FSR Forum 14-04

Microfinance

14th VolumeJuly 2012issue #4

Interview K. MolenaarVice-President of European Microfinance Network

Competition, Microfinance, and Credit InformationArticle

Column J. G. GroeneveldEuropees “zwemwater”

p32p24 p38

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Microfinance

Preface

Dear readers,

In front of you lies the fourth edition of the 14th volume of the FSR Forum. This edition’s

theme is Microfinance. Microfinance is sometimes confused with Micro Credit, which is the

division of small loans to people who are in need and cannot borrow from commercial institutions.

Micro Credit is a form of Microfinance, but the concept of Microfinance is broader than merely

the provision of small loans. It also covers other financial services such as saving accounts and

in some cases Microfinance Institutions even provide education to the poor. Another mistake

often made is that Microfinance Institutions belong to the category of charity. Sometimes the

opposite can even be true, which will be demonstrated in this edition.

As in every edition you will first find several articles about the central theme to give you a better

understanding of the topic. The first article is a summary of the article ‘Microfinance Institutions

and Public Policy’ by Daniel C. Hardy, Paul Holden and Vassili Prokopeno. The authors first

describe the specific characteristics of Microfinance after which they give policy recommendations

concerning the regulation and supervision of Microfinance Institutions (MFIs). One of their

conclusions indicates that supporting MFIs is in itself positive but it will only be effective when

the background of the specific MFI is considered.

The second article from M. Tonelli and C. Dalglish builds on the previous article by questioning

whether Micro Credit can effectively solve the issues micro-entrepreneurs living in poor conditions

face. Important to note is that this article only criticizes the specific part of Micro Credit instead

of Microfinance as a whole. The authors conclude their paper with a model implemented in

Mozambique, which in their opinion forms a good example for other African countries.

In the last article C. McIntosh and B. Wydick discuss the effect competition between Microfinance

Institutions has on credit contracts. Traditionally competition has mainly been argued as being

positive, since it ensures a better output. McIntosh and Wydick however argue that unless

credit information systems are developed simultaneously, competition between MFIs will harm

poor borrowers. Also this paper concludes with several policy recommendations concerning MFIs.

As the authors of the articles mentioned above Klaas Molenaar, founder of Triodos Facet BV and

lector at the Haagsche School, also has his concerns when it comes to the developments of

Microfinance. In an interview we asked him about his opinion related to Microfinance and help-

ing the poor micro entrepreneurs to develop. Personally this interview has provided me with

new insights, such as the emergence of Microfinance. I had always thought that Microfinance

originated from Bangladesh, but Molenaar made it clear that the foundation of the Rabobank

also may be grouped under Microfinance initiatives.

In previous editions the professors who wrote the “Professors Column” almost all originated

from the Erasmus School of Economics. This edition the dean of the International Institute of

Social Studies, Leo de Haan, has written a column. Professor De Haan was present at the Access

to Health Insurance Conference, initiated by Princess Maxima, on which experts on the field of

financial inclusiveness and health insurance came together. In his column Professor De Haan

discusses the main message spread during the conference.

fsrforum • volume 14 • issue #4

2 • Preface

Since this FSR Forum is one of the last editions, almost all of our activities have taken place

and the active members are finishing the last tasks. But do not worry, because you can already

check out all the new events coming up next year in the activities calendar. As you can see a

new event will take place at the start of the new academic year: the Erasmus Banking Congress.

The Erasmus Banking Congress will take place on the 12th of September. During this congress

different speakers will give you an insight of the current economic situation and the future of

banking. On page 45 you can already find an overview of the theme of this year’s EBC and the

speakers of the congress. Keep an eye on the next edition of the FSR Forum because in that edition

the EBC will be discussed extensively.

Besides the activities that have yet to come you can as usual find the activity reports of the

latest events that took place. Other columns that can be found in this edition are the column

of mister Groeneveld who links the water pollution in Europe to the financial issues of Europe,

the News Update, the Former Board Member column and the FSR Member column.

The fourth and almost final edition also means that the next f.t. board has been announced. On

the 7th of June they have been introduced during a social drink at the Locus Publicus. The f.t.

board consists of Sep Vermeulen, Maaike van Lanphen, Taco Smit, Laurent Schmidt, Margriet

van der Lubbe and Joost Vlot. The Editor in Chief of the 15th volume of the FSR Forum is going

to be Maaike van Lanphen. From now on she is going to start looking for new editors to make

the next volume a great success. If you are interested please do not hesitate to contact us by

sending an email or visit us at H14-06.

Hopefully you will enjoy reading this FSR Forum and that it will enrich your knowledge about

the different financial services provided by Microfinance Institutions!

Sincerely,

Anne van Driesum

Editor in Chief FSR Forum

FSR board 2011-2012

Preface • 3

Table of contents

ColofonFSR FORUM appears five times a year and is an edition of the Financial Study Association RotterdamKvK Rotterdam no: V 40346422VAT no: NL 805159125 B01ISSN no: 1389-0913

14th volume, number 4, circulation 1680 copies

Editor in chiefAnne van Driesum

Editorial department Jeroen van Oerle

Editorial advisoryDr. M. B. J. SchautenDr. W. F. C. VerschoorDrs. R. Van der Wal RA

With the cooperation ofD. HardyP. Holden V. ProkopenkoM. TonelliC. DalglishC. McIntoshB. WydickK. MolenaarDrs. J.G. Groeneveld RA RV L. de HaanD. Smits

Editorial addressEditiorial office FSR Forum, Erasmus Universiteit Rotterdam Room H14-06Postbus 1738, 3000 DR RotterdamTel. 010 408 1830E-mail: [email protected]

Microfinance institutions and public policyDaniel Hardy, Paul Holden & Vassili Prokopenko (2003)Many governments and nongovernmental organizations have adopted policies to promote the

growth of microfinance institutions (MFIs). The appropriate level and form of support for MFIs

are discussed in this paper on the basis of a review of key MFO characteristics. 8

Micro-Credit is Necessary but Not Sufficient for Entrepreneurs in Desperate PovertyMarcello Tonelli and Carol Dalglish (2012)This study examines the issues affecting the successful provision of micro-credit to support

entrepreneurial activities in poor settings. The findings enable us to better understand why

micro-credit, though useful, is only part of the solution. 16

Competition, Microfinance, and Credit InformationCraig McIntosh & Bruce Wydick (2012)We find that competition in microfinance eliminates cross-subsidization by non-profit lenders,

potentially harming poor borrowers. Competition exacerbates asymmetric information problems,

leading to less favorable equilibrium loan contracts unless credit information systems are

developed in parallel. 24

Microfinance

4 • Table of contents


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Interview K. Molenaar 32

Expert on Micro Fiance

Column Joost Groeneveld 38

Europees “zwemwater”

Column professor 40

L. de Haan

FSR News

Word of the Chairman 43

News update 47

FSR former board member 48

FSR member 49

Activity reports 50

FSR Activity Calendar 60

Company Presentations Philips 6www.philips.nl/carriereOC&C 14www.occstrategy.nlNIBC 22www.careeratnibc.com

Table of contents • 5

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Fokke Jan Burema is typical of the ‘Top Talent’ that is helping Philips to grow. After graduating from Groningen University in 2007 with a Master’s degree in Organization Management Control, he joined Philips Lighting’s factory in Winschoten (The Netherlands) as a Production Controller. Within the space of just four years, he has risen to the position of Innovation Marketing and Strategy Controller for Philips Consumer Lifestyle in Amsterdam. From dealing with budgets of just a few million Euros in the factory, he’s now in control of a three-figure (million Euro) annual budget that carries with it far greater responsibility.

