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The Green Sheet Online Edition

January 09, 2012 • Issue 12:01:01

Highlights from Inside Microfinance

By Patti Murphy
ProScribes Inc.

Editor's Note: These articles were published by InsideMicrofinance.com in November and December 2011; reprinted with permission. 2011 InsideMicrofinance.com. All rights reserved.

Bank On gets face lift

#dcf_Bank On is getting a face lift. Its new moniker is JoinBankOn.org, and its hallmark is a simple to use database tool that helps identify underserved communities and households and is dubbed, appropriately enough, Reach Your Community.

Reach Your Community is powered by PolicyMap, an online interactive analysis tool that can be used to map out key socioeconomic statistics on U.S. communities down to the neighborhood level. PolicyMap is a service of The Reinvestment Fund, a nonprofit that promotes neighborhood revitalization programs.

I took a test drive and discovered that only one out of 510 households in the rural Maryland community where I reside are unbanked; 75 households are considered underbanked. In the upstate New York community where I spent my childhood, 7.7 percent are unbanked, which also is the national average, according to the Federal Deposit Insurance Corp.

In New Orleans, one out of every eight households (12.5 percent) is unbanked, and one out of four (25.5 percent) is underbanked, according to the website. Underbanked households are those that report having an account with a financial institution but still use nonbank providers, such as check cashing houses and payday lenders.

Bank On is a network of local coalitions of government agencies, financial institutions and community organizations intended to help unbanked and underserved consumers transition into the financial mainstream. Programs typically feature low-cost deposit accounts at participating financial institutions and financial education programs.

Pioneered in San Francisco in 2006, Bank On initiatives are now underway in over 100 communities, according to a recent report out of the U.S. Treasury Department, Banking on Opportunity: A Scan of the Evolving Field of Bank On Initiatives.

The Treasury Department is an active partner in JoinBankOn.org, as are the San Francisco Office of Financial Empowerment, the National League of Cities and the New America Foundation. The Corporation for Enterprise Development, a Washington think tank dedicated to expanded economic opportunities in low-income communities, is spearheading the project.

Kasey Wiedrich, Senior Program Manager at the CFED, said the database tool will be valuable to "anyone working to develop effective strategies aimed at increasing financial access for those who may be living outside of the financial mainstream."

The Treasury Department, in its recent report on Bank On initiatives, said the concept holds promise, and it suggests tying the programs to asset-building initiatives (for example, America Saves) to promote financial stability, not just access.

Micropayments on the cheap

#dcf_Dwolla, an online mobile payment platform operated by The Members Group, is eliminating the 25-cent fee it charges for small-dollar payments - those under $10. TMG, a payment processing firm owned by a credit union group, said the move is intended to make Dwolla more attractive to both merchants that deal in small-dollar products (like coffee and snacks) and to younger consumers.

Dwolla is more than just an online mobile payment platform. Its "wow factor" is its social networking interface. So, for example, someone using Dwolla to purchase a cup of coffee can broadcast that fact via Facebook, and instantly 100-plus friends know all about it. Think of it as free advertising.

So what does this have to do with microfinance? Plenty. Each new micropayment initiative that hits the market is another opportunity for micro-entrepreneurs to compete with more traditional merchants. To survive in most businesses these days, you need to be able to accept credit and debit cards. But traditional card acceptance fees are pricey and too confusing for the typical small upstart. Hence the introduction of mobile gadgets like the Square mini card reader.

Meanwhile, Intuit Inc., which in addition to accounting software also supports electronic payment applications, is planning to roll out a prepaid card account that unbanked merchants can use to deposit funds accepted using Intuit's GoPayment device, according to published reports. GoPayment, like Square, runs off the telephone jack of mobile smart phones.

Boom: It's mobile

#dcf_A California firm is rolling out a cash replacement product that makes it easier and safer for migrant works to send money back to family and friends in their homelands. Known as Boom, the new service aims to make person-to-person payments as easy and cheap as sending text messages. "With Boom, consumers finally have access to the kind of banking and money transfer service they have desired for years," the company said in an announcement.

Migrant workers in the United States remit billions of dollars every year to family and friends around the globe, paying as much as $20 cash per transaction. Meanwhile, recipients often have to travel long distances to money transfer offices, and they risk being held up for their cash.

M-Via, the Palo Alto, Calif., firm that created Boom, pulled together a network that includes hundreds of thousands of merchants and ATMs that covers the United States and much of Mexico as well as access to over 15,000 cash load locations in the United States. Boom supports mobile money transfers of any size from $5 to $1,000. "The beauty of m-Via's solution is that while it is complex behind the curtain, it's incredibly simple for consumers' use," said Jesus Delgado-Jenkins, a Senior Vice President at 7-Eleven Inc., a Boom merchant.

"Traditional money transfer services are unsafe, expensive and inconvenient for recipients who have to travel to pick up money," said Bill Barhydt, m-Via's Chief Executive Officer. "With massive consumer migration happening on a global scale and with billions of dollars flowing across borders every year, this is a multibillion-dollar market opportunity," said Jim Robinson of RRE Ventures, a venture capital firm with an eye for mobile and financial investments.

Mastering possibilities in microfinance

#dcf_The MasterCard Foundation and the United Nations Capital Development Fund are expanding efforts to make microfinance services, especially savings, more available to low-income individuals in Sub-Saharan Africa.

MicroLead was created in 2009 with funds from the Bill and Melinda Gates Foundation. MasterCard Worldwide and the UNCDF committed to the next phase of the project, which targets 450,000 low-income folks in underserved African markets.

The UNCDF is a capital investment fund that focuses on the world's 48 least developed countries in Africa and Asia. The MasterCard Foundation is a charitable arm of the international credit card company MasterCard.

Recent studies suggest poor people are active savers. A statement from MasterCard and the UNCDF announcing the next phase of MicroLead said that in some countries the opening of savings accounts outpaces loans by a factor of 12. One of the tasks the UNCDF is undertaking in the next phase of MicroLead is to test if a savings-led approach creates a stronger and more resilient financial services market. "We believe that the fight against extreme poverty through building inclusive financial sectors needs innovative approaches and strong partnerships," said David Morrison, UNCDF Executive Director.

Reeta Roy, President and CEO of the MasterCard Foundation, said, "By helping microfinance institutions to develop savings and other financial services that promote financial inclusion for the poor, the MicroLead program is not only building capacity, but also increasing access to financial services to nearly half a million clients in Africa."

Microfinance code of conduct for Europe

#dcf_TheEuropean Commission published a set of guidelines intended to support more uniformity in micro-credit initiatives across the continent. The European Code of Good Conduct is not a replacement for established rules and regulations. Rather, it offers guidance and is directed at micro-credit providers, investors, customers, partners and even regulators, the EU said. It is designed primarily to address nonbank providers of micro-credit, which fall under numerous regulatory jurisdictions.

The five-page code is divided into five sections addressing customer and investor relations, governance, reporting, management information systems and risk management. A sixth section addressing social and ethical issues will be added in 2012, the EU said.

"The development of the code was based on the recognition that - in light of the disparate regulatory frameworks in which micro-credit providers in the EU operate - there was a need for a unifying set of expectations and standards that was common to the sector," the publication states in its introduction. "The code sets out good-practice guidelines that will better enable the sector to face the challenges of accessing long-term finance, maintaining and raising the quality of services, and moving toward sustainability." end of article

Patti Murphy is Senior Editor of The Green Sheet and President of ProScribes Inc. She is also the founder of InsideMicrofinance.com. Email her at patti@greensheet.com.

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