Monthly Newsletter

Monthly Newsletter
Monthly Newsletter

Monthly Newsletter Issue No. 41

August, 2017

Latest News

Bangladesh:Flood-Hit People May Reschedule Their Loans     | August 03

Bangladesh Bank (BB) issued Tuesday a fresh policy on rescheduling short-term agriculture, micro-credit and SME loans to help the flood-affected borrowers continue their economic activities.

The banks were allowed to reschedule such loans based on ‘banker-client’ relationship through relaxation of down payment requirements.

“The policy support is to help the entrepreneurs keep their businesses uninterrupted despite the ongoing floods,” a senior official of the central bank told the FE.

The flood-affected farmers and entrepreneurs will be eligible for getting fresh loans without depositing any compromised amount after rescheduling such loans, according to the policy.

It said maximum six-month will be treated as a grace period for such rescheduling of loans under the ‘banker-client’ relationship.

The banks may reschedule such loans after disposal of the certificate cases through mutual agreements with the clients. Such rescheduled facility will continue until June 30 next year.

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India: A Simple Recipe for Financial Inclusion   | August 31

Today, digital technology and mobile phones offer an unprecedented opportunity to connect poor people to services such as savings, loans, insurance and payments. But owning a phone or even opening a digital account does not ensure the account is used. Two-thirds of world’s 299 million mobile money accounts are dormant. India remains among the most cash-intensive economies in the world, with a cash-to-gross domestic product ratio of 12 per cent. Around 97 per cent of all transactions in the country are in cash, which explains why India remains among nations with lowest access to digital payments.

Merely opening physical accounts as flag posts of financial identity won’t help. People must have the ability to understand and execute matters of personal finance

Finance is the glue that holds all pieces of our life together. Ideal financial societies are those which provide safe and convenient ways of managing these simple monetary affairs. This philosophy is known as financial inclusion. It has been providing financial tools to people — tools that they can afford, tools that are safe and properly regulated, one’s that people can access conveniently.
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India: Rural Financial Inclusion – Small Finance Banks Could Pick Up Where Public Sector Banks Left Off    | August 29

While the demonetisation tsunami sorely hurt the microfinance industry, Bandhan Bank offers a good template for what MFIs can do after acquiring banking licenses.

A fundamental change is taking place in Indian banking which has the potential to become as dramatic as bank nationalisation. The process is understood, but its likely impact is not. Hence the issue is missing from headlines.

Chandra Shekhar Ghosh, founder and chief of Bandhan Bank, the only microfinance institution to become a universal bank, hits the nail on the head when he says, “By 2030 microfinance institutions (MFIs), small finance banks and banks like Bandhan (coming up from the bottom) will dominate rural banking and they will remain absolutely viable.”

Ghosh is not the only financial sector leader to think along these lines, but he is particularly qualified to say what he has because of the way in which Bandhan Bank has fared in the first two years of its operations as a universal bank. So, first, a look at what Bandhan Bank has achieved and then outlining how this feeds into a bigger picture.

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India: How Tech-Enabled Agriculture Ventures Are Offering Farm Related Services via Mobile Phones  | August 29

Nearly 5,000 farmers in Samastipur, Begusarai and Muzzaffarpur districts of Bihar are reaping benefits of a smart decision taken last season. Instead of selling their produce cheap, immediately on harvesting, they warehoused yields and waited for grain prices to appreciate in the off-season. Ergos, a Bengaluru-based startup that offers micro-warehousing, seeded the idea.

“Farmers are forced to sell immediately after harvesting,” says Kishor Kumar Jha, founder-director, Ergos. “With proper warehousing, farmers can store their produce and sell when prices move up.”

The plan seems to be working as maize farmers who have tied up with Ergos have got 20-30% higher prices for their grains a few months ahead of harvest.

What makes Ergos practical and transparent is a mobile phone app, which lists out the stock held by farmers in warehouses and real-time market price of grains. The farmer is certain of his stock in the warehouse, and is also aware of market trends which allow him to set his price.

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India: MFI Investors Have to Wait a While to Reap Benefits of Digitisation  | July 14

Private equity investors seeking to earn handsome return from India’s microfinance sector may need to be patient as the process of digital transformation in microfinance companies is likely to take time to show dividend and may not be tangible immediately.

“The investors may need to be patient during the period of transition and leverage their experience to support MFIs to undergo a smooth transition,” said MicroSave, a Lucknow-based global financial inclusion consulting firm.

Investors generally tend to measure the success of their investment based on the growth of portfolio, profitability of the MFIs and consequently their return on investments.

“It is yet to be established with certainty whether implementation of cash-lite models for disbursement and repayment will lead to cost savings for MFIs,” said MicroSave in a study that examined the progress and preparedness of digital payment among the bottom of the pyramid customers.

The study was commissioned by Microfinance Institutions Network (MFIN) and was funded by German bank KfW and Small Industries Bank of India. It covered experience of 36 MFIs.

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Nepal: Promoting Green Finance – Sustainable Development  |August 15

There is a need to adopt current best practice in the management of environmental issues, and redefine the banking sector’s role and ability to address systemic environmental risk.

In the light of the Paris Climate Agreement and the United Nations’ Sustainable Development Goals, there is a growing conviction that financing environmentally-friendly growth is indispensable for sustainable economic development. Likewise, it was in 2016 that the G20 heads of state had, for the first time, acknowledged the need to ‘scale up green finance’ laying out a number of steps to make this happen. Subsequently, some countries issued strategies for greening their financial systems.