A fast track record of success“One of the great things about working for Philips is that you get meaningful project responsibility right from the start, so you can quickly begin to add real achievements to your CV,” says Fokke Jan.

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While he has seen many of his peers staying in a job for two to three years in order to build up a proven track record of success, Fokke Jan has succeeded in moving into a more challenging and more responsible job every one-and-a-half years.

“If people at Philips think you have the potential, they positively encourage you to make the most of your talents,” he says. “During the Philips internship that I did during my Master’s, they offered me a place on one of their European Business Courses, which immediately got me the Production Controller job in Winschoten. Then they put me on their ‘Top Talent’ program to help develop my business and inter-personal skills so that I could fast-track my career even more quickly.”

Broad experienceIn addition to the speed with which he has been able to progress, Fokke Jan has

also been impressed by the variety of work that he’s enjoyed at Philips.

“At Philips Lighting in Winschoten I learned a lot about supply chains and manufacturing - how you organize financial systems to cater for just-in-time production,” he says. “Then when I moved to Philips Consumer Lifestyle in Drachten I got to know the other end of the equation - the design innovation and product development process. In fast-moving consumer product markets, where development costs have to be recouped over as little as one or two years, controlling R&D project costs proved to be highly challenging. Now in my current job, it’s all about new media channels such as web promotions and social networking, which are just as fast-moving. So it’s extremely important that I help to make sure the budget is spent on the most effective means of communicating with Philips’ customer base.”

The rapid pace of change within Philips means there will plenty of new opportunities for Fokke Jan to take his career in the directions he wants to go.

“My next move will be international, probably to Asia,” he adds, “but with Philips’ rapid expansion in emerging markets such as China, it will be perfectly possible for me to do that without moving to another company.”

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Microfinance institutions and public policy

By Daniel Hardy, Paul Holden & Vassili Prokopenko (2003)

8 • Microfinance institutions and public policy


»

1 IntroductionThe last twenty-five years have witnessed a rapid expansion

in the number and size of microfinance institutions (MFIs)

in many parts of the world. What distinguishes MFIs is their

orientation to fill a gap left by (larger) conventional, com-

mercial or government-sponsored institutions in the provision

of financial services to poorer households and smaller enter-

prises. MFIs seem to promise a means to provide an especially

valuable form of assistance directly to disadvantaged sections

of society in a relatively cost-effective manner. MFIs may thus

play a significant role in financial sector development, and

therefore in overall development.

Based on this promise, the establishment and growth of MFIs

has been supported by national governments, domestic non-

governmental organizations (NGOs), foreign NGOs or official

donors, and multilateral development banks. These develop-

ments prompt the question of whether or not MFIs merit

such assistance directly to disadvantaged sections of society

in a relatively cost-effective manner. At the same time, many

countries are reconsidering the question of how, if at all,

MFIs should be regulated for prudential and non-prudential

reasons. These questions are addressed in this paper.

2 ChARACtERIStICS oF MFISThe term “microfinance institutions” is generally used to

refer to those financial institutions that are characterized by

their commitment to assisting typically poor households and

small enterprises in gaining access to financial services. This

commitment may replace or supplement other private or

public objectives, such as the maximization of shareholder

value, the direction of investment into priority sectors, or the

mobilization of savings to finance government operations. In

common usage, MFIs are distinguished from purely commercial,

small-scale, possibly informal financial institutions dealing

with the poor (for example, village moneylenders, pawnshops,

and informal transfer systems) and from large, perhaps gov-

ernment-sponsored schemes that may hold numerous small

accounts more or less as a byproduct of their main business

(for example, national savings schemes or post office savings

banks). Nonetheless, the same public policy issues - especially

those related to subsidization and regulation – may arise in

connection with these other institutions.

2.1 Services and ClientsMFIs provide a wide range of services and differ greatly in the

nature of their operations. The best-known activity of MFIs is

providing credit to poorer households and small enterprises,

but many also take deposits. In addition, some MFIs offer

other financial services, such as insurance, or advice and

training to their clients. Certain MFIs are used as a vehicle to

provide other services and education, e.g. in the area of

health awareness.

The primary clientele of MFIs consists almost by definition

those who face severe barriers to access financial products

from conventional financial institutions. These barriers

comprise mainly high operational costs, and risk factors. An

MFI’s clientele may for example be distributed in remote

locations, and the size of transactions may be small relative

to fixed costs. The risk factors are pronounced because: (1)

poorer borrowers’ income stream can be intrinsically risky and

heavily exposed to exogenous shocks (weather, macroeconomic

fluctuations); (2) the borrowers often cannot provide collateral

because they posses few negotiable assets, whether they be

physical or financial, and live in an environment where

enforcement of formal property rights and other contracts is

expensive and uncertain; and (3) loans are bound up with

personal finances of poor (e.g. a business might collapse if

large medical bill must be met).

MFIs have to be innovative to overcome these barriers.

Incentives for loan repayment, for example, can be created

through a number of techniques (see Morduch, 1999 for a

review), such as the group lending model, which was pioneered

by Grameen Bank in Bangladesh in the mid- 1950s. Under

group lending, all group members are held responsible for

loan repayments even if the loans are made to individuals.

Perhaps most commonly today, credit granting MFIs use

dynamic incentives, where a borrower initially receives a

small sum, but as a satisfactory repayment history is established,

the borrower may obtain progressively larger loans. The treat

to cut off any further lending when loans are not repaid

strengthens repayment incentives.

Small business loans may be a prominent part of MFI

activities, but lending and deposit taking to smooth consumption

by households may be more important for most MFIs and

their clients. Providing savings facilities not only enables

households to smooth consumption, but is of value also in

making and receiving payments, and establishing a financial

record. One of the lessons of the recent development of the

MFI sector is that even the very poor are eager able to save.

MFIs are not equally dispersed worldwide. They appear to

be especially well developed in certain Asian and Latin American

countries, including Bangladesh, Bolivia, and Indonesia, but

relative to the domestic financial system they are also important

in such countries as Mali. In many of those countries where

the MFI sector is still in an early phase of development, such

as Brazil, the number and size of MFIs have recently been

growing rapidly.

Most MFIs seem to be connected to NGOs and may be

legally incorporated as such, perhaps in the form of a non-

profit organization or trust. MFIs may also take the form of

credit unions or savings cooperatives, private limited companies,

and other forms depending on the legal system of the country

where they operate. So far, only a few commercial banks have

successfully entered the microfinance business.

2.2 Balance Sheet SizeThe nature of MFI business implies that the value of individual

transactions and financial stocks involved are relatively

small. Typical loan size varies from US$50 or even less for

institutions that target the very poor, to several thousand

dollars for those institutions that target successful small

businesses. Deposits might be even less (as low as US$5).

MFIs may thus play a significant role in financial sector development.

Microfinance institutions and public policy • 9

These sums may be large relative to the average income and

assets of clients or even GDP per head, but small relative to

typical financial transactions involving conventional financial

institutions.

The characteristics of the clientele, combined with the

localized operations of many MFIs, imply that most institu-

tions are usually relatively small in financial terms, with total

assets the equivalent of only a few million dollars and capital

that rarely exceeds US$1 million. However, there are MFIs in

some countries with so many depositors and borrowers that their

balance sheet size is comparable to that of a commercial bank.

Some indication of the magnitudes involved is provided by

the statistics in Table I, which are taken from November

2001, issue of The MicroBanking Bulletin. The sample of 148

MFIs is not large, and may be biased toward relatively large

and sophisticated MFIs that are capable of providing such

data, and toward MFIs specialized in lending.

2.3 Costs, Revenues, and ProfitabilityThe costs of carrying out microfinance business are usually

high relative to the value of loans and deposits involved. On

and fixed costs, independent of the size of the transaction.

