Digital finance: a weapon to fight exclusion?

Our partner ADA is taking action with the “Digital Finance Initiative” (or DFI) which aims to facilitate and co-finance the implementation of digital solutions by microfinance institutions in 12 countries in Sub-Saharan Africa. Covering a period of 5 years, from 2017 to 2021, this ambitious project will provide fast, cheap and secure access to banking services.

3-step support

1st step: initial workshop to identify priorities
The DFI workshop brings together senior MFI executives for a week. It aims to give them a complete vision of the different challenges, opportunities and constraints represented by new technologies. It gives them the keys to analyze all the possible scenarios for integrating digital into their strategy and to assess the expected impacts in technical, but also operational, financial and regulatory terms. The goal is for the participants to come out of the workshop with clear ideas on the digital strategy they wish to adopt.

2nd stage: pre-project phase: definition of a digital project
MFIs who wish to continue the adventure first validate their new project by their governance. Then, supported by the ADA manager in charge of the “Digital Finance Initiative” project and local consultants, they can launch their action plan. This plan provides for the establishment of specifications, the publication of calls for tenders and the selection of technical service providers, the establishment of a schedule and finally the drafting of a co-financing file which will be submitted to a selection committee, composed of members of the Board of Directors of ADA, Deloitte Digital, POST Luxembourg and LuxFLAG. The file, if approved, is co-financed by ADA (and possibly other donors) up to 70% of the investment costs, up to a limit of € 100,000.

3rd stage: pilot phase: implementation of the digital project
After acceptance of the file by the Committee, the implementation of the project can start with a pilot on the scale of one or two agencies. At this stage, ADA offers the MFI financial support, as well as support in all areas impacted by the project: redefinition of procedures, training need for staff and clients, risk management. As soon as the testing phase is completed and proves conclusive, the MFI deploys the project throughout the network. It is at this point that the support of ADA stops, which then considers the institution as autonomous.

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Green Index or how to combine finance and climate!

Green microfinance – now there is a term that arouses curiosity. What does it mean? Are we talking about responsibility, savings, commitment? How can the notions of “green” and “inclusive” rhyme viably?

The Green Index was devised in 2016 as a tool for measuring the environmental performance of microfinance institutions, in order to tackle these challenges. This complete and detailed file compiled by the Microfinance and Environment Workgroup of the European Microfinance Platform (e-MFP) contains the answers to all your questions.


Created in 2008, under the joint impetus of the directors of Crédit Agricole S.A. and Professor Yunus, winner of the 2006 Nobel Peace Prize and founder of the Grameen Bank, the Grameen Crédit Agricole SA Foundation is a multi-business operator that contributes to the fight against poverty through financial inclusion and entrepreneurship with a social impact. As an investor, lender, technical assistance coordinator and fund advisor, the Foundation supports microfinance institutions and social enterprises in nearly 40 countries.

Microfinance Focus: a sector undergoing a full (r)evolution

By Amélie Riou et Alice Forgeois, Grameen Crédit Agricole Foundation

©Philippe Lissac / Godong

When we think about microfinance, we think small loans, for people who do not have access to credit, only in the most remote and abandoned areas, granted by small operators managing the outstanding loans of their customers on paper or old computers, only to finance professional activities. In short, nothing very revolutionary or innovative. Do not be fooled! Microfinance continues to evolve and adapt to its environment: better customer relationships and protections, digital services and provision of innovative products for rapidly meeting essential needs. Be ready for a few surprises!

Microfinance and GAFAs *, a possible love affair?

Microfinance is no longer the exclusive domain of NGOs and specialised microfinance institutions. At least, no longer exclusively. Is it for the best…? New market players, internet, mobile, digital giants, are interested in microfinance and offer microcredit products. Easy for them as they know their customers well and can exchange information and money very quickly with them. Here are some examples:

Baidu, the Chinese google, offers microloans through its subsidiary Chongqing Baidu Micro Finance to ride the wave of consumer credit which is growing steadily in China and which represented, as of September 2017, a market of 30.2 billion yuan (3.9 billion euros). Baidu reported using big data, machine-learning techniques and facial recognition technology to help assessing the credit record of potential borrowers. Micro-borrowers repay directly through a “wallet” application and the loan application is submitted online. These loans are often intended to finance studies in private institutions (English training, professional training or IT training).
Simultaneously, last September Amazon announced a partnership with Bank of Baroda (India) to offer microcredit products to sellers on Amazon. Loans at this stage are offered to sellers who fulfill a number of criteria (date of creation of the Amazon account, sales history of the seller, customer returns, seller that complies with Amazon e-commerce rules). Indian sellers will be able to use directly the profits from their sales to repay their loan. Amazon wishes to attract 15 to 20% of Amazon India’s customers in one year…! Be careful, digital can be a channel for the development of microfinance, but could ultimately be a factor of additional financial exclusion, by recording and making available a large amount of information and borrowers’ history…

Microfinance and macro-services?

