Microfinance Banana Skins 2009 Microfinance Banana Skins 2009 - Le ...

C S F I / New York CSFIC S F I / New York CSFINUMBER EIGHTY FIVE JUNE 2009PrefacePrefaceThis is the second in what we hope will be a continuing series of Banana Skins surveys looking at the globalmicrofinance industry. It is co-sponsored by Citi Foundation and CGAP, but editorial responsibility rests with the CSFI– and specifically with my colleague, David Lascelles (who got valuable assistance this time from our formerThis programme is the director, second in Sam what Mendelson). we hope will be a continuing series of Banana Skins surveys looking at the globalmicrofinance industry. It is co-sponsored by Citi Foundation and CGAP, but editorial responsibility rests with the CSFI– The and first specifically survey was with published my colleague, in early 2008 David – just Lascelles the global (who financial got valuable crisis was assistance starting this to unfold. time from This one our reflects formerprogramme the fact that director, the financial Sam Mendelson). crisis has become an economic recession, and that no one is immune – not even themicrofinance industry, which many believed only a year or so ago to be more or less insulated from the vicissitudes ofThe mainstream first survey finance. was published in early 2008 – just as the global financial crisis was starting to unfold. This one reflectsthe fact that the financial crisis has become an economic recession, and that no one is immune – not even themicrofinance Indeed, the main industry, message which to take many from believed this year’s only survey a year or is that so ago the to climate be more for or microfinance less insulated has from changed, the vicissitudes just as surely ofmainstream as the broader finance. financial and economic climate has changed. The big concerns this year are familiar to all of us: creditrisk, the danger that liquidity will dry up, the impact of global recession, overindebtedness. In comparison, the mainIndeed, concerns the of main 2008 message – weak management, to take from this governance year’s survey issues is – that now the seem climate like small for microfinance beer. has changed, just as surelyas the broader financial and economic climate has changed. The big concerns this year are familiar to all of us: creditrisk, But it the is danger not just that the liquidity top Banana will Skins. dry up, In the my impact opinion, of it global is impossible recession, to overindebtedness. read this year’s text In without comparison, coming the to main theconcerns conclusion of that 2008 microfinance – weak management, is at a crossroads, governance and issues that it – might now seem do the like industry small beer. a power of good if it was able to call a“time-out” to reassess its role. In the popular press, microfinance is still very much the developmental flavour of theBut month it is – not and just even the the top Banana most battle-hardened Skins. In my aid opinion, veteran it is has impossible to acknowledge to read this its year’s appeal text as without an alternative coming to theconclusion conventional that ‘top microfinance down’ model is at for a crossroads, wasting taxpayers’ and that money. it might But, do the as industry the final a box power in this of good report if makes it was able clear to (p call 37), a“time-out” microfinance to currently reassess its faces role. serious In the challenges popular press, – challenges microfinance that have is still been very exacerbated much the developmental by the global crisis. flavour Should of themonth microfinance – and institutions even the most shift battle-hardened from their essential aid social veteran role has to to a acknowledge (perhaps) more its sustainable appeal as profit-seeking an alternative model? to theconventional Can they go on ‘top relying down’ (as model they have for wasting done) on taxpayers’ subventions money. of one But, sort as or another final from box in Western this report investors? makes clear Should (p they 37),microfinance develop into more currently or less faces full serious service financial challenges institutions, – challenges and that become have part been of exacerbated the formal financial by the global sector? crisis. Shouldmicrofinance institutions shift from their essential social role to a (perhaps) more sustainable profit-seeking model?Can These they kinds go on of relying questions (as pose they real have challenges done) on subventions to the microfinance one sort industry, or another and from I very Western much investors? hope that this Should Banana theydevelop Skins survey into more prompts or less practitioners, full service investors, financial institutions, donors and and regulators become to part have of a the good, formal long financial think about sector? where they aregoing. In the meantime, thanks to Citi and CGAP for making the survey possible. Thanks also to Deborah Drake ofThese the Council kinds of Microfinance questions pose Equity real challenges Funds, to to Philip the microfinance Brown, risk director industry, of and Citi I Microfinance, very much hope to Xavier that this Reille Banana ofSkins CGAP, survey and to prompts the MIX practitioners, for their valuable investors, help donors and support. and regulators And, of to course, have a thanks good, long to David think and about Sam where for pulling they are agoing. phenomenal In the amount meantime, of material thanks together.Citi and CGAP for making the survey possible. Thanks also to Deborah Drake ofthe Council of Microfinance Equity Funds, to Philip Brown, risk director of Citi Microfinance, to Xavier Reille ofCGAP, Andrew and Hiltonthe MIX for their valuable help and support. And, of course, thanks to David and Sam for pulling aphenomenal Director, CSFI amount of material together.Andrew HiltonDirector, CSFIThis report was written by David Lascelles and Sam MendelsonCover by Getty ImagesThis report was written by David Lascelles and Sam MendelsonCover by Getty ImagesCSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk 1