MIF erasing myths, boosting integrity of region's microfinance sectors

By Arlene Martin-Wilkins, Associate Editor - News

Friday, June 06, 2014

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MONTEGO BAY, St James - Having spent approximately US$6 million since 2008, the Multilateral Investment Fund (MIF) is near completion of the second phase of its Caribbean Microfinance Capacity-Building Programme (CARIB-CAP) which is designed to shore up microfinance sectors in Jamaica and other Caribbean countries.

The programme will officially come to an end in December, but already the MIF -- a member of the Inter-American Development Bank group -- is looking at ways it can further help Jamaica and its Caribbean neighbours build thriving microfinance sectors based on best practices and integrity. The programme is being undertaken in collaboration with the European Union, Caribbean Development Bank (CDB), and Citi Foundation.

"We are going to look at further supporting to the so-called stars (microfinance institutions), the ones who have done well, rather than a regional approach. If we do [take a regional approach) we might target certain aspects, maybe regulations, may be credit uptake, data and MIS (management information systems)...," Winsome Leslie, senior specialist in MIF's Access to Finance Unit, told the Jamaica Observer in an interview on Wednesday.

"... So, we probably will not be doing just a phase three of this (CARIB-CAP programme), but looking to see realistically what we have achieved and where we need to go as a sector," added Leslie, a Jamaican.

Aptly named CARIB-CAP II, the second phase of the programme -- which began in 2012 -- consists three components in institutional capacity-building, consolidation of the Caribbean Microfinance Alliance (CMFA) and knowledge-sharing and dissemination.

The objectives of the three components are to strengthen the institutional capacity of microfinance institutions that are providing financial services, strengthen the institutional capacity of the CMFA, and "develop materials, lessons learned and good practices for microfinance in the Caribbean frontier market and to make it available for public dissemination", respectively.

Overall, CARIB-CAP II is designed to "build on the activities" of CARIB-CAP I, which ran from 2008 to 2011 and had an overarching goal to "change in mindset on the part of these MFIs as well as their general understanding of the sector and the importance of a regional network" of microfinance institutions.

Specifically Leslie said that the programme has helped the region's microfinance sectors to reduce portfolio risks, boost client outreach, infuse best practices from outside the region into local operations, and improve data collection in terms of what goes on in the industry.

"Within the Multilateral Investment Fund itself, we have a major area focusing on access to finance and under that microfinance is a key component. The MIF focuses on small actors, small producers, small businesses, microentrepreneurs and so forth so microfinance is a key aspect of that space," Leslie said.

Leslie said, too, that the impact of the programme has been substantial in influencing a cultural shift and building awareness of that microfinance really is.

"Before the project started a number of institutions thought they were doing microfinance right by their clients; they believe they were in line with best practices... and within a year, in undergoing training, they found that they were [doing otherwise]," she told the Observer.

According to Leslie, a key part of the work in Jamaica focused on magnifying the blurred line that separates true microfinance providers from mere money lenders. She said there has been much confusion concerning the definition of the two, which complicates Jamaica's situation in terms of how to zoom in on and address challenges.

"The reality is that there are relatively few microfinance institutions in the country," she emphasised.

"But we are very much aware that there is a big group of informal moneylenders out there; the ones who accept payday loans and so on. So as part of CARIB-CAP we launched a microfinance network, the Caribbean Microfinance Alliance," she said.

"There are a lot of misperceptions; these so-called moneylenders who are lending at exorbitant rates and don't have any client policies are pulling down the rest of the groups, the ones who are offering a suite of services. So one of the things they (CMFA) wanted to do was to come up with a code of conduct for the sector so their members will sign on to; they will also talk to JamFin (Jamaica Association for Micro-Financing) and JamFA (Jamaica Micro Finance Association) to get their members involved. They will also try to streamline and shake out the bad guys and build some integrity in the sector," she said.

The MIF was one of the major sponsors of the four-day Fifth Caribbean Microfinance Forum (CMF V), which ended yesterday at Iberostar Rose Hall suites in St James. The other sponsors included the European Union, CDB and Citi Foundation. The discussions at the forum fell under three main categories -- youth entrepreneurship, rural entrepreneurship, and technology -- and had among its major presenting partners representatives from the Development Bank of Jamaica, National Youth Service, and HEART Trust/NTA.

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