OXUS Kyrgyzstan and its six commandments for the Covid-19 crisis

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Interview with Denis Khomyakov, DG, OXUS Kyrgyzstan

Since the start of the Covid-19 crisis, the Grameen Crédit Agricole Foundation has worked on several initiatives to better support the microfinance sector. OXUS Kyrgyzstan is one of the microfinance institutions that benefited from the Foundation's response to the crisis. Five questions for Denis Khomyakov, Director General of OXUS Kyrgyzstan (OKG).
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The Covid-19 crisis has had a significant impact on the economy in Kyrgyzstan and on your organization. What measures have you adopted to address it?

The crisis has hit Kyrgyzstan's economy and healthcare system hard. With border closures and lockdowns, industry and agriculture have declined, and transportation services have collapsed. Although new activities have emerged (such as delivery services), Covid-19 has impacted the country's economy and, by extension, our customers and our business.

In this context, we at OKG were well prepared. Starting in February, we first protected our staff by teleworking or short-time working at two-thirds of their salary, which involved digitizing our operations. In May, we adopted in-person and remote working thanks to the anti-Covid measures included in the Covid-19 Business Continuity Plan (BCP), which was quickly operational.

We have always ensured good communication. To this end, we first created a Covid-19 Committee composed of members from different departments and myself to structure communication and define operational measures. Several actions were undertaken: we organized communication with branches and clients, established loan restructuring and customer support, and decided to negotiate with lenders to obtain a grace period on repayments. We also regularly communicated with various stakeholders: the governance, which guided and advised us, the lenders, who coordinated to ensure the continuity of our activities, and the National Bank, which provided us with clarification on the possibilities for restructuring and exemptions.

What support did the Foundation provide to strengthen OKG's response?

The Foundation's Covid-19 surveys were well organized and always timely. The Foundation's Covid-19 Observatory, which publishes survey results and other useful articles, was invaluable in assessing our situation and position in the region. The Foundation also led OKG's lending group in implementing the coordinated restructuring measures and extensions; under the Foundation's leadership, with regular monitoring by Julie Serret, the Foundation's Investment Officer, we acted immediately to prepare for the worst-case scenario and agreed on terms with the lenders together.

What were the main measures implemented by this group of lenders?

The lending group decided to roll over all payments due between May and December 2020 for 12 months. The lenders also simplified reporting by collecting information through a common document, which gave us more time to focus on other issues. They also provided us with tools to create a PCA, to restart business while protecting staff. As a result, we didn't really have to worry about the liquidity situation. We were able to pay our staff salaries and benefits without delay.

What lessons do you draw from this period for the evolution of microfinance?

Here are my six commandments:

  1. Plan ahead. Every business should have a business continuity plan (BCP) for these types of events. Having an IT disaster recovery plan is very useful—it helped us greatly respond to the crisis and keep the system running.
  2. Take care of the staff, inform them of the situation and the measures decided.
  3. Make decisions. Don't be too late, but think twice.
  4. Inform investors and lenders of the situation and provide a forecast (detailed, even if you don't know how the situation will evolve) for the coming months.
  5. Communicate often with your board of directors. Its composition and experience will help you navigate any type of crisis.
  6. Be digital. Digital channels are invaluable for communicating with customers and staff. Covid-19 has pushed us to think and be more digital.

What is the outlook for OKG in 2021?

The company continues to expand and grow. We plan to open two new branches in rural areas and serve low-income customers. We plan to introduce tablets to speed up loan disbursements, but also to collect fewer paper documents and be more environmentally friendly. We also plan to expand green loans to help combat air pollution and intensive energy use in Kyrgyzstan.

Other initiatives, such as our work on customer loyalty and the project to support women entrepreneurs launched in early 2020, were slowed by the health crisis. We will resume them. We will remain a reliable company for our customers, with a zero-exclusion approach!

The desire of microfinance institutions to maintain their activities in the face of the Covid-19 crisis

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ADA, Inpulse, and the Grameen Crédit Agricole Foundation have partnered to monitor and analyze the effects of the Covid-19 crisis on their partner microfinance institutions around the world. This monitoring was carried out periodically throughout 2020 to gain a better understanding of how the situation was evolving. With this regular and in-depth analysis, we hope to contribute, at our level, to the development of strategies and solutions tailored to the needs of our partners, as well as to the dissemination and exchange of information between the various stakeholders in the sector.

In summary

The results presented in this article come from the fifth survey in the joint series (1) of ADA, Inpulse and the Grameen Crédit Agricole Foundation. Responses were collected in the second half of December from 74 microfinance institutions (MFIs) located in 42 countries in Eastern Europe and Central Asia (EAC-28%), Sub-Saharan Africa (SSA-26%), Latin America and the Caribbean (LAC-23%), South Asia (14%) and the Middle East and North Africa (MENA-9%) (2).

