During the past two weeks, both lower and upper houses of Parliament have carefully considered the Microfinance Bill, together with other Bills.

After its third reading in parliament, the Microfinance Bill has been passed on to the senate and will shortly be put before the president for signing into law.

In 2005 a National Policy on Microfinance was enunciated after consultations among the Ministry of Finance, the Reserve Bank of Zimbabwe and other stakeholders.

The Zimbabwe Association of Microfinance Finance Institutions (Zamfi), the umbrella body of microfinance Institutions, has together with other stakeholders walked a very long and arduous road and welcomes the imminent enactment of a new supreme law to govern the microfinance sector.

The Microfinance Bill itself takes a very customer-centric view in that many of its features are not any different to the requirements set out in the Zamfi Code of Conduct. The background is that Zamfi is also a signatory to the Smart Campaign, which is a microfinance industry initiative aimed at promoting responsible lending and transparent pricing.

Sadly, the prevalent public view of microfinance in this country is that of an industry led by super villains; the kind you find in James Bond movies, who preside over organisations that charge very high interest rates, engage in illegal deposit-taking and in highly unethical practices.

However, as Zamfi we understand that while there have been a few cases of malpractice, the work of the greater measure of our members is not very well understood and the errant behaviour of a few misfits has dominated the headlines. This new Microfinance Act will set a high standard, and will also allow differentiation in the industry and a number of the highly professional outfits that are law-abiding will thrive in this new dispensation.

Many will often ask why the business of such small loans draws such a huge amount of attention.

Firstly, my view is that the only thing small about this industry is the general perception on it.

The potential of the industry, as has been demonstrated globally, is huge. For example, BancoSol began as a microfinance programme in post hyperinflationary Bolivia. The institution offered tailor-made credit and deposit products for its clients, who were largely shunned by the bigger commercial banks. From this base, BancoSol has grown to become one of the biggest financial institutions in Bolivia.

Compartamos in Mexico is also a similar story. Having started from a small capital base of US$ 250 000, the microfinance programme grew over the course of 15 years to become a billion dollar business listed on the New York Stock Exchange. Closer to home, the story of Capitec Bank in South Africa has followed a microfinance model to cater to previous underserved segments of the market.

Capitec has over the course of 15 years grown to enter the top five of mainstream banking in South Africa.

You may be wondering how these global experiences relate to our local situation and what role microfinance has to play locally? The banking sector in this country is still currently dominated by the multinational banks.

These institutions follow a different model and don’t lend aggressively to micro-enterprises and small to medium enterprises. The mantle has fallen on a number of our indigenous banks to do this. Some have evidently faced challenges in navigating mainstream banking, let alone venturing into the MSME segments.

Bank failures have eroded some trust in the formal banking system. The entire formal banking sector services less than 18% of the population. Microfinance institutions currently follow credit-led models and an opportunity exists to build confidence through lending. Put another way, microfinance institutions are a credible vehicle for financial inclusion.

The Equity Bank experience in Kenya comes to mind. With a microfinance-led model, this institution has more than 40% of the deposit accounts in the Kenyan market. This is the potential that the model has.

Microfinance as an industry gives small loans to micro-entrepreneurs. The best and most able of these entrepreneurs graduate to become bankable propositions. The industry’s greatest insight, borrowed from the insurers, is that you can lend in an unsecured manner, provided that one has the necessary diversification to manage the overall portfolio. Consequently, a number of microfinance models involve lending to people that do not have the traditional forms of collateral required by the banks.

Microfinance not only gives people access to funds but also the chance for social mobility for those who are highly motivated. In this regard, the vital importance of the industry cannot be underestimated. It is very possible that these small loans will set someone on the path to creating a company that will generate significant employment opportunities.

As an industry, we believe this proposed law will provide a solid legislative framework to operate in. We particularly welcome the move to allow players to apply for perpetual licences, with the regulator having the power to withdraw the licence of any misbehaving practitioner.

This will instil discipline as errant, unethical practitioners will be de-registered.

Lastly, we don’t as an industry underestimate the role that we have to play as an allocator of capital to sections of the market that are largely neglected. The new Microfinance Act will raise the bar in terms of compliance to very high standards of practice. We are of the view that this is healthy for the industry.

While we appreciate that the interest rates in the industry are currently very high, we also subscribe to the view that interest rates for the sector should be determined by market forces.
However, it is also our belief that the interest rates in the sector will be subject to the economic tenet of scale.

As the industry scales up, and attracts increased investment, coupled with the advent of some deposit-taking microfinance institutions, a natural consequence of these factors, in our considered view,will be lower interest rates in the sector. This has been the microfinance experience in Latin America, Asia and the same should happen here.tegy.

