SOLIDARITY AND RESPONSIBILITY: INVESTING AND WORKING TOWARDS THE MILLENNIUM DEVELOPMENT GOALS

BAROMETERrd 2012 3 Edition Editorial

Jean-Michel Severino In partnership with: Chairman of Convergences 2015

ince its beginning 30 years ago, microfinance has had very productive years exemplified by a strong growth, by the positiveS impression it has had on development professionals and on public opinion in general, and finally by the attribution in 2006 of the Nobel Peace Prize to , the founder of . For many years, microfinance was considered a panacea for . Since 2010 however, the sector has been damaged by various localized crises (, Morocco, Nicaragua…). Therefore actors have been starting to question, renew and innovate their practices in order to revert to the original social assignment of microfinance, while building more sustainable economic models. Convergences 2015 wishes to fit in with this dynamic of thinking and of change. In May 2011, it launched the Paris Appeal for responsible

microfinance. It received the support © Hélène Grégoire//ACTED of thousands of people who shared the same ideas of defending the social assignment of microfinance institutions and rejecting the Improving knowledge of and serving better excessive commercialization of the sector. With the publication of the Microfinance Barometer for the third the clients of microfinance consecutive year, Convergences 2015’s goal is to present the main ubjected to considerable experienced various changes as well presented a special report « For a Diversifying products – various trends of microfinance in the world media coverage, the as an important growth for which it return to more social microfinance », types of microloans, microsavings as well as to develop some key issues crises of the microfinance must adapt its methods, structures the 2012 edition continues the and microinsurance – and improving in the sector. Analytical articles, sector have disclosed the and regulation. Professionals agree discussion for the improvement of access to are lobbying articles and feedback mission drift of certain on the fact that these localized microfinance practices and calls for opening new perspectives. from experiences will highlight the actors,S such as aggressive business crises do not bring into question the a better understanding and better challenges of microfinance and practices, prohibitive rates... role of microfinance as a tool for servicing of microfinance clients. underline emerging solutions. Most importantly, these crises – development but call for changes Firstly, it is important to understand In 2012, we have chosen to put along with the over indebtedness in the practices of microfinance them in order to analyze the real SPECIAL clients back at the centre of the which often accompanies them – institutions (MFIs) and of the and varying needs of the poorest. debate. Who are they? What are have shown the inherent weaknesses other actors involved (investors, Secondly, we need to serve them their needs? How can we better of this relatively recent sector. regulators…). Along the lines of the better, by adapting MFIs’ supply REPORT address their expectations? These For several years, the sector has 2011 Microfinance Barometer, which to meet clients’ expectations. > > > page 3 questions are at the heart of the repositioning of microfinance in the world, as well as in France – to which we have devoted the central Interview Central Leaflet - France Leaflet. In addition to MIX Market international statistics, the 2012 Microfinance Barometer Sam Daley-Harris > Microfinance in also presents data from two exclusive surveys: one on French Founder of the Microcredit France microfinance actors operating on the international scene and the Summit Campaign other on microfinance actors in France. These surveys show the > Exclusive Ipsos dynamism of the sector, which continues to grow in value and in opinion poll the number of beneficiaries. I see a future For the third consecutive year, the Microfinance Barometer also shows for microfinance that puts clients the results from an exclusive survey “ Antoine Pompa, on the perception of microfinance among the French population. at the center. Manager of ‘Espace Foot’ In addition to the Microfinance „ Barometer, Convergences 2015 continues its reflection by organizing > > > page 12 > > > page 5 the world Forum for the Millennium Development Goals to be held in September 2012, by participating in regular events throughout the year Table of contents The main trends of microfinance in developing countries p. 2 SPECIAL REPORT - Understanding the unbanked and through its website where news and underserved p. 3 Placing clients back at the heart of microfinance p. 4 Clients’ portraits p. 4 CENTRAL from solidarity actors can be found LEAFLET - FRANCE - The main issues around microfinance in France p. 5 Clients’ portraits p. 5 OPINION (www.convergences2015.org). Take action with us now! POLL - What do the French think of microfinance? p. 8 The impact of professional microcredit in France and in developed countries p. 8 SPECIAL REPORT - Improving the relevance of financial services p. 9 SURVEY - French microfinance actors on the international scene p. 10 Savings and p. 11 Interview with Sam Daley-Harris p. 12 The Paris Appeal for responsible microfinance p. 12 2. MICROFINANCE BAROMETER 2012

The main trends of microfinance in developing countries

Geographical breakdown of microfinance portfolio and active borrowers as of 2010* Overview of active microfinance borrowers in 2010* Bn: billion Mn: million East Asia & the Pacific Number 105 million South Asia of active borrowers borrowers EUR 6.8 Bn 20 Mn borrowers 12% 19% % of women borrowers 80% & East Asia & Eastern South Asia Latin America % of borrowers living in rural areas 70% the Pacific the & Central Asia 58.8 Mn borrowers & the Caribbeans EUR 18.5 Bn EUR 17.7 Bn 16.5 Mn borrowers / 16% EUR 6.7 Bn 56% Average size per borrower 426 34% 33% 12% (EUR) Eastern Europe Africa & Central Asia % of borrowers served by 83% EUR 3.6 Bn 5.1 Mn 2.8 Mn borrowers / 3% group lending 7% borrowers Middle East 5% & North Africa % of borrowers served by Middle East & North Africa individual lending 17% EUR 0.9 Bn / 2% 2.2 Mn borrowers / 2% 2010 gross loan portfolio* 2010 number of active borrowers* Total of EUR 54 Bn Total of 105 Mn active borrowers *Sample of 1193 MFIs reporting to MIX Market in 2010

Transformational change balances in LAC (Latin America and sector will be led by full service ahead for the microfinance the Caribeans) can be attributed to offering low-income clients specific Change in gross loan portfolio (EUR)** sector the strength of the local economies products and services. Reflecting the and are led in particular by the growth scaling of operations in microfinance, 35% Responding to the large number of Peru. A decline is expected for currently the 100 largest institutions 45 Bn Annual growth rate (%) of financially excluded clients South Asia when the end figures of represent roughly 82% of the global 40 Bn 30%

with a wide range of complex the 2011 fiscal year figures become loan portfolio and 80% of borrowers. Annual growth rate (%) and diverse needs, microfinance available due to the Andhra Pradesh 35 Bn continues to grow and today offers a crisis in India and the resulting Microfinance has been a leading 25% spectrum of products and services, write-offs of nearly one quarter of driver in achieving the milestone of 30 Bn including growing microsavings and the Indian market. Africa forms at banking half of the world’s global 20% microinsurance products. The latest present only 7% of the 2010 global population. However, with further 25 Bn data from the 1,193 financial services microfinance gross loan portfolio, but technological innovations such as providers listed on MIX Market is expected to be an area of strong , prepaid cards, 20 Bn 15% shows that, as of December 2010, growth with currently only 24% and exploration of new distribution

Gross loan portfolio 15 Bn they reached 105 million borrowers of adults in Africa having a channels to extend to hard-to-reach 10% with outstanding of EUR 54 account. Finally, in 2010, around clients, the microfinance sector is 10 Bn billion. More than 56% of these 56% of reporting institutions were undergoing major transformations. To 5% clients live in South Asia and around deposit-taking, which provided the help build institutions that can close 5 Bn 80% are women. However, with opportunity to develop microsavings the financial access gap, actors such half of the global adult population products directly for their clients. as Citi and MIX are working across 0 0% still unbanked, the financial access the microfinance sector in order to 2008 2009 2010 challenge remains. As demand across the globe has enable MFIs to increase scale and continued to expand, the sector has product choice to expand access to The 2010 fiscal year was seen more banks and other financial financial services. a particularly strong year for institutions open their services to the microfinance with both portfolio previously excluded. In 2010, more Bob Annibale Change in number of active borrowers** and number of borrowers growing than 61% of clients were served Global Head Citi Microfinance by 24% and 12%, respectively. The through a regulated bank or non-bank and CITI Community Development East Asia and Pacific region edged financial institution (representing www. citimicrofinance.com 35% Annual growth rate (%) out Latin America and the 84% of loan portfolio) and non- 120,000,000 to become the largest region in terms profit institutions represented Marten Leijon Chief Executive Officer of size of loan portfolio, representing approximately 42% of clients (36% MIX MARKET 30% 34% of the global portfolio. The of portfolio). It is expected that the www.mixmarket.org

100,000,000 Annual growth rate (%) strong portfolio growth and high loan further growth of the microfinance 25%

80,000,000

20%

60,000,000 15%

40,000,000 10% N umber of active borrowers

20,000,000 5%

0 0% 2008 2009 2010

** Fixed sample of 775 MFIs reporting to MIX Market from 2008 to 2010 © Hélène Grégoire//ACTED

A brief history of microfinance

1462 - An Italian monk named 1864 - Friedrich-Wilhelm an attempt to reorganize and support granted USD 27 of his own 2006 - The Nobel Peace Prize is Barnabé de Terni sets up a charitable Raiffeisen forms the first the agricultural sector. to a group of 42 women in Jobra, given to both Professor Muhammad institution, Monte di Pietà, to fight credit group in Rhineland, . ). Yunus and the , which . Its objective is to offer mutual 1970s - Following the failure of he founded in 1976. financial guarantees to banks so rural development funds financed 1989 - In France, Maria Nowak 1653 - Lorenzo Tonti, an that poor farmers can have access by international aid and various creates the Association for the right 2009-2012 - Following Italian financier, sets up a savings to credit. states in the 1950s, cooperative to economic initiative (Adie). several localized crises, various association in France. His savings savings and credit unions start initiatives are launched to reinforce system becomes known as the 1880 - In France, Father emerging in developing countries. 2005 - The year is declared the supervision, transparency tontine, after its founder. Ludovic de Besse sets up Crédit Implementation of experimental International Year for Microcredit and performance of microfinance Mutuel et Populaire, of which microcredit programs to groups of by the United Nations, the motto institutions. 1720 - In Dublin, Jonathan Swift Banque Populaire are an offshoot. poor women: in India (SEWA), in being “Building inclusive financial is the first person to lend small In the following years, the French Brazil () and in sectors to achieve the Millennium amounts to poor craftsmen in the State launches Crédit Agricole, Bangladesh (Grameen Bank, created Development Goals”. city. based on the Raiffeisen model, in by Muhammad Yunus who, in 1976, MICROFINANCE BAROMETER 2012 3.

