June’s Most Popular Posts on NextBillion: From microfinance ‘haters’ to M-PESA challengers
But as last month’s most popular post illustrates, microfinance’s defenders have no intention of throwing in the towel – and interest in the debate still runs high.
Most Viewed for June
Indeed, as Maria May pointed out in “Six Questions for Microfinance’s Biggest ’Haters’: Why it’s time for the sector to shake off its critics,” there are still plenty of reasons to value microfinance – and its detractors don’t have a monopoly on the truth.
In the post, May tackled not only the much-discussed randomized control trials on microfinance’s lack of social impact, but many of the most persistent criticisms of the sector.
Responding to charges of overly high interest rates, she offered a compelling argument:
Remember that microfinance clients are usually people that no other banks will give credit to. On top of that, many low-income countries are at risk of floods, cyclones or droughts, during which they often will defer or write off client loans. Not to mention the fact that many microfinance institutions write off loans when a client or her spouse dies. So they have to plan for certain potential losses when calculating their interest rate.
Further, in part because many MFIs are restricted from taking deposits, they often take loans from banks for their own capital. This means that they incur a cost of funds that’s reflected in their interest rates.
While microfinance haters love to cite the 200 percent interest rate that’s sometimes charged by Compartamos in Mexico, the global average is closer to 35 percent. And in some markets, interest rates are capped; in Bangladesh, 27 percent (with a declining balance) is the limit.
Second-Most Viewed for June
In our second most-read post, Banks Challenge M-PESA in Kenya: What their emergence could mean for the world’s leading mobile money market, authors Mike McCaffrey and Jacqueline Jumah dealt with the changing competitive landscape in the country that put mobile money on the map.
The shift in market dynamics in Kenya is exciting given how long it has been the story of a single player. It is still unclear if it will continue, but if it does, it seems that it will likely lead Kenya down a different, more dynamic path than other countries which have multiple players competing. Hopefully, the new services banks are offering to customers will be seen as beneficial to a more digital ecosystem, and partnerships (as opposed to price wars) will emerge.
Third-Most Viewed for June
Our third most-read post was Paving the Way Out of Poverty: Health microinsurance can keep a medical emergency from becoming a financial tragedy. In it, Jenny Nasr discussed the importance of health insurance as a tool for inclusive finance in a world where 100 million people around the world fall into poverty due to medical costs each year.
As financial institutions move toward offering a more diverse mix of services to the poor, savings and insurance products will be important to absorbing risks and improving resiliency. … There is a growing synergy and complementarity between microinsurance and other social protection mechanisms in terms of insurable risks such as sickness, old age, death, accident and disabilities, and extreme weather conditions.
Most Shared for June
Our most-shared posts of the month included two of the above, plus one other:
Congratulations to these contributors, and thank you to all our guest writers for the month of June.
- Health Care