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Microfinance
INSTITUTO DE EMPRESA

Thesis
Practical Challenges of Microfinance Institutions Dilin Lim Master in Advanced Finance candidate December 2009

Completed with direct supervision of: Prof. Eloy Gracia

This research paper discusses the optimal combinations of stable funding and operating efficiency of Microfinance Institutions to reduce interest lending levels to the Micro Entrepreneurs.

PRACTICAL CHALLENGES OF MICROFINANCE INSTITUTIONS
HYPOTHESIS: In all models of microfinance, what are required are optimal combinations of stable funding and operating efficiency. We will examine to what extent the operational aspects of developing an efficient lending structure, transparency, loan follow-up and stable sources of funds contribute to the reduction of interest rates paid by the poor i.e. the client. INTRODUCTION The considerable interest that has been developed in the financial world and academia for the topic of microfinance cannot be underestimated. In fact, one of the most impressive developments in the world of social economic development in the last few years has been the successful explosion and impact of microfinance on society at large. Ever since socio-economic development became institutionalised in the form of the objectives guiding development banking, the elimination of poverty has been proved elusive. However, well known bottom of the pyramid seems to have now found in Microfinance is most effective partner. In this analysis I intend to explore how is that microfinance actually contributes to empower those at the bottom of the pyramid by allowing them to unleash the smaller or greater degree of creativity and entrepreneurship inherent that is in any human being. I intend to look into some of the detail of how the organisations that channel the funds to the micro borrowers operate and how the pecuniary costs and benefits are or not transferred to these. Certainly, there is a wealth of information regarding micro-financing activities in general


Bibliography: Websites 1. Microcapital.org Story: Australian Bank ANZ Amasses 10 million Fijian Dollars (USD 5.3 million) in Deposits through Mobile Rural Banking Program http://www.microcapital.org/microcapitalorg-story-australian-bank-anz-amasses-10-millionfijian-dollars-usd-53-million-in-deposits-through-mobile-rural-banking-program-in-fijilaunched-in-2004-in-conjunction-with-the-united/ 2. Banks in microfinance, guidelines for successful partnerships http://pdf.dec.org/pdf_docs/PNADD684.pdf 3. Does Loan Type Matter for Microfinance Performance in Latin America? MIX Market http://www.themix.org/press-release/does-loan-type-matter-microfinance-performancelatin-america 4. MFI Capital Structure Decision Making: A Call for Greater Awareness 2007 CGAP http://www.syminvest.com/market/news/microfinance/mfi-capital-structure-decisionmaking-a-call-for-greater-awareness/2007/8/31/654 5. How are MFIs sourcing capital – Blue Orchard Microfinance Investment Manager http://www.slideshare.net/svmn/blueorchard-presentation-to-svmn-20090319 6. Unitus Equity Fund LP http://www.unitus.com/about-us/unitus-strategic-affiliates/unitusequity-fund 7. CGAP MIV Benchmarking Report 2008 http://www.cgap.org/p/site/c/template.rc/1.26.1430/ 8. MIV investments in 2008 grew by 31%: CGAP survey published by Microfinance Focus http://www.microfinancefocus.com/news/2009/10/22/miv-investments-in-2008-grew-by31-cgap-survey/ 9. Financing microfinance – The ICICI Bank Partnership mode http://www4.gsb.columbia.edu/null/download?&exclusive=filemgr.download&file_id=64644 0 10. Cf. Omtirx, “Giant Leaps in Microfinance” presentation, October 2007 11. Cf. ADA and P. Goodman, “Microfinance Investment Funds, Key Features” 2007 http://www.microfinance.lu/fileadmin/media/Publications/downloads/etudes/MF_intermed iation_overview_01.pdf 12. Press Release: Mexico 's Largest Microfinance Bank Taps Global Equity Markets in the First IPO by a Latin American Microcredit Lender http://www.milbank.com/en/NewsEvents/PressRelArch/Mexico_Largest_Microfinance_Ban k_Taps_Global_Equity_Markets_in_the_First_IPO_by_a_Latin_American_Mic.htm Professor: Eloy Garcia 35 DILIN LIM - MIAF 2009 PRACTICAL CHALLENGES OF MICROFINANCE INSTITUTIONS 13. Deutsche Bank to use CDO market to help assist the Poor, www.Financialtimes.co 14. Banco Azteca Exports Microfinance Formula from Mexico Southward – Microcapital http://www.microcapital.org/news-wire-banco-azteca-exports-microfinance-formula-frommexico-southward/ 15. Optimising Capital Supply in Support of Microfinance Industry growth – Mckinsey http://www.blueorchard.com/jahia/webdav/site/blueorchard/shared/Resources/Press%20A rticles/0610_McKinsey_Optimizing%20Capital%20Supply%20in%20Support%20of%20Microfi nance%20Growth.pdf 16. Hindustan Lever Ltd Case – Tuck School of Business At Darthmouth http://mba.tuck.dartmouth.edu/pdf/2002-2-0011.pdf 17. International Funding of Microfinance Institutions: An Overview, Ada Microfinance Expertise. http://www.microfinance.lu/50.html?&L=1 18. FDCF on website http://www.challengefunds.org 19. Microfinance and Technology – Critical issues, Lessons and Future implications; Microfinance Consulting Group. http://www.solutionexchange-un.net.in/ictd/cr/res06030801.pdf 20. Rotary Club of Manila http://www.rcmanila.org/objectives.html 21. 2008 Microfinance Technology Survey CGAP http://74.125.77.132/search?q=cache:Ygi6qMkRhFUJ:cgap.org/gm/document1.9.4398/2008%2520Microfinance%2520Technology%2520Survey_Espanol%255B1%255D.d oc+2008+Microfinance+Technology+Survey+CGAP&cd=1&hl=es&ct=clnk&gl=es 22. Building a Dialogue to Promote Microfinance Best Practices in South America (World Bank) http://siteresources.worldbank.org/INTENBREVE/Newsletters/21948774/Aug08_134_Microf inanceBP_FINAL.pdf 23. Lender With a Mission - Bangladesh 's Grameen Bank targets poorest of poor – Grameen Bank Bangladesh http://www.gdrc.org/icm/grameen-article4.html Books 1. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else Hernando de Soto 2. An Inside View of Latin American Microfinance – Inter-American Development Bank - Editado por Berger, Marguerite; Goldmark, Lara; Miller-Sanabria, Tomás. 3. Microfinance for bankers and investors - Elisabeth Rhyne 4. Microfinance Handbook: An institutional and financial perspective - Ledgerwood, Joanna Professor: Eloy Garcia 36 DILIN LIM - MIAF 2009
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