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CURRENT OPERATIONSCalmeadow has happily found itself without the opportunity to continue pursuing the innovations it pioneered in the past. It’s estimated that several hundred microfinance institutions (MFIs) currently operate as commercial, regulated financial institutions and more pursue this model through transformation or commercial bank downscaling everyday. CGAP recently published a Transformation Handbook which provides a detailed, almost step-by-step, manual for MFIs choosing a regulated, commercial model. Also, a recent survey counts over 50 investment companies or funds that target MFIs with a range of investment vehicles, each with different areas of focus and strategic interests. Calmeadow has thus rigorously analyzed its strengths and found several areas where the organization can leverage its accumulated industry knowledge to continue to profoundly impact microfinance.
Calmeadow continues to promote commercial microfinance; specifically the idea of commercial banks adapting their products and processes to reach smaller, lower-income clients. Moving forward, Calmeadow has identified several areas of focus that allow the organization to pursuer this end: Research, Services, and Enabling Environment.
Research
Calmeadow funds and produces investigations that quantify the impact and costs of commercially serving low-income financial markets and document the dynamics of the rapidly changing industry. Rapid change can easily create bottlenecks that handcuff participants and ultimately keep the most efficient services possible out of the hands of potential borrowers. The dissemination of new models and industry-wide dos and don’ts are strategic priorities. Examples of our research include:
- Commercial Bank Downscaling feasibility study and the resulting Downscaling Seminars [include attached photo] and proposed “How-to” Handbook. Seminar locations include:
- May 2006 in San José, Costa Rica
- November 2006 in Siwa, Egypt
- September 2007 in Manila, Philippines
- Microfinance IPO paper produced with the Council of Microfinance Equity Funds, Fall 2007.
Services
Calmeadow seeks to support initiatives that improve the access of commercial microfinance players to underserved markets or that increase the efficiency and security of current industry participants. Particular interests include mitigating risks, improving governance, and reducing costs. Examples include:
- Addressing market failures with the FX Mitigation Facility, a joint-venture among several microfinance and currency experts designed to help reduce the currency risks that presently plague the hard currency funding that MFIs often need to maintain growth and expand outreach.
- Founding investment in the Emergency Liquidity Facility - ELF which provides emergency liquidity to MFIs during times of crisis when low-income borrowers are most affected. ELF also provides emergency risk management technical assistance to affiliated MFIs. ELF recently expanded its geographic focus to include the Caribbean and expanded its service offering to address financial risk management. The Caribbean initiative will train local consultants and will provide emergency risk management to institutions in the region that currently lack such preparation. The Risk Management Facility – RMF will provide comprehensive and integrated risk management tools and training to MFIs that incorporate both international best practices and country banking regulations.
Enabling Environment
Calmeadow supports the dissemination of best practices and new models through seminars, publications, and industry associations. The institution will focus on appropriate regulatory frameworks, salutary government intervention, stable rules and regulations, and the elimination of common barriers such as interest rate ceiling and subsidized direct lending by governments. Examples in this area include:
CALMEADOW'S CAPITAL INITIATIVES
Following our experience in supporting the successful development of Bancosol in Bolivia in the early 1990s, we joined ACCION and others in the organization of ProFund Internacional S.A., a regional Latin American investment company with US$22,000,000 in capital. With investments ranging from US$250,000 to US$3,000,000 and holdings of 15 to 30% in twelve different microfinance institutions, ProFund indirectly supported over 300,000 microentrepreneurs. While this is an impressive number, the magnitude of the remaining challenge is clear. There are over 50 million microenterprises in Latin America and the Caribbean, employing more than 120 million individuals and accounting for 60% of the region’s GNP. In the face of this, we are convinced that creating and supporting successful and sustainable institutions as models of success is the only effective way to bring in mainstream commercial participation. Only then can we expect to see access to financial services for all.
CALMEADOW was a shareholder of ProFund, as well as being represented on the board and the investment committee, and CALMEADOW’s past Chair, Martin Connell, was Chairman of the Board of ProFund.
CALMEADOW, again working with ACCION as co-sponsor and with the valuable support of nine different institutional shareholders, launched in the third quarter of 2001 a new regional investment fund for African microfinance, AfriCap Microfinance Fund Ltd. Encouraged by the growth of the microfinance sector in Africa and by the obvious needs for financial services for the low-income small and micro enterprises, AfriCap is now operating the fund out of Johannesburg, South Africa. In addition to its US$13,500,000 in capital, AfriCap operates a US$3,000,000 Technical Services Facility funded by three institutions to provide the specialized expertise needed to support prospective and actual investees.