These costs include the administrative costs of making pay-

ments, keeping open offices, loan monitoring, etc. Typically,

the largest single expense is salaries, due to the very labor-

intensive nature of micro lending. The data in Table I support

this thesis; the ratio of administrative expenses to assets in

the sample is much higher than would be typical for a com-

mercial bank, and declines with portfolio size. On the other

hand, small scale projects or consumer lending to the poor is

often highly risky, as explained above. This often results in a

high share of impaired loans, which are sometimes bunched

(e.g. after a harvest failure or natural disaster). Certain MFIs

are very successful in achieving high loan recovery rates, but

the potential risk is almost always present.

These high costs generally force MFIs to charge high

interest rates on loans, even in real terms (Table I contains

statistics on the nominal and real ratio of revenue to loans).

Also, the spread between deposits and lending rates offered

by MFIs is usually high. MFI borrowers appear willing to pay

these high rates because the alternative is either borrowing

at even higher rates, perhaps from an informal money-lender,

or no borrowing at all. An MFI may have to operate in an oligo-

polistic manner in its local market in order to cover its fixed

costs, through its presence could still be welfare improving.

table 1: Financial Characteristics of Selected MFIs (Averages, percent except where noted)

All MFIs Financially self-sufficient

Number in sample 148 57

Years of operation 8 11

Active borrowers (number) 10710 89370

total assets (US dollar millions) 5,5 21,2

Equity/assets 42,8 40,8

Loans/assets 68 71,2

Deposits/assets 13,7 53

Borrowing at commercial rates/loans 49,5 96,2

Average loan /GDP 46 76,3

Revenue from loans/loans 38,1 41

Inflation -adjusted revenu from loans/loans 28,8 33

Return on assets -3,7 5,1

operating expenses/assets 31,2 26,2

Administrative expenses/assets 19,8 17

Interest margin/assets 18,9 24

Nonetheless, many MFIs lose money; in aggregate the

MFIs for which data are reported in Table I failed to cover

their costs. However, there is also a substantial contingent of

“financially self-sufficient” MFIs that manage to at least

break even on a sustained basis. They are generally very

much larger than other MFIs, both in terms of their loan

portfolio and the number of borrowers. Their loans also tend

to be larger relative to GDP per head. Their administrative

costs tend to be lower relative to total assets, but their inter-

est margin is higher, presumably because they are much

more successful in attracting low-cost deposits. Savers at

MFIs may be more attracted by the security and transaction

services connected with having a deposit rather than with

the interest yield. Financially self-sufficient MFIs also make

more use of commercial borrowing, although the direction

of causation is not clear: they may be able to borrow because

they are financially self-sufficient, but the borrowing capacity

may strengthen their performance. At the same time, even

financially self-sufficient MFIs maintain a high ratio of equity

to total assets.

Available data suggest that MFIs often improve their prof-

itability as they mature, primarily by lowering their average

costs; the “financially self-sufficient” MFIs included in Table

I had operated on average for 11 years, compared with an

average of 8 years for the full sample. This may reflect: (1)

learning by doing (the institution learns what operational

arrangements and loan mechanisms work best in its environ-

ment); (2) sample selection bias (only low-cost institutions

survive); and (3) decreases in average costs when an institu-

tion with significant fixed/overhead expenses expands over

time. Almost all MFIs seem to lose money for an initial

period, which implies that most MFIs require substantial

capital injection or subsidies during their start-up stage.

3 SUPPoRtING thE DEVELoPMENt oF MFIS Given the tendency to make losses or earn below-market

returns on capital and to incur relatively high operating

costs, many, and perhaps most MFIs are associated with

NGOs, and rely to some degree on support from their donors,

at least during a start-up phase. Therefore, the question

arises of whether and when the support provided to MFIs is

worthwhile.

3.1 The Provision of Support to MFIs The obvious motivation of support for MFI is a desire to help

the poor, an essentially distributional argument. At a general

level, the provision of financial services through an MFI is

viewed as empowering clients in a way that lump sum transfers

do not: instead of aid-dependence, clients who have access to

financial services gain autonomy and, ultimately, access to

the formal economy. Thus, MFIs can mitigate the powerlessness

that is often an intrinsic feature of poverty, and even improve

the functioning of society. However, it needs to be shown that

supporting an MFI is better than an alternative allocation of

limited resources, and that support for MFIs does not have

large negative side effects.

Perhaps the strongest formal argument for supporting MFIs

is that such support is likely to be particularly well-targeted

due to MFIs’ informational advantage over other mechanisms

for delivering assistance to the disadvantaged. When asym-

metric information (between donor, financial institution,

and client) and substantial fixed costs are prevalent, assistance

intermediated through MFIs can offsets these imperfections

to some extent, while direct assistance cannot. This informa-

tional advantage extends along two dimensions: First, the



»

availability of financial services allows the clients to decide

for themselves in important economic matters. Second, an

MFI should be in a position to evaluate projects ex ante and

to monitor their performance, so that resources are allocated

more efficiently.

Several financial arguments can be added to those based on

the informational advantage of channeling assistance through

MFIs:

• AnMFImay leverage the support provided to disadvan-

taged groups by mobilizing savings, so that the total provi-

sion of resources to the poor is increased. In the absence

of an MFI, the poor may accumulate few savings, and

those that do may hold assets in the form of cash, durable

goods, and possibly deposits in a commercial bank, which

intermediates funds to conventional borrowers. When an

MFI provides intermediation services, the savings of some

of its clients are likely to be used to finance borrowing by

other clients.

• AnMFIthatissufficientlyviabletoborrowcommercially,

perhaps based on the capital provided by donors, can draw

on the savings of the richer part of the population for the same

purpose, and in that way leverage the initial investment.

• It isnowwidelybelievedthatMFIscanbedesignedand

managed so as to attain sustainability, that is, to cover

operating costs plus achieve a reasonable return on capital

(Table I). Those MFIs that have achieved sustainability

should ultimately be able to grow without further assis-

tance. A very successful MFI may be able to return some

assistance to donors, who can then devote the resources to

new projects.

Nonetheless, support for MFIs needs to be weighed against

other demands, and under some conditions may even be

counterproductive. First, funds that go to MFIs could be used

instead for direct income support (e.g., lump-sum transfers),

undertaking infrastructure projects, or providing human

capital through education and training. Such alternative

forms of assistance to the poor can have significant advan-

tages, for example, by being directed at the very poorest, who

tend not to be helped by MFIs. Training schemes can provide

the poor with human capital, which might offer a less uncertain

return than a project financed by loans from an MFI.

Second, outside support is likely to weaken the budget disci-

pline on MFIs. This poor incentive structure can result in

operational inefficiency (high overheads, excess staffing,

excessive pay levels), poor resource allocation (poor loan

application selection, poor loan collection), and, perhaps,

lack of innovation. Furthermore, an MFI that is structurally

dependent on on-going subsidies will be constrained in its

growth, and could collapse if the support is withdrawn.

Third, donor-supported MFIs could crowd out commercially-

oriented providers of financial services. At least some anecdotal

evidence suggests that commercial ventures are discouraged

from entering markets which are already well served by MFIs

that receive support from NGOs or government and there-

fore have lower costs. The users of financial services in those

markets may benefit, at least initially, but donor resources

might be better devoted to providing services that commercial

institutions neglect. Furthermore, an abundance of aid-

dependent MFIs might stifle the longer-term development of

a more sophisticated, commercial financial sector.