Our latest work confirmed the gradual resumption of MFI activity in the summer of 2020, for which most of the operational difficulties encountered in the context of the COVID-19 crisis were fading. At the same time, the major constraint that remained was the difficulty in collecting loan repayments, and implied the increase in the portfolio at risk. This last point still holds at the end of the year, and three-quarters of respondents still note an increase in the PAR. Added to this is the deterioration of the epidemiological situation in the world in the fall of 2020, as evidenced by the responses collected in December 2020. The epidemic containment measures taken according to local contexts may once again have consequences for the activities of MFIs and their clients, and a return to normal is not yet on the agenda.

However, these new complications and their implications are not new. As such, they have little impact on MFIs' risk indicators. The stability of the PAR increase, as well as the recovery levels, does not reflect any major new worsening of the MFIs' financial situation. This relative balance also reflects the MFIs' state of mind as they approach 2021. Despite an unstable context and all the obstacles it brings, the vast majority of our partners anticipate growth in their business in this new year, both in terms of portfolio volume and the number of clients. This confidence, which was already evident in the surveys conducted over the summer, is a new sign of the resilience of these institutions.

1. MFIs always operate in unstable conditions

Our latest survey, conducted in October, demonstrated a significant improvement in the operating environment of MFIs and demonstrated the gradual resumption of their activities in all regions of the world. However, in a large number of countries, even those that appeared to be managing the spread of the virus well, new, more restrictive measures to contain the epidemic were taken in the last quarter of 2020 in response to the renewed rise in cases. This deterioration is particularly confirmed by our partners in Europe and Asia, while MFIs in South and Central America, Southern Africa, and North Africa report an improvement in the situation.

The comparison of the responses of our 38 partners who participated in the October and December surveys (3) in the following paragraphs confirms the observation of a return of certain difficulties for MFIs, and reflects the general results obtained at the end of the year.

First, the virus continues to spread rapidly in some parts of the world, and MFIs are no exception. Thus, we can see an increase in the share of MFIs reporting that clients and staff have been infected with COVID-19. This is reflected in the decline from 47% to 32%, (17 to 12 MFIs) of MFIs whose clients and staff are not infected with COVID-19. In October, this category included two-thirds of MFIs in sub-Saharan Africa (10/15) and the vast majority of those in South Asia (5/6). In December, the share of MFIs in sub-Saharan Africa is almost stable (9/15), while those in Asia decline to 50% (3/6). Finally, the category “more than 20% of staff were infected” went from 0% to 13% (5 MFIs) over the period, the vast majority in the Europe and Central Asia region (4 MFIs).

In terms of operational constraints, the results are relatively stable between the two periods. The list of MFIs that indicate they no longer face operational constraints remains essentially the same (39%), and is concentrated in Central Asia and West Africa. It should be added that collecting loan repayments (42% of the sample) and disbursing new loans (32%) remain the two main difficulties encountered by MFIs.

Difficulty in contacting clients, both in branches and in the field, was considered a consequence of the crisis by only 16% (6 MFIs) in this sample in October, and this figure increased in December (24%, 9 MFIs). In detail, it should be noted that the location of the MFIs highlighting this constraint has changed over the last two months. Thus, they were notably located in Latin America and the Caribbean and East Africa in October. In December, this point was raised by MFIs in Southeast Asia (3/6), Eastern Europe (2/5) and West Africa (2/8). At the overall level of the survey, it is ultimately 30% of the MFIs that specify that they are once again limited in their activities, despite a gradual recovery.

2. Customers therefore remain exposed

As the MFIs demonstrate through these surveys, the uncertain and particularly unstable context also weighs on MFI clients. And logically, the difficulty in collecting repayments for MFIs, for example, is closely linked to the difficulties encountered by the clients themselves. The activity of a large proportion of them has still not restarted or remains slowed down by the crisis context: our last survey highlighted in particular the tourism and trade sectors as being the most affected (4). As of December 2020, the proportion

of MFIs indicating that more than 90% of their clients have resumed their activity remains a minority (23%, 17 MFIs). However, 46% (34 MFIs) of the MFIs indicate that clients who have resumed their activity represent between 70% and 90% of their portfolio. And only 11% (8 MFIs) of the respondents indicate that less than 50% of their clients can resume work. However, there are some regional disparities in these results: in South Asia, Europe and Central Asia, and Sub-Saharan Africa, at least 80% of the respondents indicate that more than 70% of clients have resumed their activity. In the MENA and Latin America and the Caribbean regions, this share is reduced to 43% and 41% respectively.

