Cash withdrawals • Money transfer • NREGA / Pensions • Micro Credit • Micro Insurance • Cashless Payment • Utility Payments • SHG Utilities like Disbursals, Repayment and Record of Attendance As evident from the platform’s applications, ZERO MASS Foundation (ZMF) also works closely with Government Departments to ensure that the exact amounts of Government i4d | June 2009

benefits reach in time to the rightful beneficiaries for Government programmes like NREGA (National Rural Employment Guarantee Act), Social Security Pensions (SSP), Scholarships, Housing Grants, etc. Bank accounts are opened for all such Government beneficiaries by ZMF. ZMF also helps Government departments to automate processes such as Attendance and Job Demand for NREGA using the beneficiary fingerprint authentication and by ascertaining the GPS (Global Positioning System) co-ordinates of the work sites. ZERO Platform has been built as a cost effective method for Banks to extend all their products and services such as Savings, Loans, Recurring Deposits, etc., to customers. The platform is also built as an easy to use option of illiterate and semi-literate population in villages with features like Graphical User Interface and Voice Guidance. ALW and ZMF have done many innovations to bring down cost of operations for banks as well as for rapid scale up of operations. Few examples of such innovations are: A. ZERO platform can be used by customers without using expensive Smartcards

B. The CSP in a village can enroll customers using the same mobile device that is used for carrying out transactions with an easy to use graphical interface C. Use of both online and offline methods of transactions ZMF has expanded its operations in 19 states with more than 8,000 CSPs covering more than 16,000 villages. About 4 million customers have been enrolled under the Financial Inclusion programme. Multiple State Governments are disbursing their NREGA wages and Social Security Pensions using the ZERO system at the CSPs of ZMF. ZMF actively works towards improving commercial viability of CSPs by offering multiple products and services through the ZERO platform. A major hurdle in scaling up of the operations is to find the right business model for commercial viability of all stakeholders in the ecosystem, e.g. Customer Service Point (CSP) operators, Banks and ZMF. ZMF is constantly working with all the partner institutions to arrive at the right commercial models in all specific geographies of India. Lokanath Panda Co-Founder and Director, ZERO MASS Foundation and A.Little.World Pvt. Ltd.

FTK Technologies implements vernacular interface in government schools FTK Technologies co-branded product, Magikeys, developed with FTK’s LooKeys software, is changing the face of computing in government schools. The software, co-developed with the computer education vertical, Educomp Solutions, is specifically oriented to the needs of Indian Government schools, allowing both Students and Teachers all across India to enjoy computing experience in their mother tongues through an intuitive and easy-to learn interface, using the technology of FTK’s flag ship product- LooKeys. “We took into consideration the fact that most government schools aspire to introduce their students to the world of computers, but face obstacles due to language barrier and the familiarity and preference of the students with their mother tongue” said Rafi Palgi, FTK Executive Manager “Based on the expertise and experience of our partners in Educomp, we created a special interface that will function similarly as our comprehensive software, LooKeys, and that will enable computer-aided teaching and learning in Indian languages. Educomp, as the market leaders in computer education, along with their devotion and passion to this cause, are the most qualified partner to take this revolution and implement it in the field.” Feedback received from the schools using the software

June 2009 | www.i4donline.net

indicates the direct influence on learning across the board. “Even teachers of subjects such as physics and science are excited now to use aids such as power point presentations, which could not used so far, as teachers were restricted to English in almost every aspect when working with computers” Palgi explains. “As this was part of our vision when creating Magikeys, it gives us immense pleasure to see how we are helping to create a new generation of young computer users, using computers in their own mother tongue. Our commitment is, and will always remain, to help bring the computing experience to the entire people of India. MagiKeys, which was specifically created for the next generation of users, is maybe the most important step towards achieving that goal.” One emphasis that was implemented in Magikeys was a fully functional Offline interface that would enable teachers and students to use MS-OFFICE and other Unicode compliant applications in their own languages. In schools that enjoy internet connectivity students can also write mails, chat and surf the net in their own language using MagiKeys. The product is used by Government Schools across the nation, and has proven to be a priceless tool for the next generation of computer education.

BEST MICROFINANCE INSTITUTIONS

Forbes magazine’s top 50 MFIs The first-ever list of the World’s Top 50 Microfinance Institutions selected by Forbes were chosen from a field of 641 micro-credit providers in the year 2007. This list was prepared by Microfinance Information Exchange (www.themix.org). To qualify, the institutions must have made available their audited financials and must have passed a review by a Forbes panel of advisors. The table gives the rank (out of 641) for the top institutions according to scale, which is based on the size of their gross loan portfolio; efficiency, which considers operating expense and the cost per borrower as a percent of the gross national income per capita of their country of operation; risk, which looks at the quality of their loan portfolios, measured as the percent of the portfolio at risk greater than 30 days; and return, which is measured as a combination of return on equity and return on assets. Each category is equally weighted for an institution’s overall ranking

Rank

Name of MFI

Country

Scale

Efficiency

Risk

Returns

ASA

Bangladesh

Bandhan

India

108

Banco do Nordeste

Brazil

213

Fundación Mundial de la Mujer Bucaramanga

Colombia

193

FONDEP Micro-Credit

Morocco

119

196

Amhara Credit and Savings Institution

Ethiopia

126

118

Banco Compartamos, S.A., Institución de Banca Múltiple

Mexico

295

Association Al Amana for the Promotion of Micro-Enterprises Morocco

Morocco

212

133

Fundación Mundo Mujer Popayán

Colombia

181

141

Fundación WWB Colombia - Cali

Colombia

206

155

Consumer Credit Union ‘Economic Partnership’

