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Partnerships in Microfinance Understanding the Opportunities and Challenges Elisabeth Rhyne, Managing Director Center for Financial Inclusion at ACCION Global Partnerships in Microfinance University of Greenwich September 6, 2010

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2 Introducing: The Center for Financial Inclusion High-quality financial services for all low income people Services that improve the quality of life and build assets A sustainable, commercial inclusive finance industry The Center for Financial Inclusion at ACCION International is an action, research center that works on behalf of the microfinance industry as a whole and leverages private-sector interest in microfinance. Collaborators MFIs Banks Investors Technology Firms Regulators Universities Others Tools Convening Coalition building Research Publication Education Piloting

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The Center for Financial Inclusion leads through collaborative projects 3 Energy Links: microfinance as a platform for access to pro-poor clean energy. Microfinance for Bankers and Investors: spotlights private companies leading the way in serving low income people. Council of Microfinance Equity Funds: convenes the private funds that make equity investments in microfinance institutions. HBS-ACCION Program on Strategic Leadership in Microfinance: management and leadership for CEOs and other leaders of microfinance. The Smart Campaign: a global effort to embed Client Protection Principles throughout the microfinance industry.

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Financial Services Address the Lives of the Poor 4 Vulnerability Opportunity

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CreditSavingsInsurancePayments PERSONAL CONSUMER Credit card Education Mortgage Home improvement MICROENTERPRISE Business fixed assets SAVINGS ACCOUNT CHECKING ACCOUNT Certificate of Deposit Pension Youth savings Programmed savings LIFE Health Property Disability Crop Credit life MONEY TRANSFERS REMITTANCES Payments Government benefit payments Salary payments Debit/ATM card Electronic payments Full range of financial services with Quality 5

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How Many People Are Financially Excluded ? 2.5 billion (Financial Access Initiative) 2.8 billion (CGAP) 3.2 billion (Alliance for Financial Inclusion) Over 2 billion (UK DFID) 6

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(% households)Mexico Spain Colombia Peru Savings 37925325 Credit26772315 Life Insurance18NA11NA Branches per 100,000 people 89694 Branches per 1,000 Km. 47941 Financial Inclusion across selected countries 7

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Partnerships.Because Few Institutions Have It All 8 Understanding of the Market Distribution, Points of Contact Banking Capabilities Investment Funds Financial Services for the BOP

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Five Kinds of Partnerships 1. Learning Partnerships: Vodafone and Faulu (Kenya) ACCION and Banco Pichincha (Ecuador) 2. Distribution Partnerships: VISA and Government Payments (South Africa) Banco Bradesco and the Postal Service (Brazil) 3. Financing ICICI Bank Partnership Model Citi Microfinance 4. Social Connections Equity Bank and schools 5. Collaborations The Smart Campaign Examples drawn from Microfinance for Bankers and Investors

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M-Pesa: Vodafone/Safaricom and Faulu Kenya Safaricom initiates mobile money transfers: After only 2 years: 5 million subscribers Partnership with Faulu Kenya in pilot Faulu withdrew: Why???

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Banco Pichincha and ACCION International Created Credife, a successful microfinance service company in Ecuador (~100,000 clients) ACCIONs role evolved over time ACCIONs experience with service company model has varied depending on quality of partnership

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Distribution Partnerships Banco Bradesco and Brazils Postal Service Pioneered the Banking Agent model Closed the location gap in Brazil -- From 1590 unserved municipalities to zero Great alignment of interests and capabilities VISA Government of South Africa ABSA Bank The Sekulua Card distributes Government benefits Starts to create the ecosystem for electronic payments Brings new clients to financial system Government push required

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ICICI Partnership Model ICICI engineered the take-off of microfinance in India Strategic choice to go wholesale rather than retail Partnership model; funding MFIs through service agreements and securitization Committed $1 billion to MF Withdrawal from microfinance Due policy and regulatory issues Question: Has ICICI been a good partner for microfinance?

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Citi Microfinance Shaping strategy to incorporate social responsibility Banker to the microfinance industry

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Equity Bank and Reaches Out to Schools Schools as Nodes for banking services Education entrepreneurs Teachers Students and their Parents Equity Bank Foundation Scholarships Capacity building grants for schools

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www.smartcampaign.org The Client Protection Principles 1. Avoidance of over- indebtedness 2. Transparent and responsible pricing 3. Appropriate collections practices 4. Ethical staff behavior 5. Mechanisms for redress of grievances 6. Privacy of client data The Smart Campaign Commitment: by all major MFIs and supporting organizations Develop norms, standards and guidance and get them into use Build capacity of networks and investors to ensure their MFIs apply client protection practices Create processes for certifying financial institutions Ultimately, to protect millions of clients of microfinance

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Reflections Partnerships can create leaps Microfinance game-changers Partnerships evolve Learning partnerships naturally come to an end Alignment of interests Internal competition within the partnership breaks it apart The 3 Rs of Partnerships Risk Responsibility Returns

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Stay Connected with the Center for Financial Inclusion Microfinance for Bankers and Investors available on Amazon Follow the CFI Blog: ww.centerforfinancialinclusion.org ww.centerforfinancialinclusion.org Endorse the Smart Campaign: www.smartcampaign.org www.smartcampaign.org Thank you for your interest! We welcome your feedback.