Papers and Research: Reviews, Summaries, and Recommendations

[MicroCapital Society]

Where you find all the serious reviews on serious research. Please post reviews of papers and research on microfinance and related topics here. This Discussion Forum also serves as a library of MicroCapital paper reviews.

[MicroCapital Society]

2008 Microscope on the Microfinance Business Environment in Central America
Published by the Economist Intelligence Unit, October 2008, 62 pages, available at: http://a330.g.akamai.net/7/330/25828/20081014142739/graphics.eiu.co...

NOTE: While this report outlines the business environment for microfinance across Latin
America and the Caribbean, this summary is limited to Central America. Rankings are out of the full sampling of twenty countries. Commissioned by the Inter-American Development Bank and the Corporacion Andina de Fomento (CAF), this report covers three areas: regulatory framework, investment climate and institutional development. The indicator scores are aggregated to produce an
overall score ranging from 0 to 100 (100 is the highest).
El Salvador
El Salvador is ranked fourth out of twenty in Latin America and the Caribbean and is the highest ranked country in Central America with an overall score of 59.0. There are no legal or regulatory restrictions on establishing or operating NGOs. The market for microfinance institution (MFI) creation is competitive, with no provider dominating the current environment. Regulated and nonregulated
institutions use separate private credit bureaus and serve the majority of the adult population.
Nicaragua
Although Nicaragua ranks sixth with a score of 58, its investment climate is ranked in the bottom half of the index at 44.2. The Banking Superintendence has been encouraging domestic banks to adopt US bestpractice accounting rules regarding asset valuation/loan origination and provisioning. NGOs do not face significant roadblocks to forming MFIs. Another key strength is the country’s wide range of MFI services. Nicaragua’s two largest regulated institutions, Banco Pro Credit Nicaragua and Financiera Nicaraguense de Desarrollo SA, are larger than the combined portfolio of all NGOs. The
country is also considered be among “the five most competitive microfinance markets in the LAC region.” On the negative side, the country scored poorly on its judicial system, due to limited property protection rights. Most importantly, its capital markets infrastructure is undeveloped, which increases borrowing costs for customers. The country has also experienced a significant number of bank collapses in the last few years.
Guatemala
Guatemala ranks seventh, with a score of 54. Approximately 35 NGOs operate in the country, and those that only receive private capital are not subject to supervision by fiscal authorities. It takes no more than USD 650 to register as an NGO. Banks’ specialized microfinance units and cooperatives/credit unions are the main regulated institutions engaged in microfinance. Regulated
institutions require a capital adequacy ratio of 10 percent, which the authors consider
reasonable. G&T Continental has the largest market share, with Banco de Desarollo Rural and
Genesis EMP following. The country has minimal regulatory and examination capacity with regards to general financial sector supervision and regulation. In addition, it is very difficult to convert NGO
MFIs to regulated status.
Mexico
Mexico ranks tenth with a score of 47.5. Mexico is moving towards international accounting standards, although standards still vary widely based on institution size and regulatory and juridical status. MFI networks are currently developing standardized accounting practices for MFIs. On one hand, regulations for savings and credit entities (EACPs) have been adjusted to accommodate microfinance activities such as “the capacity to carry out personal visits to asset creditworthiness (and to consult a credit bureau).” However, the National Commission of Banks and Securities generally lacks sufficient specialized staff to create effective regulations and perform field visits to MFIs. Commercial banks have shown minimal interest in “downscaling” into microfinance,
partially due to strict prudential standards.
Panama
Panama is ranked tenth, with its investment climate ranked third. A new banking law was
enacted in August 2008 that, “considers micro and small enterprises to be banking clients if
they receive credit for commercial purposes up to a total of 200,000 balboas [USD
200,000].” This allows banks to provide microloans. Although public institutions do not compete unduly with private MFIs, a key challenge is a lack of thorough understanding of microcredit by regulators. Only a few NGO MFIs exist in Panama due to difficulties in raising capital.
Honduras
Honduras ranked twelfth with a score of 47.1. NGOs offer only microcredit, with limited insurance offerings. The main industry regulator is the National Commission for Banks and Insurance Companies. Banks and finance companies are beginning to enter the microfinance industry as
competition from state institutions is very limited. Regulated MFIs such as the Financial Private
Development Organization (OPDS) are nonbank financial institutions. Regulated institutions, unlike finance companies, face interest rate caps and cannot hold savings from the general public.
Non-regulated institutions have limited access to public funding and are mostly restricted to
microcredit.
Costa Rica
Costa Rica ranks fifteenth overall, with a score of 40.3. Its key strength stemmed from the robust economic expansion of 2006 and 2007. During those years, Costa Rica experienced strong growth in banking credit, which was perpetuated by the economic boom coupled with falling domestic interest rates. Accounting standards and MFI transparency are solid. While non-regulated institutions do not face external audits or ratings, regulated institutions are required to attain both. A large
majority of NGOs reporting to the Microfinance Information Exchange are not rated. Regulatory and examination capacities could be improved. Also, commercial and consumer loans are mixed together in microfinance portfolios as, “Institutions are not required to monitor the final destination of borrowed resources.”