Russia

300

Fondation Banque Populaire pour le Micro-Credit

Morocco

126

219

Microcredit Foundation of India

India

142

185

EKI

Bosnia and Herzegovina

102

242

Saadhana Microfin Society

India

263

Jagorani Chakra Foundation

Bangladesh

136

176

128

i4d | June 2009

Rank

Name of MFI

Country

Scale

Efficiency

Risk

Returns

Grameen Bank

Bangladesh

280

100

Partner

Bosnia and Herzegovina

169

230

Grameen Koota

India

209

106

156

Caja Municipal de Ahorro y Crédito de Cusco

Peru

222

119

Bangladesh Rural Advancement Committee

Bangladesh

159

126

205

AgroInvest

Serbia

195

222

Caja Municipal de Ahorro y Crédito de Trujillo

Peru

163

220

101

Sharada’s Women’s Association for Weaker Section

India

229

207

MIKROFIN Banja Luka

Bosnia and Herzegovina

240

205

Khan Bank (Agricultural Bank of Mongolia LLP)

Mongolia

149

280

INECO Bank

Armenia

173

202

Fondation Zakoura

Morocco

268

194

Dakahlya Businessmen’s Association for Community Development

Egypt

200

215

102

Asmitha Microfin Limited

India

254

111

Credi Fe Desarrollo Microempresarial S.A.

Ecuador

252

206

Dedebit Credit and Savings Institution

Ethiopia

246

154

MI-BOSPO Tuzla

Bosnia and Herzegovina

128

120

283

Fundacion Para La Promocion y el Desarrollo

Nicaragua

173

171

100

Kashf Foundation

Pakistan

123

194

219

Shakti Foundation for Disadvantaged Women

Bangladesh

170

221

151

enda inter-arabe

Tunisia

198

257

Kazakhstan Loan Fund

Kazakhstan

120

118

320

Integrated Development Foundation

Bangladesh

300

134

140

Microcredit Organisation Sunrise

Bosnia and Herzegovina

114

103

341

FINCA-ECU

Ecuador

125

138

264

Caja Municipal de Ahorro y Crédito de Arequipa

Peru

126

220

215

Crédito con Educación Rural

Bolivia

135

152

298

BESA Fund

Albania

109

135

345

SKS Microfinance Private Limited

India

395

141

Development and Employment Fund

Jordan

388

135

Programas para la Mujer – Peru

Peru

292

242

Kreditimi Rural i Kosoves LLC (formerly Rural Finance Project of Kosovo)

Kosovo

213

158

247

BURO, formerly BURO Tangail

Bangladesh

137

207

186

Opportunity Bank A.D. Podgorica

Serbia

234

319

Sanasa Development Bank

Sri Lanka

206

241

Source: Forbes Magazine (http://www.forbes.com/2007/12/20/microfinance-philanthropy-credit-biz-cz_ms_1220microfinance_table.html) June 2009 | www.i4donline.net

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India News Nasscom wants to partner govt for ‘inclusive’ growth

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Samsung launches solar-powered phone Samsung launched a low-cost solar-powered mobile phone. The new handset, launched under its low-cost line of products Guru at a price of Rs 2,799, has a solar panel on the back, which can be used to charge the battery anywhere the sun is shining. The phone, christened the Guru E1107, can provide around 5-10 minutes of talktime with one hour of solar charging when the handset is turned off and sunlight has adequate intensity. According to the Country Head, Samsung India, solar charging will give enough time to make few important calls when there is no electricity. The battery will attain full power with about 40 hours of solar charging. The handset, will be in shops by the end of this month. The company is also planning to introduce in India its solarpowered touchscreen mobile handset, Blue Earth - unveiled at the GSMA Mobile World Congress in Barcelona, Spain early this year.

University develops wireless tech to detect landslides Students of Amrita Vishwa Vidyapeetham University have developed a wireless network system for landslide detection, in collaboration with European Commission and Indian Space Research Organisation (ISRO). The technological breakthrough system was developed as part of the research project called, Wireless Sensor Network with Self-Organisation Capabilities for Critical and Emergency applications (WINSOC). Wireless panels with sensor nodes to read different parameters of the soil, like moisture, vibration and movement will be embedded 15 metres beneath the

The apex body representing the Indian Technology (IT) industry, the National Association of Software and Service Companies (NASSCOM) stated that it would like to work with the government to bring about an inclusive (which benefits all sections of society) economic growth agenda. NASSCOM President, Som Mittal stated that the industry and the government would have to join hands to accelerate IT adoption in the government sector. The IT-BPO industry has the potential to transform the country and play a major role in the development of India’s key sectors, including education, healthcare, infrastructure, citizen services and financial inclusion, thereby creating significant employment opportunities across India, with a consequential impact on economic growth. NASSCOM and the industry look forward to working closely with the government on this key agenda. The software body has also urged the government to extend availability of benefits under Sections 10A/10B for units in the Software Technology Parks of India (STPI) and Export Oriented Units (EOU) to mitigate the impact of the recession and protectionist measures being adopted globally. Another area of concern for the IT companies is the duplicity of indirect taxes for packaged software and policies for service tax refunds. Nasscom has requested the government to develop a uniform approach on transfer pricing and amend Fringe Benefit Tax (FBT) on employee stock options or ESOPs.

earth at different points. These sensors will be attached to a wireless transmission device, which will convert analog value into digital value and send the inputs to the base stations, which will be connected to Amrita mutt’s Kollam campus. Experts will be monitoring the inputs from the base stations in real time and any unusual behaviour or extreme value will trigger an alarm. The fully tested model has become operational in Munnar, Kerala. The system can be deployed in any part of the country prone to landslides and snow avalanches. Besides, the application could be put to industrial use for study of gas leakages or in conservation of forests by early identification of forest fires during summer. As part of this project, representatives from various European partners like University of Rome, Selex Communications, Intracom Telecom, Czech Centre for Science and Technology have arrived at the Amrita University to learn about the first-ever wireless sensor network system for landslide detection.

