The Grameen Credit Agricole Foundation participated as a Founding Partner in the inaugural 60-Decibels Microfinance Index.

18,000 customers from 72 microfinance institutions across 42 countries were interviewed to measure outcomes of microfinance in five areas (access to financial services, business impact, household impact, financial management and resilience) in order to better assess the impact of microfinance institutions and to build benchmarks.

While microfinance generally succeeds in reaching people without access to financial services, improving their financial management and quality of life, as well as increasing their ability to face shocks, the outcomes in terms of business and household impacts are more mixed.

Find more about the results in a summary article on Forbes.com and download the full report on 60-Decibels website.

The Grameen Crédit Agricole Foundation is pursuing its investments in sub-Saharan Africa with the signing of new partnerships, particularly in Kenya where it has a new partner.

Sumac Microfinance Bank was established in 2002 by a group of 14 investors who initially formed an investment group to help chart out a better future for themselves. In 2004, the institution opened its doors to the public as Sumac Credit Ltd with a mission to empower businesspeople who couldn’t match the stringent loan requirements by commercial banks.

The institution’s focus on serving businesses is driven by the fact that business enterprises are the backbone of the country’s economy. Its promise is always to keep offering the best financial services to businesses.

The Grameen Crédit Agricole Foundation thus granted a first loan to Sumac, for an amount in local currency equivalent to € 2 million over a two-year period. With this new loan, the Foundation now has 40 partners in sub-Saharan Africa, including six in Kenya. This represents 53% of the partners supported by the Foundation and 32% of its portfolio under management.

For more information on the Foundation’s partners, click here.

Inpulse and the Grameen Crédit Agricole Foundation have been working since 2020 on the analysis and monitoring of the effects of the COVID-19 pandemic crisis on the microfinance institutions (MFIs) for which they are the donors. This periodic monitoring, shared through several articles,^[1] contributes to the exchange of information between the different stakeholders of the sector.

The conclusions presented in this article follow on from the last study conducted at the beginning of May 2022. Given the international context marked in particular by the war in Ukraine, the content of the survey has been adapted to gain a better understanding of the impact of this conflict on the microfinance sector. The 47 institutions that responded are located in Europe and Central Asia (ECA-51%), Sub-Saharan Africa (SSA-34%), South and South-East Asia (SSEA-13%) and the Middle East and North Africa (MENA-2%).^[2]

1. Latent risk of COVID-19 is gradually declining

As we have seen continuously over the past year with the global economic recovery, the major consequences of the containment phases since the beginning of the COVID-19 pandemic have gradually faded away for MFIs. At the end of May 2022, almost all respondents still report a continuous recovery of activities and 68% (32 MFIs) even report that they have returned or are close to returning to a pre-pandemic pace.

The main financial consequence of COVID-19 that 30% of the respondents still perceive is the persistence of a high-risk portfolio compared with the end of 2019. However, this point is becoming less and less significant as operations have been able to resume in a more or less stable manner and the moratoria granted are gradually being repaid.

This effect can be seen in the Grameen Crédit Agricole Foundation’s MFI portfolio as a whole, where the credit risk (PAR30, restructured loans and COVID-19 moratoria) is improving: it was 10% at the end of March 2022; compared with 21% at December 2020 (the average in 2019 was 5%). This improvement can also be observed in the portfolio of MFIs financed by Inpulse, both for clients in the  MENA region and in Central and Eastern Europe. In the case of MENA clients, the deterioration of their portfolio was very significant in 2020, reaching up to 37% of their outstanding loans, but it improved significantly in 2022, to 14%, with a value closer to the pre-crisis risk level (10.2%). For Central and Eastern European clients, this credit risk was 3.3% in the first quarter of this year, compared with 8.6% in 2020, almost the same level as in 2019 (2.7%).

2. Other events affecting microfinance institutions: inflation before the consequences of the war in Ukraine

This survey clearly shows that other factors than the COVID-19 crisis are now affecting the activities of our partners. The first, mentioned by 80% of respondents, is the upsurge in inflation in recent months. Thus, the vast majority of the countries of operation of the respondents are affected by the significant rise in energy costs and, to a lesser extent, by that of agricultural products. These factors are closely linked to the start of the war in Ukraine and are therefore global in scope. Our partners in sub-Saharan Africa are also noting the difficulties in obtaining supplies from abroad in the current context and are reinforcing fears of a food crisis.

