In 2018, the Grameen Crédit Agricole Foundation launched a social impact investment fund in partnership with CA Indosuez Wealth (Asset Management) and CACEIS Bank, Luxembourg Branch. This fund offers the Regional Banks and entities of the Crédit Agricole SA Group the opportunity to invest in the financing of microfinance institutions operating in rural areas in emerging countries.
The Foundation thus reinforces its support to institutions operating in emerging countries for the benefit of people traditionally excluded from the banking sector, and more specifically for the benefit of women, who constitute the client base of these institutions. The benefit is twofold: a positive profitability objective and an impact in terms of financing of income-generating activities.
Two new microfinance institutions have recently been financed through this Fund. A loan in local currency equivalent to €1.5 million has been granted to Asian Credit Fund (ACF) in Kazakhstan. ACF offers financial services designed to promote rural household development, small business growth and homeownership. To date, the institution has 27,000 active borrowers, 79.5% of whom are women and 95.9% of whom live in rural areas. The institution manages a loan portfolio amounting to € 13.2 million.
The Fund also financed the Kosovar institution KRK with a loan of € 1.5 million. KRK’s mission is to provide access to financial services in rural areas of Kosovo. A long-standing partner of the Grameen Crédit Agricole Foundation, the institution currently has 16,000 active borrowers, of which 15.2% are women and 60.5% live in rural areas, and manages a loan portfolio amounting to € 38.4 million.
With these two new investments, the Fund is now supporting four projects for a total amount of € 5 million. As of September 30, 2019, after the confirmation of the participation of Centre Loire, 21 Regional Banks are investing in the Fund. The FIR’s outstanding amount is € 9.7 million thanks to the investments of Crédit Agricole Assurance, Amundi and 21 Regional Banks (Alpes Provence, Alsace-Vosges, Brie Picardie, Centre-est, Centre-France, Centre Loire, Centre-Ouest, Champagne-Bourgogne, Charente-Périgord, Finistère, Franche-Comté, Ille-et-Vilaine, Languedoc, Loire-Haute Loire, Martinique-Guyane, Normandie-Seine, Provence Côte-d’Azur, Réunion, Savoie, Sud Rhône Alpes and Touraine Poitou).
During the first six months of the year, the Grameen Crédit Agricole Foundation made new investments in Central Asia. It granted a new loan in USD equivalent to € 895,000 to the Tajik microfinance institution Humo. Humo is a progressive and leading microcredit deposit organisation whose main activity is to provide quality, affordable financial services to the rural population. To date, this institution has nearly 57,000 active borrowers, 42% of whom are women and 80.5% of whom live in rural areas.
The Foundation also granted a new loan to OXUS Kyrgyzstan for a total amount in local currency equivalent to € 708,000. OXUS Kyrgyzstan is a microfinance institution that offers individual and group loans to its clients who work mainly in the agricultural and livestock sectors. The institution currently has 7,600 active borrowers, 55% of whom are women and 57.2% of whom live in rural areas.
The Grameen Crédit Agricole Foundation is currently supporting 20 microfinance institutions in Eastern Europe and Central Asia with total commitments in the region amounting to € 20.1 million, that is 21% of the Foundation’s commitments as of end of August 2019.
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.
During the first half of the year, the Grameen Crédit Agricole Foundation has granted seven new fundings in sub-Saharan Africa to historic partners. With these new investments, the Foundation raises the amount of its commitments in Sub-Saharan Africa to nearly € 41 million, that is 41% of the total amount of the Foundation’s commitments as of end of August 2019.
In Benin, the RENACA microfinance institution received a loan in local currency equivalent to € 762,000 over a three-year period. RENACA is a mutual microfinance institution whose mission is to significantly strengthen the economic base of rural populations. To date, the institution has 27,000 active borrowers, 80% of whom live in rural areas and 59.5% of whom are women.
In Kenya, the Foundation granted a new loan in local currency equivalent to € 2 million to the microfinance institution Musoni. Musoni Kenya is a microfinance institution that leverages Information Communication Technology (ICT) heavily to manage its operations efficiently and to scale rapidly. To date, the institution has 44,000 active borrowers, 66.3% of whom are women and 63.3% of whom live in rural areas.
