Love is in the Air

kivaDuring this lovey-dovey time of year, we want to remind you that the sweetest gift of all isn’t fine chocolate, but the gift of helping others. Kiva borrowers around the world are looking to you –and your Valentine– to help make this Valentine’s Day one filled with love and hope.

Show your special someone that you really care by sending a Kiva Card. Make this Valentine’s Day the one where you take your relationship to the next step, and together start lending to people in need.

You can email or print your Kiva Card for your sweetheart, and give them the treat they want on Valentine’s Day. At just $25, it’s cheaper (and easier) than the dozen roses you bought last year.

So what are you waiting for? Order yours today!

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Believe it or not … Muhammad Yunus in Luxembourg

Muhammad Yunus in Luxembourg, interviewed by on Oct, 20th, 2010.


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Microloans to Women Entrepreneurs (FITE)


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MIX – Microfinance Information eXchange

MIXThe Microfinance Information Exchange, Inc. (MIX) is the leading business information provider dedicated to strengthening the microfinance sector. The organization’s core focus is to provide objective data and analysis on microfinance providers. In doing so, MIX promotes financial transparency in the industry and helps build the information infrastructure in developing countries. This addresses a key challenge for the microfinance industry: the lack of reliable, comparable and publicly available information on the financial strength and performance of microfinance institutions as well as their social impact.

MIX provides detailed financial and social performance information from microfinance institutions (MFIs), as well as business information from market facilitators and leading donor organizations and investors in microfinance. They do this through their online information exchange MIX Market™ and through a variety of publications.

MIX is a non profit organization incorporated in June 2002, with headquarters in Washington, DC, and regional offices in Peru, Senegal, India and Indonesia. MIX was founded by CGAP, and has several sponsors.

Their services:
MIX collects, analyzes, and disseminates general business information, financial and operational data on MFIs, as well as general business information on funders (investors, donors) and service organizations (networks, rating agencies, other market facilitators).

  • Data and Analysis | MIX Market™ the #1 source for financial and social performance data on MFIs across the globe
  • Reporting Frameworks | helping to define financial and social performance reporting standards
  • Social Performance Task Force | Blog
  • The MicroBanking Bulletin (MBB) | premier benchmarking source for the microfinance industry, widely used by investors, donors, MFI managers, and service providers

And here it gets together: My first loan was given by the service provider Kiva to a woman in Ghana via the 5-diamonds MFI SAT – and all can be found on the MIX Market™ website.

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Funding Poor Students Could Be The Next Big Thing In Microfinance

“Lending to get a student through college is a far better way to fight poverty than making small-business loans,” says Ganhuyag Ch. Hutagt, until recently boss of XacBank, a Mongolian microfinance lender. Graduates are more likely to take jobs that lift them into a far higher income bracket—which is why, five years ago, XacBank started offering higher-education loans, typically between $700 and $900, to the country’s more than 160,000 students.

Finding new ways to fund poor students in emerging markets has become a hotbed of innovation. Vittana, founded three years ago by Kushal Chakrabarti, a former software developer at Amazon, is raising loans for students in five countries, with more soon to follow, through “peer-to-peer” online lending, mostly by people from rich countries. Qifang, founded three years ago, is doing much the same in China, raising money online for Chinese students from Chinese lenders. Vittana is growing at over 30% a month; and Qifang has already lent over $1.3m.

Both have much in common with the best-known peer-to-peer lending website, Kiva, founded in 2005. Kiva has raised nearly $160m in microfinance loans to small entrepreneurs in poor countries, and is expected to enter the student-loan market shortly, perhaps within weeks.

Microfinance for students presents two specific problems. Micro-entrepreneurs tend to be from families embedded in communities that can exert strong peer pressure to repay. By contrast “students come from remote villages, no one knows them, they have no reputation to lose,” says Mr Hutagt. Student loans are also much longer-term—up to five years—than the one-year maximum of traditional microfinance business loans. This makes them riskier, especially as microlenders generally rely on short-term funding. As a result, XacBank tends to lend to second-year students, who at least have some record of attendance. Part of the Vittana model is to lend to the children of existing microfinance clients, targeting students in their final year at vocational schools, says Mr Chakrabarti.