ICRISAT develops climate change-ready varieties Improved crop varieties developed by the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), and

its partners, are able to withstand severe droughts, tolerate higher temperatures and mature early, enabling farmers to be ready to meet the challenges of climate change by cultivating the improved crops. According to William Dar, Director General of ICRISAT, the current research strategy at the Institute is to improve the heat-tolerance and drought-resistance qualities of ICRISAT’s mandate crops. ICRISAT’s research is focused on crops such as pearl millet, sorghum, chickpea, pigeonpea and groundnut which are important for the livelihood of the people in the dryland areas. These crops have several natural evolutionary advantages for the global warming scenarios. Both pearl millet and sorghum have high levels of salinity tolerance, and hence are better adapted to areas that are becoming saline due to global warming. Some of the pearl millet varieties and hybrids developed are able to flower and set seeds at temperatures of more than 42 degrees centigrade, in areas such as Western Rajasthan and Gujarat in India. Improved sorghum lines have also been developed that are capable of producing good yields in temperatures of 42 degrees C, and have stay-green traits that can enhance terminal drought tolerance. i4d | June 2009

World News NASA to grant $8 million for climate change education

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ITU establishes new study group to deal with climate change International Telecommunication Union (ITU) has established a Focus Group on ICTs and Climate Change and will formalise the Focus Group’s output as ITU-T Recommendations including a methodology for evaluating the effects of ICTs on climate change both in direct terms and how ICTs can reduce emission in other industry sectors. Study Group 5 was chosen as the lead study group and will be renamed the Study Group on Environment and Climate Change to reflect its new mandate. SG 5 remains the lead Study Group for protection against electromagnetic effects. Specifically SG 5 will work on documents related to: 1. Study of methodologies for calculating the amount of greenhouse gases (GHG) emissions from ICTs, and the amount of reduction in the GHG emissions in other sectors as a result of using ICTs. 2. Creation of a framework for energy efficiency in the ICT field, taking account of WTSA Resolution 73. 3. Study of methodologies for power feeding that effectively reduce power consumption and resource usage. 4. Study of methodologies that reduce environmental effects for ICT facilities and equipment such as recycling. Essentially, the group will aim to see that standards are developed in the most appropriate way and that no duplication of effort occurs. It will also provide a single point of contact for ICT and Climate Change activities in ITU-T and seek collaboration from external bodies working in the field. June 2009 | www.i4donline.net

NASA announced that it will grant $8 million to fund educational projects on global climate change. NASA aims to enhance students’ academic experiences and improve educators’ abilities to engage and stimulate their pupils in this field. The federal agency seeks proposals for students of elementary, secondary, undergraduate and lifelong teaching and learning. The funding opportunity supports NASA’s goal to engage students in the critical disciplines of science, technology, engineering and mathematics. NASA called for projects that improve teacher competency for global climate change education; strengthen teaching and learning about climate change using NASA Earth system data and models; and enable global climate change science research experiences for undergraduate or community college students and pre- or in-service teachers, including those in non-traditional teacher licensure programmes.

World Bank commits US$50 million for ICT in Nigeria The World Bank has agreed to commit US$50 million on ICT infrastructure development, connectivity, skills development and capacity building in Nigeria. With the help of this investment, the World Bank is hoping to achieve significant transformation in the region. With the World Bank funding the country will further consolidate its position as the hub of ICT development and the largest ICT market in Africa, which would attract investment by international telecom companies. The key intervention in Nigeria includes connectivity, infrastructure development and the outsourcing sector. The bank has to date committed hundreds of millions of dollars for the development of ICT throughout Africa.

Brunei’s strategic plan to achieve e-Governance Brunei has moved a step closer towards achieving e-governance with the launch of a strategic plan that will map the way to realising the initiative over the next five years. The plan encompasses strategies such as increasing human capacity in IICTs, research and development of optimising online services tailored specifically for the public and improving connectivity between ministries. Dubbed the e-Government Strategic Plan 2009-2014, it addresses the needs of the three main stakeholders, namely the citizen, industry and government. The plan is based on five key strategic priori-

ties, which have been developed based on the progress made through the e-Governnance initiative so far. The first strategic priority focuses upon the development of capabilities and capacity. Civil servants will be trained with the relevant ICT skills to successfully implement e-government projects. Strategic Priority Two (SP2) will focus on enhancing e-Governance through reviewing, revising and developing policies and guidelines to allow for the effective delivery of e-Government projects. Under this strategic priority, the legal framework will be updated to suit the e-Government initiative. Security and Trust in e-Governance will be the focus of SP3, as the necessary infrastructure will be put in place to ensure that electronic transactions and exchange of information is kept confidential and is conducted in a secure manner. ICT awareness programmes will be introduced to educate all parties of the prevalent ‘cyber risks’ and the precautions that ought to be taken to minimise these threats. Strategic Priority Four aims to integrate the ministries under a common network, where government agencies will be able to work together more effectively. ICT tools and resources will also be standardised to ensure efficient and cost-effective use of these resources. These criteria fall under the ambition of the realisation of a ‘one government’ network. Lastly, Strategic Priority Five calls for a more convenient and efficient approach to online government services for the public. Wherever applicable, the public will have 24-hour access to these e-services.