Clive Msipha is the Chairperson of The Zimbabwe Association of Microfinance Institutions ( Zamfi). He writes in his personal capacity.

SOURCE: Zimbabwe Independent

By Stephen Ssenkaaba, New Vision

A LADDER can only mean one thing: Progress. That is why the Stromme Foundation recently chose this important tool to symbolize their movetowards greater heights in their activities to improve the lives of the poor in Uganda. “We build ladders. Unique, very special ladders. On these ladders people climb to a better life,” says the foundation’s management in a report. “

As a development organisation whose goal is to eradicate poverty, the ladders are the means by which we are reaching this goal. In other words, we help people climb out of poverty,” says Priscilla Serukka, the Stromme Foundation regional director. Over the last year, the Stromme Foundation has invested time, energies and resources in special projects from education, to community empowerment.

Education
“In 2012, we continued to implement education interventions through partnerships with 25 registered local organisations and community based organisations,” says Serukka. “We enrolled 49,830 children (51% of whom are girls), in 51 primary schools and 2,676 (47% of whom are girls) in 19early childhood development centres in the region,” says the Stromme regional report. Stromme has championed a project to educate girls. the Adolescent Girls Empowerment programme (Mazungmzo in Kiswahili) was implemented by five partners in Uganda and South Sudan.

According to Serukka, the programme targets girls from the ages of 14 to 19, who have dropped out of school and those that have never gone to school. Under this programme, the foundation last year enrolled 1,097 girls in 45 centres in Abim and Yumbe and in Central Equatoria in South Sudan. The girls who completed their courses in Abim graduated last year and their ceremony was graced by the First Lady,” says Serukka. Stromme worked handin- hand with the local governments to implement the programmes.

The Stromme Foundation has over the past one year provided training for adolescent girls in literary and numeracy skills and lessons on hygiene and family planning. “We have also provided occupational skills like hair dressing, knitting, tailoring, catering, weaving, agriculture and computer skills,” says Serukka. To improve the learning environment for school-going children, the organisation built 16 new classrooms and renovated 23 classrooms for pupils who previously took their lessons under trees or in incomplete structures.

Teachers’ welfare
Stromme has directed much of its support towards skills development for teachers, school management committees and parent-teacher associations. As a result of that intervention, 235 preservice teachers (43% of them women), 112 in-service teachers (37% of them women) and 577 school community representatives (33% of them women) have received training over the past year. There is a teacher training programme going in Sudan.

Nine teachers’ houses were also built, which has helped to reduce absenteeism. The interventions have improved education standards in beneficiary areas. Overall, the performance of pupils at primary seven in the communities and schools where we work registered improvement,” says the Stromme report. About 47% pupils joined secondary school compared to 44% in 2011, says Serukka. At 69% pass rate compared to 67% in 2011, the girl’s performance was particularly impressive.

Sports and Culture
In addition to this, Stromme foundation has continued to support sports, culture and arts, providing life skills training as a way of equipping young people with leadership capabilities, promoting knowledge and bringing about behavioural change to curb substance abuse, guard against HIV and AIDS and anti-social behaviour.

Such interventions have gone a long way in curbing social risks. They have also done a lot to empower young people and to equip them with practical skills for their own sustainability. “Through our partnership with Christian Youth Sports Contact (CHRISc) we have equipped over 26,000 young people with sports skills and knowledge on responsible and dignified behaviour in society,” says Serukka.

Microfinance services
Stromme Microfinance East Africa Limited (SMF EA ltd) has been at the forefront of providing financial support by providing the poor with loans and micro finance services. Reports on the performance of this sector indicate adherence by the beneficiaries to meet repayment schedules. A stromme foundation report indicates that there was 2.8% growth in the company’s total assets and a 5.6% increase in the loan portfolio of microfinance partners while beneficiaries reached through this initiative rose to 243,935in the community microfinance programme.

The reports further indicate a 30% increase in the total number of clients to 85,345 from 63,932 in 2011 and 73% of the clients were women. And to emphasise the impact of this scheme, $4.1m was realised in cumulative savings. As a result of all these interventions, beneficiaries recorded positive changes in their lives. Indeed, many were able to acquire assets, others were able to send their children to school and a number improved their homes.

Despite all these achievements, a few challenges remain, especially shortage of funds and also in accounting for funds by some local leaders. Nevertheless, Stromme Foundation remains determined to grow even bigger and to reach out to more needy communities in the region. “We will remain committed to cause the development of the poor,” says Serukka. There is no doubt that Stromme foundation has done a tremendous job and with support from well-wishers, it will continue encouraging people to scale the heights of development.

By Dimeji Kayode-Adedeji, Premium Times

The bank staff has abandoned his position making him a prime suspect in the crime.

