Globally, governments make regulations of the finance sector to influence how they conduct their operations and ensure the safety of the industry. Financial stability is critical elements that impact on the economic, socio-political stability of any country. Monetary stability and a secure economic environment is a core factor of the Central Bank of Nigeria (CBN). Nigeria Deposit Insurance Corporation (NDIC) also holds the same mandate to protect its clients and contribute to a stable financial system. Unfortunately, some micro finance operators dismiss certain regulatory requirements as non-essential and minor to them. Undermining even the minor requirements in regulation leaves cracks on the walls that later create significant financial problems and instability in a nation.
Self-Regulation in microfinance requires market discipline where the market participants influence the financial institution behavior through the monitoring of its risk profile and financial position. Investors can also exercise market discipline from their charges on financial institutions when supplying them with funds of make withdrawals of their cash. Lack of substantial enforcement mechanisms and presence of groups with self-interests are making the critical element of self-regulation a challenge to achieve in the financial institutions.
Globally, there is much emphasis placed on the economic agents because of the far-reaching consequences of inconsistent finical actions that hurt the entire economy.
The biggest microfinance in Pakistan, Khushhali Bank Microfinance Bank (KMBL) celebrated 17 years of service in the sector. They have been years of tremendous achievements of rebuilding lives by offering finance solutions to small businesses and the creation of limitless job opportunities over the years. The bank has established a nationwide network of branches and takes pride in the continued service of more than 5 million relationships KMBL. The bank currently operates 147 branches and centers in Punjab with growing and active clients all over Pakistan. Khushhali Bank Microfinance Bank maintains its commitment to expand and diversify its services and expand its presence in Pakistan through the launch of new branches to serve clients in regions of its operation. During the anniversary. Ghalib Nishtar, President, Khushhali Microfinance Bank, said the growth of the bank is a great accomplishment being the first licensed bank in Pakistan. The employees in this bank are committed to customer service and describe the opportunity of working in the bank as a privilege.
The bank maintains its commitment to continue its support to the small business and generate more employment opportunities as a corporate social responsibility to ensure sustainable development to its clients. KMBL challenges new frontiers and the upcoming markets for the formal financial services to ensure they fulfill their roles in the society.
Mobile and online technology can and have significantly improved the efficiency in the operations of microfinance institutions lowering the interest rates from the digitization of finance. It was discussed during a session at the Small Business Association of Jamaica MSME Conference, held at the Hilton Rose Hall Resort and Spa, in St James, on the 20th of July. Paul Chin who is a general manager of Microfinance Services at the Development Bank of Jamaica (DBJ) explained to the delegates how administrative costs fuelled the soaring interest rates in the micro finance sector. Advancements and investments in IT services have improved the efficiency which cuts administrative costs and thus lowering the interest rates.
Lenders can quickly make loan disbursements through the use of smartphones in the absence of the borrower. Similarly, the clients can make their repayments and check their balances using their phones and other technologies increasing the speed of financial transactions and reducing the procedures taken to complete the process.
Gillian Hyde, general manager, JN Small Business Loans, and the co-presenter during this session said that their company uses technology to access information and manage the data of their clients while signing up new customers in their offices and other locations. Hyde argued that the system makes their services company customer friendly and flexible to their customers who can make request and inquiries at any time of the day. The speakers at the event emphasized on the increased use of technology in the sector.
New accounts in micro finance are continually opened daily with many clients hailing from developing countries and also individuals with low incomes. The borrowers from the microfinance institutions are mostly unaware of the dangers of borrowing the money and also the vulnerabilities to abuses from the institutions. In a survey by Smart Campaign, the consumer movement surveyed 4000 micro credit borrowers in four countries and documented their findings in a report. According to the report, Peru and Georgia protect their consumers whereas, in Pakistan and Benin, the protection was robust.