FAO-GTZ MICROBANKING SYSTEM FOR WINDOWS (MBWIN)

Technology for microfinancing The FAO-GTZ MicroBanking System is a software that is aimed at managing a financial organisation’s client transactions in a comprehensive manner, maintaining it’s general ledger, and at monitoring all operations. The system is the product of collaboration between the Food and Agriculture Organisation of the United Nations (http://www.fao.org) and Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH (http://www.gtz.de). The FAO-GTZ MicroBanking System for Windows (MBWin) is the successor of the older DOS-based FAO MicroBanking System. The system has been designed and developed for a wide range of Loans Screen banks and financial intermediaries. With an eye on the varying needs of its prospective users, the software has been designed on a multi-tier architecture, which is scaleable and can be adapted to a variety of hardware configurations. It is modular in terms of applications and functionality. Carrying over features from the earlier version of the software, MBWin has modules for current accounts, savings accounts, time deposits, share accounts and loan accounts that interface with the general ledger module (GL) and the contact information module (CIF). The centralised CIF module maintains comprehensive information on corporate and individual customers, guarantors and signatories, and it has additional features for specialised microfinance System Configurator Screen operators that deploy group methodologies. MBWin offers a classic user-friendly menu structure as well as a set of speed buttons for quick access to the most

http://www.mbwin.net

common functions. An inbuilt report generator allows users to custombuild reports to meet their requirements. The report generator has been designed to meet the Customer Information File Screen basic internal and external reporting requirements of most financial organisations. A product generator allows the user to setup and specify products without the need of reprogramming MBWin’s source code. For users who are looking forward to migrating from the older version of this software, Batch Data Entry Screen M BW i n h a s a number of utilities which help with the migration of data, translation of the system into new languages apart from assistance with the conversion of work from manual operation. The in-built MIS System allows the user to consolidate and merge branch level MBWin databases at the head office of the institution where the system has been deployed. All reports can be exported in many formats including MS Excel spreadsheets. The full version of MBWin costs US$1500 for a single user and US$2000 for the first ten concurrent users. MBWin Light (preconfigured for a single user) is also available for US$500. A fully functional demo version of the software can be downloaded for free from their website. i4d | June 2009

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD), INDIA

Banking for All The National Bank for Agriculture and Rural Development (NABARD) was set up as an apex Development Bank with a mandate for facilitating credit flow for the promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It is also mandated to support all other allied economic activities in rural areas, to promote integrated and sustainalbe rural development and secure prosperity of rural areas. In order to facilitate rural prosperity, NABARD: • Provides refinance to lending institutions working in rural areas • Brings about and promotes institutional development • Evaluates, monitors and inspects the client banks and lending institutions Apart from these functions, NABARD also acts as a coordinator in the operations of rural credit institutions, assists the government, the Reserve Bank of India and other organisations in matters pertaining to rural development, offers training and research facilities to banks, co-operatives, and organisations working in the realm of rural development and helps the state governments in achieving their targets of providing assistance to institutions in agriculture and rural development. NABARD also acts as a regulator for co-operative banks and Regional Rural Banks (RRBs).

Some milestones 1. Refinance disbursement under ST-Agri & Others and MTConversion/ Liquidity support aggregated INR 16952.83 crore during 2007-08. 2. Refinance disbursement under Investment Credit to commercial banks, state cooperative banks, state cooperative agriculture and rural development banks, RRBs and other eligible financial institutions during 2007-08 aggregated INR 9,046.27 crore. 3. Through the Rural Infrastructure Development Fund (RIDF) Rs.8034.93 crores were disbursed during 2007-08. With this, a cumulative amount of INR 74,073.41 crore has been sanctioned for 2,80,227 projects as on 31 March 2008 covering irrigation, rural roads and bridges, health and education, soil conservation, drinking water schemes, flood protection, forest management etc. 4. Under Watershed Development Fund with a corpus of INR 613.71 crore as on 31 March 2008, 416 projects in 94 districts of 14 states have benefited. 5. Farmers now enjoy hassle free access to credit and security through 714.68 lakh Kisan Credit Cards that have been issued through a vast rural banking network. 6. Under the Farmers’ Club Programme, a total of 28,226 clubs covering 61,789 villages in 555 districts have been formed, helping farmers get access to credit, technology and extension services.

June 2009 | www.i4donline.net

www.nabard.org

NABARD was established by an act of the Indian Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). Some of the major activities of the bank since it’s inception are as follows: • Preparing of Potential Linked Credit Plans for identification of exploitable potentials under agriculture and other activities available for development through bank credit. • Refinancing banks for extending loans for investment and production purpose in rural areas. • Providing loans to State Government/NGOs/Panchayati Raj Institutions (PRIs) for developing rural infrastructure. • Supporting credit innovations of NGOs and other nonformal agencies. • Extending formal banking services to the unreached rural poor by evolving a supplementary credit delivery strategy in a cost effective manner by promoting Self Help Groups (SHGs). • Promoting participatory watershed development for enhancing productivity and profitability of rainfed agriculture in a sustainable manner. • On-site inspection of cooperative banks and RRBs and offsite surveillance over health of cooperatives and RRBs.