A man working with a micro-finance bank belonging to the Federal University of Agriculture, UNAAB, Abeokuta has allegedly fled with the sum of N6.5million belonging to the bank.

The suspect is said to be the accounting officer of the bank and used his position to siphon money from the bank account for his personal use.

He was reportedly in charge of the money coming into the account of the bank and the subsequent transfer of such to the GTBank, which is the superintending bank for the microfinance bank.

However, rather than lodge such money on a daily basis to the account of the superintending bank, the suspect allegedly uses fake tellers as evidence of payment.

The bubble burst recently when the authority of the micro finance bank issued cheques to some customers for collection of money from its account with the superintending bank, only to discover that the account was in red.

The account officer has since failed to show up for questioning and has become the principal suspect in the crime, university sources said.

The bank authorities have equally informed the police. Some of the staff of the bank have been invited for questioning by the police, just as security operatives are still on the trail of the suspect.

When contacted, the Ogun State Police Command Public Relations Officer, Muyiwa Adejobi, confirmed the story.

“Yes the case is with us here, and we are still on it for investigation,” he said.

Chairman of the National Association of Microfinance Banks (NAMB) in the South-west zone, Mr Olufemi Babajide, has urged members to look forward to the proposed uniform software system.

Babajide said yesterday in Lagos that the Central Bank of Nigeria (CBN) was working on the modality to ensure the reality of the software system.

He said the apex bank recently invited some operators of micro-finance banks to make enquiries on some of the requirements.

“CBN has invited some micro-finance banks to make enquiries about the requirements that we need. That one is ongoing. They are working on that in about five centres including Lagos and Abuja,” he said.

The CBN in 2012 proposed a uniform software platform for operators of micro-finance banks to make the sub-sector vibrant.

Babajide said that the aim of the software was to help micro-finance operators maximise costs of operation. He said that it would enhance uniformity in the operation of the sub-sector.

He said: “It’s to ensure that we have uniformity so that when the regulators and donor agencies come, if they say they want information, they can get it. All we have presently is over 500 software.

“That one is confusing; quite a number of them can’t prepare ordinary basic report that the regulator needs and instead of us going to spend money, they want to make sure that we have what is called economies of scale whereby if we adopt same software, the cost will be better for the micro-finance banks, and for the providers too. About 1000 micro-finance banks can sign into one software, that’s beautiful, and the cost would be very low for all of us.

“Some are spending as high as N500, 000, N1 million on annual maintenance charges. We don’t need to spend more than N50, 000 if all of us are keyed into one software.”

Babajide said that the uniform software would facilitate auditing of the operators’ statement of accounts by the regulatory body. NAN

SOURCE: Daily Trust

By Kingsley Habu, This Day Live

The advent of bank failures in Nigeria emerged in the 1950s when all the 25 except three banks collapsed without any form of protection to the affected depositors. However, in furtherance of the implementation of the Structural Adjustment Programme (SAP) in 1986, the Federal Government accepted the recommendations of IMF and considered the need to establish an explicit deposit protection scheme. This move paved way for the establishment of the Nigeria Deposit Insurance Corporation (NDIC).

The NDIC was established by NDIC Decree No. 22 of 1988, now repealed and replaced with the NDIC Act, 2006 to implement the Deposit Insurance Scheme in Nigeria. A Deposit Insurance Scheme is a financial guarantee to protect depositors in the event of failure of a deposit-taking financial institution. It also offers a measure of safety and engender confidence in the banking system by providing financial guarantee up to a maximum limit as provided for in the NDIC Act. It is currently fixed at N500,000 and N200,000 per depositor of deposit money banks (DMBs) as well as microfinance banks (MFBs) and primary mortgage banks (PMBs) respectively. The Corporation is also one of three pillars of the financial safety net in Nigeria with others being regulation/supervision and lender-of-last-resort role of the central bank.

The Corporation is also one of three pillars of the financial safety net in Nigeria with others being regulation/supervision and lender-of-last-resort role of the central bank. Without this type of assurance provided by the NDIC, slight speculation of liquidity problem of a financial institution can degenerate into a full-blown systemic crisis. With the DIS as a component of financial safety-net arrangement in Nigeria, depositors’ confidence has been strengthened. The NDIC operates as a “risk minimizer” which makes its broad mandate to cover the examination of books and affairs of the insured banks in order to monitor continuously their financial condition.

