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Small Money Big Impact. Fighting Poverty with Microfinance

  • ID: 3816686
  • Book
  • 272 Pages
  • John Wiley and Sons Ltd
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"This book is a standard reference. It is an invaluable contribution towards the further development of current strategies in the fight against global poverty."
Prof. Klaus Schwab, Founder and Executive Chairman, World Economic Forum (WEF)

PRAISE FOR SMALL MONEY

"Impact investing is a megatrend! Fanconi and Scheurle provide an insightful and very well–researched look into this new Asset Class. A must–read for any private or institutional investor."
Boris Collardi, CEO, Julius Baer Group Ltd.

"Small Money Big Impact is a great read and door opener to this meaningful topic."
Deval L. Patrick, MD BainCapital; former Governor of Massachusetts, USA

"A thoughtful reflection bringing timely input to the new field of impact investing, with the great benefit of being based on rich experience in microfinance."
Prof. Michael Chu, Harvard Business School

"A meaningful and timely contribution for any investor."
Tadashi Maeda, CEO, Japan Bank for International Cooperation (JBIC)

"Poverty is man–made and it can be finally overcome by providing adequate skills and professional, efficient finance to individuals."
Monika Beck, Director Compliance, Kreditanstalt für Wiederaufbau (KfW)

"Microfinance is like a fabric weaving its threads across the world. Business leaders need to be smart enough to realise how important impact investing has become."
Omar Qandeel, Member of the Board, BlueOrchard Finance

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Foreword ix

Preface xi

Acknowledgments xiii

About the Authors xv

CHAPTER 1 Introduction 1

1.1 Fighting Poverty 2

1.2 Investing in Financial Infrastructure 7

1.3 Content Overview 8

Notes 9

CHAPTER 2 Microfinance the Concept 11

2.1 History 12

2.2 Definition and Goals 15

2.3 Double Bottom Line 18

2.4 Financial Inclusion 21

2.5 Market Participants 24

2.6 Impact Investing 25

2.7 Preliminary Conclusions 29

Notes 31

CHAPTER 3 The Microfinance Value Chain 33

3.1 The Protagonists and Their Tasks 34

3.2 Regulatory Environment 36

3.3 Development Finance Institutions 37

3.4 Market Overview 39

3.5 Geneva: Birthplace of Modern Microfinance 42

3.6 Preliminary Conclusions 46

Notes 47

CHAPTER 4 Micro Entrepreneurs 49

4.1 Definition 50

4.2 Needs and Requirements 52

4.3 Micro Entrepreneurs 59

4.4 Preliminary Conclusions 67

Notes 68

CHAPTER 5 Microfinance Institutions 71

5.1 Definition and Goals 72

5.2 Types of MFIs 73

5.3 MFI Funding 76

5.4 Services 85

5.5 Regulation 88

5.6 Preliminary Conclusions 94

Notes 96

CHAPTER 6 Lending Methodologies 99

6.1 Traditional Credit Theory and Microfinance 100

6.2 Lending Methodologies 101

6.3 Socio –Economic Factors 104

6.4 Late Payments and Over –Indebtedness of Clients 108

6.5 Default Prevention and Restructuring 110

6.6 Occupation: Loan Officer 113

6.7 Preliminary Conclusions 114

Notes 116

CHAPTER 7 Loan Pricing 119

7.1 Interest Rate Components 120

7.2 Setting Sustainable Interest Rates 127

7.3 Regional Differences 127

7.4 Loan Recipients Willingness to Repay 129

7.5 Preliminary Conclusions 130

Notes 132

CHAPTER 8 Social Performance Management 133

8.1 Social Performance 134

8.2 Measuring Social Performance 135

8.3 Measuring the Outcome of Microfinance 149

8.4 Social Rating Agencies 151

8.5 Technical Assistance 153

8.6 Linking Social Performance with Profitability 156

8.7 Preliminary Conclusions 157

Notes 159

CHAPTER 9 Beyond the Reach of Microfinance? 161

9.1 Prejudices and Reservations 162

9.2 Preliminary Conclusions 171

Notes 172

CHAPTER 10 Investing in Microfinance 175

10.1 Market Development 176

10.2 Microfinance Investment Vehicles 177

10.3 The Investment Process 181

10.4 Loan Agreements and Pricing Policy 187

10.5 Microfinance in the Overall Investment Portfolio 191

10.6 Incentives for Investing in Microfinance 195

10.7 Preliminary Conclusions 197

Notes 199

CHAPTER 11 Real and Financial Economy 201

11.1 Microfinance Is Crisis –Proof 202

11.2 Real Economy and Local Influencing Factors 203

11.3 Financial Economy 205

11.4 Stability Mechanisms 207

11.5 Preliminary Conclusions 208

Notes 209

CHAPTER 12 Discussion of Results and Conclusions 211

12.1 Win –Win –Win 212

12.2 Onwards and Upwards 212

Notes 215

APPENDIX A Example of a Loan Application 217

APPENDIX B Due Diligence of Socio –Economic Impact Factors 221

List of Abbreviations 227

Glossary 229

References 233

Photo Credits 243

Index 245

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Peter A. Fanconi
Patrick Scheurle
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