Three recent microfinance commitments from financial institutions

In the midst of the ongoing turmoil in US and international capital markets, three recent announcements by financial institutions deserve notice. While totalling less than $700 billion , these are significant moves by several ongoing players in global microfinance:

1.  Merrill Lynch Community Development Company (MLCDC) announced that it has invested $10 million in Calvert Foundation’s Community Investment Note, a fixed income investment product that allows individual and institutional investors to support economically disadvantaged communities around the world.  The initiative will be designated as a Clinton Global Initiative (CGI) and will provide financing to thirteen different MFI’s in eleven countries.  MLCDC invests alongside it’s clients by matching up to 10% of the Community Investment Notes in the form of risk protection built into the Notes, providing security to their own investors in the event of loss.   One can only hope that MLCDC will continue this program in the “new financial world” in which it now operates as part of Bank of America!  http://www.calvertfoundation.org/news/media_kit/press_releases/article.cgi?articleid=2555

2.  Barclays Bank commits $20m to expansion of VSLAs (Village Savings & Loan Associations).  Also part of the Clinton Global Initiative (CGI), Barclay’s, the British-based banking giant, announced the continuation and expansion of a pilot program in Uganda that has provided funding to VSLAs.  Working with Care International, Plan International, and Accenture, Barclay’s will invest $20 million over the next three years to introduce new VSLA programs in ten countries across Africa, Asia, and Latin America.  http://www.guardian.co.uk/katine/2008/sep/26/livelihoods.news.  A VSLA, for those not familiar, is a self-selected group of people who pool their money into a fund from which members can borrow.  By intermediating small local pools of capital to satisfy household cash-management needs it provides immediately sustainable and profitable savings, insurance, and credit services to people who live in places where banks and MFIs do not have a presence.  The model was developed by CARE International in 1991 and has the beauty of not requiring the continual infusion of foreign capital in order to fund growth in lending.  More information on VSLAs can be found at  http://www.vsla.net/

3.  Lastly, Schwab Charitable, one of the country’s largest facilitators of charitable giving, announced a pioneering program of microfinance guarantees.  The program is designed to enable donors to set aside a portion of funds they have already invested in their Schwab Charitable Gift Accounts, and use these funds to guarantee microfinance loans.  The first phase of this program will begin with an estimated $20-$30million in guarantees and is being launched in conjunction with the Grameen Foundation.  The program will evolve to include Developing World Markets, a leading lender to MFIs, as the program grows.  http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2008/09/22/daily46.html

Each quite different approaches to financing for the poor.  Each valuable in its own way.