Welcome to Scribd. Sign in or start your free trial to enjoy unlimited e-books, audiobooks & documents.Find out more
Download
Standard view
Full view
of .
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
A New Look at Microfinance Apexes

A New Look at Microfinance Apexes

Ratings: (0)|Views: 3|Likes:
Published by CGAP Publications
This paper reviews recent experience with apex facilities that support institutions delivering retail financial services to poor and low-income clients. CGAP published its first study of such apexes 10 years ago. That study did not reach categorical conclusions about apex effectiveness, but it did raise some serious concerns about the extent to which apexes supported the development of sustainable microfinance.

Since then, the number of apexes and their total funding have grown a great deal. Apex facilities have become increasingly popular with host-country governments, as well as with development finance institutions (DFIs) and multilateral agencies, such as the European Commission (EC), the Inter-American Development Bank (IDB), the International Fund for Agricultural Development (IFAD), Germany's Kreditanstalt fur Wiederaufbau (KfW), and the World Bank. A 2008 CGAP mapping exercise identified 76 apexes in 46 countries. In 2009, the largest 15 of these disbursed US$1.5 billion. By comparison, total disbursements of all cross-border funders (including bilateral and multilateral donors, DFIs, and microfinance investment vehicles) are roughly US$3 billion annually. Not only has the number of apexes grown, but more individual apexes have accumulated enough years of experience to permit some assessment of their usefulness.
This paper reviews recent experience with apex facilities that support institutions delivering retail financial services to poor and low-income clients. CGAP published its first study of such apexes 10 years ago. That study did not reach categorical conclusions about apex effectiveness, but it did raise some serious concerns about the extent to which apexes supported the development of sustainable microfinance.

Since then, the number of apexes and their total funding have grown a great deal. Apex facilities have become increasingly popular with host-country governments, as well as with development finance institutions (DFIs) and multilateral agencies, such as the European Commission (EC), the Inter-American Development Bank (IDB), the International Fund for Agricultural Development (IFAD), Germany's Kreditanstalt fur Wiederaufbau (KfW), and the World Bank. A 2008 CGAP mapping exercise identified 76 apexes in 46 countries. In 2009, the largest 15 of these disbursed US$1.5 billion. By comparison, total disbursements of all cross-border funders (including bilateral and multilateral donors, DFIs, and microfinance investment vehicles) are roughly US$3 billion annually. Not only has the number of apexes grown, but more individual apexes have accumulated enough years of experience to permit some assessment of their usefulness.

More info:

Categories:Types, Research
Published by: CGAP Publications on Mar 14, 2013
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