However, so far, there is no precise and universally accepted definition of green finance.  Definitions of green can be explicit or implicit. Some are very broad while others seem more technical and specific. Likewise, some are investment-driven, while some arise from ecological or ethical discussions. Nonetheless, simply put, green finance covers the financing of investments that generate environmental benefits as part of the broader strategy to achieve inclusive, resilient and sustainable development. The main aspects of green finance include sustainable investment and banking, where investment and lending decisions are taken based on environmental screening and risk assessment to fulfill sustainability standards, as well as insurance services that cover environmental and climate risk.

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Pakistan: Microcredit Climbs 47 Percent to Rs132 Billion in 2016   | August 31

Microfinance sector continued to grow at a double-digit rate during the last year as its loan portfolio surged 47 percent to Rs132 billion, an industry report said. Number of active borrowers increased 16 percent to 4.2 million during the last year. Rural segment accounted for 54 percent of total active borrowers. Around 88 percent is unsecured lending.

Microfinance asset base grew 55 percent to Rs225 billion in 2016 over the preceding year. Pakistan Microfinance Network (PMN), a group of practitioners, said the sector “may be forced to capitalise (itself) either through equity injections or issuing subordinated debt.”

“Despite an improvement in the overall gross loan portfolio the share of advances in total assets fell to 58.6 percent in 2016,” it said in an annual Pakistan Microfinance Review 2016.  Total number of depositors stood at 15.9 million as of December 2016, up staggering 88 percent from year earlier. The largest increase in numbers of depositors came from Mobilink Microfinance Bank. “In comparison to global players, the asset utilisation in Pakistan is low,” PMN said.

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Pakistan: Fostering Financial Inclusion and Women Entrepreneurship in Pakistan  | July 14

Efforts are beingmade to minimize the gender disparity level in the country. In this regard, Karandaaz Pakistan in collaboration with Department for International Development (UKAid) has launched a program, Innovation Challenge Fund, focused on supporting female entrepreneurs in Pakistan.

It is a fact that Pakistan faces gender disparity at various social levels. The country ranks 143 out of 144 in the Global Gender Gap Report of 2016 in terms of economic participation and opportunities for women. This global ranking has been unchanged since 2015 because of the complexity surrounding the socioeconomic factors like employment, financial inclusion, business and asset ownership.

Efforts are being made to minimize the gender disparity level in the country. In this regard, Karandaaz Pakistan in collaboration with Department for International Development (UKAid) has launched a program, Innovation Challenge Fund, focused on supporting female entrepreneurs in Pakistan.

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Pakistan: Gearing Up FinTech for Wider Financial Inclusion    | August 7

Financial technology start-ups (FinTechs) are transforming the financial services industry globally and more and more banks are embracing this platform in order to devise more innovative solutions. The trend is now catching on in Pakistan.

This year two organisations, Habib Bank Limited (HBL) and Karandaaz Pakistan held their FinTech challenges with two separate objectives. HBL launched their ‘Innovation Challenge’ in May to find potential start-ups to bring in new and efficient financial solutions and ideas to their financial system, and Karandaaz Pakistan (a not-for-profit organisation) ran its second round of Financial Disruptive Challenge (FDC), in partnership with the IBA AMAN Centre for Entrepreneurial Development to promote financial inclusion in Pakistan.

Giving details about the HBL Innovation Challenge, Abrar A. Mir, Innovation and Financial Inclusion Officer, HBL, says the bank realises the importance of engaging with the entrepreneurial ecosystem to develop new solutions, and in order to reach out to the start-up community and source new solutions, it ran the Innovation Challenge.

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Pakistan: PEW for Promoting Agriculture to Alleviate Rural Poverty   | July 09

The Pakistan Economy Watch (PEW) Tuesday stressed the need for promoting agriculture and livestock sectors to get rural communities out of poverty.

The agricultural sector was considered the backbone of the economy and had been largest employment provider while eighty percent of exports were linked to it, it said.

However, this sector was not getting due attention President PEW, Dr Murtaza Mughal in a statement issued here said.

He was of the view that it was next to impossible to ensure national development while keeping the agricultural development on the back burner which was the mainstay of the economy.

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Sri Lanka: IFC Invests in Nations Trust Bank to Increase Financing to Small Business    | August 31

IFC, a member of the World Bank Group, is extending a $50-million financing facility to Sri Lanka’s Nations Trust Bank PLC. The funds will enable the bank to expand its lending in the Small and Medium Enterprise segment across the country. This will boost access to finance for SMEs, helping to create jobs and increasing overall economic growth in the country.

The long-term nature of the facility will further improve the bank’s liquidity profile.

“In a country where SMEs contribute more than half of the country’s GDP, our partnership with IFC will help SMEs in Sri Lanka grow,” said Renuka Fernando, Chief Executive Officer, Nations Trust Bank PLC. “The IFC loan brings the required long-term financing for the Nations Trust Bank to grow significantly in this segment.

Despite being a key driver of economic growth in Sri Lanka, a large number of SMEs still lack access to adequate financial services. IFC supports Sri Lankan financial institutions that have widespread distribution channels, helping them reach underserved segments and widen their access to credit, savings and other financial products.

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 Upcoming Events

Financial Inclusion Summit for Practitioners in Sub-Saharan Africa

February 20 – 21, 2018 | Accra, Ghana
Advanced Program on Microfinance and Financial Inclusion

February 26 – March 02, 2018 | London, UK


Institution Assessment Training for Independent Assessors

March 21 – 23, 2018 | Luxembourg City, Luxembourg

 About SAMN

The South Asia Micro-entrepreneurs Network (SAMN) is a regional body working to enhance financial inclusion among low-income population in the region. SAMN achieves this by improving knowledge, business environment and capital flows for the microfinance industry across six countries in the region: Afghanistan, Bangladesh, India, Nepal, Pakistan and Sri Lanka. SAMN’s members are national networks from these countries. Thus, SAMN is the representative voice of the South Asian Micro-entrepreneurs community reaching more than 60 million low-income customers in the region.c