European Microfinance Week 2015

PRESENTATION

Ben MACKAY shared the backgrounds of the panellists and said the aim of the session was to share ideas on innovations, challenges and possible solutions. He then presented his definition of innovation and the general context of innovation through networks: “Changes to target markets, products and services, delivery channels or processes that open up new opportunities for increasing the productivity of both MFIs and the clients they serve”. According to Mackay, innovations have struggled to reach scale and are often difficult to replicate in different contexts. Nevertheless, he believes that networks have proven capable of pooling scarce resources, whether financial, human or technical. This provides members of the network with the necessary tools, methodologies and financial or other incentives to innovate more efficiently and effectively with new products and services.

Subsequently, Allan SICAT explained about the Microfinance Council of the Philippines Inc. (MCPI), and how the sector landscape has changed. The aim of financial inclusion is to remove exclusion of in particular low-income farmers, off-grid clients and youth. He then provided some examples, starting with DevSEA, which deals with sustainable energy solutions for micro and small businesses. Together with ADA, they work with two pilot MFIs, and he explained about the approach and advantages. They start with an energy needs assessments of clients, for which they then do a technology and supplier assessment. Sicat considers this to be the commercialisation phase of MFIs for which they develop and provide tailored loan products. The second example presented was on climate-smart agriculture, with integrated farming systems expanding the agricultural options for small farmers with innovative loan products. The results of these two pilot cases are not yet promising, as there are still many challenges to be tackled at the network level in efficiency and costs of technical assistance. As next steps, they aim to improve the business model and broaden the scope of the pilots to a ‘bigger green initiative’ at the network level. When Mackay asked him about how to manage high staff turnover (staff starting their own businesses), Sicat explained that they develop guidebooks to maintain knowledge and expertise within and among the MFIs. Similar, for scaling up and innovations, they need to get bigger buy-in at a green network level, including accreditation and tax incentives.

Jack BURGA CARMONA presented the experiences of COPEME in Peru, which aims to help micro and small entrepreneurs in Peru. For 25 years they have worked with two main services: Microfinance and Business Development. He then introduced the ‘Rural Expert’, a mobile application, allowing small rural producers to get the right technical and microfinance information to obtain credit. They select service providers on the basis of added value, although they still encounter challenges in getting the business models right and add value for the network and members. There are obviously cost implications for scaling up and sustainability. COPEME works with loan products based on market trends which offer a broad service portfolio which is more than solely finance solutions. They have a relatively small team, which according to Mackay must mean some challenge to manage and innovate. Burga Carmona explained that there is good commitment and sharing of experiences, also during the field visits which they see as a ‘learning cooperation’. They get donors’ support for the payment of some services, in order not to exclude smaller or poorer members. For their network members to manage such schemes, it is important to differentiate and build capacities.

Syed AHMED then introduced the Pakistan Microfinance Network (PMN). This network has a Microfinance Growth Strategy 2020, addressing financial exclusion in Pakistan with an Inclusion Strategy. After presenting some poverty figures of Pakistan, Ahmed pointed to the bigger picture of the Sustainable Development Goals. He sees PMN as a national Apex body to address strategic rather than operational issues, using research and knowledge as the pillar of advocacy and product innovation, such as mobile wallets for savings (Mwallet). Dealing with some 3.8 million borrowers, it is crucial 

to manage risks, for example through microinsurance and disaster management. Fortunately, several consecutive governments have contributed to a number of positive developments for inclusive finance in Pakistan. This was possible because the central bank of Pakistan (SBP) has played a major role in leading the industry. Through some of these initiatives, PMN aims to reach 10 million borrowers. A Medium Term Framework, which is said to need some USD 2 billion in funding, encompasses capacity building, disaster risk management, and a regulatory framework for non-bank microfinance institutions. When asked by Mackay how to manage and get funding for all this, Ahmed replied that it is important to have a good business plan to engage with funders and to develop a proper eco-system for that plan to work. It also requires a clear revenue model, with membership fees, training fees and consultancies, and fees for enquiries by the Credit Bureau. In addition, he mentioned funding for research and income from fees generated through their digital platform.

DISCUSSION

On a question regarding the structure of the Mwallet, Ahmed responded that Mwallet is a digital wallet for which all proper regulation is in place. They now want to also improve on a documented payment system, which is still not much liked in Pakistan. PMN is not aimed at retail, but works through agents to establish low-cost health and disaster insurance schemes. He attributed the relatively low rate of outreach in Pakistan to the late start and rollout of such schemes. 

Sicat added that microinsurance in the Philippines has already a regulatory framework, but is indeed quite expensive and difficult to roll out. As for green finance in rural areas, technical assistance officers engage with clients, after which the supplier assesses potential services to be provided. Burga Carmona added that there is indeed much potential in services to be developed, but that it is important and a challenge to certify their quality. Even if he agrees that insurances are interesting, they are still expensive for the poor, and hence COPEME focuses more on other innovative low-cost loan products.