Most of the clients in the microcredit sector do not take their time to understand the partnership they are getting into with the microfinance institutions. It includes the terms and conditions of their loans. In Georgia, multiple clients have once issued loans in US dollars. Unfortunately, the Georgian currency depreciated dramatically, and higher loan repayments by the customers affected their financial capabilities. There have been cases of scammers claiming to be credible micro finance institutions and made away with individuals savings.
Few customers take their time to understand the sophistication in markets and how it impacts on their credit rating. Clients should endeavor to establish that rules and regulations placed forward by a microfinance institution are understood and fair while highlighting the essential information including the modes and terms of repayment. The organizations should respect their clients and maintain a healthy cooperation.
Professional women in Washington, D.C. area, teamed up and founded the Women’s Microfinance Initiative (WMI) which is a non-profit organization. The founding of the organization sprout from a discussion of an initiative that would allow local women to reach out to their counterparts in the developing nations. Robyn Nietert and Betsy Gordon, who resided in Carderock Springs neighborhood in Bethesda, brainstormed the idea in spring 2007. WMI has U.S.-based board members working with interns and other volunteers to use non-exploitative approaches for making a society financial stable. The organization offers loans to women who cannot access financial services. It issues affordable and collateral free loans to promote the economic participation of women with the hope of achieving prosperity for the poor in the rural areas of Uganda, Kenya, and Tanzania. WMI helps the society to grow small businesses and empower their lives through affordable basic needs education, healthcare and savings for the future and emergencies. Two years into the WMI village-level loan program and the women are then promoted to access financial services in banks and financial autonomy and join the formal economy of their country.
Women’s Microfinance Initiative disburse the loans through village-level organizations and collaborates with the organizations to develop social-outreach programs. Some of the organizations that have partnered with WMI include Andrew Stevenson Architect, Arlington Academy of Hope, The law firm of Baker and & McKenzie, Boeing among others committed to improving the financial status of marginalized people such as the women in the society.
Accion East is an organization that offers affordable micro finance solution to small businesses owners. The non-profit organization operates nationwide and has empowered small business owners to start their businesses and thrive through the challenging financial times. Apart from financial solutions, the organization provides financial education to the entrepreneurs who are mostly minorities inclusive of women who afterward strengthen the social status of their families and transform the same into the society through the creation of employment.
Accion was founded in 1991 as the domestic arm of Accion International, a global microfinance organization, to provide people with financial tools that would deliver them from poverty. From its operation in major U.S. metropolitan areas, the group has expanded its operations globally through dedication and continued innovation in microfinance. It is among the leading microfinance institutions in the United States that have received some awards for their services.
In 1998, the company received the presidential award for excellence in Microenterprise development for program innovation. Through the years the company has continuously been awarded for its achievements including the partner of the year honoree award in 2009 by Boston Business Journal Corporate Citizenship. Accion offers micro loans from $500 to $50,000 where its consultants engage with their clients directly when assessing their credit and business status. The company also provides loans for start-ups firms and credit development loans.
The microfinance sector in India remains united in the provision of their services through Microfinance Institutions Network (MFIN) association. The organization was found in 2009 and has remained functional in India where it is headquartered. The primary objective that inspired the creation of this partnership was to empower the economically underserved communities to achieve financial independence and nurture sustainable livelihoods. To ensure the achievement of this goal, Microfinance Institutions Network has continually worked closely with regulators and critical stakeholders to accomplish larger financial inclusion goal through the use of microfinance.
MFIN ensures its functionality through of self-regulation, Advocacy & Development and making impacts in research and analytics. Self-regulation has maintained transparency and good governance in the functioning of this association of the prominent microfinance institutions in India. The client remains to be the most valued stakeholder of the organization thus the association endeavors to protect and strengthen the customer financially.
MFIN receives recognition as a Primary Representative Body and Self-Regulatory Organization for the Non-Banking Finance Companies (NBFC). The microfinance institutions that encompass MFIN are regulated by the Reserve Bank of India. Currently, the association is comprised of 42 NBFC MFIs. The organizations constitute an approximately 89% of the microfinance businesses in India.