The NDIC has the mandate of deposit guarantee, banking supervision, failure resolution and liquidation. To achieve its mandate, the Corporation rolled out a five year strategic plan which covers the period 2011-2015. The strategic thrusts represented a mark of excellence that target four main initiatives: operational readiness, culture of continuous performance management, strategic partnering and collaboration with key stakeholders and promoting public awareness on deposit insurance system.
Deposit guarantee is the key and distinct function of the Corporation. At inception, the insurance coverage was only limited to DMBs and the maximum insured sum was N50,000 per depositor per bank. In 2006, the coverage level was increased to N200,000 for DMBs while N100,000 was fixed for microfinance banks (MFBs) and primary mortgage banks (PMBs) when the DIS was extended to that category of institutions. By 2010, to demonstrate its commitment to depositor protection, the NDIC Board reviewed upward the insured sum to N500,000 and N200,000 for DMBs, and PMBs and MFBs respectively. That was to conform with global best practice and in line with economic realities of our environment. The Corporation was able to meet its obligation solely from the annual premiums it collected from all the insured deposit-taking financial institutions in Nigeria. The deposit insurance guarantee scheme presently covers 20 deposit money banks (DMBs), 880 microfinance banks (MFBs) and 77 primary mortgage banks (PMIs) operating in Nigeria.

The banking supervision task of the Corporation is another mandate that aims at determining the financial condition of the deposit-taking financial institutions in order to facilitate safety, soundness and stability of the financial system. It also aims at reducing the potential risk of failure and ensure that unsafe and unsound banking practices are checked promptly. The supervisory responsibilities of the Corporation are undertaken through the off-site surveillance and on-site examination of the insured institutions from which exception reports are written with recommendations based on observed lapses. This supervisory function is shared with the CBN and over the years the two bodies have developed a comprehensive framework which had removed any conflict and duplication of efforts in exercising of their functions.

It would be recalled that soon after it commenced operations in 1989, the NDIC provided financial assistance to the tune of N2.3 billion to bail out 10 distressed banks following the withdrawal of public sector deposits in the banking system.

In the area of liquidation, the Corporation’s responsibility commences from the moment the CBN revokes the operating licence of any deposit-taking financial institution. Liquidation involves orderly and efficient closure of failed institutions with minimal disruption to the banking system, settlement of insured sums, cost-effectiveness in realization of risk and physical assets and settlement of uninsured claims to depositors, creditors and shareholders.

The Corporation has recorded giant landmark achievements in its liquidation activities despite precarious challenges over the twenty years of its existence some of which are as follows. It is on record that the NDIC had paid a cumulative sum of N90.13 billion to depositors of 48 deposit money banks (DMBs) in-liquidation as at 31st December, 2012 as against N80.18 billion paid as at 31st December, 2011 representing an increase of about N10 billion. Similarly, a total sum of N2.50 billion had been paid to depositors of the 103 closed Microfinance Banks (MFBs) as at 31st December, 2012 as against the sum of N2.25 billion that was paid as at the end of December 2011. That was not all, the NDIC also paid cumulative liquidation dividend to shareholders of Alpha Merchant Bank, Nigeria Merchant Bank and Pan African Bank (in-liquidation) to the tune of N373.04 million, N620.0 million and N293.0 million respectively. That was in addition to the settlement of all the depositors and creditors of the three banks (In Liquidation). The debt recoveries from closed DMBs was a cumulative sum of N24.68 billion while that of MFBs stood at N42.63 million as at 31st December, 2012. In furtherance to its commitment to maximum recovery, the Corporation packaged and offered for sale 11 debts accounts to AMCON for the sum of N795 million in 2012.

It is imperative to report that the NDIC had declared full payment of 100% of total deposits to all the depositors of 14 out of 34 banks in-liquidation prior to 2006 and had concluded the purchase and assumption (P&A) transactions on 11 out of 13 banks in-liquidation for banks closed in 2006 after the banking consolidation exercise. The P & A method was adopted in 2006, after the bank consolidation programme which ended in December 2005 during which some DMBs could not meet the N25 billion recapitalization requirement set by the CBN. The method reduced the number of DMBs from 89 to 25 well capitalized banks.

At the end of the recapitalization exercise, 13 banks failed to meet the N25 billion requirement and therefore, had their licences revoked by the CBN. Consequently, The NDIC Board approved the adoption of P & A transaction mechanism in resolving the affairs of the affected banks in order to sustain public confidence in the banking system. The P & A transaction is a process where healthy banks are allowed to assume the deposit liabilities and assume some or all the assets of the failed banks. The approach adopted in Nigeria, allowed private depositors’ full access to their funds. It is instructive to note that 2 out of the 13 banks, namely Fortune Bank and Triumph Bank Limited contested the revocation of their operating licences in court. As a responsible corporate citizen, the Corporation had to operate within the dictates of the law.