Understanding the unbanked and underserved

pproximately 2.5 billion Poor people have active Unlocking the key to 80 million fishermen and pastoralists adults do not have a financial lives responsible market expansion formal bank account. This 100 million unemployed represents 50% of all Even though over half of working By combining MIX Market and adults worldwide. Most of adults in the world do not have a Microcredit Summit data, we know 180 million Athem are concentrated in developing formal account, we know that poor that the bulk of the clients reached micro-entrepreneurs economies where 59% of adults lack people lead astonishingly active today by the microfinance industry, an account with a formal financial financial lives. They manage risks, around 200 million people, are institution. Geography also matters. smooth consumption, and build assets urban micro-entrepreneurs. We have 300 million Sub-Saharan Africa, the Middle East in ingenious and complex ways. They barely scratched the surface of the low-waged employees and North Africa have the lowest may not have a formal account, but potential demand. However, trying account penetration rate at around they use a myriad of informal tools to reach more clients without fully 20%. All the unbanked have one and sources. understanding who they are and what thing in common: they do not have they need may be counterproductive. access to a broad range of financial How do we learn about the day-to- In some markets, over-supply and services. Beyond that, they are very day financial management of different lack of access can co-exist. What we 370 million casual laborers diverse. types of clients? In recent years, books mean is that if supply consists largely 1,6 billion like Portfolios of the Poor have shown of a plain vanilla working capital loan working age adults living on less The ’s Global Financial us the texture of poor people’s financial product, the potential market might than Inclusion Database (Global Findex), a lives. On average, Bangladeshi be much smaller than we imagined. USD 2 per day detailed demand-side survey in 148 households, for instance, put into or But if the supply is diverse both in economies, provides a window on take out from financial services and terms of financial services and access this diversity. Through representative devices each year a sum of money that points and delivery channels, then 610 million interviews held nationally with represents two-thirds of their annual the demand might be quite large. small-holder farmers 150,000 individuals conducted by cash income. In India, households Gallup, Inc., we have robust evidence enter a fresh financial arrangement Implementing systems to observe that certain client segments are on average every two weeks – with a clients, listening to them, and systematically more excluded than moneylender, money guard, savings exploiting client data is essential for others. If you are a woman, if you live club, or formal provider, among others. providers and policymakers to do their in a rural area, if you live on less than jobs well. And a different granularity USD 2 per day, and if you are young, Research commissioned by the Bill of data is needed for different then you have less access to finance. & Melinda Gates Foundation and purposes. High level aggregate conducted by Oliver Wyman provided numbers on clients served are useful Worldwide, only 23% of adults a useful segmentation of working age to track overall but, living on less than USD 2 per adults living on under USD 2 a day by very quickly, disaggregated data by day report having an account livelihood. Of the 1.6 billion working income, gender, geographic location, in a formal financial institution age adults, the research showed that etc., are also needed to meaningfully * Source: Oliver Wyman (2007), Sizing and Segmenting Financial Needs of the World’s Poor, (compared to 50% for all adults over 600 million are small-holder inform the policy dialogue. The type unpublished paper commissioned by the Bill & Melinda Gates Foundation. worldwide). farmers, while only 180 million are of disaggregation can also be driven micro-entrepreneurs (see figure). The by specific country context – for If you are a woman in a poor research also found that 800 million example, in some countries tracking Understanding how and when those Today, there is great momentum to country, you have fewer chances youth (not counted in the 1.6 billion) the access of specific castes or socio- clients use a financial service will put clients first. This is promising for of having an account than a man – though not of working age – have religious groups is important. be a prerequisite to full financial narrowing the gap between actual and (37% vs. 46%). financial service needs. inclusion. potential clients, not only numerically Focusing on pure access numbers but from an effective usage and In Sub-Saharan Africa, the In countries such as Mexico, recent may miss the point of financial Actual and potential clients of quality perspective as well. account ownership rate for adults segmentation work commissioned by inclusion. The number of users microfinance are diverse. Low in cities is more than twice that CGAP and conducted by McKinsey is of mobile banking services, such income households are producers of adults living in towns/villages also helping us to understand that the as M-Pesa in Kenya, has grown and consumers, and they are often with a population under 10,000. main economic activity of a family is exponentially for instance. However, multi-generational with a wide mix Alexia Latortue just one dimension for segmentation digging deeper into this topic with a of income streams. Even households AND Meritxell Martinez CGAP Only 7% of adults living in the — the regularity of income flows study involving four providers, CGAP in deep rural areas rarely depend on poorest income quintile in the and households’ aspirations are also found out that less than 30% of agriculture for their entire livelihood. Middle East and North Africa critical aspects to understand what registered customers for a sample So, it should not be surprising have access to an account in a type of financial products they need. of branchless banking providers that diverse clients require diverse formal financial institution. are active, and active rates of less financial services. than 10% are not uncommon.

From microcredit to savings accumulation Point of view of a Zambian customer The success story of Johann, an unbanked micro-entrepreneur from the Philippines Sitali Amukasana, beneficiary of two microloans

n recent years, numerous ne of AMZ’s first clients AMZ loan”, she says. Mrs Amukasana businesses have opened around after operations began in took up trading during a critical the main market square of Clarin, July 2011, 47- year-old period for her family, and valued the a small town in the South of the Sitali Amukusana, makes prompt processing and disbursement. Philippines. One of the reasons her living as an informal “The loan was timely because that Ibehind this Otrader selling beans, fish, soya pieces, was the time my husband was laid is the presence of Gata Daku Multi- rice, cabbage and onions in Zambia’s off at work and life had become Purpose Cooperative a short walk remote and rural Western Province. unbearable until I started a small away. This becomes clear after a few Almost a year later, she has repaid business to sustain my family.” As discussions with these businesses’ her first loan of 1.2 million kwachas for what the future holds, “my plan owners. Johann Barrientos, 41 years old, (EUR 180) and is servicing her is to continue to expand my business is one of these local entrepreneurs who second loan of 1.7 million kwachas gradually as I benefit from AMZ.” have developed their businesses thanks (EUR 260), taken out in December. to microfinance and their refinancing on “I would be happier if the company the babyloan.org website. Taking into account her experiences could consider relaxing the group with formal and informal financial guarantee system as they get to She previously used to harvest services providers, she says: “Since know us, the clients, better so coconuts. She worked “far away in there is only one other MFI in my that the group does not become a the mountains”, she says, pointing area, I am especially happy that hindrance to individual progress”, to the Malidang Mount whose peak Gata Daku cooperative, located only of hope. Johann owns a share in the AMZ decided to give access to she says, referring to the individual can be seen through the clouds a hundred meters from her shop. cooperative’s capital and her savings credit to people, such as myself, loan products AMZ plans to introduce giving the impression of an erupting Thanks to her business’s success, are partly reinvested in other micro- whose businesses are very small and in response to market research and volcano. A few years back, the she was able to save money, which entrepreneurs by Gata Daku. considered unreliable. The payment client demand. Nonetheless, the rebels devastated this little piece of she deposited with Gata Daku. Each instalments are very flexible and the benefits of the services are so far paradise, encouraging her to open month, she put between 1,000 and Despite her very long working hours interest rates are very affordable. clear to Mrs Amukasana: “These days, a modest grocery store in this small 1,500 pesos (between EUR 18 and (from 4am to 8pm), she would not This is the reason why I decided to I can afford to have three meals a day town far from the conflict zone. It was 27) of her income onto her account. want to change anything in her life. borrow from them. It is the flexibility which I wasn’t managing before I got an immediate success thanks to her Her savings (EUR 240) were paid Or maybe just one thing: to be able with the instalments that I like about these loans. I have also been able to cheap products and her hard work. 1.25% each quarter, based on the to play her favorite sport, volleyball, it, and also that at whatever time I put my children back in school.” balance at the end of each day. She on the black sandy beaches of Clarin finish repaying my loan I can still This initial success encouraged now regularly dips into her savings, “when [she] has more time”, says get another loan even if my friends her to find a better location for her either to further develop her business, Johann. in the group have not yet finished. I business. The main market square or for her personal needs. Thanks to can pace my own progression.” MALUBA H. WAKUNG’UMA in Clarin was indeed the ideal place. her savings, she feels secure about Executive Director AMZ She selected a location just in front her future. Above all, she is now “very yasmine hamraoui Taking ownership of the time and of the market’s entrance, which was a proud” to, in turn, contribute to the Head of MFI partnerships scale of her business development, babyloan very smart choice. To get her business success of entrepreneurs: “it is like a “my life has changed since I got the financed, she logically asked the handover”, she says with a smile full 4. MICROFINANCE BAROMETER 2012

Placing clients back at the heart of microfinance Point of view of an investor

icrofinance came about short term productive microloans to The key role of shareholders simply triple according to the institution. client’s repositioning that we would like just 30 years ago. Few finance the rolling funds of their micro- Putting clients back at the heart of MFIs’ to implement would eventually lead to could dispute that its enterprises. They also need access Shareholders have a key role to play activities can therefore significantly the reinforcement of the MFI’s social initial assignment was to savings, consumption, , in placing clients back at the centre of improve their risk profile. mission while still allowing shareholders to fight against poverty. transfers and payment systems (to microfinance, which is the first step to to reach a level of profitability similar to MOffering microloans to marginalized which they already have access in take in order to achieve a social goal. Moreover, thanks to the economic that of the banking system. The case of women to help them start their own informal ways). Just like any other Indeed, this goal should be formalized model of microfinance and its weak the ProCredit Group goes even further by businesses could only bring positive consumer, the poor maximize the use within the MFI’s strategy defined by its regulation, two objectives that are showing that this profitability can even results. Once the issue of results was of their funds and do not hesitate to leaders. The analysis of the impact of the seemingly contradictory are being be more stable than that of the banking settled, the only thing left to do was deviate from their initial objectives in repositioning of clients on the risk and achieved: first the access for vulnerable system. to create sustainable institutions. order to address their needs. This was profitability profile of MFIs shows a very populations to financial services and The focus therefore drifted away from specifically shown in Murdoch and interesting insight and is a real argument second the maximization of profits. This In a context where some markets are beneficiaries to concentrate more on Rutherford’s « Portfolios of the Poor: in favor of the reinforcement of the social situation could encourage shareholders being saturated, intense competition is microfinance institutions (MFIs) which How the World’s Poor Live on USD goal. to implement a strategy, which could prevailing and vulnerable populations were to become more profitable and to 2 a Day ». It is therefore essential favor profitability to the detriment of risk excessive debt, only the MFIs which offer a portfolio of qualitative loans. to recognize that resources are In crisis situations, such as the one clients. develop a responsible, ethical and With over 205 million clients and fungible and that financial products in Kosovo, clients first reimburse humanist approach towards their clients, 10,000 MFIs, the sector is currently as well as distribution, payment and MFIs who offer them a portfolio of This can be illustrated by the case of placing them at the heart of their action, undergoing a ‘teenage crisis’: excessive reimbursement mechanisms, need adapted financial services (including the Mexican MFI Compartamos. A simple will be able to develop in the long term interest rates, crisis of over indebtness to be adapted to match the clients’ savings products) and with whom they analysis of the situation shows that, by and serve a wider range of people. (Kosovo, Andhra Pradesh in India), specific needs. have gradually built up trust. These reducing levels of profitability from 56% abusive recovery practices… All these institutions manage the period of to 15% (which is the average for the experiences have tainted the sector’s difficulty, while maintaining a portfolio banking sector), billing rates for clients Elodie Parent image, and should encourage us to re- range of dubious loans significantly lower could be reduced by 30% and reach Senior Microfinance Officer Putting the social goal of Proparco examine the initial promises made by microfinance back at the heart than that of their competitors who would 56% per year. One of the lessons learnt its founders. not have been able to serve these two key from the sector’s crisis is that maximizing Philippe Serres of MFIs’ activities objectives. Indeed, the number of loans profit is not a sustainable strategy. It can Senior Microfinance Officer Microfinance cannot be regarded, Placing clients at the heart of being paid more than 30 days late can also be harmful to vulnerable clients. The AFD however, as yet another example of the microfinance also means bringing the failure of development theories. Some focus of MFIs’ activities back to their of the latest random impact studies, social goal. The Campaign for Client notably by Crépon, Devoto, Duflo and Protection in Microfinance supports Parienté (2011) and by Karlan and this idea. This campaign promotes Zinman (2011), show that microfinance seven fundamental principles, which can have positive results. As of today, it should eventually be respected is difficult to say that microfinance can by all practitioners. Among these reduce poverty. Nevertheless, it can principles, the transparency of costs certainly help clients resist economic and the reasonable billing of services crises and increase levels of savings represent a significant progress in the and productive investments. Studies relationship between MFIs and clients. have also shown that microfinance Other international initiatives, such as works for specific populations with the Social Performance Task Force, try specific economic characteristics and and encourage MFIs to put in place specific products. Thus, we need to procedures and tools in compliance remind ourselves that putting clients with their social assignment. However, back at the heart of our discussions is without a legal framework, these essential. sectorial initiatives may well die out. Regulators need to become aware of the uniqueness of microfinance, Understanding the financial which is a financial service as well as needs of the poor a development tool offered to poor and therefore vulnerable populations. Placing clients back at the heart of microfinance means first and foremost to understand the poor’s financial needs. Poor people do not only need