3.2 Forms of Support for MFIs These arguments suggest that MFIs can be worth supporting,

but the form of support needs to be carefully chosen to suit

the needs of MFIs at different stages of development, and to

minimize possible drawbacks. Several approaches can be

envisaged whereby warranted assistance is provided without

creating aid dependence, weakening the incentives to achieve

sustainability, or suppressing the scope for competition and

commercially-driven develop¬ment. One means is to provide

assistance in the form of a one-time start-up grant or capital

injection. Such a grant would be attached to the start-up of

particular projects, and its beneficiaries would be not only

microfinance institutions per se but also commercial banks

willing to proceed in the microfinance business. One could

also provide a start-up loan with a graduated and fairly long

repayment period. Thus, such support would help cover high

initial fixed costs, or could be invested to provide a stream of

Support for MFIs does not have large negative side effects.


income that reduces net average costs, but the MFI would

still be motivated to keep down costs and innovate (to at least

achieve satisficing profitability and to finance expansion).

A policy to provide only start-up support needs to be made

credible. Especially if a donor has invested substantial sums

in an MFI and if many small businesses and households are

at risk if the MFI fails, a bailout may be difficult to resist. The

budget constraint may be harder if a number of MFIs operate:

they not only compete against one another, but the failure of

any one does not leave the poor without services. Further-

more, MFIs can be innovative in their techniques to select

borrowers and ensure repayment, and in stimulating savings.

The need for (intrinsically risky) innovation implies that it

may be productive to encourage several institutions to be

established and to undertake a variety of experiments, even if

it is recognized in advance that a proportion are likely to fail.

The limitation to this approach is that relatively high fixed

costs imply that few MFIs can exist in any one market—espe-

cially in more remote regions— and that competition may

keep all MFIs from minimizing average costs.

If it is found that on-going support for MFIs is needed,

mechanisms can be designed to limit aid-dependence and

even promote competition between MFIs. One approach is to

provide assistance to a central provider of services that can

be used by individual MFIs, which are themselves to be self-

supporting.

4 REGULAtIoN AND SUPERVISIoN oF MFIS

4.1 Costs and Benefits of Regulation Besides possible measures to promote the MFI sector, the

other main policy issue concerns how they should be regu-

lated and supervised. This regulatory framework may differ

significantly from that applicable to commercial banks.

Financial institutions are generally subject to two forms of

regulation: prudential regulation, which seeks to reinforce

their financial soundness, and non-prudential regulation,

which serves other purposes such as consumer protection

and which is similar to regulations applied to other busi-

nesses. Any one piece of regulation can serve both purposes,

but the distinction is useful in considering the “pros and

cons” of various provisions. The appropriate form and degree

of regulation and supervision depend on the balance of a

number of objectives and the interest of different parties,

which are worth making explicit:

• Protection of depositors. The depositors of an MFI are

unlikely to be able to exercise a high degree of market dis-

cipline on the institution, perhaps because they may be

relatively unsophisticated, but also because their individ-

ual deposits may be small, it may be difficult for them to

coordinate, and the MFI may be in the position of a local

monopolist. Furthermore, the depositors are unlikely to

have diversified portfolios or reserves, so any loss from the

failure of an MFI would affect them gravely and discourage

them from participating in the financial system indefi-

nitely. Depositors also need some protection from fraud;

otherwise a “pyramid scheme” might call itself an MFI in

order to undertake a scam (as happened in some transition

countries). Hence, there are grounds for regulating and

supervising MFIs that take deposits from the public.

• Protectionofborrowers.AnMFImayenjoyconsiderable

local market power, and its goals could be perverted into

maximizing profits at the expense of (poor) clients. Then

there would be grounds to regulate its activities and in

particular its pricing policies. However, it may be very dif-

ficult to establish when monopoly rents are being earned,

especially if they are dissipated in high overhead costs and

management remuneration. Given the worldwide evidence

that MFIs tend to have high costs, and the willingness of

borrowers to accept high real rates, MFI’s monopolistic

lending practices may not often be of concern. Indeed, in

some countries, usury laws have had to be amended or

abolished in order to make MFIs viable.

• Protection of the financial system. Thefinancial sound-

ness of an MFI can have an effect on the state of the financial

system as a whole when that MFI has borrowed signifi-

cantly from commercial banks or other financial institu-

tions, or when the failure of the MFI is likely to provoke

(perhaps ill-founded) doubts about the soundness of the

entire system. This is the standard rationale for regulating

the financial sector more strictly than other sectors. Yet,

the effects of MFI failures are likely to be of minor concern

in most cases, since the institutions involved tend to be

relatively small.

• PromotionoftheMFIsector.Aninstitutionknowntobe

well regulated and closely supervised may be able to

attract more deposits from the public, and may be able to

obtain financing at lower cost, so regulation and super-

vision may promote the development of the MFI sector.

However, there is little evidence that these effects are pro-



nounced; experience in South America suggests that MFIs

grew and became more sophisticated autonomously, and

only later was this development ratified by the financial

supervisors (Christen and Rosenberg, 2000).

• Protectionofpublicfunds.Theprotectionofpublicfunds

may motivate regulation and supervision of MFIs where

public funds have been used to establish an MFI, or where

the MFI’s liabilities are covered by explicit or implicit

deposit insurance.

The possible benefits of MFI regulation and supervision need

to be balanced against the costs. These costs can be relatively

more important for these small institutions than they are for

large commercial banks. The principal costs are:

• Coststosupervisors.ThecostofMFIsupervisionmaybe

disproportionate to their financial importance or the

underlying interests that supervision is meant to serve.

Supervisory costs may be high because MFIs are often

small, numerous, located in remote regions, and with

poor record keeping. Furthermore, in many developing

countries, skilled supervisory capacity may be in short

supply, so employing these scarce skills in supervising

MFIs could endanger the effective supervision of institu-

tions that are more central to the soundness of the finan-

cial system.

• Coststosupervisedinstitutions.Besidesthecostsincurred

by the supervisor, complying with regulations and satisfy-

ing on- and off-site supervision can be administratively

burdensome and expensive for an MFI. These costs are

ultimately passed to the MFI’s clients.

• Stifling of innovation and competition. Regulation and

supervision may restrict the ability of MFIs to experiment

with new forms of loan agreement and systems to attract

deposits by discouraging or prohibiting innovations that

are not foreseen in the regulatory framework.

4.2 A Strategy for the Prudential Regulation of MFIs The balance of these factors will likely vary with the state of

development of a country’s MFI sector and the services cur-

rently or potentially provided by MFIs. The regulations

applied to MFIs may also have to evolve along with the insti-

tutions, with more stringent and extensive regulations

applied as those MFIs that start operations that could have

more important externalities. Furthermore, regulations will

essentially have to apply to types of activity (lending, deposit

taking, etc.), rather than to categories of institutions defined

some other way, such as legal form (commercial versus non-

profit making, publicly incorporated versus cooperative,

etc.). To do otherwise would be an invitation to regulatory

arbitrage—shifting perhaps dubious activities to the least

regulated sector—and create unwarranted market distortions.

At one extreme, where an MFI does nothing but lend out

donor funds, there seems to be little good reason to subject it

to prudential regulation and supervision, except as necessary

to verify that its activities remain circumscribed. At the other

extreme, if an MFI acts as a full-fledged commercial bank, it

will have to be subject to the same prudential regulatory

regime as other commercial banks.

In any case, it is important that the supervisory authority

know what activities an MFI engages in, for only with this

knowledge can one know which prudential requirements to

apply, if any. Therefore, a mechanism to verify that an MFI’s

activities have remained within the agreed range is needed.

At the very least, the supervisory authorities should have

some means to determine whether an MFI is small enough

not to be of systemic importance by setting minimum standards

of record keeping and publication for all but the most informal

MFIs.