Our partners' responses also allow us to continue profiling the clients most impacted by the crisis. First, it should be noted that a large proportion of the MFIs surveyed exclude the possibility that there is a category of clients more affected than others, whether in terms of gender, location (urban or rural), or age. In detail, 42% (31 MFIs) of those surveyed believe that all their clients are impacted equally, and 51% (38 MFIs) indicate that there is no notable difference in repayments based on these criteria. Generally speaking, the idea that there is a difference in exposure to the impact of the crisis based on age is also dismissed. And while some MFIs say they see differences based on age categories (-30, 30-50, 50+), none of them stand out.

Among the MFIs that perceive a difference in the impact of the crisis on their clients (36 MFIs), one criterion stands out most: 76% (27 MFIs) believe that the most impacted populations are urban populations. The same proportion states that this difference is felt in loan repayments. These responses confirm the previous results we obtained concerning the most affected sectors, decidedly urban. The fact that the rurality criterion is rarely mentioned points in the same direction, and echoes the agriculture sector, revealed over the course of the surveys by our partners as a sector less affected by the Covid-19 crisis than the others, and towards which a certain number of MFIs imagined wanting to move. Finally, one last characteristic is mentioned by the MFIs noting disparities in the impact of the crisis: 36% (13 MFIs) perceive that women are more affected than men and therefore by default could have more difficulty repaying their loans. Note that some of the respondents only serve female clients, which logically makes them the most affected population in the sector.

3. Challenges now well known to MFIs

Continued low activity levels and COVID-19 containment measures implemented by local authorities are now factors that MFIs are aware of. And to which they are adapting. Thus, the financial difficulties mentioned by MFIs were very stable from October to December 2020, and did not reveal any new trends. Two of the four most cited difficulties remain linked to the decline in MFI profitability, due to the increase in provisioning expenses (45% of respondents, 33 MFIs) and the non-collection of interest (55%, 41 MFIs). These two points are closely linked to the most significant difficulty of the crisis for MFIs during this period: the increase in the portfolio at risk (74%, 55 MFIs).

As of December 2020, 74% (55 MFIs) of respondents indicate that more than 70% of clients are repaying their loans, and 37% report a client repayment level above 90%. On the other hand, only 9% report that less than 50% of clients are managing to repay their loans, which coincides with the levels of client activity recovery. These levels are reflected in the MFIs' portfolio at risk level: as of December 2020, 47% of respondents (35 MFIs) indicate that PAR 30 has increased without doubling, 16% that it has doubled, and 12% that it has more than doubled.

Nevertheless, this risk configuration appears to have generally stabilized in the last quarter of 2020, despite the additional constraints presented previously (see Fig. 7). In the sample common to the October and December surveys, we still find a quarter of MFIs that are not affected by this increase in the portfolio at risk. At the same time, no MFI is added to the list of MFIs whose PAR 30 has more than doubled. The vast majority of transfers from one category to another over the October-December period are made between a stable PAR and a PAR that is increasing without doubling. This is therefore a sign that the deteriorations in local contexts presented previously would not affect all clients, thus having only a moderate impact on the MFIs' risk indicators.

This stability coincides with the MFIs' new objectives at the start of the new year. The crisis has disrupted their operations and inevitably impacted their projections. Thus, 58% of the MFIs report having updated their business plan and growth objectives for the coming months and years. Armed with these lessons learned from the crisis and a better understanding of the context, the vast majority of MFIs still plan to continue growing in 2021. Thus, 80% of the respondents expect their portfolio volume to increase this year, while 15% expect it to stagnate and 5% anticipate a decline. Moreover, this increase in the portfolio should also be accompanied by an increase in the number of clients for 75% of the MFIs that anticipate growth in this new year. A new sign of hope, therefore, but also of ambition on the part of institutions determined to continue moving forward in 2021.

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(1) The results of the first four surveys of ADA partners, Inpulse and the Grameen Agricultural Foundation are available here: //www.gca-foundation.org/observatoire-covid-19/, //www.ada-microfinance.org/fr/crise-du-covid-19 And //www.in-pulse.coop/news-and-media/
(2) The number of responding MFIs per region is as follows: SSA 19 MFIs; LAC 17 MFIs; EAC 21 MFIs, South Asia 10 MFIs; MENA: 7 MFIs.
(3) The sample is 38 MFIs: 6 in South Asia, 10 in Eastern Europe and Central Asia, 6 in Latin America and the Caribbean, 1 in MENA and 15 in sub-Saharan Africa.
(4) //www.gca-foundation.org/espace-medias/#covid-19-a-progressive-recovery-of-IMFs-at-the-pace-of-that-of-their-clients

Travel Diary of a Solidarity Banker in Bosnia and Herzegovina

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By Daniel Hoarau, IT Manager, Crédit Agricole de La Réunion

Launched by the Grameen Crédit Agricole Foundation and Crédit Agricole SA in 2018, Solidarity Bankers is a skills-based volunteer program open to all Crédit Agricole Group employees in support of microfinance institutions and impact businesses supported by the Foundation. Discover the opinion piece by Daniel Hoarau, Solidarity Banker at Crédit Agricole de La Réunion, who went to Bosnia in 2020 to support Partner Microfinance Foundation.