How do clients perceive microfinance?

he way clients perceive time is limited and whose physical The quality of relationships with is being used in addition to these They are also used within a double microfinance is very mobility is sometimes restricted. credit agents is another essential practices, which it often competes logic of temporality: one in the short diverse and depends on component of this closeness. Some with but rarely replaces. term (daily protection and survival) the context in which it The level of social and cultural agents act as advisors or even and the other more in the long term, grows and on the services closeness also determines the way someone you can confide in. Others, The way in which the obligation to which makes it possible to organize Twhich it offers. The perception varies in which services are understood, however, do not take time to build reimburse is perceived is also very and finance social and religious between satisfaction, adaptation and interpreted and then owned. This personal relationships with their variable. Arrears can result from over events. These local forms of savings domestication, avoidance, bypassing idea of closeness translates into clients and can even be aggressive indebtedness but may also be an act serve a symbolic, economic and or rejection. Understanding this the ability to adapt services to local either when identifying new clients or of resistance and rejection towards social function, which can explain the diversity of perception requires us to habits, practices and norms. We when recovering loans. It is important microfinance institutions, which have low interest for collecting monetary take into consideration the multiplicity often highlight the need for simple to note here that the increasing lost their legitimacy, towards one savings. of appreciation criteria of financial procedures; this is indeed essential demands of profitability weighing on of their representative, towards the services. While these vary according to given the low levels of education. this sector are not compatible with sector in general, or even towards ‘the We can therefore notice that social, economic and cultural contexts, It is necessary to reduce the use of this need to be closer to the clients, authority’. people use specific tools and ways some appear quite frequently. banking and legal jargon. However, whereas this need indeed is supposed of reasoning to define how they beyond the technical questions, what to be the particularity of microfinance Collecting savings is often considered perceive microfinance services. These Firstly, the flexibility of services matters is also the compatibility of as opposed to conventional finance. as a service that is less risky and more can sometimes lead people to take defines how microfinance is being norms and visions. For instance, the appreciated by the clients. Here again, decisions, which can surprise or perceived. As a result of irregular, very principle of debt can be perceived Perception and ownership of it much dependson the way in which it puzzle us. However, if we consider random and sometimes unpredictable differently depending on the cultural microcredit also strongly depend adapts to restrictions and local norms. local social norms, these decisions income, clients need flexibility – which and religious context. In certain areas on existing indebtedness practices. While saving in a monetary fashion are often justified. While the concept microfinance today does not offer such as in the south of India, the Excluded from the banking is often limited and banking savings of ‘financial education’ – implying enough. For instance, this translates concept of debt is part of the human system, most micro-borrowers are are practically inexistent among the often that poor people are lacking into being able to reimburse loans condition and people have no negative nonetheless included in various poor, these people still do save by in any financial analytical capacity in advance, to adapt reimbursement feeling towards it. There, microcredit indebtedness circles – usually trying to protect themselves against – is very popular, it is urgent for us timetables to the flux of cash flow, or has had a lot of success and the risk informal, not regulated by the state the vagaries of everyday life and to to consider the complex and specific to have access to emergency loans. of over indebtedness is very high. nor by registering procedures. Private anticipate upcoming expenditure. ways of reasoning of those excluded In other places, such as in the rural professional or occasional lenders, Nevertheless, means of saving and from the standard finance sector. The convenience of services is areas of the Maghreb for instance, pawn brokers, shop owners, suppliers, ownership criteria are numerous. The This is essential if we want to offer another essential criterion. Indeed, being indebted is perceived as an travelling bankers, rotating savings use of savings in kind such as jewelry, services which are more adapted to services need to enable clients immoral act, all the more so if the and credit associations, family and clothes, livestock or even cereals is their needs. to borrow, reimburse, save and act of having borrowed is not free and friends are examples of this informal extremely widespread. Far from aiming withdraw deposits on a regular basis aims at the accumulation of resources. finance, which is often costly both at accumulating resources, they are Isabelle GUerin in a location close to their home or There, microcredit has had much less socially and financially, but which used in the logic of reciprocity – I Researcher their professional activity. This is success. has the advantage of being much more give you something today and you UMR 201 Development and Societies particularly true for women, whose flexible than microcredit. Microcredit will give me something tomorrow. Université Paris I Panthéon Sorbonne - IRD CENTRAL LEAFLET - FRANCE 5. The main issues around microfinance in France hilst microfinance In this context, various types of the credit, or by another actor. Its which are offered to the poorest and to to highlight the main characteristics was first developed in products have been developed, each first aim is to ensure the project’s micro-businesses in France. of microcredit and to follow up on developing countries of them addressing specific needs: viability (whether it is a personal or a the progress of the sector in France. as a tool to fight personal microcredit, professional professional project) and, in the long This convergence should emerge It will, in turn, complete the data poverty and to support microcredit as well as microinsurance. run, to redirect beneficiaries towards around a key issue: increasing the already published by the Caisse des Wthe economic activities of the poorest, These products share the same goal: traditional banks. visibility of microfinance and its Dépôts et Consignations on microloans in the global North, it spread by to fight poverty and more particularly recognition as a useful tool to fight guaranteed by the FCS (Social providing financial services adapted unemployment, two problems which Initially developed to compensate poverty and social insecurity, and more Cohesion Fund). to the needs of clients who had are intrinsically linked. Therefore, for the gaps in the banking system, specifically against unemployment. been distanced or excluded from the microcredit is part of a wider approach microcredit was created as a stepping- One of CNIS’s conclusions constitutes Nevertheless, it is important to traditional banking system. It appeared to improve financial, economic and stone towards the banking sector and an important first step towards this complement these studies with others in France in 1989 with the creation of social inclusion, which was specified in remains today closely connected with recognition as it has led to a definition aimed at measuring the social and Adie and has evolved in a very different a “Manifesto for the banking inclusion banks. Microcredit has been developed of the different types of microcredit economic in economic and financial context to of vulnerable populations”, which was around a diversity of economic models, in France, common to all actors France. These would indeed show that of developing countries. While launched by the French Red Cross, mixing and guarantees from working in the sector. On this basis, the usefulness and efficiency of the percentage of people who do not Secours Catholique and UNCCAS in the community sector, the public the Banque de France launched an microcredit in the fight against social have access to credit in France is very 2011 (see page 7). sector, and the banking system. It can important statistical enquiry in 2011 insecurity and unemployment, guide low (less than 1%), and while saving therefore adapt to the specific risks of aimed at addressing the legal reporting actors in improving their practices, services are relatively well developed, The work which was carried out in microfinance (such as weak guarantees obligations of microfinance actors, as and encourage the State to reinforce access to credit for individuals as well 2011 by the CNIS (National Council provided by clients). Integrating the well as collecting on a regular basis its support for the development of as for businesses is still a problem. The for Statistical Information) in which all work of all banking and non-banking quantitative data on personal and microfinance in France. economic and financial crisis affecting microcredit actors took part, led to the actors is essential in order to guarantee professional microloans disbursed by Europe since 2008 has made the recognition that support to clients is the coherence and the continuity of the banking and non-banking actors. This situation even worse. an essential element of microcredit in different types of financial services data, which will be available in 2012, Faustine Delasalle France. This support can be provided will allow us to better measure the Research Officer CONVERGENCES 2015 either directly by institutions granting importance of microfinance in France,

Professional microcredit, personal microcredit: which loan for which need? oth professional and quickly in the event of difficulties Its targets are generally people with and targets people who are detached etc. Resulting from the Lagarde law, personal microloans with repayment. In order to be able projects under EUR 5,000 who are from employment. In 2011, 36,065 people who are listed in the National address different needs to provide this essential support to eligible for minimum social benefits. businesses were created thanks to Payment Incident Database (FICP) are and operate according to borrowers, the Caisse des Dépôts these different microcredit systems. eligible to apply for this loan which is different mechanisms. provides financial support to these The microcredit “with the character guaranteed by FCS. BThey nonetheless have two things networks of social actors, with whom it of equity capital”, offered by France in common. Firstly, their goal is signs a partnership agreement. Initiative, aims at financing bigger Personal microcredit: support As a result of the diversity of to improve access to classic bank projects. In addition to the interest- to social and professional borrowers’ profiles and financial loans for borrowers who have been free microcredit provided by France integration situations, and of the different nature excluded from the banking system. Professional microcredit: Initiative, it also offers the possibility of their personal projects, the type Secondly, they both recognize the support to the setting up of for borrowers to apply for a bank The Lagarde law relating to credit of support given to them must be as need for borrowers to provide sufficient loan. The Réseau Entreprendre (passed on the 1st July 2010) sets out wide and as complete as possible. guarantees. In 2005, the State businesses provides support to projects with high the framework for personal microloans Consequently, the Caisse des Dépôts has improved the constitution of these In 2011, the National Council for development potential. guaranteed by the FCS and confirms created partnerships with 25 financial guarantees by creating the FCS (Social Statistical Information (CNIS) defined their social goal. The personal or related institutions and around 10 Cohesion Fund) whose management the type of microcredit aimed at the Finally, the “guaranteed bank microcredit is a loan between 300 networks of support networks1 who has been assigned to the Caisse des creation of businesses as a loan (bank microcredit” enables borrowers to and 3,000 euros which is accessible offer their skills throughout the country Dépôts. or non-bank) of less than EUR 25,000, benefit from a bank loan which is to all those who have not had access through their local representatives. for which the borrower automatically guaranteed by France Active Garantie to standard bank loans but who are Around 30,000 personal microloans Since the creation of the FCS, a receives support. This type of as well as support from one of the 40 capable of reimbursing. It can help have been disbursed since the launch particular emphasis has been given to microcredit is offered through three local organizations of the network. to finance any project whose aim is of this system in 2005, 10,000 of the provision of support to borrowers. complementary mechanisms, which to improve the social and economic which since 2011. Social actors are providing this support provide support during the setting- In 2009 the State along with the situation of the borrower even if the 1 They are: Adie, ANDML, CNLRQ, Croix-Rouge, Familles in a global and integrated manner. Prior up, the funding and the post-launch Caisse des Dépôts put in place the project is not directly linked to a Rurales, FNARS, Restos du Cœur, Secours Catholique, to the loan disbursement, they support phases: NACRE system which accompanies professional objective. For instance: UNAF and UNCCAS. borrowers first in formalizing and then projects from the development stage a project aimed at improving mobility in carrying out their professional or The non-bank microcredit with up to 3 years. It aims at disbursing (purchase or repair of a vehicle, CAISSE DES DEPOTS ET CONSIGNATIONS social integration project. After the interest is mainly distributed by Adie, credit in the form of interest-free loans financing of a driving license), a training disbursement, they are able to react an important actor working nationwide. for a maximum amount of EUR 10,000 project or one of home improvement,

