Project

[Linda Madriz]

hey group,
i found some helpful sites for our project that i will post on the
site in a little bit... on another note, i was wondering about our
'solutions' for our team project and i had another idea... i dont
remember if we discussed this or not but what about allowing MFIs to
take deposits and such so that they are able to fund the loans out own
their own... just like banks... so instead of relying on money from
banks, they rely mainly on money from deposits, which is what many
banks do.

So, I started looking around online and found that some MFIs already
do allow deposits and even insure the deposits. I also found that many
MFIs actually rely mainly on investors to fund their loans, not
banks... so, i was thinking that maybe this contradicts a solution of
ours...??

Anyway, getting to the point, since MFIs have already started offering
deposits, we know that this is possible. I found information that
people want to a place to put their money that is safe. I think having
MFIs offer deposits so that they can rely less on investor money and
more on deposits for their loans is a good solution. This way, they
still reduce the high interest rates that they must pay back, plus
they help the entrepreneurs by having a safe place to store their
money. ill talk more about it on monday...

I know this was a super long email.. but i hope it helps our project
and your research... do you guys have any opinions about this?
thanks n happy weekend!
linda

[Arun Singh]

Hey Linda/Group,

 

Long email is not a problem. You are doing the research needed.

First of all i would again recommend instead of wondering in space of uncertainity and confusion we need to focus on one MFI as studying MFI in general may result in conflicting problems and solutions. You guys can decide on any of MFI. I am as of now focusing on Bandhan.

Bandhan is not taking deposits as is the case with MOST of MFI and there are reasons for doing so. Mentioned below:

 

NBFCs in India engaged in

(i) micro financing activities,

(ii) licensed under Section 25 of the Companies Act, 1956 and

(iii) which are not accepting public deposits (this is the condition)

 

ARE EXEMPT FROM

 

1. from the purview of Sections 45-IA (registration),

2. 45-IB (maintenance of liquid assets) and

3. 45-IC (transfer of profits to Reserve Fund) of the RBI Act, 1934. (This act makes mandatory for a NBFC to get itself registered with the RBI (Reserve Bank of India) as a deposit taking company, but for MFI there are the exceptions)

 

These MFIs dont have fund when they start their operations. They have a difficulty in maintaining liquid assets and they do not have enough profit to transfer to Reserve Bank of India. As we know in US too certain percentage of deposit has to be transferred to Federal Reserve Bank EVERY DAY. In India also we have same regulation. The kind of infrastructure these MFI has they cannot go for the closing every day. It takes a weeks time to travel information from branch to Head Office for Bandhan.

 

Bandhan is not only NBFC, its legal status is NBFC, NOT TAKING DEPOSITS to take advantage of crucial exemptions mentioned above. But one important thing. They can raise fund from the public and advance loans from this fund.

 

Again i would request for a more focused study we take legal, political and regulatory system of one country. I have no reservation to study another country for MFI regulation if anyone of you think ok. Its just i understand Indian one to some degree of certainty.

 

I am attaching the pdf report of credit rating agency for Bandha. On page 9 you can see the borrowing profile of Bandhan. THE WEIGHTAGE AVERAGE COST OF BORROWING FROM VARIOUS SOURCES STOOD AT 11.25%. some of the lending institutions have been mean enough to demand monthly repayment. Its really surprising to see the MFI making a difference in lives of 150,000 million borrowers is running on a networth of just Rs 101 mln ($ 2.2 mln).

 

If you find it difficult to convert rupee values to dollar, just divide by 46 to come to dollar. 

 

Researching on site links posted by  Linda.

 

Keep posting.

 

Kabir

[spencer jaffe]

Hey all,

I think that we need to at least acknowledge the fact that some MFI's do take deposits. We can still focus on MFI's that do not and discuss possible solutions for those MFI's with funding problems. One of the solutions we can present for the funding issue is MFI's should take deposits and back that up with examples of MFI's that already do successfully. Any thoughts?

[spencer jaffe]

OK so here is a copy of what I intend to be my speech. I probably won't read it verbatum, but its a template I want to try to work with. It is focused on financial sustainability of microfinance organizations and why it is important. I am using statistics from a Microbulletin survey from 2001 that did a survey of 147 MFI's from all different parts of the world and of all different sizes. The last paragraph I probably won't use, but it is there if I need to add more time. We can tweak tomorrow also. I am also attaching a slide I made it is at the end of our template version. Any feedback or stuff to add would be welcomed

Spencer

[spencer jaffe]

[Kenny Phung]

Latest as of 3:50 PM 2/22/10

--
Regards,

kenny phung
operations manager
Two Towers Inc.
yogen fruz
510.816.0668

[Linda Madriz]

hey group,

i edited my slides onto the powerpoint... ill edit the conclusion on wednesday after our mock presentation...

this is the latest version of the ppt 

thanks!!!!!!!!!

linda

[spencer jaffe]

I edited my slide a bit. See everyone tomorrow

[Linda Madriz]

hey spencer... i found a cool graph showing a 395 million (72%) gap with MFIs serving clients... take a look at the pic... idk if u want to use it in addition to the funding gap? you could site that there is also a 395 million industry gap failing to reach the entrepreneurs due to its limitations on growth,... i just thought it might be good to add another graph in there... i know its last minute but let me know if u wanna use it or not.. no biggie,,, see ya tomorrow!

p.s. here is the website where i got it from if u want to take a look!

http://www.microfinanceinfo.com/economies-of-scale/

thanks!

linda

[Arun Singh]

Linda/Group,

 

Graph is awesome. I have decided not to add the fourth slide. If any questions comes the Q&A session i will mention about it. So my three slides with animations are attached here.

If i work on fourth slide, we will keep it hidden and just for backup in case we need during Q&A.

 

Thanks for your works. Group

Kabir