Dream of discoveries

Once upon a time, there was an employee of the Caisse régionale de la Réunion who dreamed of getting involved in a solidarity project and exploring other cultures and businesses. A colleague, a friend, told him about the Grameen Crédit Agricole Foundation and its Solidarity Bankers program. This was the beginning of my story as a Solidarity Banker. I applied and was selected to support Partner MKF, a microfinance institution in Bosnia, in structuring its IT system.

Partner is a local microcredit organization that offers banking products and services to people excluded from the traditional banking system. Today, Partner serves more than 40,000 clients, 46% of whom are women and 86% live in rural areas. It has been funded by the Grameen Crédit Agricole Foundation since 2019.

Preparation for the mission was marked by regular exchanges with the Partner and Foundation teams. I was also able to study several documents and assess the existing IT infrastructure as well as the initial avenues for development envisaged by the institution. I was ready for my mission in the field.

Departure for Bosnia

The departure is announced, after several postponements due to Covid-19, thanks to the tenacity of the Foundation and the Crédit Agricole SA logistics teams. Due to Covid-19 testing planning, the flight plan is established: Saint-Denis, Paris, Vienna, Sarajevo, Tuzla: a 24-hour journey, departing on October 31st at 25°C, arriving on November 1st in Tuzla at barely 10°C.

First contact upon arrival: Salih, the driver, or when two beginner English speakers meet. Once safely arrived, the light shines: Ivana, the interpreter assigned to accompany me. Thanks to her, everything becomes simple and fluid. She will be the guide throughout the entire mission.

The very next day, I discovered Partner: the teams and the welcome were remarkable, everyone put me at ease and helped break the ice, both literally and figuratively. The mission was short, and I had to be efficient. Multiple interviews with the various department heads (information systems, human resources, compliance, credit) were followed by an audit of the technical installations, an analysis of user needs, and the first scoping suggestions. As the days went by, things became clearer, and recommendations were made. The final step was the review meeting with Partner's management: the analyses were presented, and the IT structure's development plan was validated.

Bosnians have a very different work schedule: starting at 8 a.m., breakfast break at 10 a.m., no lunch break between 12 p.m. and 2 p.m., and finishing work at 5 p.m. This leaves plenty of opportunity for friendly moments organized by Partner. Dinners, moments of discovery of Bosnian culture and customs, and even climbing a local mountain added even more color to my mission!

Return to Reunion Island

After another 24-hour flight home, I arrived in Reunion Island. I finalized my 34-page report, which aimed to inform Partner's choices for framing its system and IT infrastructure.

I have returned wonderfully enriched by this experience working with teams committed to their company's values: Responsibility, Fairness, and Honesty. Values shared by Crédit Agricole de la Réunion, Crédit Agricole SA, and the Foundation that made this adventure possible.

“If you want to build a ship, don’t start by gathering wood, cutting planks and distributing labor, but awaken in men the desire for the great and wide sea,” Antoine de Saint-Exupéry.

My thanks to all the people at my regional bank, Crédit Agricole de la Réunion, who helped make this mission possible; to Jasmin Smigalovic, Selma Jahic and all the Partner teams, not forgetting Ivana Bilić the interpreter, for their welcome; to Caroline Brand and Carolina Viguet of the Grameen Crédit Agricole Foundation for their support during the mission; and to Aurélie Cacciotti of Crédit Agricole SA for their logistical support.
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The Grameen Crédit Agricole Foundation consolidates its partnerships in Europe

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Article-investissement-Europe

©FGCA/Godong

During the last quarter of 2020, the Grameen Crédit Agricole Foundation continued its financing from its European partners, thus consolidating its position in a region which represents 18% of its outstanding amount.

In Bosnia and Herzegovina, the microfinance institution Mikra was thus granted a new loan of €1.2 million over a period of three years. Funded by the Foundation since 2019, Mikra's mission is to provide financial services to the poorest but economically active populations. The institution promotes equality for Bosnian women by financing and supporting entrepreneurship projects. To date, Mikra has more than 15,000 active clients, including 68% women and 58% rural clients.

In Moldova, Smart Credit was granted a new loan in the amount of €500,000 in local currency. Smart Credit is a microfinance institution whose objective is to help clients improve their living conditions, particularly socially disadvantaged small entrepreneurs. The institution currently has more than 3,000 active borrowers, including 54% women and 71% rural clients, and manages a portfolio of €3.5 million.

Finally, the Foundation granted a new loan, the second since 2018, to ADVANS Holding for an amount of 800,000 euros. ADVANS, headquartered in Luxembourg, is an international group whose mission is to build a network of microfinance institutions in developing and emerging countries. The Group offers financial and non-financial services to low-income individuals in nine countries, primarily in sub-Saharan Africa. Through its network, ADVANS serves nearly 800,000 clients and manages a portfolio of approximately 780 million euros.

