Live Chat: Do Financial Markets Work for the Poor?

April 10, 2013 10:00 AM to 11:00 AM EDT
Online only, CGAP.org

Imagine a life without access to financial services: no deposit account, no debit card, no fire insurance, no college savings plan, and no home mortgage. Life would be an incredibly stressful roller coaster ride, and most dreams would remain unfulfilled. For us, life without access to financial services is unimaginable.

The microfinance sector now reflects the multidisciplinary intersection of finance, technology, and development, where new ideas are changing the art of what is possible. The actors reflect this diverse ecosystem and include everything from mobile operators to microfinance institutions to community networks.

On 10 April, Joanna Ledgerwood, microfinance expert and editor of The New Microfinance Handbook, and Steve Rasmussen, Manager of Technology and Business Model Innovation at CGAP, took questions during a live web chat addressing the evolving understanding of financial inclusion, the demands of clients, how financial markets can work better for the poor, and the role of new technology in expanding financial access.

A transcript of this chat follows.

Comments

Submitted by Rajendra Dulal on

One of the factors that influences the success and sustainability of micro finance is the health of the poor people. Given the high risk of health problems and limited resources available for the poor people, how can the micro finance address this health issue ??

Submitted by Chander shekhar on

Is the microfinanace scheme for poors availavle to India too ?? If yes, may kindly tell how can I help those needy people to reach reach to you. It wud be a great pelasure for me to work someone in need.

Submitted by Fernando Flores on

We have a new model for social banking, but we required to share it with a comercial bank, like a one of the stakeholders, this project required a big solution for a lot of little problems. Do you belive it¿

Submitted by Eric H Yeboah on

it is sad that the development world continues to equate access to financial services to reduction in poverty. this simplistic assumption implies that ensuring poor people's access to MFI would make them less poor. It is time that researcher understand what mode of delivering financial services to the poor can make them less poor. Most MFIs formulate and implement financial interventions without any input from the users of such services. How can such services benefit the poor? The questions that needs much attention is "how does MFis make people less poor?". Finding of such studies can be incorporated into MFIs to ensure that they have the maximum positive impact on the poor and not only on the MFIs.

Submitted by helga salinas on

can you talk about How regulatory schemes can improve capital at IMFs, so they can decrease their interest rate and continue the financial inclusion

Submitted by Sabry on

New opportunities, new risks. Introducing the financial markets into the world of microfinance can certainly have a lot to offer to the development of capabilities and means of those that would otherwise not have access to these financial services, particularly by increasing the volume and reach of microfinancing.
However, any balanced conversation must highlight the likely (and unlikely, as we've learnt the hard way from 2007/08) risks involved for the various stakeholders, particularly the most end user.
Given that those that use microfinancing are, more often than not, some of the most vulnerable in the world, what risks does the greater inclusion of financial markets in the world of microfinancing present to (the extremely vulnerable) end user?

Submitted by Israel on

In fact, how are microfinancial institutions protecting to theirs customers against over-indebtedness?

Submitted by Apollo Gabazira on

I have invested time in supporting the startup and growth of a rural savings and credit cooperative - it's goal is to provide financial service to the very poor - but the dilemma faced by the nascent institution is that the very poor aren't using its services, even with prompting. Is there something we need to do to the very poor, to prep them for some of our 'wishes' for them like markets working for them?

Submitted by Luis Humberto Guzmán on

I have two questions for you: 1) Do you think that increasing access of the poor to financial services has an effect on competition in the markets?

2) How has been resolved to grant the credit market to natural or legal persons who have no bank guarantee?

Submitted by Anonymous on

High interest rates charged by the 'For profit" Microfinance Instituttions. The 'for profit' MFIs charge very high interest rates to their borrowers, even though the MFIs themselves would have ot the loan funds at much cheaper rates from the commercial banks. As the MFIs do not take deposits, there is very little Central Bank supervision and regulation on these MFIs. Thus there may be chances that MFIs charge as much as if not more than local scrupulous money lenders. This defeats the purpose of Financial Inclusion as the finance then cannot be made affordable to the poor. What can be done to curb this problem? Is Regulation the only answer?

Submitted by Lukundo Siame on

Some developing countries are actually operating Microfins very differently from the initial concept and as such the level of financial inclusion is still very low.

Submitted by Mukund Bangalore on

What role does microfinance play in promoting successful agricultural adaptation to climate change in sub-Saharan Africa where financial access and adaptive capacity are low while climate impacts on agriculture likely to be high?

Submitted by saphan musela on

How can microfinance lend to individual persons indepedently and reduce the rate of defaults rather than lending to groups thus punishing others at the expense of others.

Submitted by indra on

1) What conversations are taking place with philanthropic foundations & funders as well as "angel" networks in developing a multi-year program (5-7) in which money is fully leveraged at the outset (2-3 yrs) with gradual minimal interest assessed to intended borrower in subsequent years (sliding scale based on revenue stream of borrower)?

2) What type of surveys/focus studies have been conducted with constituents as well as on-the-ground program staff that provide needs assessment, cultural input, and challenges with regard to MF?

3) With many ex-pats (of respective developing countries) living in the more wealthy countries, how is crowdsourcing/funding being fully utilized in a thoughtful, comprehensive manner?

Submitted by Anonymous on

How much of a priority is greater integration between mobile money and formal (bank-led) financial services?

Submitted by Getaneh Gobezie on

In contexts where microfinance institutions work under low competition, clients have few other option but take microloans at a given terms and conditions set by institutions (and fully repay loans). Regulators usually do not investigate such issues. And often there are no other organs to look into client protection issues, etc. ... Under these contexts, what can be the mechanism to incentivise institution to behave, and respect clients right, do fair pricing, etc. Getaneh (getanehg2002@yahoo.com)