It also follows that careful oversight at the time of the founding

of an MFI is essential. It is at that stage when the founders

determine the purposes of an MFI, and when the authorities

can determine the requirement that will have to be met. In

particular, the founders could be required to demonstrate

that the controlling interests such as Board members and

senior managers are qualified and otherwise “fit and proper;”

provide capital commensurate to the risk structure of the

MFI’s envisage portfolio; and establish a system to keep the

authorities informed of major developments at the MFI.

Concentrating the regulatory burden at the time of start-up

may raise the cost of establishing new MFIs, but the future

regulatory costs should be reduced. Furthermore, this regu-

latory approach reinforces the argument made above that

external support for an MFI should mainly take the form of

an initial capital injection rather than an on¬going subsidy.

Once an MFI is established, it might initially be restricted to

a rather narrow range of activities. The range can be

expanded over time, but only as the MFI acquires the neces-

sary skills and structures to handle them, and demonstrates

to the supervisory authority that it can carry out the new

activities in a sound manner and support the heavier regula-

tory requirements that are entailed. Some MFIs develop from

NGO-sponsored lending organizations. Others might start as

savings cooperatives, which are in effect “narrow banks,”

which just take deposits and invest them in fairly safe liquid

assets.

When an MFI begins borrowing significantly or taking

deposits from the public, probably the most important set of

prudential regulations concern the recognition of impaired

loans and the making of provisions. In most financial systems,

and especially for an MFI, credit risk is the greatest threat to

survival. Prompt and full recognition of actual or potential

loan losses is the most effective means to contain them, and

even if an MFI is forced to close due to loan losses, losses for

depositors and other creditors are likely to be smaller if loan

losses have been identified early.

NotesSee Daniel Hardy, Paul Holden & Vassili Prokopenko (2003) for the complete article including the

reference list.

For an MFI, credit risk is the greatest threat to survival.


‘BIJ OC&C BOUWEN WE MEE AAN DE FIRMA

Thijs: Je bent nu een week of zes bij ons aan de slag. Mis je het studenten-leven al een beetje? Ruben: Nou, missen niet, maar het verschil liegt er natuurlijk niet om. Als student kon ik nog wel eens een, eh, gat in de week hebben. Dat is voorbij. Van de andere kant: nu heb ik in mijn vrije tijd tenminste wat te verteren!

Thijs: Mooi, we houden je dus kennelijk goed bezig! Hoe bevalt het werk tot nu toe?Ruben: Heel goed! De eerste twee weken heb ik onderzoek gedaan voor nieuwe projecten. Toen werd ik ingedeeld bij een team dat aan een project werkt in de levensmiddelenindustrie. Onze cliënt is een goed lopend bedrijf in een niche-segment dat te koop staat.

Thijs: Jullie ondersteunen dus de verkopers …Ruben: Ja, wij stellen als het ware een commercieel profi el op van dit bedrijf, zodat eventuele kopers een inschatting kunnen maken van de potentie die het heeft. We hebben ook voortdurend contact met het managementteam van het bedrijf, investment bankers en accountants. Ik leer hier zo veel van!

Thijs: Wat vond je trouwens van onze sollicitatieprocedure?Ruben: Snel en leuk! Ik deed mee aan de Strategy Course (de business course van OC&C; red.) op 16 november, heb daarna gesolliciteerd en had mijn eerste sollicitatieronde op 2 december. De tweede ronde was op 22 december: drie gesprekken met partners. Na afl oop kreeg ik te horen: ‘We gaan je bellen!’ Toen werd ik toch nog zenuwachtig. Ik dacht dat ik het er goed vanaf had gebracht, maar nu begon ik opeens te twijfelen. Die zelfde middag nog ging mijn telefoon: OC&C bood me een contract aan. Man wat was ik blij!

Thijs: Veel mensen die bij OC&C komenwerken, zeggen dat ze zich zo aan-getrokken voelden door de sfeer bij ons. Gaf dat ook voor jou de doorslag? En maken we je verwachtingen een beetje waar?Ruben: Absoluut! Voordat ik kennis maakte met OC&C had ik twee maanden stage gelopen bij een ander advies-bureau. Het werk was heel leuk, maar ik had daar minder een ‘klik’ met de mensen. Tijdens de Strategy Course bij OC&C voelde ik wel meteen die klik! Toen wist ik dat ik hier moest solliciteren. Inmiddels heb ik veel collega’s al goed leren kennen, ook door de retreat die we eind maart met kantoor hebben gehad in Villars, in Zwitserland – dat was echt super leuk!

Thijs: Wilde je altijd al strategie-consultant worden?Ruben: Nee, daar kwam ik pas vrij laat achter. Ik dacht altijd dat ik door zou gaan in de techniek. Dat trok me ook echt. Maar bij een van mijn stages zag ik consultants aan het werk. Ik merkte dat zij bovengemiddeld gedreven waren om dingen voor elkaar te krijgen – zij waren heel energiek en hadden een drive die mij ontzettend aansprak. Toen viel voor mij het kwartje en ben ik me gaan oriënteren op strategy consulting. OC&C kende ik al van naam, onder meer via het circuit in Delft. Wat mijn interesse verder in OC&C vergrootte was dat iemand bij Sequoia (corporate fi nance- en investeringsfi rma; red.) mij vertelde dat zij ‘net als OC&C’ een beetje eigenzinnig, een tikkeltje eigenwijs in de goede zin van het woord, waren. Zoiets maakt mij nieuwsgierig.

Thijs: Dat herken ik natuurlijk. Voor mij was ook de groeiagenda van OC&C een belangrijke overweging! Behalve resultaat boeken voor de cliënt en onze eigen mensen ontwikkelen is ons derde

Thijs Dikkers (1981) studeerde Civiele Techniek in Delft (MA O� shore Engineering). Hij raakte geïnteresseerd in strategy consulting toen hij als thesaurier betrokken was bij een reorganisatie van studentensociëteit Phoenix en nam deel aan de International Strategy Workshop van OC&C in Barcelona. Thijs werkt sinds september 2006 bij OC&C en is sinds 2011 project manager.

Ruben Janssen (1986) studeerde Lucht- en Ruimtevaarttechniek in Delft, was daar onder meer betrokken bij de organisatie van het 32e lustrum van het DSC (in 2008), deed een exchange-programma in Melbourne en liep stages bij diverse bedrijven. Ruben werkt sinds medio februari 2012 bij OC&C.

KIJK VOOR ALLE KENNISMAKINGSMOGELIJKHEDEN OP WWW.OCCSTRATEGY.COM

Contact:Marjolein van den Blink (Recruiter)010 217 5555, [email protected]

OC&C Strategy ConsultantsWeena 157, 3013 CK Rotterdam010 217 5555, www.occstrategy.com

OC&C interviewEen interview met OC&C-ers Thijs Dikkers (Project Manager) en Ruben Janssen (Associate Consultant)

Thijs Dikkers (links) en Ruben Janssen (rechts)

hoofddoel dat we samen OC&C willen uitbouwen en nog beter willen maken. Daar krijgen we ook allemaal de ruimte voor: als je hier met een goed plan komt, dan wordt dat opgepakt.

Ruben: Wat voor ervaringen heb jij daarmee? Thijs: Ik ben op gegeven moment onze recruitment-activiteiten gaan coördi-neren omdat ik vond dat dat beter kon. We doen nu op het vlak van recruitingmeer activiteiten dan ooit. Ander voorbeeld is dat ik samen met enkele collega’s ben gestart om elk jaar deel te nemen aan Limburgs Mooiste, een 160km lange wielertocht. Waanzinnig om te doen!

