Microfinance

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Cooperative bank in Cambodia

As microfinance Institutions ( english microfinance institutions ) organizations are referred to the financial basic services such as loans , savings accounts or insurance also available to customers that are not served by traditional banks for various reasons. Microfinance is therefore an important instrument in development policy .

Methods and services of microfinance

Important services from microfinance institutions are

Microfinance and microcredit

The term microfinance covers a wider field than the term microcredit, which is limited to the credit side, including savings, insurance and money transfer services that would otherwise be closed to the much-cited “poorest of the poor”. This segment of the population has recently been increasingly addressed in management literature and practice as part of the so-called Base of the Pyramid concept, which discusses business models for successfully integrating previously largely neglected segments of the population into corporate value chains and in which microfinance concepts often play a central role. The value chain of the microfinance industry essentially comprises four actors: investors, microfinance investment vehicles, microfinance institutions (MFIs) and micro-entrepreneurs.

Often the so-called micro-entrepreneurs only have their manpower and a lot of ideas, but too little money and entrepreneurial know-how to implement these ideas. Because these people usually cannot offer any security for their assets, they do not receive any loans from conventional banks. Microfinance institutions are now trying to fill this gap by granting loans that they secure in other ways. A common approach is the formation of cooperatives. The borrowers (they are often women) form a cooperative in which the women support each other with production and loan repayment. The strong social structure in many developing countries means that each of the women wants to repay the loan because otherwise they would “lose face” in the village. In addition, the borrowers are advised and supported by the micro-credit institutions. Lending rates are high by Western standards, but significantly lower than would be the case with those money dealers (usurers) where women could alternatively stock up on loans. With these safeguards, many micro-credit institutions have managed to achieve high repayment rates of up to 98%, more than in conventional banks.

In addition to loans, microfinance service providers also offer other financial services, such as insurance or savings opportunities. Since conventional banks are not accessible, most of the wealth of people in developing countries is not in liquid form in a bank and can therefore neither bear interest nor be drawn on as a loan and invested productively. The fortune, for example, hangs around the grandmother's neck in the form of a gold chain. Microfinance offers these people an opportunity to save their money, which in turn can be used by other borrowers to take out loans. Since agriculture is an important branch of the economy in many developing countries, insurance, for example against price fluctuations during the harvest, is also interesting. Such products are only just emerging. As a further financial service in certain developing countries, cell phone owners with a corresponding service contract from a cell phone company can top up money, store it more securely, make transfers to other cell phone owners and withdraw cash themselves without the need for bank details. At the Bim organization in Peru , the maximum amount is set at around 600 euros. The transaction fees incurred are low (less than 30 euro cents). It is a new national system that is operated across networks by three mobile communications companies.

What is interesting about the microfinance approach is that development should be achieved with market-based funds. It assumes that both parties benefit from trading relationships when these trading relationships are fair. Microfinance is now trying to meet these conditions in order to subsequently achieve a win-win situation by awarding financial services. Studies show that these are interesting investments from an investor's point of view.

The microfinance approach can be distinguished from a similar approach, which also aims to make the poorest of the poor creditworthy and thus potential entrepreneurs. This approach was especially popularized by Hernando de Soto (economist) with his book "The Mystery of Capital" . The microfinance approach tries to use social relationships as collateral that motivates borrowers to repay on time. De Soto, on the other hand, recommends providing the “poorest of the poor” with loan collateral based on a similarly market-oriented stance that their existing informal property rights to land (which he calls “dead capital”) are formalized and under private law Order to transform justiziable property rights . This gives you the opportunity to participate in the formalized credit market, for example through mortgage loans, and to take up self-employment. Similar theories of a connection between formalized property rights as a means of securing credit and social development are also represented by Tom Bethell as well as by Gunnar Heinsohn and Otto Steiger .

Differentiation from other financial service providers

People who do not have a steady income or no credit collateral are often excluded from the formal financial market , and not only in developing countries . In many places, the only alternative to the classic banking system are private moneylenders with often high interest rates . But these only offer loans. The possibility of insuring oneself against illness or of saving money on one's own did not exist until the advent of microfinance systems. Even today, many microfinance institutions focus on the microcredit business area.