At the beginning of May 2022, the Europe and Central Asia region stood out for its exposure to other economic difficulties. For example, 50% of respondents in the region reported that their country was facing rising interest rates, 25% reported tensions on the local currency (partly resolved at the time of at the time of writing of this article), 21% pointed out reduced foreign capital flows and 17% reported a decline in remittances. Currency tensions appear to be much higher in Central Asian countries than in Europe. A situation of devaluation of the local currency was reported by 83% of Central Asian MFIs (6% for European MFIs) and 50% reported a reduction in capital flows and remittances (compared with 11% and 6% respectively for European MFIs).

Finally, some microfinance institutions note a deterioration of the security situation in their country, notably in sub-Saharan Africa (Burkina Faso, Mali, and South Africa), South-East Asia (Myanmar, Indonesia) and Palestine. Whereas these results are not discussed in depth here, our partners confirm these issues and their impact on their activities.

3. Consequences on MFIs and their clients

The macroeconomic factors presented above are negatively affecting microfinance institutions. At the time of the survey, 50% of them indicated that they were already feeling the first effects, including 65% of those located in the ECA region – although some (Lithuania, Kosovo and Bosnia-Herzegovina) did not express such a feeling. The main consequence so far, mentioned by 39% of the affected MFIs, is the compression of their financial margin, which is mostly explained by the increase in funding costs over the last months, experienced by 32% of the respondents. This increase is mainly due to the cost of currency hedging on international loans, but also to the reduction of local hedging opportunities and access to local funding.

“The quotes offered by TCX/MFX for MDL continue to be too expensive” – Partner in Moldova

While this has not yet materialized at the time of this survey, at the beginning of the year MFIs also indicate that they fear an unbudgeted cost increase in the coming months.

“The increase in the price of fuel is affecting the institution’s expenses“ – Partner in Togo

Only a few MFIs cite the increase in portfolio at risk or the decrease in demand as immediate effects of the international context. However, this is a possibility in the coming months: 71% of them (all areas) consider the probability of deterioration high, although it is still too early to estimate it. And if this were to materialize, it would come directly from customers finding themselves in a more difficult situation, notably through a contraction in their disposable income and their ability to repay in the face of increased food and energy costs.

“We could be affected by the impact of the war on the economic situation of our clients” – Partner in Romania

“[We could be affected by] the increase in the cost of bread, due to the cost of supplying wheat flour” – Partner in Burkina Faso

Thus, even if the situation is until now well understood and seems to be under control by our partners with adapted measures, weak signals of real difficulties to be expected are clearly perceived. It seems that they are announcing a negative impact on their clients in the medium and long term.

Finally, let us note the humanitarian actions deployed from the first days of the outbreak of hostilities by certain MFIs in Central and Eastern Europe, which participate in the reception or emergency aid of Ukrainian refugees (Moldavia, Lithuania, Romania, Kosovo).

“From the company’s funds were purchased goods which are considered the necessities and donated to refugees Also, while some of our employees donated food, clothing, or money, others especially young people, decided to become volunteers. It is worth to mention that during last month Microinvest hired a refugee, which decided to remain in Moldova for a longer time within our IT team” –  Partner in Moldova

____________________________________________________________

^[1] Articles available here: //www.gca-foundation.org/observatoire-covid-19/ and //www.inpulse.coop/news-and-media/

^[2] Number of responding MFIs per region: ECA: 24 MFIs; SSA 16 MFIs; SSEA 6 MFIs; MENA: 1 MFI.

The Grameen Crédit Agricole Foundation is happy to announce that the GEF project ” Indicators and Framework for Climate Change Adaptation and Biodiversity conservation finance for Smallholders and Rural communities: leveraging private and public finance: //www.thegef.org/projects-operations/projects/11001” has been just approved.

The project aims to foster and scale up climate change adaptation for the most vulnerable ones, thanks to provision of trainings, technology and adapted financing. To support the generation of long lasting and scalable transformation, part of the project will be implemented by the Foundation and in partnership with the JuST Institute (in the project document the “CBIFI”), the non-for profit, members based, entity aiming to catalyse market development towards Inclusive, Biodiversity, Climate Change Positive Finance.

The Foundation is proud to partner with IFAD for the project implementation. It sees this project as an opportunity to foster its strategy on climate change adaptation, green finance and agriculture finance, with specific focus in smallholder farmers.

Further information on the GEF here.