[MicroCapital Society]

A Simple Poverty Scorecard for Vietnam
By Shiyuan Chen and Mark Schreiner, March 2009,
160 pages, available at: http://microfinance.com/
English/Papers/Scoring_Poverty_Vietnam_EN.pdf

This study uses a 2006 Vietnamese Household Living Standards Survey to construct a scorecard that estimates the likelihood that a household has expenditures below a given poverty line. The scorecard uses ten indicators that field workers collect and verify. Poverty scores can be computed on paper in the field in ten minutes. The scorecard’s accuracy and precision are reported for a range of poverty lines. The poverty scorecard can be used to monitor poverty rates, track changes in
poverty rates over time and target services.

Due Diligence Guidelines for the Review of Microcredit Loan Portfolios: A Tiered Approach
By Robert Peck Christen, published by CGAP (Consultative Group to Assist the Poor), July 2005, 39 pages, available at: http://www.microfinancegateway.org/files/26200_file_26200.pdf

The paper presents a due diligence tool for regulators, grantors and investors to evaluate the accuracy of a microfinance institution’s (MFI) reported portfolio quality and the extent to which an MFI employs sound loan management practices. Investment in MFIs can be risky, and external audits often fail to accurately identify the primary risk facing investors - misrepresentation of portfolio quality - because they depend on the assumed veracity of an MFI’s management information system. The author argues that MFIs suffer from three potentially fatal weaknesses: “[1] Basic governance of MFIs is weak…. Given that the profit motive is not predominant in most cases, boards of directors…may fail to act aggressively to rein in their managers. [2] Potential exists for rapid deterioration of portfolio quality…. Loan delinquency…can increase rapidly when management
deteriorates. [3] Most microloans are unsecured…. Thus, when loan portfolio quality suffers substantially, MFIs face far greater loan losses relative to the amounts outstanding than intermediaries that operate other types of portfolios secured with collateral.”
The Loan Portfolio Review Tool is a threetier due diligence process, with each tier digging progressively deeper into an MFI’s lending policies, loan administration and credit-risk control procedures. The tool aims to verify: the accuracy of accounting and loan tracking systems; that policies exists for loan provisioning; that measures for recovering and writing off bad loans are in place; that measures are in place to prevent fraud; and that the MFI is not managing its loan portfolio
in a risky manner.
Recommended for entities making small grants, a Tier I review takes about two days and involves both a desk review and an onsite discussion with senior management covering the country’s investment climate and the MFI’s loan portfolio, methodology and management.
A Tier II evaluation involves up to five days of review at the branch level to assess whether what was presented at the head office is consistent with what is happening in the field. Tier II is recommended for those considering sizeable grants or investments in an MFI.
A Tier III evaluation takes up to four weeks onsite with a team of local auditors, plus two weeks of off-site analysis. Tier III aims to quantify asset quality through statistical sampling. It is recommended when MFIs are wishing to access capital market funding mechanisms.