03/14/2013

pdf

text

original

 
T
his paper reviews recent experience withapex facilities (defined in Box 1) that supportinstitutions delivering retail financial services topoor and low-income clients.
1
CGAP published itsfirst study of such apexes 10 years ago (Levy 2002aand 2002b). That study did not reach categoricalconclusions about apex effectiveness, but it did raisesome serious concerns about the extent to whichapexes supported the development of sustainablemicrofinance.Since then, the number of apexes and their totalfunding have grown a great deal. Apex facilitieshave become increasingly popular with host-countrygovernments, as well as with development financeinstitutions (DFIs) and multilateral agencies, such asthe European Commission (EC), the Inter-AmericanDevelopment Bank (IDB), the International Fundfor Agricultural Development (IFAD), Germany’sKreditanstalt für Wiederaufbau (KfW), and the WorldBank. A 2008 CGAP mapping exercise identified76 apexes in 46 countries. In 2009 the largest 15of these disbursed US$1.5 billion. By comparison,total disbursements of all cross-border funders(including bilateral and multilateral donors, DFIs,and microfinance investment vehicles [MIVs]) areroughly US$3 billion annually (El-Zoghbi, Gähwiler,and Lauer 2011). Not only has the number of apexes grown, but more individual apexes haveaccumulated enough years of experience to permitsome assessment of their usefulness.Clearly, it is time for a fresh look.
Terminology
This paper uses the shorthand term “microfinance”to refer to financial services for low-income people.
2
 Apex facilities exist for other sectors besidesmicrofinance—for instance, lending to exportersor small and medium enterprises (SMEs). However,since this paper is limited to microfinance; “apex”here generally refers only to microfinance apexes.This paper does not cover federations of retailcooperatives or credit unions, even though theysometimes play a refinancing role. Such federationsoften provide management or supervision inaddition to finance and, therefore, tend to involvedistinctive operational issues. Finally, some peoplecall associations of microfinance retailers “apexes,”but these have no refinancing role and thus falloutside the scope of this paper.
Principal Sources
Data collection for this paper involved four efforts:
•The2008
mapping
referred to above, whichidentified 76 microfinance apexes.
•A
literature review
, including both global andcountry-specific studies, as well as reports fromapex institutions themselves (see Annex 4,Bibliography).
A2010
quantitative survey
of 23 apexes,representing about 90 percent of all apex funding
A New Look at MicrofinanceApexes
1 These “microfinance institutions” assume a variety of organizational forms, including, for instance, not-for-profit nongovernmentorganizations, commercial banks, finance companies, postal savings banks, and financial cooperatives.2 The financial services used by low-income people include credit, savings, transfers, and insurance. Today, many prefer to refer to suchservices in terms of “inclusive finance” or “access to finance” rather than the more common “microfinance,” arguing that the latter term hastended to connote microcredit rather than a full range of services, and specialized microfinance institutions rather than the full range offinancial providers. Nevertheless, this paper uses “microfinance” for the sake of conciseness. Note that microfinance apexes have focusedmuch more on supporting credit than on supporting other financial services, and that most institutions receiving apex funding specialize inmicrocredit.
No. 80June 2012
Sarah Forster,Eric Duflos,and RichardRosenberg
   F   O   C   U   S   N   O   T   E
Box 1. What is an apex?
An apex is a second-tier (or “wholesale”) fund thatchannels public resources to multiple retail financialproviders—typically lenders—in a single country.Apexes provide mainly local currency loans, but mayalso offer loan guarantees, equity investment, grantsfor operational cost support, and technical assistance.An apex is not always a standalone institution. It maybe housed within a larger organization, such as adevelopment bank.
 
2
in terms of their loan portfolios. This surveycollected information about the apex’s mission,portfolio size, performance management,funding sources, and other characteristics using aquestionnaire and follow-up telephone calls.
•
Case study analysis
of six apexes representingdifferent regions and institutional forms (see Table1). These six apexes represent about 60 percentof the total global apex portfolio surveyed. Theywere judged to offer lessons of global relevance,but the sample is not representative: it is biasedtoward larger apexes and those more able toprovide information. The research team conductedinterviews with 73 stakeholders, including apexmanagement, microfinance institutions (MFIs),donors, and investors, as well as analysis of apexand Microfinance Information Exchange (MIX)data on the performance of the MFIs funded. Theresearch team also conducted field visits to studythe operations of Bancoldex, Palli Karma-SahayakFoundation (PKSF), Social Fund for Development(SFD), and Small Industries Development Bank of India (SIDBI). A list of those interviewed, whichincludes apex managers, MFIs, and donors, isprovided in Annex 1.At the outset of the project, CGAP members whofund apexes or have an interest in them formed aworking group that provided early input into theresearch design. In March 2011, this group, alongwith managers from MISFA and SIDBI, reviewed theinitial findings at a one-day workshop and provideduseful inputs for this report.
3
 