The innovations are not limited to lending. Take Lumni, which was set up in 2002 and has funded students from Mexico, Chile, Colombia and America to the tune of $14m. Investors make an equity-like investment, which pays a set percentage of whatever the student earns in a predefined number of years of employment after graduating. “When the student does well, so do the investors. When the student fails, the investors bear the risk,” says Felipe Vergara, Lumni’s co-founder. Enzi, another start-up, has just put students from India and Iran through Stanford University; they are paying investors up to 6% of their income for five years. The big challenge is to come up with enforceable contracts, says Ashni Mohnot, Enzi’s founder. Millions of poor would-be students could benefit.

Source: The Economist

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Celebrate Kiva’s 5th Birthday!

Kiva's 5th BirthdayKiva’s Birthday
Help grow the Kiva community and celebrate with us this month. If you get 5 new friends to make a Kiva loan in October, you’ll receive $25 Kiva Credit to your account!

We are celebrating five years of empowering people to lift themselves out of poverty through micro-loans, with over $150 million lent to nearly 400,000 entrepreneurs all over the globe by Kiva users. Thanks to the generous support of Omidyar Network, a philanthropic investment firm, we are able to provide $25 to Kiva lenders who successfully refer 5 new friends this month (subject to our promotion terms).

Join Us and Celebrate
If you make 5 successful referrals in the month of October, you will receive a $25 credit to your Kiva account. It’s that simple! A successful referral means that your friends are new to Kiva and make a loan of $25 or more.

Thank you for five wonderful years. We couldn’t have done it without you!

Look for this invite tool on your Portfolio page!

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European Impact Financing

Impact financing allows investors to achieve two goals: that of financial return and making a significant social or environmental impact.

A group of five companies established in the country has seen in Luxembourg the capacity of supporting a coordinate practice of Impact Finance as an alternative to continue supporting social and environmental initiatives as well as contributing towards sustainability through balancing investors’ financial returns and social expectations.

With a strong conviction that Luxembourg could become an ideal place for investors, the group has created the European Impact Financing – Luxembourg a.s.b.l (EIFL) to promote the concept and its practice as well as to develop Impact Financial tools.

EIFL aims to be the moderator of impact financing initiatives within the country and the main representative of Luxembourg in international forums; participating into partnership with international organization as well as supporting worldwide events, the European Impact Financing – Luxembourg will serve as a network platform for foundations, social and sustainable enterprises or HNWI (high net worth individual) worried for social & environmental issues.


An initiative of ADA, Arendt & Medernach, Banque de Luxembourg, Ernst & Young, European Investment Fund.


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European Microfinance Platform e-MFP

e-MFPe-MFP was founded formally in 2006. It’s a growing network of over 120 organisations and individuals active in the area of microfinance. Our principal objective is to promote co-operation amongst European microfinance bodies working in developing countries, by facilitating communication and the exchange of information. We are a multi-stakeholder organisation representative of the European microfinance community. e-MFP members include banks, financial institutions, government agencies, NGOs, consultancy firms, researchers and universities.

e-MFP’s vision is to become the microfinance focal point in Europe linking with the South through its members.

In fostering our vision, e-MFP aims to enhance dialogue, learning and competence in microfinance, by building on existing European experience in developing countries. We actively promote innovative and inclusive financial sector policy, development strategy, and development modelling, based on research and good practice. e-MFP also provides an open platform for microfinance experts, practitioners, researchers and policy makers to promote and encourage innovation, joint initiatives and synergy within the sector.

In facilitating exchange and discussion on microfinance policy issues with European institutions and governments, we aim to advance best practice in microfinance for the benefit of those on low income and to assist in the implementation of practical efficient European development aid programming.

The current e-MFP Action Groups are:

  • Rural Outreach and Innovation – focussing on value chain development and value chain finance
  • The Legal Framework for Microfinance Funds in Europe – proposing solutions for a well adapted regulatory framework within the European Alternative Investment Fund Managers directive (AIFM)
  • Making Microfinance Investments Responsible – a framework for strengthening the social strategy of microfinance investment vehicles (MIVs)
  • Research in Microfinance – gathering high level researchers, academics, professionals and students to discuss essential issues the microfinance sector is facing today

The primary information resource is, which is updated on a continuous basis and provides general information and contact details; news items and articles relevant to the microfinance sector; information on upcoming and past events; conference proceedings; online versions of our publications; and access to the endeavors of our Action Groups.