[MicroCapital Society]

May 13, 2009 from MicroCapital.org

Top Ten Downloads from the Library at MicroSave India

Top Ten Downloads from MicroSave India’s Library at http://www.microsaveindia.org
The top ten most read documents in the past 30 days: (Name and Views)

Microfinance Handbook: An Institutional and Financial Perspective (Feb 2008)
286
India Microfinance Review 2007 (Feb 2008)
150
Good Practice Guidelines E-book (Feb 2008)
104
Management Information Systems for Microfinance Institutions: A Handbook (Feb 1998)
69
News, Views and Reviews: Vol 1.4, June 2008 (Jun 2008)
66
A Simple Poverty Scorecard for India (Jan 2007)
58
The Service Company Model: A New Strategy for Commercial Banks in Microfinance (Sep 2003)
53
Microenterprise Development Brief: Controlling Fraud in Microfinance Programs (Jun 1995)
51
MicroSave Briefing Note # 26: Adapting Market Research Tools to Diverse Environments - Lessons from Europe (Jul 2008)
46
MicroSave Briefing Note # 2: Introducing Savings into a MicroCredit Institution – Lessons from ASA (Jul 2008)

[MicroCapital Society]

Wednesday, September 14, 2005 from MicroCapital.org
MicroCapital Paper Review: “The Microfinance Experience of Latin America and the Caribbean”

To access this article visit: “The Microfinance Experience of Latin America and the Caribbean”

Author: A. Ramirez, of the Inter-American Development Bank SME Division

Published by: Asian Development Bank Institute, October 2004

Quantitative Information: The article has a good overview of the microfinance market, as well as comparisons to the Asian microfinance market. Although Asia comes out ahead in operational efficiency and loans per staff member, Latin America is more successful in raising capital. Mr. Ramirez also provides statistics on micro-enterprises in Latin America, which is useful for understanding how microfinance affects the big picture. It estimates that small and medium enterprises make up about 20% of GDP and 40% of employment. Looking at the number of micro-enterprises served shows just how underserved the market is: only 2.6% have received loans from an MFI.

Qualitative Information: The beginning of the article has a concise history of microfinance in Latin America. Mr. Ramirez describes the virtuous and vicious cycles of MFIs; small MFIs have higher costs per loan that translates into a competitive disadvantage and prevents them from expanding operations. Large MFIs, on the other hand, have lower costs, which gives them an advantage and allows them to expand even more. Mr. Ramirez points out lots of problems, but does not provide any solutions or recommendations for reaching more clients. Nor does he explicitly discuss the commercialization of microfinance, which seems quite relevant to the microfinance experience of Latin America and the Caribbean.

[MicroCapital Society]

Thursday, September 15, 2005 from MicroCapital.org
MicroCapital Paper Review: "The Profile of Microfinance in Latin America in 10 Years”

To access this article visit: "The Profile of Microfinance in Latin America in 10 Years”

Authors: B. Marulana and M. Otero

Published by: Acción International, April 2005

Quantitative Information: This article contains comprehensive statistics on the current microfinance market in Latin America, including the number of clients served and loan portfolios of commercial banks, MFIs and NGOs. It has information on which markets have the most need for microfinance services and which are the most commercialized.

Qualitative Information: The policy recommendations are more oriented to NGOs than commercial banks—the only real comment about commercial banks is that they should invest in microfinance. The article supports fairly wide usage of NGOs in microfinance to reach the poorest of the poor because loaning to those sections of the populace is seldom profitable. In Latin America, the poorest 10% of the population live predominantly in rural areas, so this would imply that NGOs should serve those areas while commercial banks should serve urban areas. It assumes that providing services to the rural poor cannot be profitable, which may be erroneous considering recent advances in technology and operational innovations. Additionally, the article argues that donors should fund research and technical assistance for MFIs.

[MicroCapital Society]

Friday, September 29. 2006 from microcapital.org
Micro-banks Sought to Participate in Pilot Study to Foster Securitization of Microloan Portfolios

The Center for the Development of Social Finance (CDSF) is launching a project for the development of securitization style static pool analysis to the portfolio of Microfinance Institutions (MFIs). This project has received funding support from the Omidyar Network and Taylor Jordan Donor Advised Fund of the RSF Global Community Fund.

Static pool analysis involves the performance tracking of a pool of investments with similar risk-return profiles, typically loans that have similar vintages and underwriting criteria. Thus static pool analysis shows a financial institution’s true return on a pool by keeping it static. This allows the disaggregation of the overall loan portfolio into loan pools whose returns can be more accurately predicted and priced.

Static pool analysis has normally not been carried out for MFI portfolios, the constraints being the need for training of MFI personnel and the expense associated with the process. CDSF expects this pilot project to enable identification of resources for the implementation of static pool analysis.

Risk analysis experts Dr. Sylvain Raynes and Ann Rutledge, principals of R&R Consulting are providing the quantitative resources. Gary Schurman, a finance industry veteran, will manage the MFI data at CDSF.

