As can be seen, the advantages commercial banks can capitalize on arise from their market position, while most of the obstacles involve the need to change internal ways of thinking and operating. Successful strategies provide a structure that uses the positional advantages of banks while preventing the attitudes and processes of traditional banking from hobbling microfinance.
Trang 1Summary of the Last Lecture
* Financing vs Delivery
Trang 2MODELS AND
Trang 3Social Responsibility Positioning
* When thinking about inclusive finance,
companies are advised to be clear about where they place themselves on the
Spectrum of corporate social responsibility (CSR) Will they approach financial
Trang 4Social Responsibility Positioning
- Will they pursue a double bottom line, and,
Trang 5Social Responsibility Positioning
- Some players see their involvement in inclusive finance strictly as corporate social responsibility An international
Trang 6Social Responsibility Positioning
* Do you think this really matters for our bottom line? You couldn't do three big
Trang 7Social Responsibility Positioning
Trang 8Social Responsibility Positioning
* ACCION believes that for-profit
businesses can and should incorporate social goals Moreover, the transfer of
social objectives from CSR to mainstream Strategy is one of the harbingers of
Trang 9Social Responsibility Positioning
* Projects viewed through the CSR lens and handled by CSR departments tend to stay limited because they lack the full weight of the company behind them
- Scale becomes possible when these
Trang 10Social Responsibility Positioning
Trang 11Social Responsibility Positioning
Trang 12Social Responsibility Positioning
- The companies cited in this course have motivations ranging from the highly
Trang 13Social Responsibility Positioning
- Yet all the examples we selected approach inclusive finance ina
businesslike manner, using sound
Trang 14Social Responsibility Positioning
* Companies can find many opportunities to address important social and economic
challenges if they seek them creatively An excellent example comes from the
education services of Equity Bank In
Kenya, which contribute to the education of hundreds of thousands of students,
address one of Kenya’s highest social
Trang 15Social Responsibility Positioning
* Social goals must also include a strong commitment to consumer protection
When financial institutions do not protect consumers, as in the case of the subprime mortgage debacle in the United States,
the damage can spread far beyond a single offending bank It tarnishes the
Trang 16Social Responsibility Positioning
- Consumer protection Is only a minimum Standard, however There is much to gain when companies pursue inclusive finance
Trang 17Social Responsibility Positioning
* When they ask, “How can we Improve lives through financial services?” this question may help them discover the
Trang 18COMMERCIAL BANKS AS MICROLENDERS
* Banks can participate in inclusive finance In many ways In this lecture we focus on one mode, often called bank
Trang 19COMMERCIAL BANKS AS MICROLENDERS
- For a few brave banks that have launched
their own microenterprise finance
operations, downscaling has already
provided rewards in the form of growth, profits, and social value added ACCION has assisted seven banks to start
Trang 20COMMERCIAL BANKS AS MICROLENDERS
- All of the operations more than two years old are consistently profitable, and
together they reach more than 450,000 active borrowers There are numerous
Trang 21COMMERCIAL BANKS AS MICROLENDERS
* And the original microfinance bank, Bank Rakyat Indonesia (BRI), although a public- sector bank, implemented what was In
many ways the first successful
downscaling effort in the mid—1980s, which Is still going strong BRI’s
microfinance division, with 3.5 million borrowers and 21.2 million savers, has
Trang 22COMMERCIAL BANKS AS MICROLENDERS
- External factors have often helped
convince banks to downscale Regulatory changes such as financial-sector
liberalization and removal of interest-rate Caps created conditions that allowed
Trang 23COMMERCIAL BANKS AS MICROLENDERS
- They also created intense competition In the mainstream corporate sector, which
pushed some banks toward underserved markets In addition, banks seek to
Trang 24COMMERCIAL BANKS AS MICROLENDERS
- Motives such as these have created
interest in downscaling, but many banks needed an additional risk-reducing nudge These banks have taken advantage of
Trang 25COMMERCIAL BANKS AS MICROLENDERS
like the International Finance Corporation and United States Agency for International
Development Such up-front subsidies Support initial trial-and-error
Trang 26COMMERCIAL BANKS AS MICROLENDERS
- If commercial banks decide to operate microlending operations, they have
Trang 27Physical and human infrastructure
* An existing network of branches and service technologies, if located near
Trang 28Physical and human infrastructure
- And commercial banks bring staff with Skills In human resources, customer service, Information technology,
Trang 29Market presence and brand recognition
* Banks in the market for a long time are well-known and have a recognized brand
even among lower-income people Some large banks already have connections to the BOP population through savings
Trang 30Access to plentiful and low- cost funds
- Banks can directly access local and International financial markets, and
established banks have a broad deposit base They can raise large amounts of funds that can be loaned quickly and at
Trang 31Low cost structure
* Banks generally have a much lower
Trang 32Why Is It, then, that banks have not moved faster Into
microenterprise lending?
‘ Not all banks possess all these
advantages to the same degree, but taken together, these make banks potentially
successful competitors in the microfinance
market
Trang 33Market knowledge
- Commercial banks lack an understanding of the microfinance market and Its
Trang 34Market knowledge
- Even if a bank recognizes that
microfinance can be profitable, the
resulting portfolio size may be viewed as too small relative to the management
Trang 35Credit methodology
‘ Banks often attempt to serve the market with inappropriate credit methodologies; for example, adaptations of traditional commercial or consumer lending
approaches When these methodologies fail, they reinforce the idea that
Trang 36Trend toward automation
- The banking sector Is fast adopting
technologies that reduce the number of costly face-to-face transactions Bankers may see the labor-intensive and personal nature of microenterprise credit as the
Trang 37Conservative corporate culture
- The long tradition of banking ts closely tied to specific ways of doing business With a conservative outlook, banks may tend to burden microfinance with traditional
Trang 38Human resources
- Microenterprise credit requires a staff
Trang 39Human resources
Trang 40Summary
- As can be seen, the advantages
commercial banks can capitalize on arise from their market position, while most of the obstacles involve the need to change
Trang 41Summary
- Successful strategies provide a structure that uses the positional advantages of
banks while preventing the attitudes and processes of traditional banking from