To learn more, Click here.

The Foundation continues its funding in Kyrgyzstan

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©FGCA/Didier Gentilhomme

In the last quarter of 2020, the Grameen Crédit Agricole Foundation granted a new loan to the microfinance institution Salym in Kyrgyzstan. Founded in 2007, Salym aims to support income-generating activities to improve the living standards of disadvantaged populations. In December, the Foundation granted it a new loan equivalent to €1.3 million in local currency.

The institution, which currently has approximately 14,000 active clients, including 571 women and 761 rural clients, primarily supports low-income individuals from rural or urban areas. It offers its clients a variety of products, including housing loans, consumer credit, agricultural loans, and business loans.

With this loan, the Grameen Crédit Agricole Foundation has 18 partners in the Europe and Central Asia region, representing €281 million of its outstanding loans. As of the end of December 2020, the Foundation was present in 39 countries, with 85 microfinance institutions and impact businesses, and had €81.2 million in outstanding loans.

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Created in 2008, under the joint leadership of Crédit Agricole SA's management and Professor Yunus, 2006 Nobel Peace Prize winner and founder of Grameen Bank, the Grameen Crédit Agricole Foundation is a multi-sector operator that contributes to the fight against poverty through financial inclusion and social impact entrepreneurship. As an investor, lender, technical assistance coordinator, and fund advisor, the Foundation supports microfinance institutions and social enterprises in 39 countries.

For more information on the organizations supported by the Foundation, Click here.

The Foundation is securing new funding in sub-Saharan Africa

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©FGCA/Didier Gentilhomme

During the last half of 2020, the Grameen Crédit Agricole Foundation carried out 3 new financings in sub-Saharan Africa, notably in Benin and Malawi, which are in addition to the two loans granted in Zambia to MLF Zambia And EFC Zambia.

In Benin, the Foundation granted a new loan to the microfinance institution ACFB for an amount in local currency equivalent to 305,000 euros. ACFB, a partner of the Foundation since 2017, offers a diverse range of financial and non-financial services adapted to the needs of marginalized populations excluded from the traditional financial system. ACFB is a leading institution in promoting women's empowerment and microenterprise development. To date, the institution has more than 32,000 active clients, including 88% women and 95% living in rural areas.

Still in Benin, the Foundation granted a new loan to the microfinance institution COMUBA for an amount in local currency equivalent to 500,000 euros. COMUBA was created in 2000 and offers financial and non-financial services, particularly through group loans. A partner of the Foundation since 2015, the institution has approximately 32,000 active clients, including 90% women.

Similarly, the Grameen Crédit Agricole Foundation granted a new loan to the microfinance institution MLF Malawi, for an amount in local currency equivalent to 284,000 euros. Founded in 2002, MLF has nearly 30,000 active clients, exclusively women living in rural areas. The institution offers a wide range of products designed to support agriculture and the development of small businesses.

This new funding was granted as part of the African Facility program launched in 2013 in partnership with the French Development Agency (AFD) and bring the total number of partners in Sub-Saharan Africa to 40, representing 39% of the Foundation's outstanding funds at the end of December 2020.

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Foundation grants loan to new partner in Zambia

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© Oleksandr Rupeta / Alamy Stock Photo

The Grameen Crédit Agricole Foundation continues its investments in East Africa with a first local currency loan equivalent to 1.5 million euros granted to the microfinance institution. Entrepreneurs Financial Center (EFC) in Zambia, over a period of three years.

EFC is a microfinance institution founded with the intention of providing working capital solutions for micro, small, and medium-sized enterprises (MSMEs), with a focus on innovating products tailored to client needs. The institution, which also accepts savings, has approximately 3,000 borrowers, including 42% women and 6% rural clients. With this loan, the Foundation now has €32 million in outstanding loans in the sub-Saharan African region, representing 39% of the outstanding loans monitored by the Foundation.
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Created in 2008, under the joint leadership of Crédit Agricole SA's management and Professor Yunus, 2006 Nobel Peace Prize winner and founder of Grameen Bank, the Grameen Crédit Agricole Foundation is a multi-sector operator that contributes to the fight against poverty through financial inclusion and social impact entrepreneurship. As an investor, lender, technical assistance coordinator, and fund advisor, the Foundation supports microfinance institutions and social enterprises in 39 countries.

For more information on the organizations supported by the Foundation, Click here.

