Portfolio’s is a book not to be missed by serious microfinance people. It documents why microcredit is secondary and supporting cash flow management is primary to poor people’s finances. To find out more, you can read more in the review of the book I made together with Kristine Pors in Udvikling (page 21) or listen to two of the authors in this podcast.
Last week, the Danish microfinance sector got its own organisation for knowledge sharing. It’s called the Danish Forum for Microfinance. See more at Ulandsnyt:
Last week, two Danish sociology students, Anders Ludvig Sevelsted and Lasse Folke Henriksen, defended their thesis on what you could call a sociology of global microfinance. By looking at the role of professional economists in global microfinance, they show (among other things) that economics as an academic discipline anchored in the North/West has played a profound role in the development of microfinance globally, not least the focus on financial sustainability and the decision of the World Bank to endorse and promote microfinance through CGAP. I had the pleasure of serving as a secondary adviser, and am glad to see that besides the conclusions in the thesis, the work also prove by its example that there is a great unfulfilled need for sociologists in microfinance.
If they read this post, they perhaps want to answer a couple of questions :- )
1) Given the conclusions in your thesis, what should microfinance practitioners do differently?
2) What other questions have you come across that would be interesting for sociologists to look at in microfinance?
It’s surprisingly simple what they’ve done recently in Norway to boost their microfinance activities with 117m USD: Norfund invests 53m USD and provides expertise in how to invest in developing countries, Norad provides 1,6m USD and technincal expertise in microfinance and – the real surprise – four commercial companies invest another 53m USD and chip in with their experience in managing money. This is a genuine Public Private Partnership (PPP).
And PPP’s are hot. Everybody (in the public sectors I know of) wants them, but few know what it is. The result has been a number of PPPs that look more like ordinary procurement of services or grants for ventures that real partnerships, at least in Denmark, whereas the true partnerships have been rare.
Creating one of the world’s largest microfinance funds as a PPP is pretty cool, then. Some questions arise: Will the private and publics involved be able to complement each other and gain from it? Will the Norwegian Microfinance Initiative be able to invest its massive pool of funds without crowding out real private investors? Will the interplay between capacity development and investment work to make the institutions capable of absorbing such an amount of capital, when it is acknowledged that “growth of the microfinance sector is constrained by the limited ability of MFIs to absorb large capital inflows”?
Let’s hope Danish actors will be as innovative.
Today, I was interviewed by the Danish Radio on microfinance, where I gave my opinion on the Compartamos case. If you understand Danish, you can hear the interview online.
This coming spring, I will be co-teaching a class on microfinance at Department of Political Science, University of Copenhagen. If you know any students in the city who might be interested, please let them know! Find more info in this PDF.
A mechanism that can lower the risk of investing in microfinance in developing countries. This is what the Dutch Development Finance Company has launch today, together with a series of partners, among other the Danish sister of FMO, called IFU (Investeringsfonden for Udviklingslandene). It might seem boring to some, but it will most likely make a very big difference to a lot of poor people in developing countries.
This fund will drastically improve the options for investors in microfinance and thus bring capital to institutions that have until now been out of reach for investors because of country risks.
It is well know that microfinance in itself is not a very risky investment. Unless for the small MFIs, microfinance is low risk because it does not depend on global market, or other volatile financial factors. But investing in microfinance as been risky because of the country risk associated with such investments. Until now. The problem has so far been to find someone with enough capital to diversify the risk enough, and none of the investment banks or financial institutions, who for example hedge Euro and Dollar risk as easy as paying a bill – the rate is around 1% p.a. – have not been willing to enter the market because the returns are so low.
The technical details of the fund have not been published, and the performance will of course be seen only in the future. But the beginning looks very promising.