The target group is out of the question as customers for traditional commercial banks for various reasons: They usually do not have a regular income of the appropriate amount, which is often required for opening an account (savings book), no collateral for loans, and as a rule in developing countries neither the identification documents required to open an account (passport, identity card). Microfinance institutions work differently here. The de Soto mentioned above, on the other hand, recommends not only transforming informal ownership into formalized, justiciable property rights, but also including the poorest in a functioning passport system so that they also have access to the regular credit market. There are also providers who grant loans despite negative credit bureaus. Applications are individually checked for creditworthiness.

The extended family acts as another functioning provider of “financial services” in societies with close social cohesion . Here, the social network serves as security (which microfinance providers often make use of). B. but also social dependencies created or cemented through lending .

Microfinance and development policy

Microfinance is often discussed from the perspective of poverty reduction and equality for women. In principle, microfinance programs or institutions address the economically active part of the population. These are often (but not always) women and economically particularly active people who want to improve their businesses and thus their standard of living through access to financial services . In principle, a skeptical approach is appropriate. Many outdated or purely quantitative studies are based on an isolated view of microfinance initiatives and ignore competition from informal lenders. Microfinance initiatives can also have completely unintended consequences. Badly managed, they offer entrepreneurs the opportunity to become "middlemen" by lending formal microcredit obtained through proven creditworthiness to poorer borrowers. As a result of this informal intermediation, the poorest of the poor micro-entrepreneurs benefit less than the comparatively fewer poor.

Pioneer Microfinance Institutions

Well-known microfinance institutions that have been on the market for a very long time are the Grameen Bank in Bangladesh , Banco Solidario ( BancoSol , active since 1986, banking license since 1992) in Bolivia and Bank Rakyat Indonesia (BRI) in Indonesia.

Well-known development cooperation organizations and financial service providers active in the field of microfinance (selection)

Microfinance in the financial industry

In addition to the so-called NGOs, major banks and the financial industry are now discovering the return potential of microfinance. These include Deutsche Bank, ABN-AMRO-Bank, Credit Suisse and Citibank. Microfinance funds are offered to customers . The Deutsche Bank offered z. B. 2008 investors funds with loans for the poor with returns of up to 9.5%. According to the FAZ, the combination of “social commitment”, high returns and “astonishingly low failure rates” plays a key role in these interventions. For example, “the return ... mostly exceeds that of money market funds”. (FAZ, January 11, 2008)

After Compartamos, a Mexican company that started out as a not-for-profit organization, achieved $ 458 million in an IPO in 2007, this market was discovered by investors worldwide as a profitable business area. Since no one has drawn the line where development aid ends and exploitation begins, there is a risk that microfinance will fail because of its own economic success.

According to the World Bank , microfinance institutions lend at least 60 billion USD annually (as of 2015), which reach 135 million people.

Security systems

  • Self-help groups as debt collectors

As a result of the NGO practice, in which a self-help group jointly cares for, supports and advises the economic emergency situation, commercial credit institutions developed, these self-help groups are changing against the background of increasing commercialization by banking groups as a system of compulsion for their mini-loan customers to collect the debts use. If the payment fails, the self-help group is used as the debtor. From a self-organization based on solidarity, an informal coercive system developed that does not shy away from terror and violence against borrowers. Reports from India describe dramatic suicides here. The result is, among other things, the "surprisingly low failure rates" determined by the FAZ.

Historical and current microfinance systems in and from the First World

In countries in Europe and North America, too, there are and were people who are largely excluded from banking services or who have been for a long time. In Great Britain, the traditional commercial banks have largely withdrawn from unprofitable areas with high unemployment. Savings and loans societies similar to the German cooperative banks are often the only ones who provide this clientele with savings accounts for even the smallest amounts, loans with legally regulated interest rates and bank cards.

In Germany, the federal government is currently expanding the microfinance offering. To this end, it set up the Microcredit Fund Germany at the beginning of 2010 , on the basis of which the GLS Bank grants loans to small businesses and start-ups, in cooperation with the German Microfinance Institute . The Ethikbank offers an online current account based on credit for people in debt under certain conditions.