NABARD and microfinance Headquartered in Mumbai, India, the Bank conducted a series of research studies in association with MYRADA (a leading NGO from South India) and independently during the early eighties. These studies showed that despite having a wide network of rural bank branches implementing poverty alleviation programmes and self-employment opportunities through bank credits for almost two decades, a very large number of the poorest of the poor continued to remain outside the formal banking sector. These studies indicated that the existing banking policies, systems, procedures and financial products were not well suited to meet the needs of the poor. It appeared that what the poor needed was better access to these products and services and not just cheap, subsidised credit. After these studies, a need was felt for alternative policies, systems and procedures, savings and loan instruments and new service delivery mechanisms that would fulfill the requirements of the target group especially the women. Therefore, the emphasis was on improving access to microfinance instead of just microcredit. To this end, NABARD considers the launch of its pilot phase of the SHG Bank Linkage programme in February 1992, a landmark development in banking for the poor in India. The

SHG-informal thrift and credit groups of the poor came to be recognised as bank clients under the pilot phase. The strategy deployed for this programme involved forming small, cohesive and participative groups of the poor and encouraging them to pool in their thrift regularly which will be used to make small interest-bearing loans to members and learning the nuances of financial discipline in the process. Apart fromt his approach, NABARD also took a conscious decision to experiment with other successful models such as replicating the Grameen model, financing NGO-MFIs, etc. The Bank commenced a nationwide Pilot Project in 1992 aimed at promoting and financign 500 SHGs across the coutnry. The SHG-bank linkage strategy includes financing of SHGs promoted by external facilitators like NGOs, bankers, government agencies and individuals as also promotion of SHGs by banks and fonancing SHGs directlyby banks or indirectly where NGOs and similar organisations act as financial intermediaries. The pilot was followed by the settign up of a Workign Group on NGOs and SHGs by the Reserve Bank of India in 1994 which gave a number of recommendations on the internalisation of the SHG concept as an intervention tool in the area of banking with the poor. Based on the pilot and the recommendations of the Working Group, NABARD, in 1998 crystallised its vision for providing access to one third of the rural poor by linking 1 million SHGs by 2007. This target was achieved in the year 2004 by massive scaling up of the training and capacity building awareness programmes by NABARD covering a large number of officials and staff of NGOs, banks, government agencies and rural volunteers in SHG promotion, nurturing, appraisal and financing.

Highlights of SHG bank linkage programme (as on 31 March 2006) •

•

During the period April 2005 to March 2006, 620109 new SHGs were financed by banks to the tune of Rs 44.99 billion by way of loans. Cumulatively, banks have lent Rs 113.97 billion to 2238565 SHGs. NABARD has extended a refinance of Rs 10.68 billion to banks during 2005-06 bring the cumulative refinance amount to Rs 41.60 billion. 44362 branches of 545 banks (Commercial banks- 47; Regional Rural banks-158; & Cooperative banks - 340) situated in 583 districts in 30 states of the country are participating in the programme. About 32.98 million poor households have gained access to formal banking system through SHG bank linkage programme. Nearly 90% of the groups are women groups.

Developmental mandate of NABARD The provisions of the NABARD Act, 1981 clearly indicate the nature and scope of the developmental mandate of the Bank and its role in training and capacity building with the underlying belief that the process of development cannot be accomplished by credit/refinance alone. Section 38 of the NABARD Act provides that the Bank shall:

maintain expert staff to study all problems relating to agriculture and rural development and be available for consultation to the Central Government, the Reserve Bank, the State Governments and the other institutions engaged in the field of rural development. • provide facilities for training, for dissemination of information and the promotion of research including the undertaking of studies, researches, techno-economic and other surveys in the field of rural banking, agriculture and rural development. • provide technical, legal, financial, marketing and administrative assistance to any person engaged in agriculture and rural development activities. • may provide consultancy services in the field of agriculture and rural development and other related matters in or outside India, on such terms and against such remuneration, as may be agreed upon. In this context, the role of training in NABARD and the role played by it for capacity building in client institutions, partner agencies and other developmental agencies is important. For maintaining ‘Expert Staff ’, the Bank needs to provide continuous exposure to its officers and staff for upscaling their knowledge and skills in core areas. In the initial years the Bank had recruited expert staff from various technical disciplines and created a separate cadre of officers. These officers were involved in formulating, appraising, monitoring and evaluating different agricultural projects implemented by different credit agencies. These officers, irrespective of their academic background, were imparted similar type of training as all other officers. Their placements and the regular job rotations helped in grooming them to take up assorted assignments, get involved in a variety of roles and functions including credit, developmental, promotional, supervisory and necessary support and information for decision making. In pursuance of the Bank’s mandate as stated in the Act, the Bank provides training facilities for the RFIs and agencies involved in rural development through the Bankers Institute of Rural Development (BIRD), Lucknow and the two Regional Training Centres in Bolpur and Mangalore. With a view to broadbase the training and capacity building efforts, the Bank encourages the Regional Finance Institutions to set up their own training systems and provides these training institutes the necessary support to conduct meaningful and quality training. The bank continuously examines the options and avenues for strengthening the training interventions at the client level so that the human resources in these institutions are developed to take on the challenges, reckon with the competition, improve customer service, expand outreach, develop suitable products and thereby contribute to rural development. As NABARD primarily functions through other agencies, the needs of the client institutions largely determine the knowledge and skill requirements of NABARD officers. The Bank endeavours to blend the experiences of client bank training with the training for NABARD officers so as to make training meaningful and relevant to their roles. Efforts are also made to blend the study findings with the outcome from training to periodically measure the overall impact of the investments made in the training efforts. •

i4d | June 2009

RENDEZVOUS RENDEZVOUS: GLOBAL CONFERENCE ON FINANCING THE POOR: MOVING BEYOND INCLUSION, MICROFINANCE CONNECT, 29 DECEMBER 2009, NEW DELHI, INDIA