In Uganda, ENCOT received a new loan in local currency equivalent to € 296,000 over a three-year period. This loan was made within the framework of the African Facility, a programme developed by the Grameen Crédit Agricole Foundation in partnership with the French Development Agency to support small microfinance institutions in sub-Saharan Africa. ENCOT is an indigenous rural community development microcredit and rural-enterprise development NGO whose goal is to provide financial and enterprise development services. To date, the institution has 6,200 active borrowers, 56% of whom are women and 88.4% live in rural areas.
Similarly, in the Democratic Republic of Congo, the Foundation granted a loan equivalent to € 540,000 within the framework of the African Facility, to the microfinance institution Paidek, an institution whose role is to finance the development of small commercial or livestock-raising activities. To date, Paidek has 15,500 active borrowers, 51% of whom are women and 31.2% of whom live in rural clients.
In Zambia, the Foundation also provided a new loan in local currency equivalkent to € 300,000 over a three-year period to Agora Microfinance Zambia (AMZ), within the framework of the African Facility. AMZ is a microfinance institution which targets specifically people with low incomes through suitable financial products. To date, it has 37,100 active borrowers, 58% of whom are women and 85% of whom live in rural areas.
Finally, in Senegal, the Foundation has made two new investments. A first investment was made with the microfinance institution CAURIE in the form of a loan, for an amouint in local currency equivalent to € 1.14 million over a four-year period. Caurie Microfinance’s mission is to contribute to the economic and social improvement of poor microentrepreneurs. The institution now has 72,200 active borrowers, 99% of whom are women. 55% of Caurie’s customers live in rural areas. The second investment made by the Foundation in this country was made in the form of an equity investment to Laiterie du Berger for an amount equivalent to € 99,700. La Laiterie du Berger, of whom the Foundation has been a shareholder since 2010, is a social company that collects milk from Fulani herders, in the North of the country, and transforms it into yogurts and other dairy products that are sold under the brand Dolima.
During the first half of 2019, the Grameen Crédit Agricole Foundation funded three new partners in Africa and Central Asia. With these three new partners, at the end of August 2019 the Foundation supported 81 organisations in 38 countries.
It has thus granted a first loan in FCFA equivalent to € 1.5 million to Vital Finance in Benin, a microfinance institution founded in 1998. Launched as a microfinance project funded by USAID, Vital Finance has gained impressive experience in the field of microfinance. Its constant evolution in terms of both its activities and its profitability places it among one of the largest microfinance institutions in the country. The institution is mainly active in peri-urban areas with very active populations, economically viable but without access to traditional banks. To date, Vital Finance has 29,000 active borrowers, 66% of whom are women.
Also in the first semester, in Zambia, the Foundation provided a loan in local currency equivalent to € 1.5 million to the microfinance institution Entrepreneur Financial Center Zambia (EFC). It is the largest regulated microfinance institution in the country. EFC offers loans to individual businesses and loans for housing. It also offers deposit and savings products to its clients. The institution, established by CARE Zambia in 1996 as a microfinance project, aims to provide working capital solutions for micro, small and medium enterprises (MSMEs), with a focus on innovation customised products. To date, it has nearly 4,000 active borrowers, 44% of whom are women and 6% of whom are located in rural areas.
Finally, the Foundation also granted a first loan in local currency equivalent to € 890,000 to the microfinance institution Salym Finance in Kyrgyzstan. This institution, created in 2007 by four Kyrgyz entrepreneurs, aims to create the financial conditions to support and develop client activities and improve the standard of living of the population. Salym offers loans following the individual methodology. Currently, the institution has nearly 12,500 active borrowers, 53% of whom are women and 74% of whom are living in rural areas, and manages a portfolio of €16.5 million.
Launched by the Grameen Crédit Agricole Foundation and Crédit Agricole S.A. in 2018, Solidarity Bankers is a skills volunteering programme open to all Crédit Agricole Group employees for microfinance institutions or impact companies supported by the Foundation. Discover the platform of Haoly Basse, a CACIB Solidarity Banker who went to Senegal in July to provide guidance and support to KOSSAM, a social business supported by the Grameen Crédit Agricole Foundation.
When I discovered the Solidarity Bankers programme, I felt an affinity with the values of commitment, solidarity and sharing embodied by the assignments offered. I became aware that the values conveyed by Crédit Agricole were not just “pretty words” but were backed by inspiring, visible and concrete actions.