[INTERVIEW] The Foundation's actions in response to the Covid-19 crisis

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Hélène Keraudren Baube & Edouard Sers, Grameen Crédit Agricole Foundation

To overcome the effects of this unprecedented health and economic crisis, the Foundation has had to innovate, adapt, and collaborate with other key players in the inclusive finance and social impact entrepreneurship sectors. This cross-functional effort involves all of the Foundation's teams. To learn more, we highlight the testimonies of two Foundation experts: Hélène Keraudren-Baube, Administrative and Financial Director, and Edouard Sers, Director of Risk, Compliance, and Social Performance.

1. How has the Covid-19 crisis impacted the internal organization of the Foundation and the organizations it supports?

Helen: We resorted to teleworking overnight, but since it was already a possible option at the Foundation, the transition was very smooth. In addition to providing the equipment for teleworking, we also adapted the schedules to take into account the context of confinement with children at home. We have experienced a very unusual year, with no field missions for the team based in France since February, while the Investment Officers all go on field missions several times a year. The Foundation's Steering Committee held regular updates to monitor the situation and determine the best measures to support the teams and funded organizations. In addition, we have been communicating more regularly with our governance to keep them informed of the evolution of the situation and activity.

2. What responses did the Foundation provide to address this?

Edward: The Foundation's first response was to establish a rapid and ongoing dialogue with the organizations we support to understand the effects of the crisis, the measures taken, and their needs. Our investment management teams remained in very close contact with all the organizations we support, and we conducted regular surveys with them to understand the impacts of the crisis in the various countries where we operate. In addition, we created the Covid-19 Observatory, in which we regularly published articles to share our analyses and inform stakeholders of developments in the situation. At the same time, we led an international coordination of lenders and inclusive finance stakeholders to act together, in consultation, to protect microfinance institutions and their clients and prevent any liquidity shock that would have destabilized the sector.

Helen: We have adapted our monitoring and analysis tools and our requests for information, particularly regarding business continuity plans and short-term cash flow plans. On the financial front, we have granted deferrals to around thirty of the Foundation's partner organizations, primarily microfinance institutions. These deferrals, ranging from 6 to 12 months depending on the case, have been materialized by amendments to loan contracts and revised payment schedules. This volume of deferral requests is completely unprecedented and has put stress on our liquidity. We have refined our projection and monitoring tools to track the financial impact on the Foundation.

3. Regarding the international coalition, what are the first results?

Edward: Six months after signing the Commitment, we and all the signatories produced a joint publication presenting the status of implementation of the Commitment's 10 principles. Among the publication's conclusions, we can highlight the strong coordination between international donors to agree on payment deferrals, avoiding a liquidity crisis in the microfinance sector. We have also made progress in the area of technical assistance, including joint webinars and field surveys with end clients. Finally, we have encouraged the coordinated collection of information on staff management and client monitoring of microfinance institutions and are promoting initiatives to strengthen client and staff protection. In 2021, we will continue our efforts to support the gradual recovery of the microfinance institutions we support with technical assistance, tailored financing, and regular exchanges between the various stakeholders in the sector.

4. In relation to the Foundation's donors, what joint actions have been taken?

Helen: We very quickly kept our donors informed of the evolving situation, with detailed presentations. We understood from the start of the crisis that the main impact for us in 2020 would be on our liquidity management. Requests for deferrals from our partners are putting a strain on the Foundation's cash flow, and we wanted to preserve our ability to support our partners and avoid a liquidity crisis at all costs. To this end, we requested deferrals from our donors and considered new "special Covid-19" financing lines to support the resumption of activity of the microfinance institutions we support.

5. Finally, what are the prospects for 2021? What will be the Foundation's priorities?

Helen: After a year 2020 marked by an operating result supported by portfolio growth in previous years and substantial savings in 2020, particularly on travel expenses, 2021 will be directly impacted by the contraction of the Foundation's loan portfolio following the crisis. The Foundation's activity should continue its gradual and cautious recovery begun in recent months. We believe that the first half of the year will still be heavily constrained by the pandemic and its consequences, and we hope to be able to resume our field trips, as close as possible to our partners, from the second half of the year. It will probably take another year for the Foundation to return to the level of activity it had before the crisis.

Edward: A large proportion of the organizations we support have successfully weathered the crisis and are eligible for the Foundation's funding based on standard risk criteria. However, a significant proportion of them still carry significant risk from 2020 on their balance sheets. It is crucial that we continue to strengthen our support system to offer solutions tailored to different levels of risk, combining new financing, technical assistance, loan deferrals, or—in more exceptional circumstances—debt restructuring.

At the sector level, lenders were able to coordinate in 2020 to avoid a liquidity crisis, and we will continue on this path in 2021. This year will also be crucial for investors to support microfinance institutions in accordance with their responsibility as shareholders. Finally, we will continue to promote initiatives to protect the clients and staff of microfinance institutions during this time of crisis. For example, we are actively participating in the Social Performance Task Force (SPTF) working group to define new certification criteria for client protection in the sector. Ongoing dialogue with our partners and coordinated actions will be among the keys to the success of our commitments.