The latest resolution option the NDIC adopted in August, 2011 was bridge bank approach which was novel in Africa. It was a situation where regulatory authorities rescued 3 ailing banks whose failure was deemed to be capable of causing systemic crisis in the banking system. The 3 DMBs which were resolved seamlessly without disruption to the financial system were Afribank Plc, Bank PHB Plc and Spring Bank Plc which metamorphosed into bridge banks that were bought over by Asset Management Corporation (AMCON) as Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Plc respectively. The seamless introduction of 3 bridge banks had also saved over 3.7 million depositors from losing their funds and over 6600 jobs in the erstwhile Afribank Plc, Bank PHB and Spring Bank in August 2011.

The Corporation is also working conscientiously with the CBN to resolve the case of Savannah Bank of Nigeria Plc while it had assisted Societe Generale Bank Limited (now Heritage Bank Limited) to reopen its doors in the interest of the affected depositors who suffered untold hardship over the years.

Further to its commitment to sanitize other sub-sector of the banking industry, NDIC, in collaboration with CBN set new supervisory framework and guidelines for MFBs and PMBs. The regulatory bodies conducted special examination of all the existing MFBs, the outcome of which led to the revocation of licences by the CBN of 103 MFBs which were immediately handed over to NDIC for liquidation. Similarly, in 2013, the Corporation commenced the liquidation of 25 PMBs to give the mortgage sub sector a renewed vigor in its operations.

It is pertinent at this juncture to point out that the deposit insurance coverage of the NDIC has some exceptions which were aimed at reinforcing discipline and guard against moral hazard in the banking system. These exceptions which are clearly spelt out in the NDIC enabling law, include insider deposits (belonging to staff and directors), counter-claims deposits from persons who maintain both deposit and loan accounts, where the deposits serve as collateral for the loan account and interbank deposits. It would be recalled that some shareholders who invested during the public offers of the DMBs in-liquidation recently clamored for reimbursement from the Corporation.

In all its liquidation exercises, the NDIC has been very steadfast in ensuring prompt payment to depositors, which was within 90 days in the past and 48 hours in the case of closure of the 3 bridge banks. The Corporation also appointed agent banks to continue the payment to depositors of the 34 banks closed prior 2006 and for the 103 MFBs liquidated in 2010. Depositors’ reimbursement had also commenced for 7 out of the 25 PMBs closed recently through the appointed agent banks. Furthermore, the Corporation recently initiated a pilot scheme referred to as “depositor tracer” to reach out to depositors of liquidated banks who were yet to file their claims to come forward and collect such trapped funds. Under the scheme the Corporation staff traced the depositors to their respective addresses for the payment of their trapped claims. The pilot scheme commenced with depositors of Ivory Merchant Bank in-liquidation which was liquidated in January 1998. As at December 2012, over 30 depositors that were traced successfully to their current addresses were paid N36.303 million representing 84.6 percent of the N42.89 million outstanding insured deposit against the failed bank. Another batch of 158 depositors with wrong or changed addresses had been referred to the agent banks appointed by the Corporation for payment of their claims under the insured deposits. This scheme was also extended to the depositors and creditors of Continental Merchant Bank in-liquidation which was also liquidated in 1998, out of which N839,523.15 was paid to two creditors. In furtherance of such effort, the Corporation is currently documenting its experience to develop a framework for tracing missing depositors of other liquidated banks.

The Corporation has continued to embark on vigorous public enlightenment programmes to improve the understanding of its stakeholders about the deposit insurance scheme. This was undertaken in many ways. For instance, the Corporation created a Help Desk, which is a dedicated toll-free 24-hour telephone line (080063424357), to address depositors and other stakeholders’ enquiries. It also, developed of a user-friendly, robust and interactive Website-www.ndic.ng.org and Email -info@ndic.org.ng.

The Corporation has also established Complaint Units in the Bank Examination Department (BED), Claims Resolution Department (CRD), and Special Insured Institutions Department (SIID) to address complaints of customers of the deposit money banks and microfinance banks/primary mortgage banks respectively. It is instructive to note that the Corporation has been receiving a lot of commendations from depositors for this initiative.

The NDIC has published books, pamphlets, and fliers such as Facts about NDIC, Basic Knowledge in Banking, 20 years of Deposit Insurance in addition, among other publications which were distributed to students on educational visits, tertiary institutions and general public free of charge

Other public awareness initiatives embarked upon by the Corporation included the following: Periodic press briefings by the Corporation’s MD/CEO; Sensitisation Seminar for relevant Committees of the National Assembly, Judges and other key stakeholders; Partnership with the mass media through the annual Editors Forum and Annual Workshop for Business Editors and Finance Correspondents under the umbrella of the Finance Correspondents Association of Nigeria (FICAN); Production of depositor protection awareness television and radio jingles in three major Nigerian Languages, namely Igbo, Hausa and Yoruba and transmitting same on national and local television and radio stations nationwide; Production and transmission of a weekly public enlightenment television programmes tagged “NDIC Calling”; and hosting of students of secondary schools, universities and other higher institutions on educational visits.