Historically, the Raiffeisen and cooperative banks as well as the building societies in German-speaking countries were crucial for the access of the disadvantaged and poor to affordable loans and financial instruments. The so-called savings associations , which emerged in the middle of the 19th century and also flourished to a certain extent after the currency reform in West Germany, represented a kind of preliminary organization . Some of these savings associations, some of which were also organized through the companies, associations or (for example, in the case of railways and post offices) through the associated regional administration of the employer, were also forerunners of relevant banking institutes in the employee sector. Similar developments can already be found in the 19th century among craftsmen, civil servants and farmers. The occasionally ridiculed savings associations are currently on the rise again in West and Central Africa, also in parts of Southeast Asia. For microfinance institutions in general, mobilizing savings is still the main source of finance, even for very poor people. Emerging countries such as China are also interested in establishing building societies. In the summer of 2017, in a project with the  Central Bank of the Russian Federation, a and Yandex logo was published (a green circle with a  tick ), which marks websites with registered microfinance organizations.

literature

  • Manfred Stüttgen: Microloans. Sustainable investment in the field of tension between marketing and morals, in: Manfred Stüttgen (ed.) Ethics of Banking and Finance, 2nd edition, 2019, Zurich / Baden Baden: Nomos, ISBN 978-3-8487-3846-5 , p. 117 -139.
  • Michael P. Sommer: A slightly different money cycle - the added value of microfinance, church and society, issue 356, January 2009, publisher: Kath.Sozialwiss.Zentralstelle Mönchengladbach, ISBN 978-3-7616-2119-6 .
  • Djordje Popovic: Microfinance. Basics, instruments, perspectives ISBN 3-86550-690-9 .
  • Manfred Nitsch: Glass Palaces and Microfinance: Contributions to Development Financing: 12 (Development And Financing) ISBN 3-631-38563-3 .
  • Peter Fanconi, Patrick Scheurle: Small Money - Big Impact. Microfinance: Living Without Poverty. NZZ Libro, Zurich 2015, ISBN 978-3-03810-131-4
  • Naoko Felder-Kuzu: Making Sense Microfinance and Microfinance Investments ISBN 3-938017-29-5 .
  • Naoko Felder-Kuzu: Small effort, big effect ISBN 978-3-907625-40-8 .
  • Ingrid Matthäus-Meyer, JD von Pischke: Microfinance Investment Funds: Leveraging Private Capital for Economic Growth and Poverty Reduction ISBN 3-540-72423-0
  • Joanna Ledgerwood: Microfinance Handbook: An Institutional and Financial Perspective. 2001, ISBN 0-8213-4306-8 .
  • Juliet Hunt, Nalini Kasynathan: Pathways of empowerment? Reflections on microfinance and transformation in gender relations in South Asia. In: Caroline Sweetman (Ed.): Gender, Development and Money. Oxfam 2001, pp. 42-52.
  • Beatriz Armendáriz de Aghion / Jonathan Morduch: The Economics of Microfinance. MIT Press, 2004.
  • Jonathan Morduch: The Microfinance Promise. Journal of Economic Literature, Vol. 37, 1999, pp. 1569-1614
  • Annette Krauss, Birgit Joußen, Koenraad Verhagen, Financial System Development - Savings and Credit Institutions for the Poor. Report of the first research phase, ed. by the Scientific Working Group for Universal Church Tasks of the German Bishops' Conference, Münster 2001