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The Rating Initiative

The Rating InitiativeThe Rating Initiative was launched by ADA in collaboration with the Government of Luxembourg and many other institutions. It is driven by the following 3 objectives:

  • Promote and contribute to the establishment of a financially viable, sustainable and healthy global microfinance rating market both from the demand and supply side in underserved regions for financial ratings and in all regions for social ratings.
  • Address in the long term the lack of available, transparent information on MFIs for investors, donors and other microfinance stakeholders, including the MFIs themselves.
  • Ensure the availability of market information not just on MFIs but on the microfinance rating sector in general.

The Rating Initiative funds five types of rating services: performance ratings, credit ratings, social ratings, combined ratings, and diagnostics/ assessments. The Rating Initiative provides partial funding of rating services and assessment services for MFIs, for both financial and social ratings. Independent evaluations or ratings help to establish a balance between an MFI’s economic objective (maintaining financial sustainability in order to allow the institution to continue to service an ever growing customer base) and social objective (the provision of financial services adapted to serve poor “bankable” customers).

One exemple of a MFI rating report issued by The Rating Initiative: Sinapi Aba Trust, Ghana (the one I used for my Kiva lendings)
The Rating Initiative’s 2nd Quarterly Brief 2010 is now available.

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Blog friendship with Luxembourg for Finance

The blog of Luxembourg For Finance – the agency for the development of the financial sector in Luxmebourg – has now a friendship relationship with mine … Have a look here or at the blogroll on my blog.

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A new microfinance giant in Morocco ;-)

I discovered a new microfinance giant. The newly created Postal Bank of Morocco is the largest microfinance provider in the country: it offers payments and transfer and saving services to 4.5 million low-income clients and boasts 90% of the domestic transfer market thanks to its flagship product the “mandat poste”.

It has ambitious goals for financial inclusion. Its business plan aims at bringing 2.5 million more clients into the financial system over the next five years. This is more than twice the current outreach of all the MFIs in Morocco. So, can it succeed?

The Postal Bank is a subsidiary of the country’s postal network and was granted a full banking license in late 2009. It has a unique network of 1800 branches spread out among all Moroccan districts including the most remote ones. It has a very low cost structure with access to cheap deposit funding and affordable staff resources. Remarkably, it has talented senior managers all coming from commercial banks. The bank plans to offer credit services soon, but management admits they lack the expertise in credit underwriting, so they will partner with experienced credit companies. The bank will first launch a consumption credit product with SOFAC, a leading consumer lender. They are also contemplating offering housing loans and microenterprise loans through partnerships with MFIs.

Obviously the new Postal Bank also has its challenges. The quality of service at the branches is poor and the staff lacks training and good incentives. The MIS is obsolete and as much as 30% of the reported accounts are dormant.

Yet the Postal Bank of Morocco has an exciting new vision for financial inclusion, a first class management in place, a bank license, and a unique delivery platform for financial services. This shows the great potential for countries to leverage their postal networks to advance financial inclusion.
Bienvenues les Banques Postales!

Source: Xavier Reille

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Kiva has won a $1 million grant from Sam’s Club!

We are thrilled to announce that Kiva has won a $1 million grant through the Sam’s Club Giving Made Simple campaign. The campaign ran from April 8th to May 2nd with over 125,000 Sam’s Club members and associates placing votes for their favorite charities. For more information on the campaign, please click here.

Thank you to everyone who supported Kiva throughout the campaign. We could not have won without your daily votes, outreach to friends, and participation during the Double Points Days on Twitter.

KIVA will use the $1 million grant to enhance and expand the reach of its microloan platform to generate approximately $10 million more in loans from the internet community, helping approximately 25,000 entrepreneurs in the United States and around the world.

“We are truly grateful to Sam’s Club and its members for helping Kiva win this generous grant,” said Premal Shah, president of Kiva. “Kiva’s mission is to help to connect people, through lending, for the sake of alleviating poverty in the developing world – and right here at home. This grant will enable Kiva to continue to provide the opportunity that microfinance presents to hard-working entrepreneurs in our global community.”

On behalf of our community of staff, board members, volunteers, and friends, thank you for showing your support for Kiva. We won this together!