The Corporation is also championing a cause for the establishment of an explicit Investor and insurance policy holder Protection Schemes to protect small investors and insurance policy holders in the capital market and conventional insurance sub-sectors of the financial system. There is no doubt that it is never a case of too little or too late for reimbursement of depositors of liquidated banks in Nigeria. The NDIC has been very proactive and left no one in doubt as to its commitment to protect depositors’ interest. As a matter of fact, unlike what obtains in other jurisdictions, the NDIC allows depositors of liquidated banks to file their claims beyond the statutory time limit of five (5) years as contained in the NDIC Act 2006.

Visakhapatnam, May 20: IndiaFirst Life Insurance Company is foraying into health insurance and micro insurance from the current financial year and the company will achieve break-even sooner than expected, according to P. Nandagopal, Managing Director and Chief Executive Officer.

He told presspersons here on Monday that at present, the company floated by Andhra Bank and Bank of Baroda, was doing well in the country and Andhra Pradesh in particular. “We registered a growth rate of 34 per cent last year in spite of the slowdown during the past two years affecting the industry. During the current year too we expect a growth rate of more than 20 per cent on a larger base. We are confident we will achieve break-even in much less than the originally expected eight years,” he said.

The company, which started functioning three-and-a-half years ago, was tying up with regional rural banks to sell health insurance and micro insurance. “We already have access to the network of Andhra Bank and Bank of Baroda to sell our products, and we are also opening our own offices. We are concentrating on the retail distribution channel which accounts for 10 per cent of our business. It may grow to 20 per cent this year,” he said.

Referring to health insurance, he said the company was introducing the IndiaFirst mediclaim policy in accordance with IRDA guidelines and it had also introduced a health card. The company was also offering pension plans, he added.

Nandagopal said the company was focusing on IT and it had developed its software in-house to provide better services to the customers. He said the company was in a position to provide an insurance policy to an applicant within half-an-hour. “Most of the policies in the range of Rs 5-10 lakhs do not require medical examination. We can easily give the policy in that time,” he explained.

SOURCE: The Hindu Business Line

Star Microinsurance Company, through their underwriting partners (Star Assurance and Starlife) has presented a cheque for Ghs115, 000 as claims to the first batch of victims of the recent fire outbreak at the Kantamanto and Agbogbloshie markets.

In all, over 250 people were affected by the fire that claimed millions in properties belonging to traders at both markets.

The claims were paid to the victims through Avans Ghana Savings and Loans and MicroEnsure Ghana, partners of Star Microinsurance Company Ltd.

Apart from the payment of the outstanding loans, all individuals who were affected by the fire were given a benefit token of GHc 200.

Making the presenting, the Head of Operations of Star Microinsurance company Ltd, Mr. Solomon Larbey said, “This claims has been made possible because of the credit life protection policy which gives protection to the loan beneficiary (death), the business property (fire and allied perils) and hospitalization cover”.

“No one expects a tragedy or mishap to happen but we all need to prepare for it. Death, property destructions and even sickness can come when one does not expect. The credit life policy is therefore arranged to protect the customer against such events like the fire which gutted the Kantamanto market”.

Mrs. Barbara Odei, the Chief Operating Officer of Advans Ghana Saving and Loans company, on her part, urged “all savings and loans and microfinance companies to take up the credit life protection policy to cushion [their clients] against such occurrences.

“And to our business men and women to ensure that they access loans from institutions which have such policies in place, so that in case of such happenings, the insurance company can come to their aid,” she added.

The traders who benefitted from the insurance claims were full of praise for the gesture and edged their colleagues to take insurance policies seriously.

SOURCE: Myjoyonline.com

By Clive Mphambela, Zimbabwe Independent

EMPLOYEES in the microfinance sector will now be able to enjoy pension benefits upon retirement following the approval by the Insurance and Pensions Commision (Ipec) earlier this month for the setting up of a Micro Finance Industry pension fund, businessdigest can reveal.

Cavport Consultants MD Emmanuel Matina, whose company is the employee benefits consulting firm behind the setting up of the MFI Pension, said the scheme was licenced by Ipec on May 2 2013 following the registration earlier on April 24 of a trust deed to govern the operations of the Fund.

Under Zimbabwean laws, a pension fund must set up a trust deed to be administered by a properly balanced board of trustees which must comprise trustees elected from both employee and employer representatives from the participating employers as well as independent trustees drawn from relevant professional fields.

The MFI Pension Fund has already appointed to its board lawyer Advocate Taona Sibanda and Kotsai Makamure, a chartered accountant.