Green microfinance, micro-nutrition, agricultural insurance … No link between these different topics a priori? Indeed, there is a link. These products have now become an integral part of microfinance institution activities and complement the offer of traditional credit. Forget the classic pattern and welcome in the 2.0 microfinance! Thanks to the geographical diversity of MFIs, the proximity they have with each client and their strong rural roots, microfinance is becoming a privileged channel for the distribution of new services.

A team of researchers recently asked whether it was possible to use the network of MFIs to combat malnutrition, which is almost always linked to poverty in developing countries. The team thus made available to the institutions micronutrients containing 15 essential vitamins and minerals and then measured the impact of this distribution by taking blood samples. Following this study, this distribution network appeared to be very effective in the fight against malnutrition. To consolidate the results, a study will be conducted throughout Haiti. Interesting prospects are in sight!

Very little widespread in Africa but with huge potential developments, agricultural microinsurance offers small producers the opportunity to insure their harvest against various risks (weather conditions, diseases, etc.). How to democratise access to microinsurance? Precisely, thanks to microfinance: the insurance product can be offered to the client, together with a microcredit.

The supply of credit products has also grown considerably over the past years: specific microcredits to facilitate access to renewable energy, decent housing, etc. An increasingly wide range of products that make it possible to better cover the needs of the communities, on levels as different as necessary.

Is microfinance heading towards new horizons?

Historically intended for developing countries, microfinance is also present in Europe.

Why? It is presented as one of the possible answers to the economic crisis, social unrest or financial exclusion and is supported by the States. Who? Thanks in particular to non-bank financial institutions and NGOs. Who is it for? According to the Convergences 8th Microfinance Barometer, the outstanding microcredit gross portfolio in Europe amounts to 2.5 billion euros, of which 71% is intended for professional purposes for people who have a limited access to financial resources. How? The terms and conditions of these loans vary widely from one European State to another: from 3% in Poland, Finland and France to 28% in Serbia, with average loans per borrower ranging from around 100 euros to 25,000 euros. In addition to microcredit, these European microfinance institutions are increasingly offering additional services, such as savings, insurance, etc.

In addition to expanding to new countries, microfinance is adapting to countries in which it has already been present for many years: Islamic microfinance is developing. Why? In order to satisfy potential beneficiaries who do not use traditional microfinance because of their religious beliefs. How? By adapting the traditional microfinance scheme to commercialise Sharia-compliant products, mainly by withdrawing the concept of interest rates from products on offer. What prospects? Still in a minority compared to the entire sector, the market is growing rapidly in many countries. The three pioneering countries of Islamic microfinance are Indonesia, Lebanon and Bangladesh but the model should expand to improve the financial inclusion of all. What impact? The scope of this new type of microfinance is very important in Muslim countries with around 56% of Moroccans who refuse to use microfinance services for religious reasons.

* Acronym for the four US giants of fixed and mobile Internet, Google, Apple, Facebook and Amazon


* Google, Apple, Facebook et Amazon

Social Business Focus

By Juliette Charrier, Grameen Crédit Agricole Foundation

When one enters a Social Impact Foundation, you do so with lots of misconceptions and idealism. At least that was my case. I would now finally discover the recipe of the qualitative and quantitative impact to find models that are meaningful, efficient to combat poverty, financially successful and that align the interests of all actors in the value chain. Cold water on my hopes! Nothing is ever all right or all wrong. It is difficult to have an impact and we have found no single recipe for success. However, gradually we realise it is possible to contribute to the economic development of emerging countries, support companies that create economic opportunities, that remunerate in an inclusive and equitable way their stakeholders.

First of all, disillusionment: have we been lied to for 10 years? Can social business companies really balance profitable growth with social impact? When we first look at our portfolio, we would be tempted to give up and ask ourselves whether we are creating a financial and social speculative bubble on the concept of social business by saying it works although the figures are not forthcoming. Despair and loss of confidence.

Then, by digging into the subjects and by understanding each social business company, we realise that there are strong and concrete improvements, sometimes operational, sometimes social, sometimes both. Except in extreme cases, there are tangible results. It is reassuring, exciting! Renewed hope towards Social Business companies.

There are certainly results, but still well below expectations. We think about the means to be employed, we realise that this is a long-term process and that we must be properly coached. We also conclude that there are as many situations in social business companies as variables to collect to ensure their success. But are we the only ones to face such situation?

Phase shift: some impact funds indicate they have real social impact and market yields: how is that possible? Two lessons emerge: 1) the concept of impact investing is very broad and ranges from “investments that do no harm, to investments that are seeking at any price to do good”. 2) The Grameen Crédit Agricole Foundation funds more social start-ups than companies or social programmes. The Foundation thus belongs to the “impact investing” sector, in the “social business” section, and more specifically in the Social Impact Seed-Capital Risk subsection, due to its low average tickets and the entrepreneurial nature of the companies invested. When we realise that Venture Capital funds rely on a “unicorn” company to achieve the added value that will absorb the costs of a dozen less successful investments, while creating, when possible, returns to remunerate managers and shareholders, all this in flourishing and developed economies … we measure the challenge faced by Seed Social Business Funds in emerging countries.