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Banks Making Big Profits From Tiny Loans

New York Times wrote on April 13th, 2010: “In recent years, the idea of giving small loans to poor people became the darling of the development world, hailed as the long elusive formula to propel even the most destitute into better lives.
Actors like Natalie Portman and Michael Douglas lent their boldface names to the cause. Muhammad Yunus, the economist who pioneered the practice by lending small amounts to basket weavers in Bangladesh, won a Nobel Peace Prize for it in 2006. The idea even got its very own United Nations year in 2005.

But the phenomenon has grown so popular that some of its biggest proponents are now wringing their hands over the direction it has taken. Drawn by the prospect of hefty profits from even the smallest of loans, a raft of banks and financial institutions now dominate the field, with some charging interest rates of 100 percent or more. [...]”
(read the full article here)

Kiva’s reaction (April 15th, 2010) was prompt:
“We’re writing in response to the recent New York Times article, “Big Banks Draw Profits From Microloans to Poor” by Neil MacFarquhar. If you haven’t read it, you can find it here:

The article brings up valid concerns regarding microfinance institutions (MFIs) and the dangers of commercialization. We share these concerns, especially as a non-profit dedicated to helping alleviate poverty. That said, we noticed that the article may leave readers with an impression about Kiva’s role that is not entirely accurate. As such, we understand that you may have questions, so we wanted to clarify any confusion around how Kiva works.

Q. When I lend money on Kiva, does the borrower pay interest?
Yes. Kiva’s local Field Partners (MFIs) charge interest rates and fees to the borrower in order to cover the cost of their operations. [...]”
(read the full article here)


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Great news from Kiva: Help us win a $1 million grant!

Kiva ( is the world’s first online micro-lending website to help the world’s working poor help themselves to alleviate poverty. They have been chosen as one of four finalists in the Sam’s Club “Giving Made Simple” competition, for a chance to win a $1 million dollar grant – but can only win with your help and support! With this grant, Kiva will multiply the impact by 10 by generating approximately $10 million more in loans from the Internet community, to help 25,000 entrepreneurs in the US and around the world.

How is this possible? Kiva historically generates $10 in loans from the Internet community for every $1 they spend building and strengthening the platform. By investing in the dedicated engineering and portfolio staff who make Kiva possible, they can have 10 times the impact of the original grant.


–Sam’s Club members can vote DAILY through May 2nd here.
There are only 24 days left in this campaign, so your daily vote really matters! If you have additional time to volunteer for the campaign, please fill out the following form.

–If you don’t have a Sam’s Club membership, please spread the word! Send Sam’s Club members you know the link to vote for Kiva. Utilize your social media outlets by encouraging others to vote for Kiva on Facebook and Twitter.

I am really excited about Kiva’s chance to win a $1 million dollar grant. Let’s win this together!

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My Resume on Google Map

Bulleted lists are so 2009. This one may not be a traditional résumé, but it’s definitely 21st century-savvy. Is this appropriate only for jobs where creativity is valued? Or does this merit extra credit for outside-the-box thinking? I leave it to you … Just clic on the pins.

View Werner AIGNER’s Professional Career Steps in a larger map

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La microfinance, un grand coup de pouce

Les acteurs publics et privés ont lancé le fonds d’investissement de microfinance LMDF. Il est distribué dans la plupart des grandes banques au Luxembourg. LMDF souscrit au double objectif du fonds : impact social et rendement financier. Ce nouveau fonds ne s’implique pas directement auprès des personnes pauvres mais soutient les fournisseurs locaux. LMDF envisage de recueillir 25 millions d’euros.

Le but de ce fonds d’investissement en microfinance est double : il contribue à la diminution de la pauvreté dans les pays en voie de développement (Afrique, Asie et Amérique Latine) et offre à ses actionnaires un rendement financier palliant au moins l’inflation.

La vocation sociale de LMDF implique une orientation complémentaire aux fonds existants en microfinance. Ce fonds d’investissement soutient les institutions de microfinance (IMF) plus petites et moins développées avec des prêts d’une durée pouvant aller jusqu’à sept ans, des garanties et des investissements en capital.

L’Appui au Développement Autonome (ADA) a été conseillé comme conseiller en investissement. Ses atouts: a plus de 15 ans d’expérience et une grande renommée dans le mouvement international de la microfinance.