Ruben: Ben je eigenlijk veel naar het buitenland geweest voor OC&C?Thijs: Alles bij elkaar zo’n acht maanden. Mijn mooiste project was in Houston Texas. Daar wilde ik per se bij zijn. Ik heb toen twee fantastische maanden gehad in Amerika. Buiten dat project in de VS heb ik ook nog twee maanden in Singapore, drie in Londen en één in Cambridge (Engeland) gezeten. En behalve projecten in het buitenland hebben we natuurlijk ook nog trainingen die we samen met andere kantoren doen, zoals Introduction to Consulting dat jij net in Düsseldorf hebt gehad met Duitse en Engelse collega’s.

Ruben: Ik had niet verwacht al zo snel internationale contacten te krijgen bij OC&C. Maar als ik over een tijd eens wat langer naar het buitenland wil, heb ik daar dan zelf invloed op?Thijs: Als je het echt wilt, dan gebeurt het ook. Het zal niet altijd stante pede geregeld kunnen worden, maar het gebeurt wel!

Ruben: Is jouw werk heel erg veranderd sinds je projectleider bent geworden?Thijs: Je rol wordt een stuk breder. Behalve de analyse moet ik ook mijn team goed aansturen, de relatie met decliënt onderhouden, en natuurlijk de partners aan wie ik rapporteer goed bedienen. De sociale kant van het werk wordt belangrijker: niet alleen gelijk hebben maar ook gelijk krijgen – dat maakt het werk extra uitdagend en leuk.

Ruben: Maar ook lastig, toch? Zeker als je pas komt kijken, zoals ik. Hoe zorg je er dan voor, dat je serieus wordt genomen? Thijs: Aan het begin van een project stuit je als consultant vaak op fl ink wat scepsis in de organisatie waar je komt. Daar moet je je op instellen. Zowel voor jou als voor mij geldt: je wint vertrouwen door je integer en bescheiden op te stellen, goed te luisteren, goede vragen te stellen – en

je zeker niet arrogant te gedragen, want dan verlies je je geloofwaardigheid en kun je het schudden. Vorig jaar werkten we aan de prijsstelling bij een cliënt waar Sales en Operations al jarenlang met elkaar in de clinch lagen. Het heeft ons twee maanden gekost om ze op één lijn te krijgen. Maar de voldoening is er dan ook naar als je mensen na afl oop hoort zeggen: ‘P ̈f, dat hebben we samen toch maar mooi gefl ikt!’

Ruben: Ik heb voorlopig wel even genoeg aan mijn eigen stuk van het werk in de projecten, denk ik. Ik vond het al een hele ervaring om in week 1 van mijn aller-eerste project dat werkplan te zien, met mijn naam achter bepaalde onderdelen. Bam, daar stond mijn verantwoordelijk-heid: zwart op wit. Ik vond het een enorme kick om die vervolgens ook op te leveren. En na twee weken zat ik, hoewel wel samen met senioren van OC&C, al met de CEO van de cliënt en Amerikaanse investment bankers om tafel!

Thijs: Vind je dat genoeg vrije tijd overhoudt?Ruben: Geen issues tot nu toe. De weekenden zijn vrij, ik squash nog steeds iedere maandagavond en het lukt ook vaak om ’s avonds naar de sportschool te gaan. Ook houd ik voldoende tijd over om te trainen voor de tourversie van de Amstel Gold Race. En voor de Ringvaart-regatta: ik zit bij de acht van OC&C, als invaller voor een collega die een blessure heeft opgelopen.

Ruben: Hoe is jouw work-life balance geweest de afgelopen jaren?Thijs: Goed. Het is natuurlijk geen baan van 9 tot 5, en er zijn zeker avonden dat je fl ink moet doorwerken. Maar als ik iets gepland heb voor ’s avonds lukt het me bijna altijd om dat ook te doen. In de ruim vijf jaar die ik nu bij OC&C zit, heb ik mijn hockey op donderdagavond voor 95 procent gehaald.

Kom een week stage lopen: • ervaar het werken in Strategy Consulting

• volg intensieve trainingen• have fun tijdens het avondprogramma

OC&C SUMMER SCHOOL

BACHELORSTUDENTEN KUNNEN ZICH INSCHRIJVEN T/M 7 JUNI 2012;

SELECTIEDAG OP 15 JUNI 2012Kijk voor meer informatie op www.occstrategy.nl of neem contact op met

Marjolein van den Blink (recruiter) via telefoon (010) - 217 55 55 of per mail

[email protected]

OC&C Strategy Consultants

Weena 157 | 3013 CK Rotterdam

010 217 5555 | www.occstrategy.com

INTERVIEW_THIJS_RUBEN_A4_SPREAD.indd 1-2 20-4-2012 16:06:37

Micro-Credit is Necessary but Not Sufficient for Entrepreneurs in Desperate Poverty

Marcello Tonelli & Carol Dalglish (2012)

16 • Micro-Credit is Necessary but Not Sufficient for Entrepreneurs in Desperate Poverty


1. IntroductionMicro-credit has often been used as a poverty alleviation

strategy. However, there is little evidence to suggest that

micro-credit alone can promote economic activities because

micro-credit does not teach anything by itself (Brett 2006;

Mayoux 1999; Sievers & Vandenberg 2007). Mistakenly, the

focus of micro-credit has been the alleviation of immediate

poverty, rather than the development of economic activity

that would provide a long term solution. Paraphrasing the

age old saying, “Give a man a fish and you feed him for a day,

teach him to fish and you will feed him for a life time” micro-

credit enables the fisherman to buy a net, but in many cases

does nothing to ensure that he knows how to use it to benefit

his family and the community. If the borrower doesn’t know

how to use the net, he will return to his old way of doing

things – but with the added burden of having to pay back the debt.

Given the state of extreme poverty experienced by the vast

majority of the population in developing countries, borrowed

money is often used for purposes other than creating the

foundations for a sustainable economic growth. Typical examples

of how micro-credit is generally used include covering

funeral costs, buying food, medicines, and other similarly

important necessities. The main problem that derives from

using loans in this way is that apart from not improving

living conditions in a sustainable manner, borrowers are also

exposed to the risk of over-indebtedness, with its subsequent

human and social implications.

On the contrary, using microloans for the development of

entrepreneurial activities can help achieving a sustainable

elevation from extreme poverty (GEM 2005; Baumol 1996).

The World Bank suggests that micro-credit as part of an

entrepreneurial development approach that also focuses on

education, skills improvements, and innovation (Acs & Virgill

2010) can indeed have a lasting effect on economic development

and the reduction of poverty.

This paper responds to recent calls for more studies to under-

stand micro-credit and its effects on enterprise development

for people living in extreme poverty. It is our hope that this

study will not only stimulate future research, but also sug-

gest new ideas and structures for development agencies and

governments to further improve entrepreneurial development

programs. We asked the question: What are the factors

needed for the successful implementation of micro-credit in

developing entrepreneurs in desperate poverty settings?

Given the research context, the term micro-credit in this

paper refers to the loaning of small sums of money to the

poor for the establishment of micro-enterprises, without

traditional collateral (Charitonenko & Campion 2003; Mwenda

& Muuka 2004). With regard to entrepreneurship the definition

by Hisrich and Peters is used, which allows for a wide range of

cultural contexts and stages of development (Acs & Virgill 2010)

describing entrepreneurship as: “the process of creating

something new with value by devoting the necessary time

and effort, assuming the accompanying financial, psychic

and social risks and receiving the resulting rewards of money

and personal satisfaction and independence” (1998:9).

This study considers a sample of survival entrepreneurs who

benefited from the delivery of micro-credit to help them take

down one of the main barriers to entrepreneurial activity (i.e.

access to finance). The investigation also reports the importance

of gradually developing an appropriate entity, rooted in the local

community, to deliver services in a socially responsible manner.