Portrait of an entrepreneur Interview Antoine Pompa, manager of ‘Espace Foot’, benefited from a professional microcredit Pierre, retired and beneficiary of a personal microcredit hanks to a professional Why did you apply for a personal very different from that of traditional microcredit which he microcredit? banks whose objective is to make received from the MFI Créa- money. If I didn’t have access to a Sol, Antoine Pompa, now As I needed to have access to a microcredit, I would have had to ask manager of ‘Espace Foot’ in loan, I first contacted a bank. But a friend to lend me money, which is TMarseille (France), was able to finance at my age, the cost of the loan never an easy thing to do. and open a footballers’ paradise. would have been too high (because Antoine Pompa, 26 years old, holds a of the insurance) and the bank Are you experiencing some Masters Degree in “Entertainment & suggested that I apply for a personal difficulties in reimbursing? Media Management”. After a few years microcredit. spent working in organizing sports No, I am managing my budget very events, he decided to become his own Why did you need the loan? wisely. At my age, one becomes more boss by pursuing his love of sports, sensible and targets expenditures more specifically of football. I had medical expenditure to more reasonably. I don’t usually finance. I first needed vari-focal use automatic bill payments so I ‘Espace Foot’ is a franchised chain lenses, and then dentures. I don’t am particularly attentive to making store with around 50 branches in have private medical insurance and sure there is sufficient money on France. Attracted by the concept of this the social security system does my account for the reimbursement chain, Antoine seized the opportunity sufficient cash flow, I would not have the 6th arrondissement of Marseille, not cover all of these costs. What of my loan. to become a branch manager, and lasted 6 months.” offers a wide range of products for I needed was not a luxury but a opened a store in Marseille. He first players, supporters or football fans. necessity for my everyday life. The Would you request a personal carried out a market survey and visited From then on, everything moved ‘Espace Foot’ offers more than 100 microcredit therefore allowed me to microcredit again? various premises. With the support of very quickly. He met Corinne kinds of studs for all types of grounds, pay the difference that I wouldn’t a certified accountant, he then started Ferrovecchio, who followed his over 150 official football shirts, and have been able to pay alone with my For the moment I don’t need it. contacting various banks to get his project at Créa-Sol. “His application hundreds of products from various small retirement benefits. But you never know: if my fridge or project financed. Despite having his was complete. His project was good football clubs. It is also a concept- my washing machine breaks down own funds to contribute and a very well- and viable. I immediately believed store inspired by the Ultra Movement What is your view on personal for instance, I know I could rely on planned project, Antoine approached in it and quickly submitted it to the (which provides entertainment at microcredit? microcredit. several banks, which was not easy. He steering committee”, she says. Within events and organizes trips for fans to finally managed to convince one bank a month, he received his professional follow their teams). And Antoine does This financial product is closer that agreed to finance his investment. microcredit from the MFI allowing not plan on stopping here: he would to people. The interview that I had In order to finance his cash flow, him to finalize his financing plan and like to open two additional stores in was very cordial and the person was SANDRA BYTHELL he was directed to France Initiative launch his project. the area! very competent and attentive to my IN CHARGE OF MICROCREDIT CREDIT MUNICIPAL DE PARIS and then towards the MFI Créa-Sol. needs. She helped me calculate my According to Antoine, “Cash flow is One year after its launch, ‘Espace budget and the monthly payments Christian FARA the most important thing. Without a Foot’, located at 118 rue de Rome in Managing Director, CrEa-Sol that I could afford. The approach is 6. MICROFINANCE BAROMETER 2012 SURVEY - Microfinance in France

At the end of 2011, in accordance with the sectors’ legal obligation, the Participants in the ConvergenceS2015 survey on microfinance in France: Banque de France launched a statistical survey on microcredit, alongside Professional microcredit: Adie, France Active, France Initiative. bank and non-bank actors. Official data on microcredit in France should Personal microcredit: Adie, Crédit Municipal de Paris, Restos du Cœur. therefore be published before the end of 2012. Additionally, the Caisse des Dépôts et Consignations publishes statistics on personal and professional Who benefits from microcredit in France? microloans guaranteed by the FCS (Social Cohesion Fund). The data collected by Convergences 2015 does not intend to compete with these official Beneficiaries of personal and professional microcredit often share the same characteristics. In statistics but to complement them with non-exhaustive qualitative data general, they are under 40 years old with minimal qualifications. More specifically, beneficiaries on the main actors of microcredit in France: Adie, Crédit Municipal de Paris, of professional microcredit are essentially male (62%), with a secondary or higher education Restos du Cœur for personal microcredit, and Adie, France Active and France diploma (43%) and mostly unemployed (65%). In this case, microcredit is a stepping-stone on Initiative for professional microcredit. the path to employment. Beneficiaries of personal microcredit on the other hand are essentially employed (52%).

What is microcredit used for? Breakdown of beneficiaries by gender

Female Professional microloans disbursed by Adie, France Active and France Initiative mostly PersonalMicrocrédit microcredit personnel 51% 49% benefit firms working in the business and repair sector (38%) and firms providing services to Male businesses and individuals (27%).

ProfessionalMicrocrédit microcredit professionnel 38% 62% Breakdown of professional microloans by purpose in 2011 Commerce et réparation 0% 20% 40% 60% 80% 100% 6% 3% Services aux entreprises et aux particuliers Hommes 3% Business and repair Femmes Services to businesses and individuals Breakdown of beneficiaries by age category Hôtels et restaurants 11% Hotels and restaurants 38% Construction and civil engineering Under 30 years old PersonalMicrocrédit microcredit personnel 35% 30% 21% 14% IndustryConstruction - BTP From 30 to 39 years old 12% Agriculture, forestry, fishing From 40 to 49 years old Other Industriesectors Over 50 years old ProfessionalMicrocrédit microcredit professionnel 22% 31% 28% 18% 27%

Agriculture, sylviculture, pêche 0% 20% 40% 60% 80% 100%

Plus de 50 ans Autres secteurs De 40 à 49 ans BreakdownDe 30 à of39 ans beneficiaries by qualification level Moins de 30 ans In 2011, the objective of personal microloans disbursed by Adie, Crédit Municipal de Paris and Restos du Coeur was essentially employment and mobility. Without a diploma or primary education PersonalMicrocrédit microcredit personnel 17% 53% 30% certificate Breakdown of personal microloans by purpose in 2011 Lower secondary school leaving certificate or equivalent professional education

2% Employment and mobility ProfessionalMicrocrédit microcredit professionnel Secondary education 4% 3% 23% 35% 43% 3% diploma (baccalaureate) Education and training or higher education Basic necessities equipment 0% 20% 40% 60% 80% 100% Housing Baccalauréat ou enseignement supérieur Moins de 30 ans Health Brevet des collèges, CAP, BEP De 30 à 39 ans Others BreakdownSans diplôme of beneficiaries ou CEP by employment status De 40 à 49 ans Employed 88% PersonalMicrocrédit microcredit personnel 52% 1% 36% 9% Self-employed Unemployed Not economically active ProfessionalMicrocrédit microcredit professionnel 13% 18% 65% 2% Retired Others 0% 20% 40% 60% 80% 100%

The impact of professional microcredit in France Autres Commerce et réparation Retraité Services aux entreprises et aux particuliers Hôtels et restaurants  Professional microloans disbursed Number of businesses supported and number of jobs created in 2011 Construction - BTPBusinesses’ survival rate after 3 years of existence by the three main French support Travailleur indépendant Industrie networks have made it possible to 35,000 create 19,000 businesses and have 100% 30,000 provided support for 12,000 additional Number of businesses supported 90% businesses, which makes a total of 25,000 in 2011 80% 75% 31,000 businesses supported in 2011. 70% 66% This resulted in the creation of 57,000 20,000 Number of jobs created in 2011 jobs in that period. On average, these 60% businesses are more sustainable after 3 15,000 50% years than the average of new French 10,000 40% businesses. 30% 5,000 20% 0 10% 0% Creation Transition Businesses which Average of have been supported Development French businesses

Acquisition & transfer CENTRAL LEAFLET - FRANCE 7. New challenges around the banking inclusion of micro-businesses and very small businesses n France, the creation of micro- these challenges. Through their action Each of these networks has therefore notably for those who are seriously In this period of economic crisis, businesses and very small for the benefit of new entrepreneurs, created different kinds of partnerships excluded from the employment world. investment is decreasing when it businesses is a source of growth the three main support and funding with banks in accordance with their should be generating growth. In and an efficient way to fight networks (Adie, France Active and methods of intervention and their First of all, the support networks’ this context, access to funding and against unemployment. Yet it France Initiative) work towards economic models. banking partners need to strengthen support to micro-enterprises and Iis confronted with two challenges: improving access to the banking their teams in order to be able to very small businesses are central project funding and banking inclusion. system for project holders who are For more than 20 years now, these systematically refer business creators to economic development and Only 36% of business creators have experiencing difficulties. three major networks have proven who need support to fund their project employment in France. Indeed, effective access to bank loans to fund the validity and the efficiency of to these networks. Beyond this, 94% of French businesses are their project (source: INSEE). These These three networks, present their respective models in mobilizing banking networks and professional currently micro-businesses and data do not even include information throughout France, are in line necessary resources for the creation microcredit actors need to continue very small businesses. Professional on self-employed entrepreneurs for with public policy in relation to of businesses by people who are working in collaboration in order to microcredit plays an essential role which the rate of bank financing is employment, and have partnerships out of employment. In 2011, Adie, reach a better understanding of the in the creation and development even lower. with nearly all the banking networks. France Active and France Initiative specificities of each network for bank of these businesses. Support for They usually target the unemployed enabled the creation of more than advisors. This will allow them to better this tool should be reinforced and In addition, the 2008 economic and those eligible for the minimum 31,000 micro-businesses and very orient project holders towards the strengthened. Microcredit networks crisis has worsened the situation: social benefits. These networks small businesses which have directly appropriate structure. have the capacity to develop further credit crunch, requests for additional develop complementary actions in created 57,000 jobs. Thanks to their and to support an increasing number guarantees, increase in interest rates, terms of targets and tools. They aim partners, notably banks, EUR 1,327 Similarly, the support provided of business creators. It is now in longer delays and increased number at providing an adapted solution to billion have been injected into the by Adie, France Active and France the hands of those who care about of rejections. Micro-business and very the needs of each business creator, local economy. Initiative contributes to increasing employment and economic growth small business managers have been in accordance with his/her profile and the level of understanding of project to provide them with the means they particularly affected and their medium project. Their ambition is to create a Given the current economic holders in relation to financial, need to do so. term projections in relation to access continuum that will cover the needs context, we all need to continue administrative, accounting and to funding are quite pessimistic of a wide range of business creators the momentum around the French commercial issues when creating (source: CCI survey, April 2012). for whom access to credit must be professional microcredit and its a business. These are the keys to GREGOIRE LECHAT facilitated. capacity to help the funding of micro- ensuring the efficiency and the security HEAD OF COMMUNICATION In this context, support and businesses and very small businesses. of funding and, most importantly, FRANCE ACTIVE assistance to micro-businesses and By offering adapted financial services While maintaining public and private to guaranteeing the existence and very small businesses accessing as well as non-financial services such funding is essential, it is no longer of businesses and MARC OLAGNON financial services is crucial. It is as counseling during the first years sufficient. This support needs to be created jobs. Today, this qualitative DEPUTY GENERAL DELEGATE particularly important during the start- of activity, these three networks are developed as the needs of the sector support needs to be institutionally FRANCE INITIATIVE up phase to encourage establishing working towards improved banking and its operators grow. Other methods recognized. Its cost should also be sustainable businesses, which can inclusion for micro-businesses and exist and need to be explored in covered by public institutions, banking THIERRY RACAUD grow and create sustainable jobs. very small businesses in order to order to optimize the services which actors and more generally speaking by HEAD OF RESEARCH AND ADVOCACY The professional microcredit offers give them the same opportunities to are offered to business creators and all the stakeholders in the business ADIE a relevant and efficient solution to access funding as big businesses. therefore to encourage job creation, world.