Le Ministère des Affaires Étrangères, la Direction de la Coopération au développement, et l’ADA sont à l’origine de ce projet. Ces deux acteurs ont souscrit les actions de la Classe A du Fonds qui prennent en charge en première ligne pour la Classe C (investisseurs privés) les pertes liées au risque d’une institution de microfinance ne pouvant plus faire face à ses obligations financières.

La Classe B réservée aux investisseurs institutionnels à été souscrite par l’État Luxembourgeois (Ministère des Finances) et de nombreux acteurs de la place financière (Dexia BIL, BGL BNP Paribas, Spuerkees, Banque de Luxembourg, Fortuna Banque, Compagnie de Banque Privée, Le Foyer, etika et La Luxembourgeoise).

En savoir plus sur le LMDF. Voir la brochure.

Source: Luxembourg for Finance


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My First Kiva Loan – Remember?

Kiva - loans that change livesRemember my post on Dec 15th “My first Kiva loan“? Now guess what? Adwoa, the lady I lent the money just paid me back ;-) I’m very happy, not because I have my money back, no, but rather because obviously she made it. Her business case turned out to be positive – for her and for her family. Thanks to Kiva and thanks to the Kiva lenders. How cool is that?

And here is her story.

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La Fonction de CFO Intègre les Conséquences de la Crise et Se Renouvelle

Selon une étude de CSC, Cegid et TNS Sofres, le rôle des directeurs financiers est renforcé dans les grandes entreprises européennes, notamment en interne.
La crise a profondément modifié la fonction de directeur financier au sein des grandes entreprises européennes. A en croire le baromètre Phi 2010 de la fonction finance réalisé par CSC, Cegid et TNS Sofres, il y a «une nécessité pour la fonction finance de se réinventer afin d’intégrer les leçons de la crise». Les auteurs de l’étude publiée mardi évoquent la mise en œuvre de stratégies de «rupture» dans la plupart des secteurs pour s’adapter au nouveau contexte. Ces nouvelles stratégies impliquent un renforcement et une rénovation du rôle du directeur financier.

De fait, selon le rapport, les missions initiales des directeurs financiers passent au second plan. Ainsi, sur les 80 directeurs financiers interrogés, 56% estiment que la gestion du cash ne constitue plus une priorité et 39% d’entre eux jugent que les problématiques de financements ne sont plus une tâche clé.

Le contexte permet d’expliquer cette évolution. L’étude avance en effet que «lorsque la conjoncture est favorable et la concurrence forte, la pression des marchés et la pression concurrentielle encouragent un pilotage par la rentabilité à court terme. A contrario, par temps de crise, la capacité à piloter la solvabilité à moyen-long terme devient prioritaire pour assurer la survie de l’entreprise».

En conséquence, les rôles assignés aux directeurs financiers évoluent. Selon l’étude, «86% des directions financières travaillent en priorité à améliorer la pertinence des informations et 84% s’appliquent à gagner en agilité pour répondre aux questions de leurs dirigeants». Ainsi, selon l’étude, le contrôle des risques joue un rôle accru pour 67% des sondés. De même aux yeux de 63% des directeurs interrogés, la communication et la gestion de crise constituent une activité plus importante.

Là encore, le contexte offre un élément explicatif de cette évolution puisque face à un environnement encore incertain, les dirigeants d’entreprise attendent de leurs directeurs financiers qu’ils leur apportent davantage de visibilité.

Le directeur financier est ainsi face à un double défi: être plus utile face à ses interlocuteurs internes et se poser en garant du maintien de l’équilibre du bilan à moyen-long terme, souligne l’étude.

Source: L’AGEFI

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What’s up with microfinance interest rates?

When hearing about microfinance, people are usually amazed (at the concept) and appalled (at the perceived high interest and fees of the microfinance institutions – or MFIs). Indeed, interest and fees relative to portfolio average 31% (23% in real terms).

If microfinance is serving mostly poor and excluded people, shouldn’t MFIs subsidize the loans? Are they taking advantage of the poor?

A few facts

  • Most poor people don’t have access to financial services
  • When they have access, it is often at exorbitant rates from money lenders
  • They value lower interest rates less than one would think

That being said, most MFIs don’t charge high interest because they can. They charge high interest because they need to in order to cover their costs and stay in business. And, despite their seemingly high fees, they offer a cheaper alternative to existing sources of finance.