Web links

swell

  1. ↑ Manfred Stüttgen microcredits. Sustainable investment in the field of tension between marketing and morals , in: Manfred Stüttgen (ed.) Ethics of Banking and Finance, 2nd edition, Zurich / Baden Baden: Nomos, 121
  2. ↑ Microfinance Wiki methodology: group model
  3. ↑ Microfinance Wiki Methodology: Interest
  4. ↑ MicrofinanceWiki micro- saving
  5. ^ First Mobile Money platform in Peru. (Engl.) ( Memento of 16 May 2016 Internet Archive ) February 2016 responsability investments 23
  6. ↑ Bim website in Peru (Spanish)
  7. ↑ Michael Schäfer: Investing in the low interest rate environment. Microfinance investment miracle cure? Neue Zürcher Zeitung , December 12, 2016
  8. ^ Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. London: Bantam 2000; s. a. Hernando de Soto, Enrique Díaz Ortega: Dead Capital, Fluid Capital and Money Archived copy ( memento of June 26, 2007 in the Internet Archive ). Paper presented at the International Symposium on the Economic Role of Property, University of Bremen, 28-30 Nov. 2003 Archived copy ( Memento from June 26, 2007 in the Internet Archive )
  9. ^ Hans-Heinrich Bass , Markus Wauschkuhn: Hernando de Soto - the legalization of the factual . ( Memento of July 30, 2013 in the Internet Archive ) In: D + C Development and Cooperation , 2000, No. 1, pp. 15–18.
  10. ↑ Tom Bethell: The Noblest Triumph: Property and Prosperity Through the Ages. New York: St. Griffin 1998, ISBN 0-312-22337-4 ; s. a. Tom Bethell: Why Isn't the Whole World Developed? On Property in the Third World Archived copy ( Memento dated June 26, 2007 in the Internet Archive ). Paper presented at the International Symposium on the Economic Role of Property, University of Bremen, 28-30 Nov. 2003 Archived copy ( Memento from June 26, 2007 in the Internet Archive )
  11. ^ Gunnar Heinsohn, Otto Steiger: Property, Interest and Money. Reinbek: Rowohlt 1996; this: property economics. Marburg: Metropolis 2006; Otto Steiger: Securing Core Principles for Protected Transactions in IDA Countries: Theoretical Foundation Archived copy ( Memento from June 26, 2007 in the Internet Archive ). Paper presented at the International Symposium on the Economic Role of Property, University of Bremen, November 28-30, 2003 Archived copy ( Memento from June 26, 2007 in the Internet Archive ); Otto Steiger: Property Rights and Economic Development: Two Views [1] , not yet published.
  12. ^ Credit Wiki. Retrieved August 6, 2020 .
  13. ^ "Revolution in Microfinance" ( Memento from November 7, 2006 in the Internet Archive ) (PDF file; 96 kB), GTZ
  14. ↑ Frithjof Arp: The 34 billion dollar question: Is microfinance the answer to poverty? . In: World Economic Forum (Ed.): Global Agenda . January 12, 2018.
  15. ↑ Frithjof Arp, Alvin Ardisa, Alviani Ardisa: Microfinance for poverty alleviation: Do transnational initiatives overlook fundamental questions of competition and intermediation? . In: United Nations Conference on Trade and Development (Ed.): Transnational Corporations . 24, No. 3, 2017, pp. 103-117. UNCTAD / DIAE / IA / 2017D4A8. doi : 10.18356 / 10695889-en .
  16. ↑ "Woman's World Banking" ( Memento of 7 October 2006 at the Internet Archive )
  17. ↑ a b Gerhard Klas: Help for the poor or profits for the rich? In: Lunapark 21, 2009. Page 54 f. Archived copy ( memento from June 26, 2011 in the Internet Archive ) (PDF file; 150 kB)
  18. ^ Neil MacFarquhar Big Banks Draw Big Profits From Microloans to Poor . The New York Times , April 13, 2010.
  19. ↑ Fortune , September 1, 2015, p. 24
  20. ↑ FAZ of January 11, 2008
  21. ↑ MikroKonto der Ethikbank ( Memento from October 22, 2007 in the Internet Archive )
  22. ^ Alfred Böttcher: The German employee banks . In: Jahrbuch für Nationalökonomie und Statistik / Journal of Economics and Statistics . tape 69 (124) , no. 3/4 , January 1, 1926, p. 339-350 , JSTOR : 23823289 .
  23. ^ A b Hans Dieter Seibel: Microfinance instead of microcredit. a regulatory concept to promote self-help structures In: Hunger: causes, consequences, remedies; an interdisciplinary controversy (2012), p. 339-359, quoted from the linked excerpt from hf.uni-koeln.de
  24. ^ As a China pioneer, Bausparkasse took seven years: The Long March from Schwäbisch Hall. In: www.handelsblatt.com. Retrieved January 22, 2016 .
  25. ↑ Bank of Russia to mark microfinance organizations on the Internet | Банк России. Retrieved August 18, 2017 .