Supported personal microcredit Financial exclusion: A stepping-stone towards banking inclusion It’s time to act! any unemployed people such an impact? Borrowers risk lasting whatever the rate or the duration of Manifesto for the banking inclusion of vulnerable populations will not start up their exclusion from the banking system. the loan. Thanks to the allocation of a own businesses. And supported microloan, Karim was able oday, over 5 million people are just some of the difficulties yet many of them will Personal microcredit therefore to find the resources to get back on are excluded from the experienced not only by beneficiaries need to buy a vehicle needs to be accompanied by banks’ his feet and bring his budget back banking system in of minimum social benefits, but also Min which to travel to work, to furnish offers and advice adapted to the to normal, thanks to the joint effect France. Unfortunately, by the unemployed, low-salary workers their homes, to receive training, etc. borrowers’ abilities and needs. In this of obtaining a supported microloan, the problems these as well as middle-class households This is what the supported personal way, microcredit becomes a service, having an authorized and Tpeople face in accessing and more confronted with bad debt. For each of microcredit is for. It enables borrowers among others, whose aim is to foster regaining the right to hold a bank importantly in using banking products these categories, a sudden life change to purchase useful goods or services people’s banking inclusion, and a way account. and services are not sufficiently such as loss of employment, divorce or without exceeding their budgets. to help them to become clients just considered in official statistics. In illness, can rapidly worsen their already like many other people. By providing a microloan without this context, Jean-François Mattei, weak situation. To have a bank account Microcredit alone cannot address considering the relationship between Chairman of the French Red Cross, is not enough. It is important to be able the needs of those 5-6 million French This was the case for Karim. In a borrower and his/her bank, we run François Soulage, Chairman of the to use it under good conditions and to people who are experiencing banking 2010, when he requested a microloan the risk of not adequately equipping Secours Catholique and Patrick benefit from sound and appropriate difficulties. However, according to from the Caisse d’Epargne in order to people to succeed. We also run Kanner, Chairman of UNCCAS advice. a study carried out by the Caisse fund his nursing training, Karim had the risk of banks losing interest in (National union of communal social Breakdown of beneficiaries by employment status d’Epargne and the Caisse des Dépôts, an unauthorized overdraft of EUR 470; microcredit. centers) presented on December 7th, Through this Manifesto, the French personal microcredit can help one in he was therefore banned from issuing 2011, in Paris, the Manifesto for Red Cross, Secours Catholique and two borrowers to find a job. It therefore cheques and did not have any savings. Cedric Turini the banking inclusion of vulnerable UNCCAS aim to: helps beneficiaries to increase their His monthly benefit allowance was Head of Microfinance and Financial Inclusion populations. Make public the problem of Federation nationale des Caisses d’epargne available budgets, which is a key insufficient to enable him to deal banking exclusion, which can be factor in improving their banking with his banking difficulties. It was Given the place which bank services either a cause or a consequence of situation. However, what happens clear that microcredit alone would hold in our daily lives, the French social exclusion. when microcredit fails to produce not be enough to resolve the situation, Red Cross, Secours Catholique and Highlight public policies’ lack of UNCCAS have drawn attention to the efficiency and insufficient funds from social consequences of this situation the private sector on this subject. and suggest solutions to deal with this The laws currently in effect do not form of exclusion on a large scale. fully address the issue and banking practices are unequal and do not have Denied access to cash machines or sufficient impact in the fight against to personal advisors, mismanagement banking exclusion. of accounts and payment methods Suggest concrete solutions leading to cascading for payment through observation, certification and incidents, misunderstanding of the incentive mechanisms to encourage modalities of renewable loans, etc., banking institutions to change their current practices.

The authors of this Manifesto also advocate for a reinforced budgetary guidance for vulnerable populations and ask the Government to promote a new economic model. MANIFESTE The presentation of this Manifesto POUR in December 2011 in Paris marked L’INCLUSION an important step in maintaining BANCAIRE discussions, with public and private EN FRANCE actors around this social issue which DES POPULATIONS the 3 networks initiated. FRAGILES ou comment lutter à grande échelle contre une forme latente d’exclusion sociale French Red Cross Secours catholique unccas 8. MICROFINANCE BAROMETER 2012

Exclusive Ipsos opinion poll What do the French think of microfinance? Each year the Microfinance Barometer presents the results of an exclusive opinion poll on what French people think of microfinance. The Ipsos/Logica Business Consulting survey was conducted in March 2012 with a representative sample of 1,006 people. It presents an updated overview of the perception of microfinance in France.

Knowledge of microfinance in France Is microfinance a solution to fight poverty and exclusion? 2012 Personally, have you ever heard of microcredit? Do the following statements match your views? 2011 2010 What French people think of 34% 2010 microfinance in 2012 is relatively Yes, precisely 30% 2011 76 75 Oui précisément 72 71 the same as in 2011. It is a largely 22% 70 69 68 2012 80% positive appreciation as 70% of 62 50% 70% those interviewed agree with the OuiYes, pas but précisément not precisely 50% idea that microfinance helps people 49% 50 60% 47 46 46 provide for themselves and is an 16% 41 42 50% innovative solution to fight poverty NonNo 20% and exclusion worldwide. 55% 29% 40% do not agree with the criticisms 0 10 20 30 40 50 30% concerning the level of interest rates and the risks of insolvency of 20% debtors.

10% Microcredit Microcre- Microcredit Microcre- Microcredit Since 2010, knowledge of microfinance has greatly improved. 84% of those gives its dit is an allows the dit is a interest benefi- innovative poorest dangerous rates are interviewed were familiar with the term in 2012 and more than a third knew ciaries a solution to escape solution too high. sense of to poverty poverty. because exactly what it meant. responsi- and exclu- it involves 2010 bility by sion in the lending providing world. money to 2011 them with people who the means are not to meet creditwor- 2012 their needs thy. them- selves. Ready to take action?

As in previous years, those who decide to take action Lend money to organizations that provide microloans to the most impoverished financially to help poor populations continue to prefer Personally, which of the 20% following solutions would two solutions: 39% would prefer investing in a solidarity- you want to take part in as Donate to an organization that combats exclusion among the most 39% based savings scheme while 41% would choose making a a financial gesture to help impoverished donation to an organization fighting against poverty. 20% poor populations in France would decide on lending money to an organization offering and abroad? Invest in a solidarity-based savings product (savings invested in social microloans. cohesion projects, sustainable development and fight against social exclusion 41% and poverty)

The impact of professional microcredit Going further In France and in developed countries

he impact of microfinance, In France, microcredit programs by a social protection scheme? How Do you need access to a Support microfinance hence the sustainable vary in their objectives, their terms stable and regular are his income and professional microcredit in by investing! changes it creates in and their conditions: they can affect his savings capacity? Most importantly, France? the living conditions of beneficiaries directly or indirectly, how about his “personal satisfaction”? Ask your bank advisor a specific target group, aim at covering operational costs or Association pour le droit à You can invest your money by Tis an increasingly debated issue. not; they have different strategies The aspects are captured only l’initiative économique (Adie) placing it in a financial product In the context of financial crisis in relation to targeting clients, and partially and separately by French Caisse Sociale de Développement that is certified by Finansol and is and reduction in public spending, offer a wide range of services from operators, who work independently, Local, Bordeaux (CSDL) invested in microfinance activities. practitioners and public authorities microcredit alone to close support for therefore using tools which are often Créa-Sol can no longer afford not to question clients in managing their professional incompatible. Harmonizing approaches France Active Become a shareholder of a the effectiveness of microfinance and activity. However, their commonality is indeed difficult given the fact that France Initiative microfinance institution more specifically that of subsidized lies in the way that their impact is each network has its own modalities Réseau Entreprendre You can directly invest in the capital microcredit. Is the impact on the measured in terms of the number of intervention as well as its own Boutiques de gestion (BGE) of institutions which support people beneficiary sustainable? Could we of created or assisted jobs and the target group. Aggregated tools that And the banking networks excluded from the traditional banking have obtained equal or better results sustainability of the created activity. would allow us to capture the effects mentioned below system and which offer them adapted with other mechanisms? How efficient All operators rely on indicators such as in a comprehensive manner are not financial services. is the professional microcredit in loss ratio, survival rate of the funded yet available. If we had the capacity comparison with other mechanisms activity or continued professional to assess the qualitative aspects of Do you need access to a Take action through your company aiming at creating jobs? activity. microcredit based on common impact personal microcredit in Ask your company if it is already indicators, we would be able to have a offering PEE (Savings Scheme for Given the important support Since the 90s, numerous surveys better understanding of the needs and France? Business) or PERCO (Savings Scheme granted to beneficiaries of professional have been conducted in France expectations of micro-entrepreneurs. Association pour le droit à for Common Retirement). With these microcredit in the setting up of their and other developed countries (see This would also feed into the current l’initiative économique (Adie) services, you can invest your savings activities, these questions are even for instance International Labor discussions about the ways to better Caisse Sociale de Développement in a financial product certified by more relevant in developed countries, Organization (2002), Microfinance assist microcredit beneficiaries. These Local, Bordeaux (CSDL) Finansol. where it is now necessary to measure in industrialized countries, Helping issues will be addressed in a joint Créa-Sol the impact of professional microcredit, the unemployed to start a business, publication of the Centre d’Analyse Crédit Municipal (in several cities) Directly lend to micro- beyond simply the question of access Social Finance Department). These Stratégique and of the International Banque Fédérale Mutualiste entrepreneurs in developing to funds. studies all show that microcredit Labor Organization, whose first task Banque Populaire countries and in France is an efficient and effective way to will be to examine with all the actors Banque Postale Through various peer-to-peer While microcredit is essentially create jobs and that the survival rate the effect of microcredit on the BNP Paribas lending websites, you can directly disbursed in developing countries, the of businesses that benefited from a creation of jobs as well as to assess Caisses d’Epargne lend money to micro-entrepreneurs issue of measuring the impact is as microcredit (whether they are created monitoring and evaluation methods Crédit Agricole throughout the world: babyloan.org, important in developed countries, but or taken over from) is equivalent to which are being used or which could Crédit Coopératif .org, microworld.org, myc4.com, in a different manner. In developing that of businesses created in more be used. This will be carried out in Crédit Mutuel xetic.org… countries, microcredit is used to favorable conditions (70% after 3 2012. Société Générale assist poor people with no access to years and 60% after 5 years). Cofidis For more information: the banking system to better manage LaSer Cofinoga www.finansol.org their cash, to protect themselves Identifying and measuring this type from vulnerability and to increase of impact is necessary but it is not Contacts of all support networks their level of income. In developed enough to capture all the changes Bernd Balkenhol can be found on the website: countries, where access to financial in the careers and the daily lives Microfinance Consultant www.france-microcredit.org and banking systems is easier (even of beneficiaries. There is indeed a if financial inclusion of vulnerable shortage of assessments taking into Camille GuezenneC populations is still a challenge), and account more qualitative and societal Centre d’Analyse Strategique Do you need a microinsurance where there is a social security system aspects relating to the impact of in France? in place, professional microcredit aims professional microloans. What is at the social/professional integration the pace of work of those who have Entrepreneurs de la Cité of beneficiaries through a sustainable created a business (working hours, Association pour le droit à l’initiative professional activity created thanks to. holidays, etc.)? Is this person covered économique (Adie) MICROFINANCE BAROMETER 2012 9.