An MFI’s main costs are: a) Loan loss provision, b) Financial costs and c) Operating costs.

A look at some numbers
Loan loss provision are low (2% of loan portfolio) due to low delinquencies. Financial and operating costs are higher, at 10% and 20% respectively. Donor grants and subsidized loans (from Kiva lenders and other social investors) allow MFIs to control their financial costs to some extent, but many MFIs are not allowed to mobilize a cheap source of funds, savings. For small, new MFIs, or MFIs that offer very small loans, operating costs average 28%, double that of MFIs that offer larger loans to small businesses. Small African MFIs that are not yet sustainable reach 52% average operating costs!

Size matters
It is much more expensive to administer 1,000 loans of $100 than one loan of $100,000. For a typical MFI reaching the poor, that would represent 1,000 client visits on a weekly or bi-weekly basis, travelling in areas that can take a day or more to reach. That MFI would also likely combine the loan with other services such as financial or health education. Compare this to the client getting a $100,000 by visiting the bank and showing its credit history…

The appropriate benchmark
Rather than judging MFI interest rates in a vacum, one needs to take a closer look at the services offered by the MFI, the clients it is reaching, and the areas where it works. Organizations like MIX and MF Transparency are working to compare interest rates and fees across MFIs that share similar characteristics. This type of analysis is much more meaningful when trying to determine whether an MFI is charging a “fair price” for its unique services than comparing microfinance interest rates to the traditional banking sector.


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Jonathon Stalls’ Kiva-Walk across the United States

KivawalkIn a growing tradition of Kiva lenders doing some amazing things, this March, Jonathon Stalls and his dog, Kanoa, will embark on a coast-to-coast cross country trek covering an estimated 3,000 miles from Delaware to San Francisco, CA – and he’s taking Kiva with him.
He will be walking through hundreds of towns, cities, and communities in Delaware, Maryland, West Virginia, Ohio, Indiana, Illinois, Missouri, Kansas, Colorado, Utah, Nevada, and California.

Why is Jonathon going on this cross country trek?

“Since living in Ireland (2005-2006), visiting Honduras in 2007, and swapping life stories with many travelers, I have craved an adventure that would challenge my daily activities, expectations, and priorities. The speed and growth of our commodity driven and over-communicated culture feeds a personal call to engage in quieter, slower, and more intentional experiences with less. This walk will be a journey in listening, eating, sharing, and growing with: strangers, neighbors, officials, hikers, animals, wind, and dirt.”

Why is he supporting Kiva?
“I wanted and needed a larger purpose that would stretch far beyond my own personal attractions to such a trek. I came across Kiva in my social entrepreneurship class at Metropolitan State College of Denver in the fall of 2007. I craved to do more the minute I clicked on the link, browsed the website, and began lending. I am excited to spread Kiva’s mission and build lending communities across the country. I am more than enthusiastic to do my part in helping our nation’s leading incubators in the fight to alleviate extreme poverty across the world – GO KIVA!”

If you wish to support Jonathon, learn more here about the various ways you can get involved, including, in his words:
Walk: “I strongly encourage everyone and anyone to take a day, a week, or more and find a way to meet me on the trail.”

Host: “Connect with me at if you or anyone you know can host Kanoa and me along the way.”

Inspire: “Have me be the reason to host a party and let me speak about how I was inspired to help raise awareness about Kiva!”
Connect: “Put me in touch with someone you know at a University along the trail. I’d love to present to students and/or teachers who are interested in learning more about how Kiva inspired me to walk across the country!”
Kiva Walk website: “Visit my site to learn more about more ways to get involved!”

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Does Microfinance Really Help Poor People? Yes, but…

Kiva - loans that change livesOver the last four months working in microfinance in urban Senegal, I have come across many clients who report increased income thanks to their loans. Fishmongers, clothing salesman, taxi drivers, you name it. Indeed, this has come to be expected – put the capital into the entrepreneur’s hands and he will surely put it to the most efficient use, and help bring his family out of poverty.

Makes sense. But trying to tease out exactly by how much the client’s income has increased is not as straight forward. Clients rarely keep good track of revenues and expenses, so the bottom line at the end of the month can be pretty hard to decipher. Often I wonder after the interest payments, did the client really increase his income or was it a mirage simply reflecting more money coming in and out?