Is it a problem of financial means? Do investment funds invest too little to really enable social business companies to develop, be structured and create a business? According to the GIIN report, internal return rates (IRRs) do not vary according to the total size of the funds but may vary according to the size of the investments.

Is it a problem of extra financial means? The isolation of entrepreneurs and the lack of qualified support? How to draw lessons with investments as diverse in terms of leadership profile, market segment, socio-economic context, value added of the company, targeted beneficiaries etc?

And even if it all works, are the social business companies the best way to achieve impact? Would it not be better to try to change the methods and practices of large groups already resilient in emerging countries to have a real global impact? Integrating new stakeholders such as new customer and supplier segments could ultimately have a longer reach.

In the end, we grow up, by realising that the goal is not to have the most profitable social impact but to contribute to the economic development of emerging countries, by integrating into value chains previously excluded actors, by creating jobs and giving access to essential goods to as many people as possible. The key is that we find ourselves in a stimulating environment, where situations evolve rapidly, where we fumble in search of successful mechanisms, where we try to strengthen social business companies through fruitful partnerships, to achieve financial balance and maximize social utility, and where innovation is everywhere.

News from the front

Social Business clients = 100% of beneficiaries? Not necessarily! In social business companies, it is often considered that the customers are the beneficiaries. That would be ideal to maximize the impact. But to allow the company to have an impact, it must, above all, be able to operate with a minimum of profitability to cover its costs. Thus, it becomes clear that in order to diversify risk and strengthen the business, it would be preferable that the company addresses different segments of the population, both beneficiaries and “traditional” customers. This is at least the opinion of OikoCredit that recommends starting a social business in the field of access to solar energy by first addressing customers who have the financial means, and subsequently include the Bottom of Pyramid (BOP) segment in the business model.
Social impact challenges are not always where we expect them. When seeking to include a marginalised population in an agricultural value chain, to improve their incomes and living conditions, one thinks, first, it might be necessary to improve the livelihoods of small farmers. Admittedly, obtaining inputs, preparing and cultivating a field takes time and money, but these steps do not turn out to be the biggest hurdle marginalised small farmers face. According to the Managing Director of Selina Wamucii, a fruits and vegetables export company in Kenya, the real factor of exclusion for small producers is the difficult access to economic opportunities. Indeed, while NGOs, impact funds and governments are mobilising to finance upstream production, they should also ensure downstream, because if the market demand is strong, it will reassure small producers who will no longer be afraid to take credit without the backing of an economic income later.
Do not be dazzled by solar energy. Access to solar energy has been booming in recent years. Indeed, it provides access, at a competitive price, to clean energy for marginalised or off-grid populations. It also enables the financial inclusion of unbanked segments via mobile payment and PAYG (pay as you go) mechanisms. It is indisputable that solar energy has many positive effects. However, it is important not to oversell the social impact of solar energy: selling solar panels to a farmer will allow him to have better lighting, but will not generate any income. A small farmer would first need energy to irrigate his/her fields, work his/her land and sell his/her products quickly and at a fair price. It is therefore important not to fall into the impact overbid; solar energy will improve the living conditions of the beneficiaries, but will not necessarily generate income.

The Grameen Crédit Agricole Foundation draws lessons from its investor experience: discover the White Paper on Social Business

After eight years of investing in social businesses, the Grameen Crédit Agricole Foundation wished to draw lessons from its experience and share them…! It thus sets out the challenges that these social business companies face. The Foundation puts forward proposals to strengthen this promising model.



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The Foundation grants a €330,000-loan to Chamroeun in Cambodia

The Grameen Crédit Agricole Foundation granted a €330,000-loan over a period of two years to the MFI Chamroeun in Cambodia, in which it has had a 20% shareholding stake since 2012. With this new loan, the Foundation’s cumulative investment in this company amounted to €1.6 million at the end of December 2017.

Chamroeun is a microfinance institution that puts the social purpose at the heart of its economic model. It provides financial services to the poorest segments of the population who are excluded from the offer of more commercial microfinance institutions. To maximize the impact of the loan and to provide effective help to very underprivileged families, it offers them a set of training and economic, social and personal services. At the end of September 2017, the institution had 24,530 active customers, including 81% with an average loan equivalent to €315 granted to its customers.


Created in 2008, under the joint impetus of the directors of Crédit Agricole S.A. and Professor Yunus, winner of the 2006 Nobel Peace Prize and founder of the Grameen Bank, the Grameen Crédit Agricole SA Foundation is a multi-business operator that contributes to the fight against poverty through financial inclusion and entrepreneurship with a social impact. As an investor, lender, technical assistance coordinator and fund advisor, the Foundation supports microfinance institutions and social enterprises in nearly 40 countries.