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Mainstreaming Microfinance Issues and challenges

Mainstreaming Microfinance Issues and challenges. Demographics. Latin America Large and growing population High unemployment and skewed income distribution Little improvement in GDP/per Capita. United States 22 million Latin America-born citizens live in US

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Mainstreaming Microfinance Issues and challenges

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  1. Mainstreaming Microfinance Issues and challenges

  2. Demographics • Latin America • Large and growing population • High unemployment and skewed income distribution • Little improvement in GDP/per Capita • United States • 22 million Latin America-born citizens live in US • Hispanic population in US increases by 5,000 each day • 50 million Hispanics in US (largest minority group)

  3. Migration Effects • Latin America • Similar to women on the homefront who did work of men during WWII: women make big contributions but experience great suffering • Remittances are largest source of hard currency and often exceed export income • United States • Entrepreneurial; work multiple hourly jobs • Maintain close financial ties with family • $54B sent to Latin America in 2005 – far more than US foreign assistance (IADB)

  4. Financial Marketplace Opportunityto bridge the two markets… • Latin America • Growing microfinance industry serving poor people • Microfinance profitability and portfolio quality better than banks • 2006 Nobel Peace Prize awarded to microfinance • United States • 25M unbanked Hispanics • Expensive, fragmented industry of mom-and-pop and non-financial providers • Few first-movers to help establish a credit history • Little/no access to credit

  5. Microfinance Int’l Corp. • Overview • For-profit led by 27-year Bank of Tokyo veteran • Financed by private investors and OPIC • Specialized to serve bi-national families on both ends of remittance chain • United States • HQ in Washington, DC • 9 MFIC-owned branches • Bank and MTO partners • Latin America/Worldwide • Distribution in 90 countries • Financing for MFIs • Transnational products

  6. Alante Financial • One-stop shop offering integrated, affordable, value-added services and products and professional, bi-lingual service • Loans and Insurance • Microloans • Car loans • Small business loans • Mortgage brokering • Health and life insurance • Transactional Services • Money transfer • Check cashing • Bill payment • Phone cards • Help building credit history

  7. Turn-key remittance platform for banks, credit unions, and money transmitters • Compliance • Compliance features at the front-end of transactions • System built post 9/11 • Distribution • 90 countries • MFIs & Banks with rural and urban coverage • Unique Advantages • Marketing support • First-hand appreciation of money transfer operations, since Alante uses ARIAS • Technology • Built on banking software used by 70 Latin banks • Secure online interfaces and real-time payout

  8. Microfinance Challenges • Requires sophisticated financial expertise • For-profits face access to capital issues to serve the poor • More enabling regulatory environment • Cumbersome and divergent State Laws • Impractical usury laws for making small loans • Restrictions on providing multiple services under one roof

  9. Costs of Microlending

  10. For More Information • Joseph Smith (North Carolina Commissioner of Banks), Savings for the Poor: The Hidden Benefits of Electronic Banking (NC Banking Institute, February 2005) • Joseph Smith, The Federal Banking Agencies’ Guidance on Subprime Lending: Regulation with a Divided Mind (NC Banking Institute, March 2002) • Craig Churchill, Client Focused Lending – The Art of Individual Lending (Accion International, 1999)

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