My experience is consistent with the broader lack of evidence to link microfinance with increased incomes and reduced levels of poverty. In “Does Microcredit Really Help Poor People?”, an excellent recent report for CGAP, Richard Rosenberg examines recent research and looks to answer this question.

The trouble with discerning the real impact of microloans is that there are a multitude of other factors at play. Often entrepreneurs who seek out micro-financing are savvier than their counterparts, so any positive outcomes could not be attributed solely to access to financing. However, randomized controlled trials (RCTs) allow researchers to more accurately look at the direct effects by comparing two groups which are statistically identical. Several RCTs examining clients in India and the Philippines found no effects on income and consumption levels in the 12 – 18 month time frames measured (see the article from the Economist for a good summary of the findings).

But, as Rosenberg suggests, perhaps we are aiming at the wrong target. As he points out, those who live on $2 per day, don’t earn exactly $2.00 each day. There is often extreme volatility in income, and microfinance can play a very useful role in smoothing consumption, especially for emergencies. In other words, microfinance can not always change the level of income, but it can change its’ structure. These benefits are not always appreciated. I would further add that the organic development of microfinance institutions is in itself highly valuable. UIMCEC, for instance, has grown not by a push from donors to expand, but by a demand from clients for more branches. As Rosenberg puts it, people have voted with their feet. In countries with weak public institutions, the MFIs are often the only formal institution people trust.

Understanding these more subtle effects of microfinance can make it seem less shiny, less sexy. But poverty is itself complex, multi-faceted and deeply opaque. A blind faith in the effectiveness of microfinance will not serve us well. I urge you to read Rosenberg’s very accessible article for yourself. If you want to delve deeper, read the RCT studies. Step back, and think about it for yourself. Then make a loan with a better understanding of how microfinance WORKS.

Written on Jan 22nd, 2010 by Ilmari Soininen (Senegal) on Kiva – Stories from the Field


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Microfinance and Financial Crisis

As we learnt in the latest LuxFLAG study (November 2009) the main potential risks identified by MFIs attributed to the global financial crisis, were:

Liquidity shortages
According to the Consultative Group to Assist the Poor (CGAP) “MFIs report that clients’ purchasing power has gone down and cash needs have gone up, causing savings to be withdrawn and sometimes straining repayments.” This observation highlights the liquidity risk that MFIs are facing. Indeed, as clients need to access their savings rapidly, some MFIs find themselves in the incapacity of both granting loans and giving back savings.

Deterioration of the portfolio quality
In addition, the repercussions of the financial crisis on micro-entrepreneurs have led to lower levels of remittances, over-indebtedness and in the worst cases unemployment. For all these reasons, the incapacity of some micro-entrepreneurs to repay their loans on time has led to a significant increase in the portfolio-at-risk at 30 days of the MFIs. [...] This may however encourage MFIs to switch strategies by taking a more long term approach and put more emphasis on the quality of their portfolio rather than on the quantity and number of clients.

Increasing interest rates on borrowings
Initially, Development Financial Institutions (DFIs) and private donors were the primary sources of foreign funding for MFIs, but as they are increasingly turning to international markets, MIVs raising funds from social, commercial, private or institutional investors, have emerged. As a result, MFIs are finding themselves more closely linked to the capital markets than ever before. As a consequence, some MFIs were impacted by the credit crunch and started to see their cost of borrowing increasing. [...]

Increased currency risk due to foreign exchange volatility
In addition to the above, MFIs borrowing in foreign currency are also facing currency depreciation. [...] The market volatility experienced recently increased the cost of hedging foreign exchange risk. MFIs that tap the international capital markets will have to pay more for local currency loans. In their article “ties to Capital Markets Challenge Microfinance Institutions” K. Andreev and P. Young from Cygma illustrate the example of Peru “Three months ago, a microfinance investment vehicle (MIV) could charge an MFI roughly 11.3 percent for a one‐year loan in PEN in order to achieve the equivalent of a 10 percent return in USD. Now, in order to achieve the same rate of USD return, the MIV would have to charge over 15 percent”.


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Help Kiva win $1 million in the Chase Community Giving contest!

Kiva has made it to the second round of the Chase Community Giving contest and we need your vote to help us win $1 million in funding! Voting is open now and ends on January 22nd.