CDSF is currently evaluating MFI candidates for the project.

The Center for the Development of Social Finance (CDSF) is a US non-profit organization involved in social finance research and finance education to communities, non-profit organizations and small businesses. Financial information on CDSF is not available in the public domain.

Omidyar Network is an investment group funding economic, political and social initiatives. Pierre Omidyar, the founder of eBay, along with his spouse Pam Omidyar, has founded it. Last year, the Omidyar Network announced a $100 million donation to Tufts University for funding microfinance initiatives. According to MIX Market, Omidyar’s total fund assets as of May 2005 amount to $400 million.

RSF is a group of non-profit organizations that provide financial vehicles for investors, philanthropists, and borrowers through various social investment funds and lending programs. As of Q1 2006, their loan portfolio was over $ 31 million with total investor funds of $ 37 million.

Resources

1) CDSF press release

2) National Credit Union Administration : White paper on static pool analysis for credit unions

3) Credit Union National Administration (CUNA) CFO Council : “Indirect Loans and Static Pool Analysis”

4) Business Week : Omidyar Network announces $100m funding to Tufts University

5) CDSF : Home Page

6) Omidyar Network : Home Page

7) RSF : Home Page

8) R&R consulting : Home Page

[Virgo d]

Thats a nice cocnept adapted by CDSF i thin once in every calendar
Year this kind of activities should be taken up to ensure the proper outflow.Common man in genereal faces problem on how to Filing Back Taxes in right time.Please think something related to this.
Virgo D
Business Process Automation

[MicroCapital Society]

Monday, October 9. 2006 from MicroCapital.org
Researcher Examines the Effects of Cash Grants on Microfinance in Tsunami-Affected Sri Lanka

M.M.M. Aheeyar, research associate at Hector Kobbekaduwa Agrarian Research and Training Institute, Colombo, Sri Lanka, recently concluded research on the impact of cash grants on the microfinance market in areas of Sri Lanka affected by the tsunamis of 2004. Mr. Aheeyar writes, “There were reports of uncoordinated and poorly targeted cash grants. Some areas attracted a large number of NGOs and aid agencies, resulting in more cash and in-kind assistance than was required. According to the MFIs, this had a negative impact on repayment cultures and on the honesty of beneficiaries. There is insufficient evidence to prove that excessive cash grants affected the repayment of culture of beneficiaries. In any case, the problem lies not with the concept of cash assistance, but with a lack of coordination and improper targeting in its delivery” (15).


Future coordinated cooperation between cash grant providers and the microfinance sector is key to avoid overlapping efforts. Mr. Aheeyar examines both groups and determines that relief grants are essential for rebuilding; however, microfinance organizations need to assist in a coordinated manner to accelerate rebuilding and cover needs that grants do not (19). This appears to be Mr. Aheeyar’s over-arching recommendation for future preparations of microfinance recovery programs in communities recuperating from large-scale natural disasters.

At the conclusion of this paper, Mr. Aheeyar proposes several suggestions to further improve recovery efforts in disaster-affected communities in the future. Among other proposals, Mr. Aheeyar does not recommend providing grants to MFIs to write-off loans as it may lead to a loss of institutional efficiency and sustainability. Mr. Aheeyar further suggests the formulation by the Government of Sri Lanka of a debt write-off policy for disaster-affected communities to help people utilize cash grants for livelihood re-activation without facing pressures to repay debt by MFIs (20).

Sources:

1) M.M.M. Aheeyar: Cash grants and microfinance in livelihood recovery: experiences from tsunami-affected areas of Sri Lanka

2) ODI Humanitarian Policy Group: Learning Lessons from Cash and Voucher Based Responses to the Tsunami

3) Asian Tribune: Micro Finance Providers worry on loan repayments

[MicroCapital Society]

Monday, October 23. 2006
Transforming Microfinance Institutions: Providing Full Financial Services to the Poor by Joanna Ledgerwood and Victoria White

Published by World Bank and the Microfinance Network, August 2006, 566 pages, purchase here: http://publications.worldbank.org/ecommerce/catalog/product?item_id...

The World Bank and the MicroFinance Network recently published a new book on microfinance in August 2006. Transforming Microfinance Institutions: Providing Full Financial Services to the Poor by Joana Ledgerwood and Victoria White is a 566 page how-to manual for credit-focused microfinance organizations interested in becoming regulated deposit-taking financial intermediaries.