Microfinance in India: The Story of Resilience

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By Devesh Sachdev, CEO, Fusion

©FGCA

The microfinance model of providing small, collateral-free loans to “bottom-of-the-pyramid” clients previously neglected by the formal sector has emerged as an effective and sustainable model of financial inclusion. Financial inclusion has, understandably, been the primary focus of policymakers over the past few decades, given the portion of our population that remains unserved and/or underserved. It doesn’t take a complex analysis to understand that if India, as a country, is to improve its per capita income and lift people above the poverty line, access to finance must be key.

Despite the policy push through the traditional banking system, few factors have acted as obstacles to this national goal of financial inclusion. First and foremost, the fact that our formal banking system has largely developed its policies and outreach (whether physical or digital) to cater to the urban/semi-urban population with established track records/income and collateral that match their defined risk/reward matrix as an asset class. Second, the “delivery cost” for small transactions in the balance of payments market has become a buffer for banks. The lack of financial literature has also acted as a constraint.

The microfinance model of providing small, collateral-free loans to bottom-of-the-pyramid clients previously neglected by the formal sector has emerged as an effective and sustainable model of financial inclusion. It was conceptualized to seamlessly deliver financial services and products to the doorsteps of these same clients in a manner that is very easy to understand. The concept of joint liability leveraging social capital combined with direct delivery to the client has helped the microfinance sector gain trust and acceptability.

The microfinance “journey” over the past decade has revolved around two major themes. On the one hand, it has withstood severe setbacks like the 2010 Andhra crisis, the 2016 demonetization crisis, the NBFC liquidity and credibility crisis, and is currently battling the global Covid-19 pandemic. All these events have created the impression in the minds of stakeholders that microfinance in itself is a risky asset class, as unfortunately for the sector, it has been affected by these unforeseen events once every 3 to 4 years.

Fortunately, however, there is a brighter side to the sector:

  1. Today, the sector serves around 60 million unique customers with a combined portfolio size of Rs 23 billion across 620 districts in 28 states and eight union territories. This makes it the 2nd largest sector after mortgage lending. However, what is even more commendable is that the sector has recorded a growth of 30% in the last 3 years compared to 17% for the retail banking sector
  2. Another strength of the microfinance sector has been offering financial products and services through a careful fusion of "Touch and Tech" at the lowest cost among its global peers. The sector leverages advances in technology to consistently provide greater transparency, data security, confidentiality, and proximity accessibility to its rural clients.
  3. With both reach and operational efficiency, microfinance is today a sustainable business model, calibrated to leverage its network to provide other goods and services to rural populations, thus contributing to the significant growth recorded by India.
  4. The sector also generates significant employment opportunities not only by hiring in the hinterland, but also by enabling its clients to provide employment opportunities to others through extensive financial support.

The sector has demonstrated remarkable resilience over the past decade and this has been made possible by some key contributing factors:

  • The 'inherent' need for such a model in an aspirational India, where a large unserved/underserved population is yet to be given an opportunity to jump on the bandwagon, has ensured that microfinance remains a 'preferred' vehicle for both policy planners and practitioners over the years.
  • The significant support and enabling policy framework provided by the Reserve Bank of India has been a catalyst in pursuing the financial inclusion mission of the microfinance sector. The sector has been assigned a special category within the Reserve Bank's broader category of non-banking financial services, giving it a distinct identity and strong credibility as the country's first self-regulatory organization recognized by the Reserve Bank.
  • The operation of MFIN (the industry association) as a self-regulatory organization since 2010 has enabled the sector to build its growth on solid pillars. The main pillars of MFIN's work have been customer protection, the sector's code of conduct, and policy advocacy, all of which contribute to building a responsible finance ecosystem.
  • Because microfinance is a far-reaching model, it has ensured the highest degree of client-centricity and knowledge. Response time in crisis situations is much faster, and the solutions offered are highly targeted. This aspect helped the sector overcome the challenges posed by demonetization in 2016, but more recently, this model has proven its resilience and sustainability in the current Covid-19 crisis. Frontline soldiers ensured that the wheels of financing kept moving when clients needed them most during the pre- and post-lockdown periods. Operating platforms were quickly modified to operate remotely and provide digital lending services.

The strong bond with clients has stood the test of time and engendered a high degree of mutual understanding and cooperation. Most financial experts were wrong when the microfinance portfolio showed better-than-expected post-Covid portfolio indicators following the moratorium period mandated by the Central Bank.

Today, the microfinance sector partners with the government to roll out various social programs, from Shishu loans under the Mudra program to Pradhan Mantri Svanidhi. The importance of the sector was recognized by the Prime Minister in his speech at the United Nations General Assembly, describing it as a tool for promoting women's entrepreneurship.

