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Access to Finance Innovations

Access to Finance Innovations. March 5, 2010 Financial Innovations Marketplace. Session Objectives. Issues in access to finance from a household/demand perspective Provider sustainability and risk management. Goals of finance. Smooth consumption over time

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Access to Finance Innovations

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  1. Access to Finance Innovations March 5, 2010 Financial Innovations Marketplace

  2. Session Objectives • Issues in access to finance from a household/demand perspective • Provider sustainability and risk management

  3. Goals of finance • Smooth consumption over time 2. Smooth consumption across uncertain states of the world

  4. Household Risk Management (demand side)

  5. Feizal, Uttar Pradesh, India (Portfolios of the Poor, Morduch et al) Household monthly income: $36 Broke his leg, no insurance Delayed treatment Lost 8 months of wages Total treatment cost: $250 Credit Savings Son’s wage advance Relatives

  6. Product Design - a Priority • Cashflow matched loans • Loans with bundled risk management • Savings with commitment features • Insurance combined with annuities

  7. Role of providers/intermediaries • Last mile between large Financial Institutions/markets and customers • MFIs, credit unions, cooperative banks, Local Area Banks • Tend to have low levels of capitalisation • Risk management crucial for sustainability

  8. Provider Risk Management (supply side)

  9. Challenges in Risk Transfer • Moral hazard on the part of the RFI • Appropriate pricing of risk • Finding relevant buyers for this risk

  10. 1, Cenotaph Road | Teynampet | Chennai - 18 www.trust.ifmr.co.in

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