Improving the relevance of financial services through microinsurance

he poor are more vulnerable Going beyond credit life hospitalization for instance, and also to risks and economic insurance to protect clients’ allow households to plan for the future. shocks than the rest of the For example, insured clients will be Percentage of MFIs reporting to MIX Market population. They are also assets less likely to have to choose which the least able to cope with The most common product that child to send to school and more likely offering microinsurance products* Tsuch shocks. While microfinance MFIs provide is credit life insurance, to seek preventive medical care and to efforts tend to focus on strategies to which covers only the principal and the accumulate assets to pay for education, % of MFIs offering boost incomes and build assets, it is interest of an outstanding loan when a for daughters as well as sons. Region microinsurance products important to recognize that gains can client dies. While such cover is useful quickly be lost when poor households for the MFI, which no longer has to Microinsurance, along with other Africa 15.3 experience illness, a death in the worry about non-repayment in the case financial tools, can prevent MFIs’ family or other crises. This is where, of death, it does not adequately cover clients in developing countries to fall Eastern Europe / 9.5 microinsurance, the provision of the risks that clients face. back or further into poverty, but these Central Asia insurance to low-income people, can clients need valid products to cater for specifically support poor households Credit life insurance becomes their needs. Basic credit life insurance South Asia 27.1 to better protect their assets and more appealing when it provides coverage should be seen as a start and reduce their vulnerability. added benefits such as payment for not as an end, as it is not sufficient East Asia / Pacific 17.1 funeral expenses, payment for utility for low-income clients to manage their Microfinance institutions (MFIs) have and grocery bills following the death risks. The of MFIs and their Latin America / 27.5 extensive experience in providing credit of the breadwinner, or when it covers clients are aligned since protected Caribbeans and more recently savings schemes additional risks such as disability for clients are better clients. for low-income households. Adding the borrower, and protection in case of MENA 18.5 microinsurance to their product mix fire or natural disasters. enables MFIs not only to improve their Craig Churchill * Sample of 317 MFIs participating in the MIX Market survey in 2011 own sustainability, but also to increase president the quality of the services offered MICROINSURANCE NETWORK Protecting your family and to their clients. Insurance enables investing in the future SARAH BEL clients to manage emergencies while Information Officer preserving their savings and avoiding Voluntary life, health or property Microinsurance Innovation Facility new debts. However, it is estimated insurance products, though more international Labour Organization that only 20% of MFIs worldwide complex to manage, provide higher provide insurance to their clients (see direct and indirect benefits for MFIs’ table), and a large majority only offer clients. They can prevent huge out- products with limited benefits. of-pocket expenses in the event of

Protection against natural hazards

Fonkoze is Haiti’s largest microfinance institution, serving 55,000 borrowers and 250,000 savers. It developed Kore W, a microinsurance product which protects clients against hurricanes, earthquakes, floods or destructive winds. The product is mandatory for all borrowers, who pay 3% of the loan principal as premium. If a natural disaster occurs, clients are eligible for a USD 125 indemnity payout to meet emergency needs such as food, water and temporary shelter. They can also benefit from the cancellation of their loan with Fonkoze and obtain a new loan as soon as they are ready. © Hélène Grégoire//ACTED

The impact of mobile financial services

hink about how the mobile Today, using even the most basic hours traveling and then waiting in and then transfer funds into their providers. According to the GSMA, phone has impacted your mobile phone, millions of people inside the nearest branch to conduct . Many unbanked there are now 123 mobile money life. Think about the in developing countries are sending transactions. Today that same person people do not save formally due to transfer systems globally. Some of convenience of reaching money to friends and family, paying can instead receive payments on their bank fees and the cost of accessing the most notable include M-Pesa someone, sending a bills, making savings deposits, loan mobile phone and go to a nearby a branch. Hence mobile financial in Kenya (used by 15 million Tmessage and checking your emails reimbursements and performing agent, often a small shop in their services break down these barriers Kenyans, processing an incredible whenever you want. Moreover, now other banking transactions through village, to withdraw or electronically and can perhaps help people to better USD 1.4 billion per month), with smart phones, you have a their mobile phone whenever and transfer funds. This convenience manage their financial resources. MTN’s MobileMoney (present in 13 plethora of applications allowing wherever they want. Many people’s saves people time, usually taken from Microfinance clients cite other African countries, reaching over 7 you to conduct just about any kind lives are being impacted by using their jobs, and money, required for benefits including the convenience million people allowing national of transaction. Imagine you lost mobile financial services without ever transport costs (petrol, bus ticket, of making loan reimbursements via and, in , even international your phone for over a week – that is having a formal bank account. etc.). their mobiles rather than traveling to ), Orange Money when you would truly realize how the MFI branches or meeting up with loan (available in 8 African countries, mobile phone has impacted your life. According to the recent Global Some of the mobile payments officers to make payments. The ease reaching over 3 million customers), Findex survey, in developing which customers receive include of these remote payments can enable and, in the Philippines, platforms Now picture yourself living in a economies, only 41% of adults have loan disbursements. Microfinance timelier loan repayments. like GCASH and SMART and a new in a rural village a formal bank account and only 23% institutions (MFIs) globally (over 8 mobile microfinance bank BPI Globe not connected to the electricity of those living on under USD 2 per in Kenya alone) are using the mobile Mobile financial services are BanKO, that offers microinsurance grid with a limited water supply. In day. According to the same survey, channel to electronically disburse already providing benefits but, in products, loans and savings accounts. order to conduct any business you 61% of account holders worldwide loans, saving time and costs for the order to truly scale up, the offerings need to travel 2 hours to get to the use their account to receive payments institution and the end customer. and functionality must be designed Mobile financial services systems nearest city. But whilst at home in from an employer, the government, or One MFI in Kenya, disbursing loans based upon customer needs and and mobile phone penetration are your village, you most likely have one distant family members. But having through checks, reported saving constraints, such as low-literacy and growing rapidly, creating an enormous of the most valuable tools in your a formal bank account just to receive customers EUR 25,000 per month affordability. The biggest challenge potential impact to improve the lives pocket, a mobile phone, and you payments can mean significant fees in time, bank and travel fees by now in the system, however, is for mobile of the unbanked and . could, for example, call anyone, send for the customer both for banking disbursing loans directly to their financial services providers to create text messages to organize meetings, transactions (account-opening fees, mobile wallet. MFIs also use the a robust agent network that allows arrange to share transport to the city, remittances and withdrawal fees, mobile channel to extend their reach customers to find easily and transact read weather forecasts or locate the etc.) and the time and costs involved to new customers. Loan officers visit quickly with trusted local agents. nearest medical clinic and… perform in getting to and from the nearest remote areas finding new customers Carol Caruso banking transactions. bank branch. People living in rural and opening accounts, such as Many mobile financial services MANAGING DIRECTOR areas in developing countries who savings accounts, allowing people systems are now available, either Triple Jump Advisory Services have accounts can spend up to 2-3 to save using a local agent to cash- developed by banks or service 10. MICROFINANCE BAROMETER 2012

SURVEY - French microfinance actors on the international scene

Who are the beneficiaries of French microfinance actors on the French operators international scene? on the international scene* Synthèse de l’action des acteurs français à l’international par zone géographique French microfinance actors intervene primarily in 3 geographical areas: Sub-Saharan Africa, Asia Despite the microfinance crises, the sector remains dynamic. The growth of the outstanding Pacific and Eastern Europe/Central Asia, where most of the funding is directed. Investors and pageCAFI_graph6portfolio is greater than that of previous years (+90% in one year), although the diversification of operators’ beneficiaries are mostly women. 40% of indirect beneficiaries of French investments products remains quite limited. The number of microfinance clients continues to grow, in particular live in rural areas, while the interviewed French operators intervene primarily in urban areas the number of savers (616,000) which is now higher than the number of borrowers (563,000). (93%). The considerable growth of microsavings can also be seen by the increase in outstanding amounts by 132% between 2010 and 2011. In addition, microinsurance continues to develop: in 2011, the number of people insured is 8.8 times higher than in 2006.

Changes in the number of beneficiaries and in the outstanding portfolio EECA between 2006 and 2011 Evolution du nombre de bénéficiaires et des encours entre 2006 et 2011 239 18 AS AP 700,000 250,000,000 € MENA outstanding credit and savings portfolio Financements des investisseurs 600,000 Outstanding credit portfolio (en millions) 56 15 104 291 200,000,000 € LAC Outstanding savings portfolio Nombre de clients soutenus par 127 0 500,000 les opérateurs (en milliers) SSA 150,000,000 € Nombre de partenariats noués par 400,000 les intermédiaires 35 7 184 232 300,000 100,000,000 € AP Asia Pacific 200,000 AS South Asia

EECA East Europe / Central Asia Borrowers, savers, insured people 50,000,000 € LAC Latin America and Caribbeans 100,000 MENA Middle East and North Africa SSA Sub-Saharan Africa 0 0 € 2006 2007 2008 2009 2010 2011 French investors funding (in million Euros) Number of clients supported by French operators (in thousands) Number of active borrowers Number of active savers Number of active insured people Nombre d’emprunteurs actifs Encours de crédits Nombre d’épargnants actifs Encours d’épargne Profile of French microfinance actors’ beneficiaries on the international scene in 2011 Breakdown of disbursed microloans by type of product in 2011 (in amounts outstanding) Nombre d’assurés actifs

80% 74% 4%3% 70% 66% Among clients of French operators Loans to very small businesses in the business Crédits TPE commerce et services 8% and servicesAutres sectors 60% Among clients of MFIs financed by French investors Loans to very small businesses in the Crédit TPE artisanat et production 50% 9% handicraft andCrédits production à lasectors consommation 40% 40% AgriculturalCrédits loans agricoles Crédits agricoles 30% 75% Consumer loansCrédit TPE artisanat et production 20% Others Crédits à la consommation 10% 7% Crédits TPE commerce et services Autres 0%0% Proportion of Proportion of people Proportionwomen Proportionliving in rural of people areas of women living in rural areas Parmi les clients des IMF financées par les investisseurs français

Femmes French investorsParmi les clients des opérateurs in françaismicrofinance* French support organizations in microfinance* Hommes

The total amount of funding spent by French public and private investors in microfinanceBrourillon has Support organizations provide microfinance institutions and MFI networks throughout the greatly increased (+33% compared to 2010, 4 times higher than in 2006). In 2011, this world with a wide range of services aimed at reinforcing their organizational and social increase was largely caused by the growth of one of the investors. The survey also highlights performances. In 2011, around 100 000 working days were devoted to different types of an increased concern of investors for the social performance of MFIs, which is a key criterion services: support to clients, management advice or information systems assistance. in funding decisions. Other criteria are mostly related to economic viability.