According to the author’s abstract, the book “outlines how to manage the transformation process and address major strategic and operational issues inherent in transformation including competitive positioning, business planning, accessing capital and shareholders, and how “transform” the MFI’s human resources, financial management, internal controls, and branch operations”.

Author Joanna Ledgerwood was Deputy Chief of Party for the USAID-funded Support for Private Enterprise Expansion and Development (SPEED) Project in Uganda and also served as Deputy Chief of Party for the Microenterprise Access to Banking Services (MABS) Project in the Philippines. Ms. Ledgerwood is also author of The Microfinance Handbook: An Institutional and Financial Perspective published in 1998.

Fellow author Victoria White is Vice President of International Operations for ACCION International where she provides technical assistance to ACCION's African- and Caribbean-based microfinance partners. Ms. White also co-authored a paper entitled, “Institutional Metamorphosis: Transformation of Microfinance NGOs into Regulated Financial Institutions” in 1999.

A Microfinance Gateway hosted Q&A with the authors can be found here. The book may be purchased for $50 here.


by Lori Chang, MicroCapital.org Writer

Sources:

1) Microfinance Gateway: Transforming Microfinance Institutions: Providing Full Financial Services to the Poor

2) World Bank: Publications

3) Microfinance Gateway: Q&A with Joanna Ledgerwood and Victoria White

4) Microfinance Gateway: Meet Our Experts

5) Microfinance Gateway: Homepage

6) World Bank: Homepage

[MicroCapital Society]

Wednesday, October 25. 2006 from MicroCapital.org
Capturing Remittances in Central America by Sam Logan

Published by the International Relations and Security Network, October 5, 2006, 4 pages, view here: http://www.isn.ethz.ch/news/sw/details.cfm?ID=16752

In the article, “Capturing Remittances in Central America”, author Sam Logan presents a short exposition about the role microfinance may play in channeling worker remittances into the formal financial sector. This is the second in a three-part series presented by the International Relations and Security Network’s (ISN) publication, Security Watch, on the impact of microfinance programs in the region containing the Andes, Central America, and the US-Mexico border area of northern Mexico.

An excerpt from the paper: “The growing amount of remittances to Central America remains largely undocumented, moving through networks outside of the formal financial sector. …[M]ore focus has been placed on how to capture the growing amount of remittances and channel this wealth into formal systems where regional and local banks and micro-lending organizations play a role in bringing more Central Americans into the formal financial sector.”

Mr. Logan presents some interesting data focusing on remittances in Honduras and Nicaragua but offers no in-depth research or policy suggestions. According to the ISN website, Mr. Logan is an investigative journalist who has reported on security, energy, politics, economics, organized crime, terrorism and black markets in Latin America since 1999. He has worked as a South America based correspondent for the International Relations and Security Network since July 2005.

by Lori Chang, MicroCapital.org Writer
Sources:
1) ISN Security Watch: Capturing Remittances in Central America
2) ISN: Homepage
3) Samuel Logan: Homepage

[MicroCapital Society]

Monday, November 20, 2006 from MicroCapital.org
Paper Wrap Up: Mobile Phone Banking and Low-Income Customers: Evidence from South Africa

By Gautam Ivatury and Mark Pickens, published by the Consultative Group to Assist the Poor/The World Bank and the United Nations Foundation, Nov 2006, 19 pages, download here: http://www.cgap.org/publications/mobilephonebanking.pdf

This paper reports on a study designed by the Consultative Group to Assist the Poor (CGAP), an NGO which was founded by several multilateral agencies, international financial organizations and interested private organizations to promote the development of financial services for the poor. The study was funded by the United Nations Foundation, a public charity which supports private-public partnerships, and the Vodafone Group Foundation, a charity founded by the mobile phone company Vodafone. The study was based on a survey of 515 low-income South Africans, 215 whom used the mobile phone-based banking (m-banking) service, WIZZIT, and 300 who did not. The first section of the paper introduces WIZZIT, which is a division of the South African Bank of Athens, specifically targeting South Africa’s “unbanked population.” It was launched in December 2004 and currently has 50,000 customers. The m-banking accounts allow customers to make bill payments, check their account balances, and make transactions using their mobile phones. Additionally, the customers are provided with debit cards which they can use to withdraw money from any ATM. Customers are able to make cash deposits into their account at all Absa Bank and Postbank locations. WIZZIT accounts have no minimum balance requirements and charge a per-transaction fee. The second section of the paper reports the findings of the survey. The authors note that low-income customers are pleased with WIZZIT’s service because it is safe, convenient, fast, and cheaper than alternative banking methods. The data also showed that WIZZIT’s low-income customers were better off, as well as more financially sophisticated than low-income non-users prior to using the service. Both customers and non-customers said they were willing to try new technology, but human interaction was still important to them. Finally, the study showed that most non-users had not heard of WIZZIT. The third, and final, part of the paper draws general conclusions from the research findings. It encourages other m-banking providers to build greater awareness of their services and emphasizes the ability of m-banking to provide financial services to the poor in developing countries.