Bankers George Nachamba and Agnela Mavhunga as well as investments practitioner Andrew Masuwa have also been proposed to the board of trustees as independent trustees, while an additional three trustees will be drawn from employer organisations.

At least 15 registered micro finance companies, led by industry leader FMC Financial Services, have come together for the ground breaking industry initiative.

There are 54 registered microfinance institutions and more than 150 money-lending companies. The combined workforce is estimated at more than 3 000 employees.

Datvest Asset Mangement are the asset managers, while Cavport are the fund administrators. Chartered Accountants firm, Grant Thornton, are the appointed independent auditors of the fund.

According to Matina, the rules of the fund have been drawn up and it should start accepting member contributions by July 1.

The fund has been set up as an umbrella fund on a defined contribution basis.

Zimbabwe Association of Pension Funds (Zapf) chairman, Francis Masukusa, said the development was welcome as the new scheme was going to contribute to the growth of the pensions industry and the national savings base. He said the MFI sector was growing and it made perfect sense for the industry to set up its own pension fund.
“Firstly, I must applaud the players in the industry who have taken this important step.

Employees in most of the microfinance companies in the sector have been previously excluded from pension arrangements by virtue of the small size of the employer organisations, who typically have ten or less employees,” he said.

Masukusa said the scheme had the advantage that it would cater for industry specific needs such as early exit arrangements or higher contribution levels to compensate for the shorter working careers.
According to Masukusa, the MFI Pension fund would be covered by an umbrella policy, with each individual pensioner having his or her own accumulation account.

James Msipa, managing director of Quest Financial Services, one of the first MFIs to join the pension scheme, said the MFI Bill being presently debated in parliament was going to usher in a new era in the MFI space and consequently the industry has to position itself as an employer of choice.

“Employees will now be able to feel comfortable to start a career in microfinance and continue until retirement, knowing fully well that they and their families are covered even after they die,” he said.
Msipa said employers would benefit as they would now haveleverage to retain key skills, adding the quality of their business would now improve.

“Previously MFIs were unable to retain high skills for very long.
The offering of pension benefits will go a long way in closing the gap between employers in the mainstream banking sector and the MFI sector. This development also affirms that the sector is maturing and taking itself and its employees seriously and this will augur well for the growth of the sector,” Msipa said.

“From a global perspective this is a first umbrella scheme of its kind and firmly puts Zimbabwe’s MFI sector on the map as highly organised.”

Microfinance companies, under the Bank of Ghana’s new regulated licensing regime, offer both lending and deposit products to their clients.

In the past year, about 100 firms have received full operational license. Over 400 others have provisional license to serve the needs of the unbanked population.

Players in the sector are upbeat about prospects to create jobs and provide financial intermediation in poverty alleviation. But all is not well in the fast-growing industry.

Petty trader, Umar Moro Abubakari opened a savings account in the ‘Daakye’ (future) product of Graford Microfinance Limited in Kumasi, in his bid to save to pursue higher learning.

Trusting in the firm’s provisional license, he managed to save GH¢810 over an eight month period. But he’s losing all his money.

“I went to my bank to withdraw my money but I didn’t get my money; they’ve closed the bank and I don’t know why”, Umar Moro complained. “I’m worried because I want to go to IPMC, so I was thinking that I’ll use that money to pay for my bills”.

Like Umar Moro, frustrated clients of microfinance firms in distress have been frequenting police stations, media houses and other places to seek help in accessing their savings.

Incidents of firms closing down and bolting with depositors savings have been reported in most parts of the country, including the Ashanti, Brong Ahafo, Western and Volta regions.

“We are in crisis but does not mean that we’ve collapsed and this is not new in the banking system”, admitted a manager of one of the firms, in response to the fate of his clients in getting their money.

Checks indicate some of the big microfinance firms are struggling to stay in business.

“We started with some companies that are no more with us; some have gone through assessment by the regulator, some have even received their provisional licenses but you see them collapsing”, observed Collins Amponsah Mensah, National Chairman of the Ghana Association of Microfinance Companies (GAMC).

Greed, irresponsible and reckless operations as well as poor management of depositors’ funds have been identified as the bane of the microfinance industry.

Sources say some of the seemingly booming firms use multi-branching as a deceptive ploy to attract clients and investors with a credible image. In some instance, the firms have managed to open more than 10 branches in less than one year.

When faced challenges in managing their growing branches, the companies go into liquidity distress. One firm in the Ashanti region is reported to be indebted to the tune of over GH¢10 billion.

In these instances, the monitoring role of the Central Bank has been questioned. “Why should the Bank of Ghana allow the unbridled opening of additional branches?” queried one industry operator, who expects the regulator to be bold in ensuring firms with additional branches recapitalize.

