Rather than pick a single theme, I thought I’d write a summary of the first month of 2013 in the embattled sector.
Princess Maxima of Holland got a promotion from ambassador of microfinance to Queen of the Netherlands. Let’s hope her replacement takes a slightly more pro-active role in cleaning up the Dutch microfinance sector, and that she runs Holland slightly better than its microfinance sector. The eternally generous Dutch tax-payer will be the ultimate judge of this.
Meanwhile SNS Bank was nationalized, after a string of silly property investments. Shareholders forked out €17 per share in the IPO in 2006. They last traded at €0.84. What is less well-known is that SNS Bank owns ASN Bank, Holland’s inappropriately named “ethical bank” (with a squirrel logo to prove it), apparent pioneer of the commercial microfinance fund. The infamous ASN-Novib fund has faced criticism, largely from me, over the last year or so, for selecting an inept fund manager, doing unethical investments, covering-up mis-deeds and having minimal impact on poverty. It was featured in the KRO-Reporter documentary, not in an entirely positive light. How the nationalization will impact the microfinance fund remains to be seen, but perhaps now it in state hands the Dutch government will take a closer look at what this fund is actually up to.
ASN-Novib was not the only microfinance fund suffering. BlueOrchard fired yet another CEO. This could be the slow death of what was, at one point, the largest microfinance fund on Earth. Investors are withdrawing in droves, but the poor won’t notice much difference. No credible reasons were given, nor any credible evidence that the new joker is any better qualified than the last (few). Investors should think twice about investing in BlueOrchard in particular, and MFIs might not want to rely on re-financing loans from the ailing fund.
An interesting, obscure development with Kiva involved one of their main lending groups – Milepoint. They’ve lent nearly $4.5m on Kiva, and are the third biggest lender ever on Kiva. Now some of their members are defecting to the smaller P2P Zidisha. In an interesting blog post some Milepoint members discuss their reasoning (I select a mix):
“[Zidisha] is smaller, has minimal overhead (just one employee, the rest are volunteers), does peer to peer lending at costs to the borrower of between 5 and 20% and it allows me to earn interest to offset possible losses. The concept is interesting as no loans are pre-funded. Borrowers specify a maximum interest rate and want-to-be lenders bid, often at much lower rates… The direct process is far more involving than is the Kiva one, and the direct lending process is completely direct. So far I am impressed. I like the idea of fewer middle men and a lower overhead than Kiva.”
Wow, actual peer-to-peer lending at reasonable interest rates – this is a novelty. How long until the rest of the Kivans catch up?
The so-called Smart Campaign actually did something – breaking news for this body. They now offer awards to banks if they don’t screw poor people. Time will tell whether this is any more than window-dressing (Smart’s traditional niche). Whether their paymasters Accion will be applying for the certificate also remains to be seen. It would be interesting to see how Compartamos get rated on transparent and fair interest rates, or their latest acquisition CrediConfia who were lambasted by the Mexican media for charging up to 229% to poor taco-vendors. Albeit from an astonishingly low base, and after an inordinate amount of time-wasting, this is at least a step in the right direction.
Perhaps the most amusing thing to have occurred this month was a spat between Tom Heinemann and Yunus. It appears Yunus went to some quite extraordinary lengths to avoid meeting Heinemann, facing any tough questions, and coercing the Danish media into censoring the entire incident. I will blog about this later, when the truth emerges. But one has to wonder why a Nobel Peace Prize Winner is so apparently terrified of a single journalist in Denmark. I interviewed Heinemann recently and he seemed positively amiable.
Otherwise it’s pretty much “business as usual” in the microfinance sector. Hype for the concept continues unabated, without supporting evidence. No one has gone to prison, no one has cleaned up their act, no convincing evidence has emerged supporting the idea, but they’re still plugging the new name for the sector: “financial inclusion”. Even the microfinance sector is becoming embarrassed by the word “microfinance”.