2. Background LiteratureThe terms micro-credit and micro-finance are often used

interchangeably. Micro-credit focuses on overcoming the

structural barriers to the poor accessing credit. These barriers

include: lack of information, lack of collateral, high cost,

high risk and systemic market bias against the poor. Micro–

finance on the other hand can be defined as a development

approach that provides, credit, savings and insurance services

(Elahi & Rahman 2006).

When exploring the role of micro-credit it is important to

understand the population served. Particularly in Africa,

many countries have 50% or more of their populations below

the $1.25 a day poverty line (World Bank 2010), there is no

significant middle class to service, illiteracy rates are often high,

infrastructure inadequate, and the health of the population is

plagued by diseases no longer existent in the developed world.

While the word micro-credit did not exist before the 1970s, it

has now become a ‘buzz’ word often simplistically seen as the

answer to all development issues. Some of the conflicting

findings concerning the impact of micro-credit may reflect

not a weakness in the idea, but in the delivery mode. Three

different types of entities generally provide micro-credit to

the poor: formal (i.e. banks) and informal (i.e. money lenders)

profit-oriented institutions; development banks and semi-

formal institutions, such as NGOs, specialized in the offering

of preferential loans; and community development initiatives.

Issues arising from lending practices are summarised in Table 1.

The focus of micro-credit has been the alleviation of immediate poverty.

Micro-Credit is Necessary but Not Sufficient for Entrepreneurs in Desperate Poverty • 17

table 1: Micro-credit related challenges discussed in the literature

Financially Financially self-sufficient

Not traditional collateral Charitenenko & Campion 2003; Mwendaa & Muuka 2004

Group collateral to lending Brett 2006; Cuong 2008; Karim 2008; Weber 2002

Measurement of success Buckley 1997; Karim 2008; Weber 2002

Insufficient on its own Brett 2006; Mayoux 1999; Sievers & Vanderberg 2007

Embedded in commercial framework Weber 2002

high interest rates Brett 2006; Byiers et al. 2010, Maimbo 2002; Rugimbana & Spring 2009; Yunus 1994

over indebtedness Chamlee-Wright 2005; hudon 2009;

Disempowerment of women Brett 2006; Rugimbana & Spring 2009; Mayoux 1999; Qadir 2003

2.1 Profit-oriented institutionsProfit-based institutions sit within the familiar banking

framework and must obey to the rules of the game of the

industry they are in, which can be hardly seen as pro-poor.

Lending institutions show excellent results with regard to

micro-credit by measuring only two variables: number of

people served, and repayment rate (Buckley 1997; Karim 2008;

Weber 2002). On both counts the results are impressive. The

third element that contributes to their financial returns is

the interest rate applied to the loans. As a result, their suc-

cess is measured in terms of: ‘number of loans’ X ‘repayment

rate’ X ‘interest rate’.

Apart from the questionable practices adopted in delivering

credit to the poor – charging high interest rates (Maimbo

2002; Yunus 1994; Brett 2006; Rugimbana & Spring 2009;

Byiers et al. 2010), tacit encouragement of over indebtedness

(Hudon 2009; Chamlee-Wright 2005), use of ‘social’ collateral

to guarantee repayment (Brett 2006; Cuong 2008; Karim

2008; Weber 2002), and the potential disempowerment of

women (Rugimbana & Spring 2009; Brett 2006; Mayoux

1999; Qadir 2003) – there is also a second important consid-

eration to be made when servicing people in desperate needs:

many banks do not target the real bottom of the pyramid

because of the lower repayment prospects. This strategy is in

line with Robinson’s argument (2001) that commercial

micro-finance is not appropriate for extremely poor people

who are badly malnourished, ill and without skills or employment

opportunities. For these people micro-finance is the next

step – after they are able to work.

Of course this approach begs the question: how do people in

developing economies, with little or no education, get their

foot on the first step of the economic ladder? How do they

move into a position where they could access commercial

micro-finance?

2.2 Development banks and NGOsThe majority of international NGOs and development banks

do not offer a valid answer to the questions above. Firstly

because, as emphasized by Hudon (2008), the means by

which credit is provided is important, and typical NGOs that

provide financial services to the poor have systematically

failed on three key dimensions: group lending, high interests,

and a pressure on employees to achieve results.

Many of the existing micro-credit schemes lend money on a

group basis, that is, the group is liable for the debts of each

member (Brett 2006; Cuong 2008; Weber 2002). “Shame” is

the collateral, as Karim puts it (2008). In different locations

across the world NGOs are charging the poor anything

between 20% and 60% interest per annum with the justifications

that their rates are less than traditional money lenders,

where those exist, and they cover the cost of servicing small

loans across long distances (Maimbo 2002). Finally, NGOs

are sources of employment in countries that have few oppor-

tunities. This puts pressure on staff to deliver against criteria

that will secure their jobs: large numbers of borrowers and

high repayment rates (i.e. the same measurements used by

profit-oriented institutions). Delays with repayments have

led in some circumstances to ill treatment of borrowers and

high levels of competition between the organisations that are

supposedly there to help the poor (Pless & Maak 2009).

Secondly, the simple provision of micro-credit as a form of

assistance does not facilitate the growth process required to

access commercial micro-finance. Micro-credit has become a

global strategy despite warnings from the World Bank and

the Asian Development Bank that micro-credit alone may

not result in poverty reduction (Pless & Maak 2009). The

basic argument is that access to financial resources may not

in itself address the challenges facing the very poor, who also

have to overcome other limitations, such as access to education

and training, inadequate physical infrastructure, and government

corruption when trying to put their money to good use

(DANIDA 2002; Naude et al. 2008; Sachs 2005; Van Stel et al.

2005).

2.3 Community Focused Development Micro-credit Initiatives

The failure of top–down approaches over the years has been

attributed to the lack of participation by the intended benefi-

ciaries (Rehnema 1992) in defining what is needed. A shift

towards a bottom-up approach has gradually occurred, which



»

views participatory methods of interaction with the local

population as essential. The Community Driven Development

(CDD) approach is a bottom-up development strategy, by

which rather than viewing underprivileged people as the

target of poverty reduction efforts, it seeks to treat individuals

and their institutions as assets and partners in development.

Evidence suggests that social cohesion is critical for eco-

nomic prosperity and sustainable development. Honig (1998)

contends that developing and promoting community cohesion

may prove as instrumental to entrepreneurial success as any

other sort of educational or institutional intervention. In line

with this way of thinking and defining social capital not just

as the sum of society’s institutions, but rather the glue that

holds them together (World Bank 2004), the CDD approach

is embedded in the idea of social capital intended as institutions,

relationships and norms that shape the quality and quantity

of social interactions (Elahi & Rahman 2006). Successful

examples of CDDs have been reported in Indonesia, Sierra

Leone, Mongolia, Nigeria, Yemen, Honduras, and Bosnia and

Herzegovina (World Bank 2009).

So, while CDD initiatives often provide loans to support the

poor, their emphasis is more towards empowering the bene-

ficiaries not to rely exclusively on external support, but to

gradually become financially independent. As figure_1 shows,

it is only this type of lender that has the potential of addressing

all needs of the borrower: loan repayment, improved living

conditions, and financial sustainability.

From the literature it is clear that micro-credit alone cannot

be sufficient in developing entrepreneurs. Therefore, lending

institutions aiming at providing micro-credit to poor indi-

viduals in devastated economies, where governments cannot

be expected to play the welfare role experienced in developed

countries (Mair & Marti 2009), should also support survival

entrepreneurs in other ways.

