Micro thoughts
I read that there is not enough public money to fund the demand for microfinance services in the world. Giving access to savings accounts, loans and microinsurance to millions of unbanked people will need more money than what the World Bank and the rest of donors can offer. MFI’s across the world need funding and investments are already pouring towards them, drop by drop, slowly, slowly. At least in Benin.
Benin is not a major destination for private money in microfinance right now. The intervention of the government in one of the major MFIs at the beginning of this year has scared most investors off. Understandable. Why would you put your money in a local MFI when the government can decide tomorrow to remove the whole management team and replace it with an interim bunch of people? Risky.
A local MFI told me yesterday that they only have funding to give credit to 31% of their total demand. Regardless on how inflated or deflated this number is, the fact that some MFIs do not serve potential low-income clients is a missed opportunity. Likewise, it seems to me that management of some MFIs needs to spend so much time in the raising funds’ quest that operations are weakened in this process.
The same MFI was interested in the product that the organization I am working for proposes: a domestic energetic platform to non-electrified households in one of the rural departments of Benin. The MFI would be in charge of offering financial services to those customers willing to buy the energetic platform (sold at a subsidized prize anyway). I am talking about a loan to buy a bio-fueled generator, that’s it. This all sounds like a good, green initiative but where does the MFI get the funding to give credits to farmers? And what’s more, who is going to take care of the warranty and maintenance of the energetic platform? If the platform fails and the repair never comes, the loan won’t be reimbursed.
I went home thinking that I learnt something…how complicated, fascinating and cross dimensional (forgive the jargon) the microfinance industry is.
Benin is not a major destination for private money in microfinance right now. The intervention of the government in one of the major MFIs at the beginning of this year has scared most investors off. Understandable. Why would you put your money in a local MFI when the government can decide tomorrow to remove the whole management team and replace it with an interim bunch of people? Risky.
A local MFI told me yesterday that they only have funding to give credit to 31% of their total demand. Regardless on how inflated or deflated this number is, the fact that some MFIs do not serve potential low-income clients is a missed opportunity. Likewise, it seems to me that management of some MFIs needs to spend so much time in the raising funds’ quest that operations are weakened in this process.
The same MFI was interested in the product that the organization I am working for proposes: a domestic energetic platform to non-electrified households in one of the rural departments of Benin. The MFI would be in charge of offering financial services to those customers willing to buy the energetic platform (sold at a subsidized prize anyway). I am talking about a loan to buy a bio-fueled generator, that’s it. This all sounds like a good, green initiative but where does the MFI get the funding to give credits to farmers? And what’s more, who is going to take care of the warranty and maintenance of the energetic platform? If the platform fails and the repair never comes, the loan won’t be reimbursed.
I went home thinking that I learnt something…how complicated, fascinating and cross dimensional (forgive the jargon) the microfinance industry is.
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