I therefore decided to apply for a “digital” assignment in favour of KOSSAM Société de développement de l’élevage (KSDE) in Senegal — an assignment even closer to my heart as I stem from the North of Senegal. KOSSAM is a social business, a subsidiary of the Laiterie du Berger, which works with nearly 450 local dairy farmers and aims to develop a sustainable dairy industry in the North of the country. The aim of the assignment was to provide guidance and support for the company in deploying the digital application “Com care” which will help improve the collecting conditions and the company’s knowledge of its farmers – suppliers.
After a series of talks with the Foundation’s team, I was confirmed as a Solidarity Banker. I also had the support of my employer, Crédit Agricole CIB, which covered 50% of the assignment time by way of skills-based sponsorship. The adventure had started.
Morning visits, meetings and learning
The discussions leading up to the assignment with the team of the Foundation and KOSSAM enabled me to prepare for the intense task that lay ahead. I arrived in Dakar on Saturday, 29 June, and was met at the airport by Jonathan Michaud, one of the first Solidarity Bankers stemming from Crédit Agricole Franche Comté, who was posted on a two-year assignment as General Manager of KOSSAM.
The next day I attended the annual Convention of supplying farmers held in Saly by the Laiterie du Berger. It was a sterling opportunity for me to take part in a key moment during which I was able to observe the strong cohesion of the dairy farmers and teams of the Laiterie du Berger and KOSSAM in facing the challenges of the dairy industry.
The following Monday was my first day at work in Richard Toll. As it happened to be payday, I was able to meet most of the farmers who worked with KOSSAM. On the days which followed, I paid several field visits which started at 5:00 AM to help the teams of KOSSAM with the deployment of the digital application “Com Care” to collect milk from the dairy farmers and to feed the company’s database. The needs of the users vary: save time when performing their work, have reliable data that can be shared in real time, automate repetitive tasks, implement procedures and have a reliable information system. The discussions with the farmers were rich and instructive, particularly concerning the establishment of mini farms – one of the development pillars of KOSSAM.
In addition to visiting several farms, I also visited the plant of the Laiterie du Berger. I found the shop foreman’s description of the industrial processes for the design of dairy products captivating. I was impressed by his professionalism and technical acumen. I also took part in the inauguration of the water fountains in one of the stores selling food in the bush – a fine moment of sharing and celebration.
10 days after – the next steps
I drew on all the data collected to analyse the existing situation and to make recommendations on how to accelerate the company’s digitization. The subsequent steps will consist of putting in place a reliable information system for KOSSAM so as to have access to shared data in real time to manage the work on a day-to-day basis and to develop the company’s business.
This assignment was very eye-opening for me, because I would have never imagined that being close to the farming world would have pleased me so much. I enjoyed being close to the dairy farmers and the local teams, sharing their everyday lives, listening to them and seeing the impact their actions and collective work had in the field. There is an African saying: “we are broke but not brazen.” I find it most telling of the mutual assistance and solidarity that I witnessed throughout my assignment. These values are deeply rooted in Senegal and it is invigorating to share them.
I returned to Paris transformed with a desire to go back to Senegal, because the country has enormous potential for development. I have come away with a rich professional experience and a fine human adventure which has reinforced my ties with the Crédit Agricole Group.
Microfinance is the set of financial products and services accessible to people who are excluded from the conventional banking system. Today, the microfinance sector boasts 139 million beneficiaries for an estimated total of outstanding loans of $114 billion (1). Beyond the objective of fostering financial inclusion, microfinancing is constantly adapting and innovating to be a lever for economic development through entrepreneurship.
This financing of entrepreneurship is a common key point between microfinance and retail banking. As in the case of microfinance, retail banking provides solutions to promote income-generating activities. In the Booklet celebrating the Foundation’s 10th anniversary published last year, we compared the figures of the Foundation and a small-sized “average” (2) regional bank and identified several analogies. This article puts the spotlight on the common challenges identified.
A few points of comparison
Retail banks and microfinance institutions (MFIs) share certain objectives and operating procedures. For example, the commercial organization is similar to that of a conventional banking network with an account manager who manages a portfolio. They both exercise their activities in the heart of their territories close to their customers. Microfinance has evolved so as to diversify its offer of financial products, moving close to that of a retail bank: lending, savings, money transfers, insurance, mobile payments, investments, etc., reflecting the variety of needs of clients and businesses.
Furthermore, MFIs and retail banks are plying their trade by endeavouring to control their costs and risk, while aiming to generate a positive and resilient result capable of securing the sustainability of their mission.