There is also the trend of microfinance operators venturing vehicle hire purchase schemes, with the attendant problems of their inability to sustain the vehicle distribution to customers who have deposited huge sums of money.

Kwame Sarpong Osei-Bonsu of the Banking Supervision Department of the Bank of Ghana acknowledged the Bank has had several complaints, which he says are under investigations.

Unfortunately, depositors with these financial institutions have no safety nets when such businesses collapse.

“There have been talks of bringing in Deposit Insurance Scheme as we have in other countries like US and UK and even Nigeria; once you’re a regulated entity, then you go into that scheme and that guarantees a person that if something goes wrong they’ll get their money back”, noted banking consultant, Nana Otuo Acheampong.

The GAMC is already thinking in that direction, in addition to establishing a Deposit Security Fund to serve as secondary reserve for members.

Whilst financial consumers are protected with the deposit insurance, the Fund, as a liquidity buffer, will aid in the management of deposit liabilities of industry players, explained Mr. Amponsah-Mensah.

“We’re going to mandate our members to deposit an amount each day out of their mobilization into that account; it will be invested, then anytime that there is pressure on them, they can fall on that deposit to free themselves from the pressure”, he said.

Presently, the credible microfinance firms are experiencing high withdrawal rate as clients take precautionary measures to protect their savings.

This is a worry to the GAMC. Mr. Amponsah-Mensah is therefore prevailing on the Bank of Ghana to empower the Association to play a key role in regulation, if the industry is to avoid a bubble.

“If the regulator is unable to enforce the rules and regulation that goes with the regulation itself, our hands will just be tied behind us. So that is why we’re working together with the regulator to ensure that whatever we say should be done under the regulation, operators are complying”, stated the GAMC Chair. “If we take away non-compliance, we should expect the system to collapse one of these days”.

SOURCE: Myjoyonline

By Biswarup Gooptu, The Economic Times

BANGALORE: Many small-and mid-size microfinance institutions are taking advantage of renewed interest by banks and risk capital investors in the sector to raise fresh capital. Samasta Microfinance is currently on the road to raise up to $6 million (Rs 32.8 crore) in equity financing, and up to Rs 100 crore in debt. The Bangalore-based company, which has an outstanding loan portfolio of Rs 50 crore, will use the money to expand into new geographies.

“We believe 2013-14 will be the turnaround year for smaller microfinance institutions. Banks are also extending more credit to us at more favourable terms compared to the year-ago period,” said Venkatesh N, managing director at Samasta. The micro-lender had tried to raise capital in 2011 and 2012, but had failed to do so.

Separately, Varanasi-based Utkarsh Micro Finance is planning to approach the market after the second-quarter of the current fiscal as it looks to raise 100 crore from investors. “The fund-raising environment has improved a lot, with the checks and balances introduced by the Reserve Bank of India over the past few months,” said Abhishek Kumar, CFO at Utkarsh Micro Finance. Utkarsh, which closed its Rs 20-crore round of equity financing in April earlier this year, is currently backed by Aavishkaar Goodwell, International Finance Corp and Norwegian Microfinance Initiative.

The first four months of the year have already seen a number of mid-sized micro-lenders raising new rounds of equity and debt financing, a significant improvement over the past two years, which saw a number of them downsize their operations due to a massive liquidity crunch.

“The RBI’s role has been significant and the industry has also reacted positively. This, in turn, has encouraged banks and investors to repose their faith in the sector,” Venkatesh said. Other MFIs that have raised funds successfully since January this year include Suryoday Microfinance, which raised Rs 60 crore through external commercial borrowings, and Delhi-based Satin Creditcare, which raised Rs 41 crore in April.

The country’s central bank has put in place a number of new regulations, including a requirement to maintain capital adequacy ratio of 15%, a key measure that determines an MFI’s ability to meet its liabilities and credit risks, as well as submission of client records to credit bureaus. “There have been a lot of regulations brought in by the RBI that have brought in more stability and more credibility to the microfinance sector,” said S Prakash Sundaram, chief risk officer at India Finserve Advisors.

Tier-2 and tier-3 micro-lenders have been the worst-hit in the downturn in fortunes of India’s microfinance sector after private capital shied away from investing in the space, after the AP government imposed tight regulations on the sector, following a spate of farmer suicides.

“A number of smaller MFIs, including Basix, Spandana, Trident, have already sought to restructure their debt. But now the smaller MFIs are managing their operating expenses much more efficiently,” said Sundaram. However, industry players prefer to sound a note of caution. “There is more optimism and the industry is settling into a bit of a rhythm, but it has to be tempered with a fair bit of caution as well,” pointed out Sameer Nanavati, founder and CEO of Ahmedabad-based Disha Microfin.