Amount of outstanding funding by type of funding between 2006 and 2011 (in million euros) Types of services provided by French support organizations in 2011 (in number of working days) C

800,000,000 772 Recherche Prêt en monnaie locale 70 4% Services70 aux 700,000,000 4% Client support Mise en réseau Prêt hors monnaie locale 60 Management, strategy and governance et aux p60ar 600,000,000 580 9% advice OthersCapital Audit et notation 500,000,000 469 50 36% Hôtels e50t r 431 Grant Support to fundraising Dette surbordonnée 400,000,000 13% Software and information systems Guarantee 40 Autres types d'assistance technique Constru40ct 285 300,000,000 SubordinatedGarantie debt Other types of technical assistance 191 30 6% Systèmes d'information et logiciels 30 200,000,000 CapitalSubvention Audit and rating Industrie Foreign currency loan 11% 100,000,000 Autres 20 17% NetworkingAide à la recherche de nancements 20 Local currency loan Agricultur 0 Research 10 Conseil en management, stratégie et gouvernance10 2006 2007 2008 2009 2010 2011 Aut – Accompagnement des clients – Structures Structures Structures Associations Structures (%) (%) Construction, Formation Prévention Petit matériel Appui à la Soins Criteria taken into account by investors in MFIs’ funding decision décentralisées intermédiaires nationales d’enseignement * See Glossary réhabilitation, médical gestion ou équipement à la maitrise Source : Etude ACTED/CUF 2010/2011 d’ouvrage Source : Etude ACTED/CUF 2010/2011 Proportion of women among clients 2/16 Number of investors rating this Targeting of specific beneficiaries 2/16 criterion amongst the 5 L’étudemost important du niveau P d’interventionarticipants in thedans Convergences issus de la 2015 société survey civile on qui French font vivremicrofinance et actorsLa typologie des actions mises en La moitié des projets mis en place projets identifiés ont une composante Size of the balance sheet 3/16 in MFIs’ funding decisionsla pyramide (out of 16 de santéon the a permis international d’identi- scenebénéficient: du partenariat entre collec- place a permis de caractériser l’ac- avec le soutien des collectivités fran- formation), tout comme la prévention Profitability 5/16 investors who answeredfier this lesquestion). établissements bénéficiaires des tivités. Dans le domaine de la santé, ces tion des collectivités en distinguant çaises a trait à l’appui non médical qui est incluse dans un projet sur trois. Debt ratio 5/16 projets et de comprendreInvestors: lesACTED, probléma- AFD, Babyloan,structures BNP Paribas, se situent Crédit Coopératif, à différents Grameen niveaux Crédit Agricole Microfinanceles éléments relevant de la pratique aux structures de santé par le biais Les collectivités françaises agissent Governance and transparency 5/16 Foundation, Investisseur et Partenaire pour le Développement (I&P), MACIF, Mairie de Paris, MicroWorld, Natixis, tiques propres à chaquePlaNIS ResponsAbility, type de struc- Proparco,qui SIDI, correspondent Société Générale, à laVeecus, structuration Xetic. de des soins, de la prévention, de la d’actions de construction, de réhabi- également en appui aux collectivités Quality of the financial rating 6/16 ture, de la plus centrale à la plus locale. l’offre de santé dans un pays, que nous formation ou de l’échange d’expé- litation ou d’équipement non médi- partenaires et au fonctionnement des MFIs' existence period (> 3 years) 7/16 avons choisi d’identifier sous cinq caté- riences, de la dotation en équi- cal. Les actions de renforcement des structures par le biais d’actions d’ap- 7/16 Support organizations: Audencia, CERISE, CGSI Consulting, COFIDES, Convergences 2015, Ecidec, GRET, Horus, Size of the portfolio La coopération décentralisée crée des gories : structures et programmes natio- pement médical, ou encore de la capacités, avec la contribution de pui à la maîtrise d’ouvrage et d’appui Average loan size 8/16 IECD, Microfinance Sans Frontières, Neuflize OBC, Octopus, PAMIGA, PlaNet Finance, PlaNet Rating, SAMN, SIDI. Portfolio at risk liens11/16 durables entre des territoires et naux, structures intermédiaires, struc- construction ou de la réhabilitation professionnels de la santé, sont éga- à la gestion. Social performance des populations,12/16 etO associeperators: Advans,un ensemble CIDR, Entrepreneurs tures décentralisées, du Monde, FERT, structuresInter Aide, MicroCred, d’ensei- OXUS. de structures de soins. lement courantes (plus d’un tiers des d’institutions publiques ou d’organismes gnement et associations. 0 2 4 6 8 10 12

Budgets des projets de coopération décentralisée Domaines médicaux abordés par les projets de coopération décentralisée 2% 10% 39% 70

13% 60

50

40

30 36% 20

Budget supérieur à 1 million d’euros (%) 10 Budget compris entre 100 000 et 1 millions d’euros (%) – Budget compris entre 10 000 et 100 000 (%) euros (%) MICROFINANCE BAROMETER 2012 11.

Credit unions, a boost for the development of Lithuania

The cooperative movement emergence of a market economy in the cities of fewer than 3,000 inhabitants, finance, etc.), documentation, legal The Dutch cooperative Oikocredit, 1990s triggered a massive influx of where they account for more than half and regulatory oversight, information which was created in 1975, is one of The United Nations named 2012 the foreign banks in Lithuania, most of which of the local financial sector. systems, etc. the most important private actors in “International Year of Cooperatives”. concentrated on financing large and development financing. It supports On this occasion, Secretary-General medium-sized enterprises while avoiding Along with their expansion The savings collected from the credit more than 800 producer organizations, Ban Ki-moon stated that “cooperatives the microfinance and agriculture sectors throughout the country came the need union members guarantee their financial cooperatives, small businesses and remind the international community which were considered too risky. Credit for cooperation amongst these credit autonomy. Using a loan mechanism, microfinance institutions throughout that economic viability and social unions emerged as a suitable solution to unions. This led to the creation in savings are used entirely to fund the world. responsibility are largely compatible.” the lack of interest of commercial banks 1998 of the professional association members’ professional and personal in rural areas and small towns where the ALCU (Association of Lithuanian Credit needs. CoopEst is a social investment firm Cooperatives are autonomous economy was dominated by agricultural Unions), followed by the establishment that operates in Eastern European and organizations owned by their members, activities and micro-businesses. of the main LCCU body in 2002. While In Lithuania, as elsewhere, Central European countries. Founded in thanks to which people and communities ALCU carries out lobbying activities democratic governance is a key feature 2006, it is today recognized as a key can improve their living conditions The first was created and promotes the sectors’ interests, of the cooperative movement. Members actor in the region’s cooperative and through an economic activity. in 1995 with EUR 5,000 of assets, LCCU offers financial and non-financial are both clients and owners of their microfinance sectors. an initiative driven by the Government services to member credit unions. cooperative and they take part in its Savings and credit cooperatives, of Lithuania which was looking into LCCU’s role is to maintain the financial governance according to the “one man The cooperative bank Crédit also called credit unions, are financial improving financial inclusion in rural health of the sector and that of the = one vote” principle. Credit unions are Coopératif has been financing the social non-profit cooperatives, owned by their areas, and with the support of CIDA credit unions through the management administered by their members. During and solidarity economy for nearly 120 members and offering them a wide range (Canadian International Development of a liquidity fund and a stabilization general assemblies, members elect the years: associations, cooperatives, mutual of financial services (savings, credit…) Agency) and DID (Desjardins fund, as well as to guarantee part of the board and the different operational insurance companies, small businesses, as well as non-financial services International Development). Today refinancing of their activity. committees of the LCCU. etc. It is today a member organization of (training, electronic transactions…). the LCCU (Lithuanian Central Credit Groupe BPCE, the second largest French Thanks to their proximity to local Union), the main body, comprises 68 Strong values Committed investors banking group, which was created in communities, credit unions play a key credit unions representing total assets 2008. role in the financing of agricultural of EUR 450 million. These cooperatives Cooperatives cater for the needs of LCCU is supported by Oikocredit, activities and micro-businesses. With have EUR 300 million in outstanding their members. They provide them with CoopEst and the Crédit Coopératif, three almost 857 million beneficiaries loans and EUR 370 million savings from what they need to ensure their economic committed investors sharing a common ANTHONY DEGOUVE throughout the world (13% of the 120,000 members. and social development. LCCU has for vision of investment that can have a MICROFINANCE PROJECT OFFICER global population), they play a key role instance allowed the establishment strong social impact by supporting the CREDIT COOPERATIF in financial inclusion. Today they account for 12% of the of national and international payment social and solidarity economy (including country’s total savings and almost half systems, the introduction of bank cards cooperatives) in developing countries. MARC-HENRI STROH LCCU and the success of credit of funding for agriculture and micro- and the development of banking. Chairman unions in Lithuania enterprises. The contribution of credit Another role of LCCU is to provide extra- oikocredit ifo unions to the Lithuanian economy is financial services to its members, such The fall of the Soviet Union and the particularly visible in rural areas and in as training, education (management,