For all that, the revenue and expenditure structure differs widely between the two models. The operating costs (for example, travel expenses of loan officers who have at least 250 to 300 clients) are high at an MFI: they account for 50% to 60% of the charges.
The revenue mix also has structural differences. The amounts and average term of loans are more modest in microfinance: microcredits are in general for a term of less than a year and the average loan (of our partners) is €765 compared with €16,000 for an average regional bank. An MFI has revenues linked almost exclusively to financing, contrary to a retail bank, which has a more extensive range of products and is less reliant on financing. The revenues of an MFI are essentially generated from the net financing margin: Interest on loans accounts for 88% to 99% of the revenues of MFIs, far more than the 51% of the average regional retail bank.
Interest rates in the microfinance sector are higher than those of a retail bank, particularly because of the operating costs. Nevertheless, ethics and the impact requirement are forcing the sector to optimize its operating costs. The table below provides a comparison of the expenditures, revenues and margins per customer of a partner MFI and a bank. Although there are sizeable variations between regions, the margin per customer is positive for the MFIs. Microfinance remains a viable economic sector, even if MFIs are facing significant challenges, which retail banks too are up against.
Common challenges for banking and microfinance
With 1.7 billion adults worldwide who still don’t have access to a bank account (3), microfinance and banking have to continue to innovate in order to reach them. Two lines of approach are available to them: digital finance and the resilience to climate change.
Digital finance is transforming the world of finance, making it more agile: New technologies provide digital financial services which are improving the operating efficiency of financial institutions and increasing the range of their service. Improving operational processes should make it possible to develop new distribution channels and to reach new markets. The dissemination of financial services by these new technologies constitutes a pillar of the current financial acceleration. The potential is significant: of the 1.7 billion adults who still do not have access to a bank account, one billion have a mobile telephone and 480 million have access to the internet (4).
The financing of the ecological transition is another common challenge. MFIs are strengthening the development of rural economies through their direct contact with small producers. Small farmers are already weakened by the small size of their farmland (80% have less than 2 hectares) and their low level of integration in agricultural sectors (only 7% are formally integrated in commercial value chains). Climatic change poses an additional risk as MFIs and retail banking alike have to innovate to grant loans better adapted to agricultural cycles and risks and to promote new cultivating practices that encourage resilience and adaptation to climate change. Microfinance and retail banking are accordingly positioning themselves around financial solutions such as those that are fostering access to green energy to promote the ecological transition.
These common challenges are bringing together the two branches of the financial system which play a powerfully inclusive role in economic development and social and environmental progress. There are many synergies to capitalize on between microfinance and the banking sector.
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(1) Microfinance Barometer 2018: //www.convergences.org/barometre-de-la-microfinance/
(2) The average regional bank is based on calculations from figures provided by French regional institutions which have made it possible to establish an average profile.
(3) Global Findex 2017
(4) Ibid
The Foundation publishes its quarterly Newsletter N.33. In this issue of The Newsletter, we present the cooperation set up with the Crédit Agricole Group entities: Crédit du Maroc and CACIB in India. Together, we implemented a scheme to support and finance local microfinance institutions. We have been working for several months on the project and it is with a great sense of pride that we present it to you.
You will also discover the article by Céline Hyon-Naudin, Investment Manager of the Foundation, who analyzes the similarities and common challenges to retail banking and microfinance.
In this edition, we are launching a new section: Solidarity Notebooks. It will present the testimonials of Solidarity Bankers who went on field missions to support the organizations funded by the Foundation. The first Notebook is written by Haoly Basse, Solidarity Banker of CACIB who went to Senegal in July to support Kossam, a social enterprise that aims at developing an inclusive daily sector in the North of the country. A great story to add: Kossam is headed by Jonathan Michaud from Crédit Agricole Franche-Comté, one of the first Solidarity Bankers.
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.
In the first half of 2019, the Grameen Crédit Agricole Foundation made new investments, including three in new countries. For the first time, it funded the LAPO microfinance institution in Sierra Leone for an amount equivalent to € 385,000. LAPO’s mission is to provide financial services that meet the needs of economically active people in a cost-effective and innovative way. It is an MFI that is committed to developing the microfinance industry in Sierra Leone based on microfinance best practices and enhancing the microfinance sector in relation to further developing a credit culture. To date, the institution has nearly 22,000 active borrowers, 97.3% of whom are women. 74% of its clientele is located in rural areas.
