Cambodia’s Sathapana Bank evolved from a small institution to a full-fledged bank thanks to the dedicated services and leadership of their former CEO Bun Mony. He worked for 20 years and now he will resign to form a new microfinance institution.
Mony said it was a tough choice to make “I think the reason is that when we became a commercial bank with our Japanese shareholders, we had different ideas for which way the bank should be heading. Also, it can be difficult to work with Japanese partners because of cultural differences.”
Mony has also been part of the Cambodian Microfinance Association (CMA), after serving two terms as its head. He will join Vithey Microfinance, a microfinance institution that currently has two branches and may expand further in near future. Mony expects that foreign investors will try to invest in the business and help expand its reach to the poor. although Cambodia is one of the poorest countries in the whole of Southeast Asia, it has started to grow as a financial paradise for many Asian businesses. Currently, Cambodia has no limitation on foreign funds transfers or investments, while their interest rates are free floating, while now even the airports and casinos have ATM machines to dispense cash.
Kenya may need some radical steps in order to maintain the current pace of its economic growth, and help fight and eradicate poverty in many of its rural regions. Hence, even at a growth rate of around 6 percent, it needs to implement policies that are aimed at improving the lives of many through the use of microcredit initiatives.
In the recent Global Islamic Microfinance Forum in Nairobi that happened last week, there was strong emphasis on the need to use Islamic Microfinance to help fight poverty and bring loans and microcredit to the underprivileged and disadvantaged communities across the 28 African countries. However, Kenya was urged to use it as a model and try help implement in other countries. Although Islamic banking hasn’t yet found a firm grounding in the African continent, it has still shown great promise in Asian markets, where it holds primary dealer relationships. Insurance products such as Takaful and sovereign bonds such as skunks are primarily the most traded financial instruments under Islamic banking and finance.
CEO of Al Huda Centre for Islamic Banking and Economics, Muhammad Zubair Mughal said, “Islamic Microfinance is mainly concentrated in Middle-East and Asian countries but it needs to expand to Kenya and Sub-Saharan Africa to help minimize poverty and financial exclusion.”
Nevertheless, Kenya is also trying to regulate the current Islamic financial market and provide more leverage and access to banks to operate in this domain. Representative to the Treasury Principal Secretary, Kamau Thugge said, “The National Treasury is in the process of developing and operationalizing the institutional and the regulatory environment that will help in facilitating the growth of Shariah compliant finance in Kenya.”
With a GDP rate of 7 percent over the past few years, Tanzania can be considered a thriving country, but it still has many living under the line of poverty. With a population of 56 million, it has a growth rate of 3 percent as per data released by the World bank. This puts the country into the spotlight as there needs to be a constant creation of new jobs and opportunities for people to thrive and improve their quality of life. More than 12 million citizens still live under the line of poverty in many major rural areas of Tanzania.
Much of this improvement may depend on economic and social reforms, of which access to banking and microfinance facilities are vital, especially in a situation where Tanzania is the only country in the East Africa Community that lacks any form of microfinance laws. This absence of proper reforms and laws has been a serious hindrance in the development of microfinance industry, despite having over 13,818 microfinance institutions registered with Tanzania Microfinance Association (TAMFI) board in 2014. Joel Mwakitalu, chairman for Tanzania Microfinance Association (TAMFI) board in a recent second East Africa Microfinance summit expressed his optimizing in reaching over 20 million clients in the next five years. Tanzania can take inspiration from Burundi, Rwanda, and Kenya, who are trying to enact laws for the Microfinance industry to prosper.
Responding to the remarks, Ms. Amina Hamisi, the deputy permanent secretary in the ministry of Finance and Planning said that the National Microfinance Policy has already been approved by the cabinet of Tanzania and the National Assembly may soon see a coherent and work Microfinance Bill ready. It will help adopt low-cost, innovative and easy to get loans for the poor.
There’s no denying that African nations are home to many efficient money management and microlending initiatives. Although underprivileged, there is no shortage of innovation when it comes to solving day to day issues of millions of citizens living there.
Solar energy has been one such initiative in Africa, and now it is getting more affordable and accessible due to easier pay-as-you-go power plans. Like M-KOPA Solar and PEG Ghana, Solar Freedom Africa is helping link Uganda to the solar power grid, as over 60 million people live without electricity. It has sold over 35,000 solar units in 32 districts and four regions of Uganda. Solar Freedom Africa offers solar power products, which can then be used and paid via a simple PAYG method, accessible via both off network locations and mobile money platforms.
Solar Freedom Africa’s Executive director, Ronald Isabirye said that local school teacher and agents are trying to make demands known, so that PAYG can be made more efficient and easy for everyone, connecting those who do not have electricity to the power grids. “This problem has mainly been attributed to the fact that most developing economies in Africa are still constrained by finances and corruption to extend the national electricity grid especially to rural areas where poverty thrives. Alternative energy sources led by solar energy have also had major challenges which include durability, affordability, and limited flexible installment payment options, meaning that little has been achieved in solving the problem and thus made it persist.”
Apart from Solar Freedom Africa, Azuri Technologies, Mobisol, M-KOPA Solar, PEG Ghan and SolarNow have collectively deployed more than 400,000 solar systems across the continent. It has helped students do their homework, understand how the technology in rural areas can better help align broader economic segments, helps connect those citizens who live in remote areas and enhances customer education over the ways in which they can better utilize electricity.
