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MICROFINANCE: It’s more than little loans

MICROFINANCE: It’s more than little loans. ANICCA JANSEN, EGAT/PR/MD OCTOBER 5, 2005. KEY MESSAGES:. Microfinance clients are economic actors; Microfinance is NOT a separate financial system; Microfinance is NOT just credit; &

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MICROFINANCE: It’s more than little loans

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  1. MICROFINANCE: It’s more than little loans ANICCA JANSEN, EGAT/PR/MD OCTOBER 5, 2005

  2. KEY MESSAGES: • Microfinance clients are economic actors; • Microfinance is NOT a separate financial system; • Microfinance is NOT just credit; & • Ensuring sustained access to financial services (micro or not) requires a multi-level approach

  3. Microfinance Clients are Economic Actors

  4. HOWEVER, MICROFINANCE CLIENTS DO NOT NECESSARILY CONTRIBUTE TO OR BENEFIT FROM ECONOMIC GROWTH Economically Active Poor Contributing to & Benefiting from EG Economically Active Poor Unaffected by EG Destitute Non Economically Active Poor

  5. RELIEF VS. REDUCING POVERTY THROUGH ECONOMIC GROWTH Development Economically Active Poor Contributing to & Benefiting from EG Economically Active Poor Not Contributing to & Benefiting from EG Destitute Non Economically Active Poor Relief

  6. BANKS BANKS INVESTORS BANKS CREDIT UNIONS Non-Bank Financial Inst. BANKS CREDIT UNIONS NBFIs MicroFinance NGOs How? By working with value chains in which poor households are active Global Retailers National Retailers Exporters Processors/Traders Producers Input Suppliers

  7. International Market Current Potential For example… The Horticulture Subsector: Albania Investors Banks Medium/Large- Scale Exporters Investors Banks Processors Retailers / Local Market Banks Wholesalers Producer Association MFIs Smallholder Producers family & friends, personal savings Input Suppliers (seeds, pesticides, fertilizers)

  8. Clients in & Beyond the Value Chain INTERNATIONAL BUYERS EXPORTERS Travel Agents Food Vendors DOMESTIC RETAILERS Advertising Companies PROCESSORS Volvo Dealers TRANSPORTERS 5-Star Restaurants BROKERS Tailors Machine Shops PRODUCER / BUSINESS ASSOCIATIONS Breweries SMALL FARMERS/ PRODUCERS Bakers Carpenters Midwives INPUT SUPPLIERS

  9. Microfinance is Not a Separate System

  10. International Market Current Potential Recall Albania Investors Banks Medium/Large- Scale Exporters Investors Banks Processors Retailers / Local Market Commercial Banks Wholesalers Producer Association MFIs Smallholder Producers family & friends, personal savings Input Suppliers (seeds, pesticides, fertilizers)

  11. Microfinance is Not Just Credit

  12. Products & Services in and Beyond the Value Chain Portable Guarantee $500 Loan to Buy a Sewing Machine $2 MILLION LINE OF CREDIT Money Transfer Services Term deposit account EQUITY INVESTMENT Checking Account $200 Loan to Buy Seeds and Fertilizer 10-YEAR LOAN FOR $1.5 MILLION Equipment to Lease for Purchase School Fee Savings Account $500 Loan to Pay for Funeral

  13. Ensuring Sustained Access to Financial Services Requires a Multi-level Approach

  14. International Market Current Potential Products: Keep your eye on the arrow Commercial Banks Medium/Large- Scale Exporters Commercial Banks Processors Retailers / Local Market Commercial Banks Wholesalers Producer Association MFIs Smallholder Producers family & friends, personal savings Input Suppliers (seeds, pesticides, fertilizers)

  15. Diverse Products are in demand… Products & Services are being adapted to … • Rural areas & Agriculture finance • Youth • Households coping with HIV / AIDS • Financing education • Financing housing • Moving & Safeguarding remittances • Conflict situations

  16. Three Levels for Strengthening: • Provider • Infrastructure • Enabling Environment

  17. Finance Providers – Banks and More formal institutions to family & friends financial institutions to industry actors with MFIs being alike and unique BANKS NBFIs Pension Funds NGOs Credit Unions Exporters Processors Suppliers Relatives living in other countries Private Investors Microfinance Institutions Tontines Venture capitalists

  18. Infrastructure MF Associations diverse infrastructural support supporting the ‘inner circle’ donors: Hands Off! Human Resource Firms Business Advisors Accounting Firms Bank Associations Credit Bureaus Brokerage Firms Rating Agencies

  19. Enabling Environment Movable Collateral Registry Stability Safety Efficiency Fairness Accounting Standards Contract Enforcement Market Interest Rates Micro-Inclusive Legislation Deposit Insurance

  20. Microfinance in the USAID Context • The “White Paper” • Regional Strategies • PL 108-484 • MRR

  21. Questions & Comments?

  22. More Info and Help • Microlinks (www.microlinks.org) • MD staff • Review strategies, design/evaluate programs • Virtual or on-site support • Partnerships • PRIME • Grants: IGP, GUCs, PLP • Case Studies • Training & Scholarships • MD Vehicles • AMAP buy-ins • FIELD Support LWA associate awards

  23. In Summary • Microfinance clients are economic actors; • Microfinance is NOT a separate financial system; • Microfinance is NOT just credit; & • Ensuring sustained access to financial services requires a multi-level approach

  24. THANK YOU!

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