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Credit Guide Lines for Microfinance Industry

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Credit Guide Lines for Microfinance Industry document sample

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									The Role of
Microfinance
Institutions in the
Remittance Market



An MFI-to-MFI Model
   Demographics

     Latin America                United States


• Large and growing          • 50 million Hispanics in US
population                   (largest minority group)
• High unemployment and      • Hispanic population in US
skewed income distribution   increases by 5,000 each day
                             • 22 million Latin America-
                             born citizens live in US
   Migration Effects

     Latin America                  United States


• Similar to women on the     • Entrepreneurial; work
homefront who did work of     multiple hourly jobs
men during WWII: women
make big contributions but    • Maintain close financial ties
experience great suffering    with family

• Remittances are largest     • $62B sent to Latin America
source of hard currency and   in 2005 (more than U.S.
often exceed export income    FDA) – $300B sent globally
   Latin Financial Market

                   Developing Countries

• Growing microfinance industry serving poor people

• Microfinance profitability, efficiency and portfolio quality
competitive with banks

• 2006 Nobel Peace Prize awarded to microfinance

• MFIs ideally suited to serve remittance recipient market
   U.S. Financial Market

                        United States

• 40M unbanked (63% Hispanic)

• Expensive, fragmented industry of mom-and-pop and non-
financial providers

• Little/no access to credit

• Low penetration of banks and new technologies in MTO-
dominated immigrant market
   Microfinance Int’l Corp.

        Overview                    United States
• For-profit led by 27-year   • HQ in Washington, DC
Bank of Tokyo veteran
                              • 9 MFIC-owned branches
• MFI-to-MFI model            • Bank and MTO partners

• Non-bank supervised by
                              Latin America/Worldwide
financial commissioners
                              • Distribution in 85 countries
• Specialized to serve bi-
                              • Financing for MFIs
national families on both
ends of remittance chain      • Transnational products
   Settlement Platform


• IT built off Cooperative Open Banking Information
System (COBIS) used by 70 banks in 13 countries

• Consists of Internet technology and worldwide network

• Built our own settlement network of financial institutions
    Alante Financial

One-stop shop offering integrated, affordable, value-added
services and products and professional, bi-lingual service


   Loans and Insurance            Transactional Services
 • Unsecured term loans &         • Money transfer
 credit lines; car loans
                                  • Check cashing
 • Domestic and international
                                  • Bill pay, money orders
 mortgages/business loans
                                  • Phone cards
 • Domestic and international
 health/life insurance products   • Help building credit history
     Money Transfer Pricing

                               $201 -     $1501 -   $2001 -
Transfer Amount   $1 - $200
                               $1500       $2000     $3000

Alante
                  $6 – $7     $9 – $10   $13 – $15 $18 – $20
Financial


Conventional
             5% – 10%         5% – 10%   5% – 10% 5% – 10%
MTOs


SWIFT               $40         $40        $40        $40
Turn-key remittance platform for MFIs, banks, credit
  unions, money transmitters & postal networks
        Compliance                           Distribution
• Strong regulatory support and      • Latin America, North America,
built-in compliance features         Asia, Europe, Africa, India
• System built post 9/11             • MFIs & Banks

   Unique Advantages                         Technology
• Marketing & cross-sale support     • Built on banking software used
                                     by 70 Latin banks
• Extendable as a central
processing platform for national     • Secure web-based interfaces &
and international networks of        real-time payout
banks, credit unions, post offices
     MFI Market Entry Issues

  Marketing & Data                          •   Establishing marketing strategy

   Management                      •       Tracking conversion rate from cross-sales


                                   •       Representation offices in foreign country?
   Business Model              •       Partner with large or small money transmitter?
                                       •    Work with multiple money transmitters?


                              •        Ability to generate profitable transaction volume
Scale & Profitability   •   Financial capacity & careful liquidity management to handle
                            remittance volumes and potential new loan disbursements


                        •   Efficient, secure, adaptable data transfer to institution’s MIS
    Technology
                                   •       Cost of adopting technology and training
    Products for MFIs & Banks

Value-Added, Full-Service Partner to MFIs & Banks


 Technical      Co-Branches        Loans           Transnational
Assistance                                           Services

 Support with     Co-branching    Institutional      Market
 marketing,       opportunities   loans for MFIs     channel for
 compliance,      with Alante     in our             MFIs to
 training,        Financial to    remittance         cross-sell
 product          expand          network to         loans and
 development      products and    support            mortgages to
                  services        portfolio          remitters in
                                  growth             U.S.
   For More Information


• mfi-corp.com / alantefinancial.com / ariasfs.com

• Jennifer Isern, William Donges & Jeremy Smith,
Guide to Making Money Transfers Work for Microfinance
Institutions: A Technical Guide to Developing and
Delivering Money Transfers (CGAP, December 2006)

• Manuel Orozco and Eve Hamilton, Remittances and
MFI Intermediation: Issues and Lessons, July 2005

								
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