Mesofinance Media - News , European Microfinance Week

Financial Services Providers MUST Act Against the Financial Abuse of Women

Fri, 15 Nov 2024 08:43:16 -0500

Institutions that provide financial services are in a unique position to help women who have had their domestic partners or others manipulate their access to money. Thus financial services providers (FSPs) have a responsibility to take concrete actions to prevent instances of financial abuse - and to help victims after abuse has begun.However, the moral argument is not the only one: Minimizing financial abuse can benefit the FSP by increasing repayment rates and client loyalty. Meanwhile, it's important to realize that women are often more open to reporting financial abuse to their FSP than to the police.

An easy way for an institution to start fighting financial abuse is to raise awareness of it among staff. Women don’t always realize right away that they are being abused, and your institution likely has staff as well as customers who are being abused. Partnering with an NGO that specializes in abuse prevention can be very helpful, such as resulted in this series of awareness-raising cat videos (in French with English subtitles).

Other practices FSPs may wish to adopt include:
- Not letting customers cancel their partners' cards,
- Forgiving bad credit history caused by abuse,
- Providing customers a confidential way to report abuse and
- Targeting financial education to households rather than individuals.

This content was delivered by presenters at European Microfinance Week 2024, which is hosted by the European Microfinance Platform. The e-MFP has about 120 members, each of which supports the provision of financial services in lower income countries.

How Mutual Health Insurance Is Protecting Families in Burkina Faso, India & Togo

Fri, 15 Nov 2024 06:14:00 -0500

The microfinance institution Yikri has partnered with its affiliated insurer Tond Laafi to provide health insurance to its borrowers and their families in Burkina Faso. When women borrow from Yikri, the insurance policy is included with the cost of loan, and the borrower becomes an owner of the insurance scheme. Tond Laafi maintains a field officer in each branch of Yikri, and this person travels to meetings of Yikri’s borrowers to educate them on health issues. Meanwhile, Yikri field officers collect insurance premiums at the same time as they collect loan repayments. Originally, the premium payment was the same for all borrowers, but now it is scaled to the size of the loan, with the fee waived for those borrowing the smallest amounts. The monthly fee starts below EUR 1 and ranges up to several euros. The average monthly income of these customers is about EUR 60.

The consulting firm Atia supports Yikri and Tond Laafi in offering the insurance, and it also partners with the Togolese microfinance institution Assilassimé. In selling a similar product, Assilassimé has found that people often are wary of paying for insurance when they are not sick - and given that they earn only about EUR 100 per month. However, potential participants are often convinced when they learn more about the insurance and hear from a current member of the mutual. People are attracted to the idea that their premiums pay to take care of their ill neighbors when they themselves are not in need of health care. Another motivation for women to buy insurance is that most women in a recent survey reported needing permission from their spouse to pay for their own health care services - permission that is not always granted.

Within these mutuals in Burkina Faso and Togo, 40,000 members pay an average of EUR 25 per year for health insurance, with 80% to 90% of those premiums paid out to health care providers. When mutual members access care, they pay 40% of the cost, and the third-party insurer pays the remainder. It is important to be sure that this third-party payment is prompt because delays have caused health care providers to decline the insurance in the past. Another key to success is engaging medical staff is reviewing claims. This saves money by reducing fraud and maximizing the use of generic medication rather than specialty drugs. Also to support financial sustainability, it is important to maximize customer retention. One way to do this is by establishing a timely and effective system for handling complaints.

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In India, Opportunity International has been working to improve the health of poor people in urban areas through a three-year pilot program. The NGO launched an insurance product at an annual cost of USD 8 per household. In response to client demand, it then added a health savings product with a fixed periodic deposit amount. Participants are also keen on access to emergency health care loans because the rate to take such a loan from a payday lender is 20% to 30% per month.

In the first year: (1) the insurance mutual has enrolled 800 people, of whom a quarter are people with disabilities; (2) 54 people have opened health savings accounts; and (3) 300 people - 72% of them women - have taken out medical loans. One challenge is that 90% of those applying for medical loans have been rejected, largely due to over-indebtedness. Applicants have an average of over four outstanding loans, and some have over 20. For recruiting, the best strategies has been pop-up stands staffed by medical personnel and soliciting people who have experienced a recent, expensive medical event.

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Atia recently conducted a randomized controlled trial on its mutual insurance model, whereby half of 2,000 subjects were enrolled in mutual health insurance. The results included that mutual members sought care for medical issues much more quickly and were more likely to buy all - not just some - of the medications they were prescribed. Another finding is that usage of the service was proportionally lower among men relative to women. This can be attributed to three main reasons: (1) when receiving care, many did not realize or remember that they were eligible for insurance coverage; (2) men saw themselves as too strong too need medical help; and (3) men did not want to appear reliant on an insurance benefit by their wives.

Additional data collection addressed the question of making insurance optional rather than bundling it with loans. When Atia offered insurance as an option, payouts were 50% to 100% higher than when it was required. This is due to those who actively opt in to insurance being more likely to need care, use care and remember that they have insurance when visiting the point of care.

This content was delivered by presenters representing the above organizations at European Microfinance Week 2024, which is hosted by the European Microfinance Platform. The e-MFP has about 120 members, each of which supports the provision of financial services in lower income countries.