Interview with Anne-Sophie DELATTRE, IGL / Project manager, Crédit Agricole SA
and Eva HÖGLUND, Chief Financial Officer, EFL Crédit Agricole Group
By: Mireille de Kerleau, Communications Manager, CACEIS
With the intervention of Mamadou FALL, Managing Director of Kossam
and Marie FAYE, CFO of Kossam

Hello, for the fourth edition of this podcast dedicated to Solidarity Bankers, I suggest you board a ferry that connects Dakar to the island of Gorée, in Senegal.

Eva: It was during a weekend, when we visited the island of Gorée, there were lots of children, and they were singing while crossing the ferry, and it was quite nice, so I filmed them.

This is Eva Hoglund speaking. We will discover in this podcast her experience as a Solidarity Banker, in tandem with Anne-Sophie Delattre.

You are going to ask me, what are the Solidarity Bankers? Well, the Solidarity Bankers are a skills volunteering scheme. It is open to all employees of the Crédit Agricole group and these are missions in favour of microfinance institutions and impact enterprises, which are supported by the Grameen Crédit Agricole Foundation.

So before starting, I will just remind you that Senegal is a predominantly rural country. Livestock represents 7.5% of national GDP and 35% of agricultural GDP, but Senegal is highly dependent on the import of milk powder: 90% of the milk consumed in Senegal is imported in powder form, while 30% of the population traditionally lives from livestock and can produce this milk. It is in the face of this observation that Bagoré Bathily created in 2006 a social enterprise called La Laiterie du Berger, with the aim of promoting local dairy production. Today, La Laiterie is the main national processing company for local milk. Its subsidiary, which is called Kossam, is in charge of supervising and improving milk production and collection systems.

So there you go, the scene is set, I suggest you now discover who Eva and Anne-Sophie are.

Anne-Sophie: My name is Anne-Sophie Delattre and I have been with the Crédit Agricole group since the end of 2006. First with an initial experience of more than 10 years in the Crédit Agricole Consumer Finance subsidiary, and a final experience at CACF in expatriation in China where I was responsible for Risks and Permanent Controls for four years. And then following this experience in China, I returned to France, to the head office of Crédit Agricole S.A. and I work at the Group General Inspection, I am in charge of missions at the level of the international local banking division. This is what I have been doing since my return from China, in April 2018.

Eva: I am Eva Höglund. I joined the group in 2001, first at CACF where I worked in international management as supervisor of various CACF subsidiaries abroad. In 2010, I left for my first expatriation in Denmark and then I continued with a second expatriation in China, and that is where I worked day to day with Anne-Sophie. Anne-Sophie was responsible for risks and I was responsible for finance. Then, when I returned from China, I joined BPI, Banque de Proximité à l’International, at the head office in Paris. And for two years now, I have been an expatriate again, in the financial department of EFL, the leasing and factoring entity in Poland.

And so, you are Polish, Eva.

Eva: No, I’m Swedish

Ah Swedish, not at all Polish, okay

Eva: Nothing to do, I don’t understand a word!

So Anne-Sophie and Eva knew each other from having worked together a few years earlier as expatriates in China. I asked Eva how they found out about the Solidarity Bankers mission and how they ended up together in Senegal.

Eva: There you go… in fact, I had already conducted a Solidarity Bankers mission, it was in 2019 I think, and I went to Kenya. I have great memories of it, it went very well, it was also very rewarding because the company really used the material I produced. And when I saw this offer, I saw that it was in the finance field, I saw that it was also in Africa, I was interested, and I ideally saw a Risk and Finance pair.  I said to myself, there you go, Anne-Sophie, she is an adventurer like me, I sent her a message right away, and she answered right away. I said to her: are you sure? Because if we apply, I’m sure we’ll get it. Because, really, our complementarity was perfect for what the announcement said and I said to myself there are not two other people who are going to match the offer the way we do. And we got it.

Then, I asked them to tell me about the social enterprise they have been supporting for the past two weeks in Senegal. Anne-Sophie begins by telling us about Kossam.

Anne-Sophie: It is a company whose main mission is a social mission. La Laiterie du Berger is a company with a capital mission, you could say, to make a profit, which is not necessarily the case with Kossam, it is really the particularity. Kossam today, of course, seeks to balance its activities, but it is very strongly colored by the social mission of developing the milk collection subsidiary in northern Senegal in fact, since the CEO of the Laiterie du Berger, when he set up this company, it was following an observation which was that the cattle were used only for meat and that the milk, in the end, it was not used in Senegal, and so he said to himself, we can’t let this material go to waste, not be exploited, so the Laiterie du Berger makes yogurts and Kossam develops the entire collection structure and therefore aims to improve the living conditions of breeders, to develop female employment since 53% of breeders are female breeders. And they also have a farm-school in which they accompany female breeders, or breeders to optimize milk production, help them to properly care for their animals and, incidentally, also try to teach them some methods for growing vegetables for example, that they can implement in the villages when they return later. So it was really a very different prism, for us who are grassroots bankers, to say to ourselves, in fact, each activity is not seen through a prism of profitability but more through a prism of social impact.