Glossary

Consumer microcredit / Microcredit Microfinance institution (MFI) Non-governmental organization (NGO) Solidarity-based finance Loans to very small businesses in the business for social purposes A MFI is an organization that provides financial A not-for-profit structure that is not part of the The segment of the financial sector that provides and services sectors A loan to finance the acquisition of consumer services to persons on low incomes or persons State or an international institution, created to funds for activities in the fields of professional good or training in order to improve the living or who cannot access the formal financial sector. defend a cause in the public interest. and social integration, housing, international working conditions of the borrower. In France, it MFIs can have a variety of legal forms: NGOs, solidarity, etc. is called a personal microcredit (see article on associations, savings and credit cooperatives, Over-indebtedness page 5). limited liability companies, financial institutions, Solidarity-based savings/investment banks, etc. Depending on the country, MFIs may A situation characterized by the inability of the Investment used to finance projects that Consumer protection or may not be regulated by monetary authorities debtor to repay in good faith their debts by the or other entities, may or may not collect savings, due date. establish or develop solidarity-based activities. A concept that arose in the at the etc. Solidarity-based activities are defined instigation of the consumerist movement led by Peer-to-peer lending according to their nature, their social utility, Ralph Nader. Consumer protection legislation relates Microinsurance the social status of their beneficiaries, etc. In to consumer contracts, but also lending operations Loans between individuals, without the involvement France, solidarity-based savings products bear in consumer credit or home loans. An insurance product for the very poor. The most of a financial institution. In the case of microfinance, the Finansol label. common services are health, incapacity and death online platforms allow internet users to lend money Gross loan portfolio / Amount of loans insurance, and cover against natural disasters and to micro-entrepreneurs in developing and developed Support networks (support for clients) harvest failure (see article on page 9). countries through microfinance institutions. outstanding Networks who provide professional support for The outstanding balance on all sound, doubtful or Microfinance Portfolio at risk (PAR) micro-entrepreneurs at one or more stages of restructured loans of an institution. This amount the loan (creating a business, budget analysis, Outstanding balance on all current loans on which does not include loans that have been the object Financial services aimed at poor individuals etc.). In France, support is an important at least one repayment of principal has been of a debt waiver or accrued interest. When loan loss excluded from the traditional banking system. component of microcredit and can take the outstanding for a certain number of days. This provisions are deducted, the portfolio becomes a It mainly includes loans, savings products, form of voluntary action or a professional account includes the total amount outstanding “net loan portfolio“. microinsurance, money transfers and leasing. In activity. developed countries, beneficiaries can have access (repayments due and unpaid + future repayments to the banking system but have very low incomes. not due), but not the interest accrued. The PAR is Honor loan Support organizations (support for frequently calculated over 30 days. microfinance) A medium-term loan (2-5 years) that does not Microfinance operators accrue interest or accrues interest at below market Professional microcredit These are actors who provide technical rates extended to a person implementing a project They are actors who control MFIs in developing assistance, advice and services to microfinance A loan used to finance an economic activity, with without asking them for real or personal guarantees. countries or are in the field to support MFIs in the institutions in developing countries. This long term and into the future, notably by helping income used to repay the loan (see article on page 5). may include research, technical assistance, them become self-sufficient. Individual loan (microfinance product) consulting, networking, skills support, financial Savings (microfinance product) intermediation, or auditing and rating. A form of credit whereby the borrower receives Mobile banking A product that may be compulsory (to obtain a loan in his or her own name. In many cases, a loan) or voluntary (term deposits or target physical collateral or a deposit must be provided. The ability to conduct financial transactions via mobile phone (transfers, money transfers, deposits remunerated according to the term, or payments, check account balances, cash deposits, at-call deposits with unrestricted deposits and Going further Investors etc.) (see article on page 9). withdrawals). Saving means giving up immediate Public or private organizations engaged in consumption to postpone spending. www.convergences2015.org investments in microfinance institutions in Mutual guarantee lending / Group- developing countries. They can also provide based lending (microfinance product) Social Cohesion Fund (Borloo law 2005) technical assistance. Investments may take the An instrument created by the Planning Act for form of loans, capital, guarantees or subsidies. A form of loan whereby borrowers come together in groups of 5 to 20 people who cannot provide Social Cohesion to encourage banks to grant professional or social microloans to individuals Mesofinance sufficient physical collateral but provide a group guarantee: if one of the members of the on low incomes by providing guarantees for Covers funding needs of small and medium group fails to meet its obligations, the other part of the loans. businesses that are covered neither by microfinance members will stand in for them. For some nor by traditional finance. Amounts may vary from group-based loans, savings are compulsory. Social performance EUR 2,000 to EUR 100,000 depending on the A practical translation of the social objectives of an country. Non-financial services institution: to serve a growing number of the poor and excluded in a sustainable manner, improve Microcredit Services provided to borrowers to reinforce their capacities: technical and management training, the quality and suitability of financial services, A small loan. There are several types of microloans literacy, education, nutrition, health, etc. improve the economic and social position of convergences 2015 (see above and below). clients and to engage the social responsibility of the institution towards its clients and employees The world Forum 19, 20, 21 and the community it serves. for the Millennium Development Goals september 2012 Towards innovative partnerships for paris 12. MICROFINANCE BAROMETER 2012 Interview with Sam Daley-Harris Founder of the Microcredit Summit Campaign

focused on creating of that first Summit, the UN declared of the poor are the potential clients, Seal of Excellence for Poverty Outreach the political will to end 2005 the Year of Microcredit. After especially those who are usually left and Transformation in Microfinance, global poverty. Soon after the announcement of his Nobel Peace out – the very poor. and The Paris Appeal for responsible I arrived, we were sent a Prize in 2006, Muhammad Yunus microfinance would have been largely video on Grameen Bank. congratulated me because he knew ignored five years ago. Now they are We had never seen such that each year I would ask the same How do you see the future of seen as keys to the way forward by a thing. The funds were two leaders to nominate him for the microfinance? more and more stakeholders. put directly into the Peace Prize. hands of the very poor. The last few years have been a I see a future for microfinance that We were blown away. So I and the organizations I have difficult time for the field, excruciating puts the clients at the center and that We sent copies of the founded have been there for some of some would say. Microfinance was in continues to ask and provide answers video to each of the 50 the pivotal moments in the last 25 danger of completely losing its way. to this question: “What do the clients RESULTS chapters across years, for the good times and for the Professor Yunus’ answer, 20 years ago, need now to work their way out of the United States. recent failures. to those who asked what his strategy poverty?” But it is up to the current was in forming Grameen Bank had leaders of the field to ensure that the By the end of 1986, become eerily prescient: “I didn’t clients are put back at the center, that we prepared microfinance Today who are the clients of have a strategy. I just kept doing what microfinance regains its integrity and, legislation to be microfinance and who should be its was next. But when I look back, my with that, its soul. Many have entered introduced in the US potential clients? strategy was, whatever banks did, I did microfinance because they wanted to Congress. Over the next the opposite. If banks lent to the rich, make a difference, not because they 12 months, RESULTS All of the poor should be the I lent to the poor. If banks lent to men, wanted to make a killing. You measure volunteers generated 100 potential clients of microfinance. I lent to women. If banks made large the difference you have made in the editorials in newspapers But just as with other fields of loans, I made small ones. If banks improvements in the lives of the across the country development, it is the very poor who required collateral, my loans were clients and their families, not in your Can you tell us more about your supporting microfinance. Muhammad are always left out. In child poverty: collateral free. If banks required a lot profits. It really is up to us. commitment to microfinance and Yunus joined our board the following who are the 21,000 children who die of paperwork, my loans were illiterate the effects of RESULTS and RESULTS year. every day from preventable causes? friendly. If you had to go to the bank, Educational Fund’s Microcredit It is the children of the very poor. my bank went to the village. Yes, that Interview conducted by Michael knaute Summit Campaign? I left RESULTS in 1995 to organize Who are the 67 million children not was my strategy. Whatever banks did, Executive Director the 1997 Microcredit Summit, a in primary school? It is the children I did the opposite.” Convergences 2015 For an advocate, I entered the project of RESULTS Educational of the very poor. Even though an MFI field of microfinance quite early. It Fund. The Summit launched a nine- might believe that you cannot reach I believe the field can come out of was in 1985 and I had just moved year campaign to reach 100 million this group, some other MFI somewhere this crisis. Initiatives like the Smart to Washington, DC as the founder of the world’s poorest families with in the world has probably already done Campaign for client protection, the of RESULTS, a citizens lobby group microcredit. In 1998, in recognition so successfully. So I would say that all Social Performance Task Force, the Sign the Paris Appeal for responsible microfinance To respond to the excessive commercialization of microfinance and other abuses

3 reasons to support the Paris Appeal: Signatures so far from:

> To bring back the social mission of microfinance dedicated to the poor > Public Figures Michel Rocard / / la Grande Duchesse du Luxembourg > To raise the interest of international organizations, media and other key Jean-Michel Severino / Abdou Diouf / Chuck Waterfield … players in microfinance as a tool to fight poverty and financial exclusion > Hundreds of organizations CARE / Crédit Coopératif / Crédit Municipal de Paris / e-MFP > To be part of a global movement involving all microfinance stakehol- Grameen Crédit Agricole Foundation / Macif / OXUS Group / SIDI … ders, including regulators, supervisors and international organizations > Thousands of experts, regulators, investors, operators and beneficiaries

Endorse the campaign online www.appeldeparis.org

A publication by Launched in 2008, Convergences 2015 is the first European think-tank aimed at building new convergences between public, private and solidarity-based actors to promote the Millennium Development Goals (MDGs) and to alleviate poverty and privation in developed and developing countries. As a backbone network, Convergences 2015 now brings more than 200 organizations together to reflect on the challenges of cross-sector partnerships, international cooperation, microfinance, social , and sustainable development. SOLIDARITY AND RESPONSIBILITY: INVESTING AND WORKING TOWARDS THE MILLENNIUM DEVELOPMENT GOALS www.convergences2015.org

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Thank you Thank you to the members of the Steering Committee of the Microfinance Barometer and to the contributors: Bob Annibale, Arvind Ashta, Bernd Balkenhol, Florent Bédécarrats, Sarah Bel, Vincent Belec, Marie-Anna Bénard, Pauline Bensoussan, Louis Bidou, Sandrine Bonamy, Gérard Brasquet, Thomas Brebion, Vitalie Bumacov, Sandra Bythell, Priscilla Carpenter, Carol Caruso, Marjolaine Chaintreau, Laurent Chéreau, Anne-Laure Chevron, Craig Churchill, Eugénie Constancias, Sam Daley-Harris, Florence de Maupéou, Béatrice de Montleau, Priscilla de Moustier, Marie-Anne de Villepin, Anthony Degouve, Agathe Delouvrier, Christian Fara, Estelle Gautier, Isabelle Guérin, Camille Guézennec, Philippe Guichandut, Yoann Guirimand, Jonas Guyot, Yasmine Hamraoui, Snezana Jovic, Gwladys Ketchemen, Perrine Lantoine-Rejas, Alexia Latortue, Thomas Lauruol, Grégoire Lechat, Marten Leijon, Antoine Leroy, Meritxell Martinez, Vanessa Mendez, David Munnich, Marc Olagnon, Claire Ozanne, Elodie Parent, Thierry Racaud, Franck Renaudin, Anne Rodier, Julien Sciau, Philippe Serres, Jean-Michel Severino, Marc-Henri Stroh, Cédric Turini, Marylène Viala-Claude, Malubah Wakunguma, Yaël Zlotowski.

For more information: [email protected] or www.convergences2015.org Suggested reference for this document: Microfinance Barometer 2012 / Convergences 2015. Special thanks to: Faustine Delasalle, Jérôme Gonnot, Monica Jahangir, Judith Jakubowicz, Charline Legrand, Mélodie Milan, Alexia Tronel and Marie Vialard from Convergences 2015, Michaël Knaute and Clémence Rousselet from the OXUS Group, Frédéric Roussel, Paul Duke and Adrien Tomarchio from ACTED, Margaret Scollen. Translation: Samantha Brangeon. Lay out: Convergences 2015. Printing: Chevillon Imprimeur. Copyright Convergences 2015 June 2012 – Convergences 2015, 33 rue Godot de Mauroy, 75009 Paris – France // www.convergences2015.org // +33 (0)1 42 65 78 84.