Exploring the Impact of Microfinance As the world is in the grip of a global financial recession which has a far reaching impact on the development process across the world the poor are most vulnerable and the most affected by such crisis as they have very limited capacity to cope with the recession. Microfinance which is an effective tool of poverty eradication, capacity building, social empowerment, also seems to be affected by the financial crisis as the interest rate increases and credit squeezes. Realising the significance of the current scenario, a Global Conclave of Microfinance Connect on 'Financing the Poor: Moving beyond Inclusion' was organised on 29th of April, 2009 at The Park Hotel, New Delhi, India. The theme of this conclave was to look at the emerging new dimensions of the microfinance movement in the current global scenario. Traditionally, banks or Microfinance Institutions (MFIs) had offered small lendings/credits which had been perceived as a tool for poverty alleviation and reduction of financial exclusion - bringing the poor and unbanked in the mainstream of financial services and social empowerment of the weaker sections of the society. Now, the microfinanace sector has been transformed. It has become more diversified, commercialised, and competitive and has grown bigger than ever before. MFIs have moved beyond credit to offer insurance and savings products. Hence, it is pertinent to address the new paradigm shifts and scale the impact and outreach of the microfinance sector and assess the role of new actors in the changing process. The Global Microfinance Connect Conclave 2009 provided a platform to share the practical experiences from the field on impact of microfinance operations, present the key assessment methodologies and June 2009 | www.i4donline.net

processes, discuss the past attempts, issues and impediments in enhancing impact and present the concept and objectives of the Global Microfinance Impact Alliance. More than 150 delegates from MFIs and NGOs, banks and financial institutions, apex bodies and networks, advocacy and support institutions and researchers and students participated in the conclave. Representatives from the World Bank, European Commission, Grameen Foundation, Sonata Finance, Oikocredit, Unitus Capital, Plural India, Centrer for Microfinance, Michael and Susan Dell Foundation, Infrasoft Tech, GRAMAUS Bangladesh, ASA Initiative Ghana, Srikrishna Institute of Management were the panelists for the conclave sessions. The event was sponsored by Infrasoft Tech, a leading software company for the banking and finance industry. Sambodhi Research and Communications was the knowledge partner and Microfinance Insights was the media partner. In his welcome address, Kultar Singh, CEO, Sambodhi accentuated the need to assess impact and outreach of microfinance on the lives of the poor and the need to think beyond the traditional aspect of the microfinance movement. He pointed out that it only requires a small effort to reach the poor and provide livelihood to them. He also asserted that despite the current global recession, the microfinance sector would grow exponentially and it had the potential to reach 80-82 million people by 2010-12. Hanuman Tripathi, MD, Infrasoft Tech discussed about the multiple applications of IT software in the delivery of microfinance services and to assess its impact. From the donor point of view, IT is required for transparent and smooth flow

of capital. The clients require safety, trust, convenience and access of information; an MFI needs technology for cost effectiveness and process automation; Loan Officials need information sharing, and efficient transaction, IT facilitates all such services. He believes that advanced technology is going to play an important role in future development of microfinance industry as its application will bring down the transaction cost and helps in management too. Therefore, technology is related to every aspect of the microfinance system and is very crucial for itâ&#x20AC;&#x2122;s control and regulation. He is of the opinion that advanced IT-enabled system is required for providing new kind of banking services such as mobile banking and branchless banking, etc. In her inaugural address, Ellen Pendersen, European Union discussed the experiences of the European Union in assessing impacts of microfinance projects. She stated that relevance, efficiency, effectiveness and impact were four criteria on which a projectâ&#x20AC;&#x2122;s performance was evaluated by the Union. Mohini Malhotra, South Asia Regional Coordinator, World Bank Institute, pointed out that cost effectivenes, lower interest rates and user friendly technologies hold the key for success of microfinance movement. In the particular context of India, she stated that we had come a long way but there still is a lot to do as we have covered less than five per cent of the rural households of the country. She quoted the remarkable success of Bangladesh, where around 40 per cent households have access to banking services. Other key speakers were Geeta Goel (Michael and Susan Dell Foundation), Justin Oliver (Centre for Microfinance, Institute for Financial Management and