Structure of This Paper
This paper is organized into three parts:
•Thefirstsectionoffersaglobalpictureofmicrofinance
apex operations, including their size, trends, andcharacteristics. It draws primarily on the 2010 surveyof 23 major apexes, but also includes some resultsfrom the broader mapping done in 2008.
•Thesecondsectionhighlightskeyissuesfrom
across the six case studies.
Thethirdsectionoffersconclusionsand
recommendations about maximizing the chancesfor apex success. It draws not only from thespecific research conducted for this paper, butalso from CGAP’s 17 years of experience with(and publications regarding) the operations of development funding agencies.Like CGAP’s previous study of apexes, this reportdoes not attempt to produce categorical conclusionsabout the usefulness of microfinance apexesworldwide. There is great diversity of experienceamong the 76 apexes we identified, and few of them make enough information public to support judgments about their success or failure. Rather, thispaper tries to distil lessons about how to improveapex performance.
3 The workshop was attended by AFD, AsDB, DFID, EC, GiZ, IFAD, IFC, KfW, UNCDF, and the World Bank as well as managers fromSIDBI and MISFA.
Table 1. Six case-study apexes
Name of ApexCountryGross LoanPortfolio 2009(USD million)Active MFI Clients2009*
Small Industries Development Bank of India (SIDBI)India84719,620,000BancoldexColombia462278,000Palli Karma-Sahayak Foundation (PKSF)Bangladesh4308,260,000Microfinance Investment Support Facilityfor Afghanistan (MISFA)Afghanistan69250,000Social Fund for Development (SFD)Egypt68218,000Banque Malienne de Solidarité (BMS)Mali12190,000
*Active clients of investee institutions, without implying that the apex is financing all of these clients.
 
3
1. The Global Landscape: ApexCharacteristics and Trends
CGAP’s 2008 mapping identified 76 microfinanceapexes. A 2010 survey collected information from 23of the largest of these, representing the vast majorityof apex portfolio and disbursements worldwide.Numerical analysis in this section is based mainly onthe 15 largest apexes.
Globally, apex funding is significant, growing,and concentrated.
The largest 15 apexes had atotal gross loan portfolio (GLP) of over US$3 billionin 2009. Although apexes exist in all regions, theyare most prevalent in Latin America and South Asia(Duflos and El-Zoghbi 2010).These apexes disbursed close to US$1.5 billion toMFIs in 2009, an increase of 25 percent over 2008.Three quarters of the total portfolio was held bythe four largest apexes. Almost three quarters of total disbursements came from three apexes: SIDBI,Bancoldex, and PKSF, which are discussed in thispaper as case studies.
Apexes use a wide variety of organizationalforms
, ranging from small divisions of governmentdevelopment banks to large standalone foundations.Bancoldex, BMS, and SIDBI are all specialist unitswithin development banks that have a broader focuson SMEs and industrial development. PKSF wasestablished as a foundation specializing in microcredit,though it is now supporting wider livelihoods efforts.SFD is a foundation that funds community-levelinfrastructure projects as well as microfinance andsmall enterprise development. MISFA began as partof a government ministry, but always had operationalindependence and a nongovernment board majority.Table 3 illustrates the range of institutional types withexamples from around the world
Table 3. Institutional Type
TypeOwnershipExamples
Development BankGovernmentSIDBI (India), Bancoldex (Colombia), RDB(Cambodia), CFN (Ecuador)Commercial BankPrivateBMS (Mali), Bank Andara (Indonesia)Standalone Fund
(could be legally constituted as a nonprofit foundation or a company) 
GovernmentPCFC (Philippines), DAMU (Kazakhstan), PKSF(Bangladesh), NAFINSA (Mexico), SFD (Yemen),PPAF (Pakistan)Quasi-governmentMISFA (Afghanistan), SFD (Egypt)PrivateJaida (Morocco), Funda-Pro (Bolivia), MITAF (SierraLeone), MDF (Mongolia), FFSA (Kazakhstan),RMDC (Nepal)Donor Project Implementing UnitGovernmentLID (Bosnia) and MISFA (Afghanistan) were initiallydonor projects before legal entities were created
Table 2. Top 15 apexes 2009, byoutstanding portforlio
SIDBIIndia$847,080,000NafinsaMexico$491,195,601BancoldexColombia$462,000,000PKSFBangladesh$429,601,508PPAFPakistan$137,705,613BTSTunisia$117,908,000FedecreditoEl Salvador$102,215,808PCFCPhilippines$74,743,843MISFAAfghanistan$69,348,000SFD EgyptEgypt$67,889,186FFSAKazakhstan$66,344,711JAIDAMorocco$47,500,000Funda-ProBolivia$39,610,405RMDCNepal$27,523,071BfP (FNI)Nicaragua$24,404,795$3,005,070,541
Source: CGAP 2010 survey.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->