To vote for Kiva, click on the picture below. After adding the Chase Community Giving application on Facebook, you will be able to place your vote for “Kiva Microfunds.”

Chase Community Giving

Winning the Chase Community Giving challenge would enable Kiva to make critical investments in staff to strengthen and expand Kiva’s Field Partner network while building and improving the Kiva website to better educate, connect, and serve Kiva lenders. By investing in Kiva’s unique model, we can generate about $10 in loans from the internet community for every $1 of award money we spend building and improving the platform.

We appreciate your support and vote for Kiva!

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In the Spotlight: Islamic Finance

Islamic Finance: refers to a system that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Islamic law prohibits the payment or acceptance of interest fees for the lending and accepting of money respectively, for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles. (Wikipedia)

On this blog you will find shortly an ever increasing collection of the most valuable and inspiring online sources in connection with islamic finance. This will give you and me an actual overview of new ideas and great concepts as well as of concrete achievements and will hopefully lead to stimulating discussions…

Check it out and … looking forward to your input ;-)


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CFO – Evolution of a Function and a Profile

Please find below a recent study conducted by Edouard Franklin Luxembourg that has drawn up an objective and precise overview of the financial population working in Luxembourg in 2009:

Previously, the role of the CFO, as a specialist of finance, was to support the general management in the realization of their objectives of profitability and their investments as well as to satisfy the statutory requirements (accounting, fiscal and financial reporting).

In recent years, the expectations of the shareholders and the board of directors towards the CFO strongly progressed. The financial scandals (Enron, WorldCom, Vivendi, Parmalat, amongst others) resulted in the introduction of laws and regulations such as Sarbanes-Oxley, the law of financial security 2003 or Basel II as well as the appearance of accounting standards and reporting IAS / IFRS. Then came a large-scale financial crisis, sparing almost no business sector in the economy.

In this context, the everyday life of a CFO is more and more complex and difficult:
Besides his/her responsibilities – guaranty the quality and the homogeneity of the produced data, optimize the costs, supervise the audit function and ensure good external and internal financial communication , the CFO sees his/her scope grow:

  • Be involved in the definition of the strategy and its implementation and position himself as a real interface between the general management, operations and the regulatory bodies.
  • Guarantee a level of reliability of the reporting through a successful information system and a high level of reactivity to achieve what we call a “fast closing”. This approach allows a better understanding of the figures both for the general management – allowing quicker and better decisions – and for the operational managers for whom the CFO has to play the role of “Business Partner”.
  • The crisis having also strongly stressed the essential role of managing the risks and the cash in the short and medium terms, the CFO feels an increasing pressure in an often very “tense” financial context. Decision making depends very much on his forecasts and analysis.
  • To become the cost killer and ensure a drastic control of the costs and the profitability of the investments, the optimization of the processes, that often means cutting staff and outsourcing some processes.

However and especially in crisis time, the essential added value of the CFO is to bring visibility to the leaders and provide them with reliable tools and data so they can make the right decisions. The CFO also has to have the capacity of finding the financial resources to ensure the company’s future.

The CFO is not only a figures expert anymore. His skills are much more general: vision of the market, a sense for strategy, communication, IT… Considered as the right hand of the CEO, his function is now recognized as a natural stepping stone towards general management functions.

Reporting to the CEO, the CFO plays a key strategic and operational role as part of the executive management team. His/her main tasks are:

  • Shape, develop and maintain a financial strategy;
  • Make strategic decisions for the company, including budgeting, forecasting, strategic growth planning;
  • Direct a finance organisation in the areas of accounting, consolidation, accounts payable/receivable, cash management, planning & reporting, tax, fraud & collection issues;
  • Provide financial evaluation of potential mergers/acquisitions;
  • Supervise tax and legal issues;
  • Maintain strong relationships with banks, auditors, and tax authorities;
  • Lead, develop and manage the staff; hire, coach, and lead an important finance organisation.

95% of CFOs are men. They usually reach this level after 18 years of experience and 5 previous roles on average. 43% of CFO’s have been appointed to their current role through internal promotion.
They are also often in charge of teams abroad.
In Luxembourg, CFO’s have been in their jobs for 3 years and most of them have had jobs outside of Luxembourg before.

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