Research, Chennai), Chandni Ohri (Grameen Foundation), A Ramanathan (Ex-Chief General Manager, NABARD), Md Abdul Khaleque, Suvarna Rani Gandham (India Regional Manager, Oikocredit and Managing Director Maanavaveeya Holdings), Ashish Gupta (Sonata Finance), Eric Savage (Unitus Capital), N V Ramana (Ex-CEO BASIX group), Shivendra Sharma (Executive Director, Plural India) and Veronica Agodoa Kitti (Managing Director, ASA Initiative, Ghana). During the day long deliberation, all delegates shared their field experiences on impact of microfinance operations, assessment findings and methodologies, issues and challenges. Chandni Ohri introduced the Grameen Foundation’s Progress out of Poverty Index (PPI), and how it can be used as both a management and a measurement tool. She explained that it allows MFIs to better determine their clients’ needs, which programmes are most effective, how quickly clients leave poverty, and what helps them to move out of poverty faster. Gandham suggests that a “one-time touch and go” policy is not what MFIs should aim for, a permanent access to credit is needed for development and empowerment. She argued that social impacts of microfinance were remarkable, particularly in rural areas of India. It has changed the attitude of the men in a family towards women. The microfinance movement is bringing hope, prosperity, a sense of security and progress to many of the poorest people across the world. She feels that microfinance approaches for the poor are a necessary ingredient in poverty alleviation, empowerment of the weaker sections of the society, and to end their financial inclusion but suggests that sustainability and affordability of MFIs are quite important for their success. Ashish Gupta introduced the study report of MiRacle software which is a pilot impact assessment and rating and practitioner-friendly tool for assessing client level impact. He shared his experiences of north India, particularly Uttar Pradesh and Madhya Pradesh. The main outcomes of the conclave were the beginning of the Global Impact Alliance that would further the agenda of moving

beyond traditional dimensions of microfinance to a more results, outcomes and impact-focused approach, secondly, a shared understanding also emerged during the meeting that there is need of methodologies for the impact assessment of microfinance operations. Thirdly, the conclave also emerged as a platform for promotion and dissemination of knowledge and information regarding microfinance projects and services among different societies and at various levels around the world, for instance, a 20 minutes film and a photo exhibition were displayed showcasing impact of microfinance of various organisations from India, Nepal, Peru, Ghana, Philippines and Cambodia. Last but not the least the conference concluded with an award ceremony celebrating the best practices in microfinance operations across the world. And the winner of the first Global Micro Finance Impact Awards 2009 was Amhara, Credit and Saving Institution of Ethiopia, and BISWA from Orissa, India was awarded Forerunner. Today microfinance is not seen as a charity business. Due to it’s commercialisation and product diversification it has become a profitable business venture and MFIs are transforming themselves from non-profit organisations to profit making organisations. We should keep in mind the fact that the prime motto of MFIs should not be profit making but to change the financial system to make it all-inclusive. To take full advantage of microfinance, it is crucial for the industry to continue to innovate, evolve and bring more economically active poor in its ambit. To this end, interaction among intelligentsia and the practitioners for knowledge sharing and assessment of new trends are necessary. The conclave which is slated to be an annual event seems to be an appropriate forum for promotion and dissemination of knowledge and expansion of the microfinance sector which provides economic lifeline for millions of poor across the world. Dinoj Kumar Upadhyay dinoj@telecentremagazine.net

WNS receives the 2009 Golden Peacock Award WNS (Holdings) Limited has been awarded the 2009 Golden Peacock Eco-Innovation Award for its Green Lean Sigma Programme by the World Environment Foundation, in association with the Institute of Directors. WNS, a leading provider of global business process outsourcing (BPO) services, was recognized by a distinguished panel of judges for its organization wide initiative, aimed to make WNS a carbon neutral company leveraging Six Sigma, LEAN and ISO methodologies. This effort was led by Shubra S Sachdev, Associate Vice President, Business Process Excellence and Transformation and Ujjwal Majumdar, Chief Quality Officer. The Golden Peacock Awards (GPA) is a set of prestigious national and global awards designed to improve productivity and quality in organisations. It aims to promote business excellence by providing a Framework or Criteria for assessment that is based on similar principles as other awards throughout the world. The Golden Peacock Awards jury is chaired by Justice P N Bhagwati, former Chief Justice of India and Member, UN Human Rights Commission. The jury is comprised of distinguished personalities from the business, political, regulatory and academic communities, including, among others, Right Honorable Joe Clark , Former Prime Minister of Canada; Ola Ullsten, Former Prime Minister of Sweden; Olivier Giscard d’Estaing, Founder and MD, INSEAD; James McHugh CBE, Former Chairman, British Gas; James McRitchie , Publisher Corporate Governance, California; Prof Viviane de Beaufort, Essec Business School, France; Justice M N Venkatchaliah, Former Chief Justice of India and Chairman, Institute of Directors; Gauri Kumar, Director General, NIFT; and Rakesh Bharti Mittal, Vice Chairman and Managing Director, Bharti Teletech.

i4d | June 2009

What’s on Africa 28-30 October 2009 IDIA2009 Conference South Africa http://www.developmentinformatics.org/conferences/ 2009/3rd.html

Australia 15-18 November 2009 2009 Asia Pacific Conference on Child Abuse and Neglect Perth, Western Australia http://www.napcan.org.au

20-25 March 2010 World Congress of Internal Medicine Melbourne, VIC http://www.wcim2010.com.au/

Bangladesh 17-19 December 2009 International Conference on the Developments in Renewable Energy Technology Dhaka

Singapore

http://www.amic.org.sg/new/news_n_updates/ conf2009cfp.htm

http://www.waset.org/wcset09/singapore/icee/

18-20 August 2009 Map Asia 2009 Suntec Singapore International Convention & Exhibition Centre

http://www.iesummit.net/

http://www.mapasia.org

9-11 September 2009 National Seminar on “ICT for Agriculture and Rural Development” Pasighat, Arunachal Pradesh

