MICROFINANCE PUBLICATION ROUND-UP: Responsible Equity Exits in Microfinance; Greenfield Microfinance Models in Africa; Mobile Financial Services Usage Among Rural Women in India, Philippines

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“The Art of the Responsible Exit in Microfinance Equity Sales;” by Daniel Rozas, Deborah Drake, Estelle Lahaye, Katharine McKee and Danielle Piskadlo; published by CGAP (Consultative Group to Assist the Poor); April 2014; 32 pages; available at http://www.cgap.org/sites/default/files/Forum-Art-of-the-Responsible-Exit-April-2014.pdf

This paper explores how microfinance investment intermediaries (MIIs) and development finance institutions (DFIs) can exit responsibly from microfinance institutions (MFIs) in which they have invested equity as well as how investors can contribute to healthy development of the overall market. The authors conducted six case studies and interviewed representatives from MIIs, nongovernmental organizations, DFIs, MFIs and merger-and-acquisition specialists. Some of the challenges that the authors identify include: limited ability of investors to engage fully in MFI governance, difficulty of balancing financial gains with social development activities, lack of flexibility in the timing of exits and the challenge of finding potential buyers that share the seller’s commitment to the MFI’s mission. The authors conclude with recommendations such as: strengthening governance, exercising post-exit influence by augmenting the voting rights of minority shareholders, conducting due diligence regarding each buyer’s true intentions and commitment to the MFI’s mission, exercising the right of first refusal to tighten control on which organizations buy into the MFI, putting in place self-perpetuating governance structures that prevent takeover by any one shareholder, and securing management’s commitment to preserve the MFI’s mission through long-term contracts and incentives.

“Greenfield MFIs in Sub-Saharan Africa: a Business Model for Advancing Access to Finance;” by Julie Earne, Tor Jansson, Antonique Koning and Mark Flaming; published by CGAP (Consultative Group to Assist the Poor); February 2014; 44 pages; available at http://www.cgap.org/blog/how-greenfield-mfis-advance-market-development-africa

This paper offers an overview of barriers faced by greenfield – newly established – microfinance institutions (MFIs) in advancing access to finance and financial market development in Sub-Saharan Africa (SSA). The authors studied 10 holding companies that own substantial stakes in 30 greenfield MFIs in the Democratic Republic of Congo, Ghana and Madagascar in terms of variables such as development of human resources, product innovation, product features and market share. The authors identify high costs of doing business, regulatory frameworks, geographically dispersed markets, overly aggressive growth strategies, inadequately skilled human resources and internal process hurdles as some of the major challenges in advancing financial inclusion in SSA. The authors propose the use of alternative delivery channels, standardized operational policies and procedures, augmented staff training, improved implementation of technological systems and curtailed growth strategies as some of the solutions to the challenges identified. The authors conclude

that as MFIs compete with banks for mass market customers and small business customers, MFIs will need to improve their capabilities, practices and services to remain relevant and competitive.

“Use of Mobile Financial Services Among Poor Women in Rural India and the Philippines;” published by The Grameen Foundation; 2013; 29 pages; available at https://grameenfoundation.box.com/shared/static/29h4qjimnkp0v5ty0c19.pdf

This report is intended to increase the understanding of the role of mobile-phone usability in helping rural women in India and the Philippines access mobile financial services. The report is based on findings from research carried out among residents of eastern Uttar Pradesh of India as well as the provinces of Quezon and Laguna in the Philippines. The authors highlight similarities between the groups of women such as: (1) having access to basic financial services such as making payments for services, paying bills and saving; and (2) lack of confidence to use formal financial services due to limited literacy and numeracy skills as well as fears of technology and losing money. The authors also found that: (1) women in India had less knowledge of formal financial products than men, while in the Philippines women accessed the products in a larger proportion than men; and (2) Filipino women were more comfortable using a variety of non-voice features, such as short message service (texting) compared with their Indian counterparts, who generally limited mobile phone usage to making calls. As such, use of mobile financial services was more widespread in the Philippines than in India. The authors conclude by offering the following recommendations to respond to the challenges identified and to draw more women to use mobile financial services: (1) introducing products that do not require interest charges, maintenance fees or initial deposits; (2) offering training and improved customer support for new products; (3) implementing customized promotions and advertising to reach rural women; and (4) introducing customized services for those with limited literacy and numeracy skills.

By Chikondano Faith Chisala, Research Associate

Sources and Additional Resources

[1] CGAP (Consultative Group to Assist the Poor), “The Art of the Responsible Exit in Microfinance Equity Sales,” http://www.cgap.org/sites/default/files/Forum-Art-of-the-Responsible-Exit-April-2014.pdf

[2] CGAP (Consultative Group to Assist the Poor), “Greenfield MFIs in Sub-Saharan Africa a Business Model for Advancing Access to Finance,” http://www.cgap.org/blog/how-greenfield-mfis-advance-market-development-africa

[3] The Grameen Foundation, “Use of Mobile Financial Services Among Poor Women in Rural India and the Philippines,” https://grameenfoundation.box.com/shared/static/29h4qjimnkp0v5ty0c19.pdf

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