As they say, “It’s not how many hits you take that makes you a winner, it’s how you always get up stronger despite the hits you take and emerge a winner” and this is an apt description of a resilient microfinance sector in India, so far… but the journey has only just begun!

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Source : BW Businessworld

Microfinance: a tool for a more inclusive economy

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Interview with Eric Campos, CEO, Grameen Crédit Agricole Foundation

Perhaps because it's a highly effective tool for combating poverty, microfinance is a central issue in rethinking the global economy. The health crisis and its impact on the poorest populations have only reinforced this urgent need for financial inclusion. Paperjam Luxembourg spotlights an interview with Eric Campos, Managing Director of the Grameen Crédit Agricole Foundation.

Why is microfinance a topic that concerns you?

Today, 1.7 billion people, the majority in rural areas, lack access to finance, and the financial sector has a key role to play in addressing this global challenge. The Foundation is one of the Crédit Agricole Group's levers to promote financial inclusion and the development of rural economies in emerging countries. This is the ambition Crédit Agricole set for itself when it created the Foundation 12 years ago with Professor Yunus, 2006 Nobel Peace Prize winner: to contribute to the fight against poverty by promoting microfinance and socially impactful entrepreneurship throughout the world. The Foundation is a committed player in poor countries, serving the Group's Purpose: "Acting every day in the interest of our customers and society."

Our mission takes on even more meaning in the current context. The Covid-19 pandemic is hitting the most vulnerable populations particularly hard, and microfinance is a lever to strengthen their resilience in the face of the crisis. In this context, we have had to adapt our intervention methods and innovate. We have implemented very regular monitoring with the funded institutions to understand the effects of the crisis and their needs. We have also implemented numerous deadline deferrals to allow these institutions to support their own clients and also agree to defer microcredit deadlines. Since last March, we have also coordinated an international movement of donors, investors, and inclusive finance stakeholders to commit to preventing a liquidity crisis in the sector and provide coordinated responses to address the economic effects of the crisis.

Can you tell us about the Grameen Crédit Agricole Foundation and its objectives?

The Foundation is a multi-business operator: investor, lender, technical assistance coordinator and fund advisor, the Foundation finances and supports microfinance institutions, businesses and projects that promote inclusive finance and the development of rural economies throughout the world.

The Foundation accompanies and supports today 86 partners (74 microfinance institutions and 12 social impact businesses) in 40 countries with nearly €100 million in outstanding loans. The Foundation seeks to promote women's empowerment through economics, 88% of the final beneficiaries are women, and primarily targets rural populations: of the 7.3 million clients of institutions that the Foundation finances, 84% live in rural areas.

How does the Foundation work with the CA group today?

The Foundation has set up several partnerships with the Regional Banks and Crédit Agricole entities. We have established cooperation schemes with the Banque de Proximité à l'international (BPI) in Romania, Egypt, India and Morocco, which allows Group entities to finance microfinance institutions in local currency with the Foundation's guarantee. We have launched, with CA Indosuez Wealth (Asset Management) and CACEIS Bank Luxembourg Branch, the Inclusive Finance fund in rural areas, Crédit Agricole's first microfinance fund, to which 21 Regional Banks, Crédit Agricole Assurance and Amundi have already subscribed. Finally, with Crédit Agricole SA, we have set up "Solidarity Bankers" since June 2018, a skills volunteering scheme enabling us to offer technical assistance missions to Group employees on behalf of organizations funded by the Foundation.

Furthermore, in response to the Covid-19 crisis, the Foundation worked with Crédit Agricole SA, Crédit Agricole CIB, Crédit Agricole Wealth (Asset Management) and other key players in inclusive finance on a Joint commitment to protect microfinance institutions and their clientsThe commitment, which now has 30 signatories, is based on a set of principles designed to protect the microfinance sector and its clients from the economic effects of the health crisis. Thanks to this coordinated action, liquidity defaults were avoided, and we supported partner organizations with technical assistance missions.

What themes will the Foundation address in the coming years?

Climate change, population growth, food security, digital transformation... many challenges are at the heart of our concerns. It is urgent to act, to innovate with new means of action, and to strengthen cooperation. This conviction is at the heart of the Foundation's actions and its 2019-2022 strategic plan and its objectives: consolidate the sustainability of organizations that provide essential services with appropriate financing and technical assistance; strengthen the resilience of rural economies by supporting social impact businesses; and promote inclusive finance within the banking sector, notably through partnerships established with the Crédit Agricole group.

In the face of the Covid-19 crisis, the Foundation will continue to support, alongside its institutional, private, and solidarity partners, microfinance institutions and social enterprises with targeted financing and technical assistance to strengthen their resilience in this unprecedented crisis. We will continue to monitor the effects of the health crisis and take action to strengthen the resilience of microfinance and impact entrepreneurship, in consultation with other stakeholders.

Source: Paparjan.lu 

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