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Building New Financial Networks

How does a network of thriving microfinance institutions serving more than 10 million poor women in 70 countries stay ahead of the curve? By developing partnerships with commercial and investment banks and fostering innovation. That’s the strategy being pursued by the Women’s World Banking network.

Over the past six years, WWB has built strategic alliances between conventional banks and leading microfinance institutions to set global standards for microfinance operations and take the lead in creating organizations that can achieve the scale needed to serve the legions of poor people who need credit for entrepreneurship. These alliances have brought together WWB network microfinance institutions with global financial institutions including Citigroup, Deutsche Bank, Triodos Bank and Alliance Capital.

This year, Women’s World Banking launched the Global Network for Banking Innovation in Microfinance (GNBI). “The network is rooted in the belief that unless you get mainstream banking involved in microfinance, you won’t get to the 500 million people who want access to microfinance,” says Nancy Barry, president of WWB.

GNBI is designed to allow banks and leading regulated microfinance institutions to share knowledge and form alliances that will spark innovation in financial products and services for the world’s poor. Its 25 founding members together serve more than 40 million microfinance clients and are pioneers in reducing transaction costs and offering diverse financial services to entrepreneurs, including insurance, educational loans and investment capital for machinery. “In the network of WWB we have the leading microfinance institutions and leading banks, and this creates a great set of greenhouses for learning,” Barry says.

The top priorities in this drive for innovation are processes that cut transaction costs, and products that respond to the financial needs of low-income entrepreneurs. GNBI promotes exchanges between its members to share ideas on savings mobilization, technology applications and insurance products, and transmits best practices in savings, conversion to regulated institutions and insurance. Based on WWB’s experience, technology transfer from the microfinance institutions to conventional banks will make the banks’ delivery systems more responsive to this large pool of new clients. Technology transfer from banks to MFIs should make transaction processes faster and cheaper through adapting smartcards, credit cards and automated teller machines.

Teamwork between the world’s big wholesale banks and some of the most successful retail microfinance institutions is already showing results. Bankers learn how to get productivity out of loan officers from leading WWB affiliates. “Our affiliates learn how new combinations of technology and the touch of loan officers could be merged to lower transaction costs,” says Barry. New technology on devices such as Palm Pilots—credit scoring and automated record keeping, for example—has reduced operating costs and increased the ability of loan officers to serve more clients.

Other partnerships will generate new financial services for the poor. Insurance giant AXA is partnered with private bank Bandesarrollo Microempresas de Chile to create a product that combines insurance with savings. Alliance Capital, the largest publicly traded investment company, is working on a method to dollarize the savings of poor people in microfinance institutions, thereby protecting their value during economic downturns. GNBI members, including commercial banks such as Banco Ademi, Financiera Calpiá, Mibanco, Financiera Interfisa, Bandesarrollo Microempresas, Deutsche Bank and Citibank, have participated in exchanges with FinComún, a credit union in Mexico that has pioneered innovations in microsaving and -lending.

Other benefits are flowing from the creation of the GNBI. Some of the participating commercial banks already have provided substantial wholesaling funding to the microfinance institutions that are members of the WWB network. “Several wholesale institutions decided to lend, and we were able to help negotiate loans in local currency,” says Barry. “Relationships have been built, letting the bankers see just how efficient top MFIs are,” she adds. Ten financing links in the form of loans have been established between the wholesalers and WWB affiliates.

Another bonus: The relationships built in the network have allowed banks and microfinance institutions to share their mistakes as well as their successes. “It is important to create a safe environment of trust,” Barry says.

To encourage the creation of new techniques in microfinance, WWB launched the Innovation Investment Facility in June 2000. The facility will provide US$20,000–$50,000 annually to fund innovations by high-performing affiliates that dramatically reduce transaction costs, increase the retention of good microfinance clients, improve the ability to reach very poor clients with diverse financial services or increase the sustainable mobilization of capital.

The results can be passed on to microfinance institutions through the WWB network and then to the industry as a whole. Women’s World Banking expects to channel up to US$1 million toward innovations in 2001.


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In a Nutshell


Women’s World Banking  Women’s World Banking (WWB) was conceived during the first United Nation’s World Conference on Women, held in Mexico City in 1975.

At that meeting, 10 participants from five continents discovered they had a key belief in common: economic access for poor women could change the way the world works. They transformed their vision into reality by formally incorporating the organization as a not-for-profit financial institution in The Netherlands in 1979.

Today, WWB, a global leader in microfinance, is the only women-led global network whose mission is to open the world’s financial system to low-income women.

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