And Eva sums up the overall structure for us.

Eva: Kossam is a subsidiary of the Laiterie du Berger. It was created by the Laiterie du Berger, which owned it 100% until last year, when they brought in cooperatives, the breeders’ cooperative. Today, the Laiterie is the main shareholder, with à 95% stake, and the cooperative owns 5% of Kossam.

So why did Kossam call on the Solidarity Bankers? Mamadou Fall, managing director of Kossam, answered Anne-Sophie’s microphone.

Mamadou Fall: The maturity phase in which Kossam is now entering requires good control of operational processes, effective financial monitoring and permanent risk monitoring. The quality of work and the pragmatism of the solutions proposed by the Solidarity Bankers’ missions from which we have already benefited, motivated us to source this new mission to help us structure these subjects.

I then wanted to know more about their missions as such: what were their objectives, how did they go about it, and with which actors in the company.

Anne-Sophie: We had three projects: one project that we addressed together, Eva and I, which was Organisation and Process, a Financial Reporting project that was lead by Eva and a Risk Mapping part on which I was more in lead.

So on the Organisation and Process part, we worked on the basis of interviews with the Management Committee. There, the principle was to discuss with them and to understand the major processes of the company, that they explain to us the detailed operation of their processes, what could be the blocking points or the risks that they already had in mind, the areas for improvement that were already underway. Here we are, we have already discussed a bit of all that and then, on the basis of these interviews, afterwards, with Eva, we had observations, we established a diagnosis and recommendations which we then shared within the framework of the Steering Committee we had every two days. So we really built everything with them, shared the action plans, and validated the work to be done with them. And then afterwards, on the Risk Mapping part, we still went back to a lot of the interviews and also the findings of the project conducted by Eva on Financial Reporting. So there it was rather me who built a risk-based approach to set up a management system, or at least of control, by identifying advanced operational indicators of Risks, and it was me who built it and I shared it with them afterwards. So there, we are more in a stage where they have to appropriate the tools that we shared at the end of the mission and we remain available to discuss with them and finalise the tools.

This response from Anne-Sophie raised a question: what kind of risks might the company face?

Anne-Sophie: Not surprisingly, we have a major operational risk, which then breaks down into sub-topic risks. The operational is quite critical because it relies on key people, and on a process context in a society, in a country subject to fairly high climatic risks, water shortages, processes that are very manual and basically, the collection is done by tricycle drivers, in the bush. A tricycle accident seems silly, but we are really on the first level risk. If there is a tricycle accident, the collection does not reach the Dairy, so the breeders are not paid, it is a net loss for everyone. These are the risks related to operations and then afterwards, at Kossam level, I think you will confirm, Eva, we have a key person risk, which is very very high since we have no back-up on the Management Committee and we have roughly 4/5 people who are really key in the company. Afterwards, there are slightly more detailed risks, tax risk, financial risk, things like that, but it’s a little less critical, I would say, than operational and key person risks. Eva, do you want to talk about your project on the Reporting part? Because it is still a big pillar of the mission?

Eva: Anne-Sophie quickly mentioned the tax risk, which is good because there is no transfer-pricing in place, which is a fairly high risk because there are a lot of activities that link the Laiterie du Berger and Kossam, but without a transfer premium between the two of them. This creates a significant tax risk. And then, the financial risk that Anne-Sophie mentioned is a fairly basic risk since it is not an interest rate risk or an exchange rate risk or a liquidity risk, it is really a Financial Reporting risk since everything is manual. It is linked on the one hand to the key person question. If the key person is not there for the reporting, it will not be done. And then, because everything is manual, it also creates a fairly high risk of error. And then we also worked on the target financial reporting. The current reporting was a little too simple and complicated at the same time: it repeated the same data from one page to another and it was not necessarily the same figure from one page to another. And we identified the new target reporting with them. And now, based on the presentation proposal that I made to them, I am now waiting for them to verify and confirm it. So the ball is now in their court. We remain available to work with them post-mission until the end of June. And we remain available if they need us.