Delivering Financial Services to Youth as They Take Over the Family Business - or Launch Their Own

Thu, 14 Nov 2024 09:15:00 -0500

For many years, ADA has supported financial services providers (FSPs) around the world in expanding their services to youth. Through market research and testing, the NGO has found various financial and non-financial services that help advance the prospects of younger clients. Examples include combined savings and loan accounts, accounting tools with related coaching, and extended revenue-based funding programs (whereby the borrower repays the loan with a set percentage of profits over three years, versus the standard one year).

While many youth are starting new enterprises, an often overlooked segment of potential customers is young people taking over their family business. This segment is especially relevant in Eastern Europe and Central Asia, where many entrepreneurs launched businesses as regional economies to liberalize in the 1990s. Today, many of those entrepreneurs are moving into retirement. Banks, however, often are wary of the risks involved with the transfer of the business to the next generation. The new owner generally has less experience and may not have training in accounting and other business skills.

To address issues such as these, the European Bank for Reconstruction and Development (EBRD) launched a program called Youth in Business in 2022. This program includes funding for three to five years, credit enhancements, and technical assistance for both lenders and borrowers. The credit enhancement includes both first-loss risk and results-based bonuses for the FSP. Under the program thus far, EBRD has disbursed EUR 175 million to 23 FSPs in 13 countries, training 1,600 people and disbursing loans to 6,300 young entrepreneurs.

The ProCredit Group is a new partner of Youth in Business, piloting the effort in Macedonia with an eye toward future expansion to other countries ProCredit serves. The institution is offering youth a product with account fees and collateral requirements suspended, plus an incentive: six months of access to the music streaming service Spotify. Other non-financial services include access to co-working spaces, networking events, university linkages, and training on topics such as accounting and artificial intelligence. ProCredit also hosted a hackathon that connected 120 participants with 20 mentors.

Alter Modus, an FSP in Macedonia, has been partnering with Youth in Business for two years. One challenge has been digitalizing more of the institution’s services to meet customer demand. Meanwhile, the government does not allow certain options, such as electronic KYC or the e-signature of loan documents.

There are many reasons an FSP in a lower income country may choose to boost its youth services. One is to counter the “brain drain” of young people moving abroad to seek economic opportunities. Another is that younger people may be easier - and hence more profitable - to serve because they are digital-first customers. They also may be easier to attract, as they are less likely to have an ongoing relationship with another financial services provider.

The estimated funding gap for youth-led businesses is EUR 100 billion in Central Asia alone. Just 10 percent of this market demand has been satisfied. And the demand is even greater when considering personal finance needs such as for housing and education.

Despite the potential challenges of focusing on serving youth, it is a growing market that can’t be ignored. In fact, as Axel de Ville of ADA has said, “We must do it. It’s a must, and it’s possible!”

This content was delivered by presenters representing the above organizations at European Microfinance Week 2024, which is hosted by the European Microfinance Platform. The e-MFP has about 120 members, each of which supports the provision of financial services in lower income countries.

FSPs in BiH, Morocco, the Philippines Innovate in Lending to Reduce Impacts on the Environment, Human Health

Wed, 13 Nov 2024 09:40:11 -0500

At today’s meeting of the Green Inclusive & Climate Smart Finance Action Group at European Microfinance Week 2024, several organizations working to expand financial inclusion in lower income countries offered examples of their work to harness finance to improve the health of families and reduce climate change.

Partner, a financial services provider (FSP) in Bosnia and Herzegovina, is addressing the fact that families in the country use more than triple the energy to heat their homes than the European average. This is due to poor insulation in many homes, as well as the prevalence of a preference for keeping interior temperatures high. The resulting potential for energy efficiency savings is estimated at EUR 2.5 billion. To date, Partner has disbursed energy efficiency loans - largely for insulation as well as replacing windows and doors - to 31,000 clients. These loans, which comprise about one third of the institution’s portfolio, average about EUR 3,000 each, with a grant of 10% to 20% offered as an incentive to the client to participate. Clients considering applying for a green loan from Partner may access its dedicated green-lending website to learn about efficient technologies, browse equipment providers and calculate potential energy savings.

Attadamoune, an FSP in Morocco, has identified a recurring issue whereby family farmers store fertilizers too close to their homes, resulting in harmful exposure of family members, particularly children. This is part of the motivation to offer farmers funding to convert to using organic inputs. However, before Attadamoune issues a loan, it educates potential clients about why and how to make the transition to green techniques. During a recent pilot phase, the institution disbursed 156 green loans totaling MAD 4 million (USD 400,000). At this time, it has a limit of 10% on the portion of its portfolio dedicated to green finance.

The Microfinance Council of the Philippines is addressing climate change - which is causing an increasing number of deadly typhoons in the country - with a pilot involving three of its member FSPs. The effort has engaged 1,400 clients in training, and the partner lenders have rolled out products funding 22 farmers to adopt green agricultural practices and 1,000 urban borrowers to implement energy efficiency measures and green housing design elements such as generating solar energy. Because the situation of every FSP is different, it is critical to: (1) begin with a baseline study to design an appropriate product; (2) partner with regulators, investors and other stakeholders; and (3) support borrowers with training and education. This training, for example, may include how scientific research ties to practical considerations, such as why climate change necessitates changing practices that farmers may have been using throughout their lifetimes.

More examples such as these are available on The Green Map. This map and other tools are available from the website of the Green Inclusive & Climate Smart Finance Action Group, one of the five Action Groups of the European Microfinance Platform. The e-MFP has about 120 members, each of which supports the provision of financial services in lower income countries. Today’s meeting of the Action Group took place on the first day of European Microfinance Week 2024.