14-16 September 2009 Agriculture Outlook Asia 2009 Grand Hyatt

http://www.modelevillage.in

Japan 24-28 August 2009 The 3rd International Symposium on the Environmental Physiology of Ectotherms and Plants Tsukuba

http://www.vaccinecongress.com

United States

http://www.highedweb.org/2009

knowledge for change

22-23 October 2009 Gender, Media and the Public Sphere Coimbra, Portugal

26-30 October 2009 mLearn 2009 - 8th World Conference on Mobile and Contextual Learning Orlando, Florida http://mlearn2009.org 28-30 October 2009 International Conference on Information Technology (ICIT 2009) Chicago http://www.waset.org/wcset09/chicago/icit/

United Kingdom 29-30 June 2009 European Conference on e-Government London

http://mediagender.wordpress.com/

India

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4-6 October 2009 3rd Vaccine Global Congress Bangkok

Malaysia

http://www.cita09.org

http://corporate.skoch.in/index.php?option=com_cont ent&view=article&id=165&Itemid=209

Thailand

4-7 October 2009 HighEdWeb 2009: Open. Connected Milwaukee, WI

http://www.wmo.int/pages/world_climate_conference/ index_en.html

16-18 July 2009 20th Skoch Summit - Banking, Financial Services and Insurance Mumbai, Maharashtra

http://www.terrapinn.com/2009/agriasia

http://www.nias.affrc.go.jp/anhydrobiosis/isepep3/ index.html

31 August–4 September 2009 World Climate Conference-3 Geneva, Switzerland

http://www.set2009.org

26 August 2009 International Conference on Energy and Environment (ICEE 2009)

14-16 September 2009 Indian Environment Summit 2009 New Delhi

6-9 July 2009 6th International Conference on IT in Asia 2009 Kuching, Sarawak

31 August-3 September 2009 Sustainable Energy Technology (SET) 2009 North Rhein Westfalia, Germany

http://ecdcconference.com

13-18 July 2009 Media, Democracy and Governance: Emerging Paradigms in a Digital Age New Delhi

http://www.icdret.uiu.ac.bd

Europe

3-4 November 2009 4th International Conference on ECommerce Penang

25 - 27 August 2009 Hyderabad, India http://www.eINDIA.net.in/2009/

http://academic-conferences.org/eceg/eceg2009/eceg09home.htm

28-29 September 2009 Energy From Waste London http://www.smi-online.co.uk/events/overview. asp?is=5&ref=3142

IN-FACT

Microfacts about microfinance •

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In Africa, women account for more than 60 per cent of the rural labour force and contribute up to 80 per cent of food production, yet receive less than 10 per cent of credit provided to farmers. The World Bank estimates at there are now over 7000 microfinance institutions, serving some 16 million poor people in developing countries. The total cash turnover of MFIs worldwide is estimated at US$2.5 billion and the potential for new growth is outstanding. There is concern that official assistance will be diverted from vital primary care aid programmes such as health, water projects and education into MFIs, owing to their popularity among donors. Though women appear to benefit most, studies indicate that many loans awarded to and paid back by women are in fact used by men. The widely-imitated Grameen Bank in Bangladesh aims to provide credit to those in extreme poverty. Some 94 per cent of those who meet the bank’s criteria and take up loans are women. Grameen borrowers keep up repayments at a rate of around 98 per cent. The Bank lends US$30 million a month to 1.8 million needy borrowers. Savings are important both as a vital safety net for the poor and as a source of funding that does not rely on external sources. Many strong MFIs, notably in Africa, recycle the savings of needy clients as a principal source of loan funds for their customers. The Microcredit Summit estimates that US$21.6 billion is needed to provide microfinance to 100 million of the world’s poorest families. The Summit planners say it should be possible to raise US$2 billion from borrowers’ savings alone. The final figure may be even higher. Studies have shown that during an eight year period, among the poorest in Bangladesh with no credit service of any type, only 4 percent pulled themselves above the poverty line. But

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with individuals and families with credit from Grameen Bank, more than 48% rose above the poverty line. It is estimated that worldwide, there are 13 million microcredit borrowers, with USD 7 billion in outstanding loans, and generating repayment rates of 97 percent. It has been growing at a rate of 30 percent annual growth. Fewer than 2 per cent of poor people have access to financial services (credit or savings) from sources other than money lenders. Under 10 million of the 500 million people who run micro and small enterprises have access to financial support for their businesses. There is a potential demand for microcredit services from seven million borrowers. There is a potential demand for microsavings services from 19 million savers. The world’s seven richest men could wipe out global poverty. Their combined wealth is more than enough to provide the basic needs of the poorest quarter of the world’s people.

Hari Srinivas, The Global Development Research Centre (GDRC), http://www.gdrc.org/icm/data/d-snapshot.html i4d | June 2009

www.i4donline.net

i4d invites feature articles on 'mobiles 4 development' The August 2009 issue of i4d magazine focuses on 'mobiles 4 development'. We encourage a wide variety of submissions on the topic areas outlined below: ! ! ! ! !

Rural connectivity Financial inclusion through mobile phones Education through mobile phones Assisting farmers through mobile technologies m-Health: Healthcare through mobiles

An ideal feature article (two-pager) should be between 1400-1600 words. Case studies should be between 1600-2200 words. Graphs, charts, tables and pictures should be sent separately in highresolution (300 dpi or more) .jpeg, .tif or .bmp format. Along with the manuscript, authors/contributors should submit their brief profile and photograph. Submission deadline is 10 July 2009.

e-mail all submissions to subir@csdms.in