From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERas the insurance multinational AIG. Insurance markets are saturatedin many rich countries and growth prospects are limited, so insurancecompanies are looking for long-term growth in emerging markets.More than four out of every five microfinance customers arewomen, often female heads of households, or elderly women, andusually grouped together into groups of three to six, who collectivelyguarantee loans. With loans, the result has been astonishingly highrepayment rates – Grameen claims that over 98 per cent of its loans arerepaid – making microfinance both self-sustaining and profitable.Although typically loans are in the order of $100, some are muchsmaller: Grameen Bank’s interest-free loans for urban beggars average$9, and include credit lines with local shops that allow items to bebought for resale, allowing beggars to upgrade to become street-sellers.The growing commercial interest in such ‘bottom-of-the-pyramid’ 30markets has seen the entrance of a number of large commercial banks,often in partnership with existing microfinance organisations, andthis has greatly increased the numbers of poor women with access tocredit and savings. The first private multinational microfinance bankis Procredit, founded in 1996 and backed by investment from theInternational Finance Corporation (IFC), the commercial arm of theWorld Bank. 31 Procredit has set up banks in 22 countries and has takenover institutions in four others.By 2008 it had 17,000 employees,€4.1bn($6bn) in assets, and an investment grade rating that allows it to raisemoney in the German bond market.Long-established commercial banks, such as Citigroup andStandard Chartered, are also getting in on the act, as are domesticbanks such as Indonesia’s Bank Rakyat Indonesia (BRI). The muchemulatedBRI converted itself in the 1970s from a failing state bankinto a microfinance institution and became one of the most profitablebanks in the country, with 32 million depositors and three millionborrowers. Still 70 per cent state-owned, BRI shows what effectivestate action can achieve in reducing vulnerability.Since as many as three billion people worldwide still do not haveaccess to financial services, there is plenty of room for expansion. InLatin America, the entry of commercial banks appears to have freedup microfinance NGOs to go in search of even poorer people, andtheir average loan sizes have shrunk. 32 New trends in microfinance222