By Drew Rifkin

[MicroCapital Society]

Thursday, January 11. 2007 from MicroCapital.org
Paper Wrap Up: Financial Inclusion 2015: Four Scenarios for the Future of Microfinance

By Elizabeth Littlefield, Brigit Helms, David Porteous, published by the Consultative Group to Assist the Poor (CGAP), Oct 2006, 16 pages, view full document here.
In this paper, Elizabeth Littlefield, one of the World Bank’s leading proponents of microfinance and CEO of the Consultative Group to Assist the Poor (CGAP), a multi-donor organization created to help build a large scale permanent microfinance industry, and colleagues reflect on the brief history of the microfinance industry and discuss possible scenarios for the future. According to the CGAP/MIX analysis of data from the MIX and Microcredit Summit, worldwide borrowers from MFIs have grown between 13 and 15 percent a year over the last decade, doubling the outreach of the microfinance industry every 7 years.

Two thirds of the world’s adults still do not have access to a bank account.

The authors of this article question the sustainability of the microfinance trend and discuss plausible narratives about the future designed to help organizations plan ahead. For scenario purposes, CGAP divides transition and developing economies into two groups:

1. BRICs, large emerging markets that have experienced rapid growth, consisting primarily of Brazil, Russia, India and China, although South Africa and Kazakhstan are sometimes included and Russia occasionally omitted. More than 40 percent of the world's population lives in a BRIC economy, with 37 percent in India and China alone.

2. LICs, low income countries that have low economic growth, deep poverty and unstable governments. Within the LIC category, CGAP divides countries into groupings of similar political structures.

Demographic shifts will have global effects on the microfinance industry. Within the next ten to twenty years, the client base for financial services will get younger, more urban and more connected. The diamond-shaped socioeconomic distribution of certain BRIC economies, such as India with its growing middle class and slender "stem" of those in extreme poverty, present an additional challenge for microfinance. Will people in the "stem" benefit from or be left behind by the increased financial inclusion?

Four more trends have the potential to help or hurt financial access:

1. Wireless technology. It can radically reduce transaction costs even in remote locations. The International Telecommunication Union (ITU) estimates that over half the people of LICs are within reach of wireless service and aims to "connect the world" by 2015. Basic banking services are made available remotely through low cost wireless phones. The ultimate level of wireless penetration depends on the cost to consumers and the profitability of providers, creating the possibility that a digital divide could be exacerbated at a lower level.

2. Activist governments: friends or foes? Governments are becoming more involved with direct delivery of financial services to the poor. The subsidized state credit in countries like Venezuela, which has recently announced that it will invest USD 220 mn to create 800 community banks, can drive financially sustainable MFIs out of business and destroy the general repayment culture.

3. New international players: dealing with popularity. It is uncertain if the new large donors will learn from the successes and failures of traditional donors. Technological advances allow the average citizen to donate small amounts of money or livestock via internet, allowing governments to be bypassed completely. These new donors can bring the breath of fresh air needed to bring microfinance to a higher level, or it could lead to overspending with unmet expectations, leading to a backlash.

4. International regulation: safety vs. access. The Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) World Bank initiative to regulate international financial transactions requires all lending institutions to collect and report various identifying information from borrowers, making some accounts and transactions unviable due to high transaction costs. Regulations also limit types of transactions allowed.

The authors predict that the international community will respond by accelerating the application of mobile phones and other technology to financial services, governments will encourage market development, donors will temper expectations with real evidence and support the creation of infrastructure like credit bureaus to restrain reckless over-lending, and there will be more BRIC and LIC representation in international regulatory committees.

-Lisa Kalajian, Microcapital.org writer