Yangon happens to be one of the most poorest of areas in Myanmar, and not everyone has access to financial services and banks. They rely on moneylenders for their daily needs and just because their income level is low, they take up more loans to pay for the existing ones, and even pay a high–interest rate that makes savings impossible, making loan payoff a dream. Citizens often use their personal belongings such as gold as collateral for loans or even sell them to pay off loans.
Most of these debts are not for education or business development, but for basic necessities such as paying for healthcare, or food supplies. Over 50 percent of the population, completely relies on monthly loans to look after their basic needs, which has made the Yangon area one of the most indebted places across Asia. A country economist at the International Growth Centre Myanmar, Tim Dobermann said that average interests can be as high as 20 percent. “In Yangon, you have an extraordinarily high [number] of people in the hands of moneylenders. Often it’s overlooked that this is to cover basic needs for every day.”.
A Yangon–based startup is trying to change this. ZigWay is determined to provide small zero interest loans to the poor. These loans can vary from a single day to a week, and citizens can take up to K50,000 in loans. Both co-founded by Miranda Phua and Laurent Savaete, hope to ease the issues of debt management in the area, by helping offer small loans that can then be monitored through the use of smartphones. As per Ms. Miranda, “Money lenders are very flexible. Although MFIs offer lower interest rates, they can’t match that flexibility. That’s where we saw the gap. We met a 23-year-old mother of two who borrowed money to buy a motorcycle so that her husband could become a motor-taxi driver, but the bike was stolen.”
An innovative way to manage microcredit is not just the need of Yangon, but the whole of Myanmar, where people do not have stable incomes. ZigWay is now trying to target the women aged 18-40, who may have any form of a smartphone to collaborate if they wish to take a loan. Moreover, ZigWay also wishes to help other moneylenders to partner with them, and provide small loans, which may have lower interest rates as smartphones may lower the transaction costs involved.
China has had some real economic progress over the past decade, and its high–priced property markets show that. In China, up to 35 percent of home prices are to be paid as down payment if a loan is sought to pay for the mortgage. As prices are high, many new homebuyers have turned to peer-to-peer or P2P lending solutions over the years to manage their needs. P2P lending helps provide a zero interest loan that can cover half of the homebuyers down payment.
As per a homebuyer Fu Songtao who bought a new house in Shanghai earlier this year, “Everybody I know took out these loans.” He borrowed around 380,000 yuan ($58,000) a year ago, with interest payments to lenders subsidized by the property agent, for his 3 million yuan apartment. The value of his apartment has risen to over 3.3 million yuan now. it makes P2P lending in China a hit, but it comes with its own flaws too. It has made the shadow banking system in China even stronger, and with debt levels and nonperforming loans increasing, it casts a dark shadow over how microcredit lending facilities work across China. It is to many viewed as what subprime crisis was to the United States.
In march, China Banking Regulation Commission brought in new laws to stop this loaned home buying experience. “Banks would be required to scrutinize mortgage applications and reject those with deposits funded by loans, the people said. First-home buyers in most Chinese cities are required to put down a minimum deposit equivalent to 20 percent of the value of their home.” Although P2P loans were down for some time, the shadow banking is again picking up steam and new down payments are getting packaged as collateralized debt obligations were in the United States. Yi Xianrong, a professor of finance at Qingdao University, and a researcher at China Academy of Social Sciences said, “There are a lot of loopholes in China’s credit system. Even though there are rules, people will break them or find ways around them.”
These activities will make it hard for small borrowers who use P2P borrowing to meet their ends meet. Moreover, it is also making the financial industry in China even more regulated, which can cause hindrance to financial accessibility for the rural community, who still rely on small loans to function and fund their businesses. Appropriate oversight is required in China to ensure that the process remains clear to all users and not just homebuyers.
After the Central Bank of Kenya capped the interest rates for microfinance loans to 4 percent above central bank rates, Kenya may see an upward trend in the microfinance lending business. The trend can be seen as a positive sign as Maisha Microfinance bank will become the 13th microfinance bank to get such a licence to operate in Kenya.
The bank is a partnership between Jared Kangwana, an influential Moi-era businessman, and his team of business associates. His primary affiliation is with the Monarch Group, which owns Monarch Insurance and various other real estate properties. The bank will aim to provide loans and support to small traders. It will also serve as a bridge to close the financial gap in the country. CEO Ireneus Gichana said, “In 2014 25.4 per cent of Kenyans were excluded from financial access, this has since reduced to 17.4 per cent to date. But people are still stashing their money in secret places including mattresses and so there is a huge gap to fill.”
Maisha will have an initial capital of Sh90 million, while it will give loans for as low as Sh10,000 to Sh350,000. The processing time as per Gichana will be two days. Maisha now has over 500 customers with 13 bank staff working. Maisha’s team is also experienced. Robert Kariuki, their finance and administration manager has previous experience of working in Equity as a former finance manager at Sumac Microfinance Bank, while Isaac Ogutu, the bank’s audit and risk manager previously worked as an internal auditor at Faulu Microfinance Bank.