Grameen Foundation Insights
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At Grameen Foundation, our goal is to spur innovation in the global movement to eliminate extreme poverty. Part of that work is to develop better solutions and share them with people like you.
On GF Insights, we share lessons learned from our leaders in the field, news about efforts to expand access to financial and information services for the poor, and how poverty-focused organizations are using data to improve the way they work.
Alex Counts is the President and CEO of Grameen Foundation.
Grameen Foundation’s recent trip to Kenya was a watershed event. Our founding director Professor Muhammad Yunus joined us at our Board meeting, held for the very first time in Africa. In addition, and members of our Board and our staff participated in the Africa-Middle East Regional Microcredit Summit, the largest microfinance convening in Africa’s history. Several of us presented Grameen Foundation’s work to the assembled delegates at some of the event’s sessions. Staff members Camilla Nestor, George Conard, and Julia Assaad (of our joint venture Grameen-Jameel Pan Arab Microfinance) presented to scores of delegates eager to learn from our experts. Most of the presenters, however, were African microfinance leaders including several who are long-standing partners of ours.
Sandra Adams is Grameen Foundation’s Vice President of External Affairs.
During the first week of April several Grameen Foundation board members, other staff and I traveled to Kiambu, Kenya—about 45 minutes outside Nairobi—to see how local organizations are making a difference in the lives of poor families. Staff at the microfinance institution Kenya Entrepreneurship Empowerment Foundation (KEEF) and some of the MFIs ambitious borrowers welcomed us and shared their triumphs and challenges in the fight against poverty in their communities.
Upon arrival, we had the pleasure of meeting the “Bright Vision” borrower’s circle. What a perfect name for a group on their way up out of poverty! They told us that they began as a small, informal borrowers circle (called a “merry-go-round” in Kenya) that provided loans and a place to put savings.
Alex Counts is President and CEO of Grameen Foundation.
Wednesday’s front-page article in the New York Times by Neil MacFarquhar raised some important issues facing the microfinance industry, but, unfortunately presented a distorted picture. I had the opportunity to challenge the author about his assertions on the Takeaway radio program.
His sweeping generalizations about interest rates, while focusing on just two countries, could lead the average reader to believe that rates above 80 percent are the norm. This is far from the truth, as evidenced by a recent report by the Consultative Group to Assist the Poor that found that, on average, sustainable microlenders were charging 26 percent. (Grameen Bank, our model for microfinance efficiency, charges rates from 8% to 20%, and gives interest-free loans to the ultra-poor as a transitional strategy to get them ready for regular borrowing.) The same report also noted that rates have been falling by 2.3 percent annually and that less than one percent of microfinance clients worldwide actually pay rates as high as those cited in the article. Moreover, in most of the 36 countries studied, microfinance interest rates were below the rates charged on consumer credit cards, which is an appropriate benchmark.
Most microfinance involves substantial direct contact with clients in remote locations and this can be costly. However, we believe that interest rates will continue to fall, getting closer to the rates charged by the Grameen Bank and other efficient lenders, as more institutions are able to lower their operating costs. These costs are largely driven by local factors, and this is something the article didn’t adequately address. For example, in taking aim at LAPO (full disclosure: Grameen Foundation has worked with LAPO for nearly a decade), the article ignored the high costs of doing business in Nigeria and omitted the fact that it actually charges the one of the lowest interest rates among Nigerian MFIs (something that was acknowledged by the client that was interviewed).
Maddie Brandenburger is a former development intern with Grameen Foundation and is involved with MFI Connect and the Nyanya Project. She recently reconnected with friends from GF at the Microcredit Summit in Nairobi.
I’ve just returned back to Wake Forest University, where I am a junior studying economics and international development, after spending a week at the Africa - Middle East Microcredit Summit in Nairobi, Kenya. I feel more than ever, extremely enthusiastic about the pivotal role students are playing in the microfinance industry. We are in a time of economic uncertainty, but it is a very important point in modern history for young people to step up, as the entire world reevaluates the definitions and parameters of success and service. I was given an incredible opportunity and provided with a grant to attend the conference in large part because of the knowledge and skills I gained interning at the Grameen Foundation last summer. MFI Connect and Wake Forest examined my experiences with Grameen Foundation and had the confidence in me to fund the conference costs.
MFI Connect was created by former Grameen America interns who identified the growing need of a resource for students wanting to engage in microfinance opportunities. Just one year old, MFI Connect boasts membership of 1000 members in over 60 countries and across 120 universities. It was MFI Connect who created the student delegation of 50 students from all over the world to attend the conference.
My week in Nairobi proved to be an invaluable exercise in harnessing the combined power of intelligence and experience of microfinance professionals. The spirit of collaboration, the passion for progress, and palpable excitement in the conference tent is something I will take with me always, and try to call upon if I ever feel overwhelmed or unsure in such an evolving industry. I was surrounded by the best and the brightest in the world, and in a continent riddled with so much poverty and sadness, I felt nothing but hope. MFI Connect arranged for private sessions with Muhammad Yunus of Grameen Bank, Fazle Abed of BRAC, Ingrid Munro of Jamii Bora, Sam Daley-Harris of the Microcredit Summit Campaign and Hans Reitz of Grameen Creative Labs. Throughout the week I was able to reconnect with many of the GF staff members who I worked with last summer.