The Foundation has also made an initial financing equivalent to € 500,000 to the Nigerian microfinance institution ACEP Niger. ACEP Niger is an MFI specialised in financing very small businesses in urban areas. It manages loans and savings products for urban and peri-urban small and micro-enterprises rejected by the traditional banking system. In accordance with its corporate social responsibility focus, ACEP Niger has adopted the SMART Campaign Client Protection Principles. It thus protects its borrowers against over-indebtedness. To date, the institution has nearly 4,000 clients, about 25% of whom are women. The entire ACEP Niger clientele is located in urban areas.
Lastly, the Foundation also granted a first loan worth € 493,000 to VisionFund Rwanda, a microfinance institution, subsidiary of VisionFund International whose mission is to provide financial and non-financial services to underprivileged rural communities. VisionFund Rwanda serves vulnerable women with children and youth in rural areas and provide them with economic empowerment opportunities. Its products and strategy are focused on strengthening and providing financial services to Village Savings and Loans Associations (VSLAs) and groups. To date, the MFI has close to 12,000 active borrowers, 62% of whom are women and 85% of whom are located in rural areas.
During the first half of 2019, the Grameen Crédit Agricole Foundation made three new investments in Asia, including a guarantee in India in partnership with CA-CIB India.
In Cambodia, Phare Performing Social Enterprise (PPSE) was granted a loan equivalent to € 332,000. This partner, of which the Foundation holds 15.5% of equity since 2013, is a social company that creates, produces and organises performing arts shows and that hires young artists from underprivileged backgrounds.
In Myanmar, the Foundation also granted a new loan equivalent to € 1.8 million to Vision Fund Myanmar, a microfinance institution that lends small sums of money to people who do not have a measurable credit history, assets to secure the loans, or access to mainstream financial providers. To date, the institution has 183,000 active borrowers of whom over 85% are women and nearly 52% live in rural areas.
Finally, in India, the Foundation, in partnership with CA-CIB India, has established a loan guarantee scheme for a total amount in local currency equivalent to € 5.5 million on behalf of Fusion Microfinance Private Ltd, a microfinance institution founded in northern India in 1994. Fusion pays particular attention to issues of over-indebtedness and irresponsible lending, training its branch managers and relationship officers on the risks of multiple lending, so that its staff can be certain that prospective borrowers are aware of the risks and responsibilities that borrowing entails.
The Grameen Crédit Agricole Foundation and Crédit Agricole Corporate and Investment Bank (Crédit Agricole CIB) have joined forces to guide and finance Indian microfinance institutions that support projects for segments of the population wo are excluded from the conventional banking system. Through this partnership, the Crédit Agricole Group is mobilizing its expertise in inclusive finance in India and committing funding to the tune of €12 million.
Loans for a global amount equivalent to €12 million in local currency may be granted by Crédit Agricole CIB to Indian microfinance institutions under the guarantee and supervision of the Grameen Crédit Agricole Foundation. The latter institution will deal with the origination and examination of funding applications and their monitoring. Loans granted to institutions will help facilitate access to financial services to the greatest possible number of people so as to encourage the development of income-generating activities. Rural populations and women entrepreneurs will be the main beneficiaries.
Through this partnership, Crédit Agricole CIB emerges as a committed stakeholder for inclusive finance in India. “The complementary nature of the know-how has played out optimally here, with the Foundation contributing its deep understanding of the stakes of microfinance, and the Indian branches of Crédit Agricole CIB their demonstrated knowledge of the local, complex and evolving banking regulations,” said Emmanuel Bouvier d’Yvoire, Senior Country Officer of Crédit Agricole CIB for India. Present in India since 1981, Crédit Agricole CIB is established in Bangalore, Chennai, Delhi, Mumbai and Pune.
“Alongside Crédit Agricole CIB, we support institutions that promote the development of rural economies in India. This cooperation shows the Group’s commitment to act every day in the interest of society,” says Eric Campos, Executive Officer of the Foundation and Head of CSR of Crédit Agricole S.A. For the Foundation, it is a sterling opportunity to work in India where microfinance is highly developed but exclusion remains a challenge.
The first financing operation is a loan of INR 5 million, guaranteed fully (100%) by the Foundation, to Fusion Microfinance in India. This company provides financial products and services to more than 1 254 007 women, mainly (86%) in rural areas, who compose its entire clientele. The institution has a portfolio of €237 million. It is present in 17 Indian States, with a network of 440 branches and 3 695 employees.