Marie Faye is the CFO of Kossam. She tells us about the contribution of the Solidarity Bankers mission to her daily work.

Marie Faye: I expected the mission to serve to strengthen the administration’s improvement capacities – I am the CFO of Kossam. And today, at the end of your mission, I admit that it will change a lot in our daily work. For example, it will allow us to minimize the risks, to strengthen our financial productions such as reporting and at the same time to save time, mainly. I will be able to move from operational tasks to more strategic tasks.

To conclude, I wanted to know what our two bankers got out of their mission.

Eva: do you want to start Anne-Sophie?

Anne-Sophie: I was about to say, come on, I’ll start ! Yes, it was very interesting, in fact, I hadn’t necessarily taken this whole social dimension into account before leaving, in fact, I hadn’t apprehended it well. And suddenly, it’s still very interesting and very rewarding to say that we are working to ultimately help the development of villages, to increase the standard of living of a population through the profitability of milk collection, by securing processes and similar. And then, being confronted with the operational process in the bush, it was also very interesting, you will tell what your point of view is, Eva, but overall, with hindsight, I tell myself that it was really funny to meet again, a morning like that, at the collection, at 7am with the collector who arrives with his son on his tricycle and his cans, the breeders who arrive with their cans, their buckets of milk to register the morning milking. And then, the second observation that I will also make is that in the end, I left with a lot of certainty about what I was going to deliver at the end of this mission and I did not deliver at all what I had in mind because we had to get back into a small entity context, with few people and we are often used to bringing out the heavy artillery and there, we had to be very operational so reframe the deliverables a little as regards the entire risk mapping part. So that was what was quite interesting because we had to rebuild tools, rethink things on the spot, and deliver things that may seem a little easy from our point of view, but which I think will greatly help.

Eva: I find that these solidarity banker missions are really unique experiences and I think we are very lucky to be in a group such as Crédit Agricole where we have the opportunity to participate in such missions. It really requires a significant open-mindedness, because you have to adapt to an activity that is not ours. Neither Anne-Sophie nor I are dairy farmers or cow breeders. We are experts in finance and risk, but in financial institutions. So you really have to adapt to the size of the company, to the activity of the company and in a context that is not at all ours. For me, one of the best memories is to see this landscape of sand, women who came from right and left, from a house, they sometimes came from quite a distance in fact, on foot. And who came to drop off these two liters of milk in these colorful clothes, very often with the children who accompanied them, and that was a great experience that I feel very lucky to have been able to experience.

A very satisfying mission for our two supportive bankers. I hope that this testimony will have aroused vocations among our listeners and I look forward to seeing you for the next episode of Solidarity Bankers… see you soon!

Listen to the podcast here

During the first half of 2022, the Grameen Crédit Agricole Foundation granted 3 new financings in Asia. To date, the Foundation manages a portfolio of € 89 million, 30% of which in South and South East Asia.

In Cambodia, the Foundation granted a new loan to Chamroeun for an amount equivalent to €3 million. Chamroeun is a Cambodian microfinance institution that puts social vocation at the heart of its economic model. It provides financial services to the poorest, excluded from the offer of more commercial microfinance institutions. In order to maximize the impact of credit and effectively help very poor families, in addition to the financial component, Chamroeun also offers a range of training and economic, social and personal support services. To date, the institution serves over 45,000 clients, 80% of whom are women.

In Indonesia, the Foundation granted a new loan to the KOMIDA for an amount in local currency equivalent to €3 million. KOMIDA is a microfinance institution created in 2004 as a foundation. Its mission is to provide financial assistance in the form of savings and loan services, non-financial services (health training), motivational education for members’ children, family financial management and provision of quality services to members. The institution, which transformed into a savings and credit cooperative in 2008, caters exclusively to women. To date, the institution has nearly 720,000 clients 97% of whom are located in rural areas.

Lastly, in India, the Foundation granted a guarantee of an amount equivalent to €4.4 million to the microfinance institution Fusion, for a loan in local currency granted by CACIB India. Fusion Microfinance is a microfinance institution created in 2009 by Devesh Sachdev. Its mission is to be an autonomous financial institution that leverages the existing distribution network to channel other products and services. Fusion has a social vision and business orientation aimed at providing disadvantaged women with economic opportunities to transform their quality of life. To date, the institution has more than 2 million clients, exclusively women.

At the end of May 2022, the Foundation had 75 partners in 36 countries. 15% of these partners are located in South and South East Asia.

More information on the organisations supported by the Foundation here.