While there cannot be definite indications as to how a

successful CDD should look like or operate, given that each

initiative should be developed and promoted internally by

the community itself with the least possible outside interfer-

ence, we also believe that certain fundamental principles should

be easily transferable and almost required by all CDDs.

A model trialled in Mozambique is described in the rest of

this paper illustrating how an attempt is being made to use

socially responsible mechanisms to deliver micro-credit to

the very poor in a way that also promotes community cohe-

siveness through a strong recognition of the local social capital

(figure 2). If successful this model may provide an example

for elsewhere in Africa where micro-credit has not been

adopted to the same extent as for example in Asia.

3. Research Site and MethodsThe design of a programme that carries the solutions to some

of the difficulties outlined in the literature was undertaken in

Beira, the second largest city of Mozambique, with a group of

local micro-entrepreneurs and self-appointed community

workers, often pastors. The scheme was intended to suit the

needs of poor peri-urban populations who wished to develop

small businesses in the absence of employment opportunities.

The choice of Mozambique was dictated by the country’s top

ranking among the poorest in the world (Dana 1996) with

over 50% of the population living below sustenance level

(World Bank 2010).

Figure_1: how Micro-credit Delivery Can Support Borrower’s Needs

Figure_2: A theoretical Model for Poverty Alleviation in Developing Countries

Commercial micro-finance is not appropriate for extremely poor people.


that is aiming to reduce poverty (Cross 1998; Rugimbana &

Spring 2009; Sievers & Vandenberg 2007). Chamlee-Wright

(2005) recognises that tapping into the knowledge embedded

within local social institutions identifies needs and opportu-

nities, lowers transaction costs, saves time, and helps anticipate

and avoid pitfalls. Embedded within the local system is also a

wealth of local knowledge regarding an individual’s savings

capacity, credit worthiness, business history and insurability

(Yunus 1994). Soros (2007) has identified this as a key factor in

the success of his foundations around the world, as has the World

Bank in its Community-Driven Development Strategy (2009).

The process of setting up Despertai Mozambique as an NGO

fully owned and operated by local people began in 2007, during

the third visit to Beira by the researchers. Around 40 local

business owners, community and church leaders attended a

meeting at which they expressed a willingness to work

together toward the establishment of an initiative that would

provide micro-loans to individuals, who did not have access to

other sources of funding. This group elected a local manage-

ment committee and nominated the people they wished to run

the organisation. Local involvement ensured that the mecha-

nisms put in place would be culturally appropriate and socially

responsible for that particular context. The initiative also

linked into the grassroots religious movements, with the

many different groups working together to support the

scheme. As a consequence, most of the borrowers found their

way into the Despertai network through the pastors from the

various churches. With limited education and access to official

networks most of these borrowers would not have had access

to financial support without the local community networks.

4.2 Capacity buildingIt was clear early on that the existing local expertise was

insufficient to support the needs of the entrepreneurs; hence

building capacity became a priority. As a result, a second

management committee, called Awaken Mozambique, was

established in Australia to raise the necessary resources for

Despertai to start off. These resources included not only

financial backing for direct funding and to finance loans to

entrepreneurs, but also processes for sharing intellectual

resources through virtual training of staff.

Training and development are in fact an integral component to

the development process. Sustainability of resources is critical

and it would be socially irresponsible to establish systems that

keep the community dependent on external resources without

This research takes a qualitative approach using surveys,

interviews and participant observation. Qualitative methods

were selected as they provide an opportunity to gain insights

from the entrepreneurs themselves on the complex set of

circumstances they face in starting any form of economic

activity. To improve cultural understanding and to develop

trust, the researchers engaged in participant observation,

spending periods of multiple weeks within the community

under study (Hammersley & Atkinson 1995).

Informal interviews with individual and in small groups were

conducted in 2004, 2006, and 2011, with additional trips over

the intervening seven years to help the local staff setting up

the NGO. Each entrepreneur received micro-credit to start

what would initially be considered a ‘survival’ enterprise in

the informal sector.

The longitudinal data provided an ongoing picture of a group

of aspiring entrepreneurs who started business activities and

expanded their views of what was to be successful. Additionally,

the collected data also illustrated the development of the NGO

and its staff, with the subsequent impact on the community.

4. DiscussionThe literature and the initial field research indicated that the

design of any humanitarian project to encourage entrepre-

neurship should be culturally fit, encompass local support

and expertise, and at the very least not cause financial harm.

With this in mind, Despertai Mozambique was born. In

designing a viable working system, the social responsibility

of everyone involved was central to the undertaking.

From the start there was no imperative that the project should be

commercially viable, but that it should be sustainable over time.

The manner in which the project was developed took into serious

consideration the potential difficulties identified in the literature

and considered them in the specific context of Beira. In particular,

four issues were revealed as highly important: involvement

of local community, capacity building, reduction of indebtedness

risk, and new measurements of performance.

4.1 A local support systemUnderstanding a particular cultural context is critically

important (IEG 2008) and recognizing and valuing local

expertise is vital for accessing knowledge networks, having

local participation, and promoting ownership. Local com-

munity involvement and the development of social capital

are identified as significant elements of success in any model

The design of any humanitarian project to encourage entrepreneurship should be culturally fit.



The reason for Despertai Mozambique to exist is the development

of micro-businesses that have the potential for long term

financial stability. This is what needs to be measured. Meas-

uring repayment rates and numbers of borrowers does little

to evaluate the impact of micro-credit on the long term well-

being of the community – or the sustainability of individual

enterprises. On the other hand, well-structured feedback on

the micro-loans and how the new ventures benefit the com-

munity enhances our understanding of the issues confronting

micro-entrepreneurs and the strategies required to enable

them to succeed. It is recognised that through this practice

running costs greatly exceed the financial earnings on the

loans (10%) – however, the social return is potentially very

high. Not only are families fed, clothed and schooled, but an

economic infrastructure develops that will sustain many who

are outside of the loan programme per se.

5. Concluding RemarksThis research enhances our understanding of the issues con-

fronting micro-entrepreneurs in desperately poor contexts

and the strategies required to enable them to be successful in

the short and long term. In particular, this study investigates

the role of micro-credit. There is a dilemma to unravel.

Micro-credit obviously does benefit a large number of people,

but what of those who through accessing micro-credit services

find themselves worse off? Do lending institutions have a

moral responsibility towards them? Can the greater good for

the greatest number really stand as an appropriate model of

social responsibility?

We find that even when the uppermost ethical model of

credit delivery is implemented to address the detrimental

implications of group lending and high interests, there is

also a need for the NGO to be able to empower disadvantaged

borrowers with the ability of sustainably improving their

living conditions. To do so, NGOs have to promote community

cohesiveness in order to build the capacity required to become

self-sufficient; implement strategies to reduce the risk of

over indebtedness through training and guidance; and use

measurements of performance that assess medium and long

term impacts rather than immediate returns.

While the model has been implemented in a specific geographical

area of Mozambique, it represents a blueprint for offering services

at a community level in other poor developing countries. The

model also provides a base for ongoing research into the process

of entrepreneurial growth in African developing economies.

developing their local capacity to grow by themselves. This

may be a long term task, but is an essential one. Therefore

local people must be involved in all decision making and a

problem-solving attitude is to be created (Yunus 1994).

As an example, processes and policies written in Australia are

then discussed and modified in Beira by the local staff. The

Despertai committee is also required to report monthly to

the Australian committee with their recommendations for

funding and the reasons for these recommendations, make

decisions about loans and debt collection.

4.3 Reducing the risk of over indebtednessIn order to reduce the risk of over indebtedness to a mini-

mum, no interest is charged on the loans and the repayment

period can be spread over one year. Only a set 10% service fee

is charged to the entrepreneurs to cover for training and the

support provided.

These procedures developed overtime. After a few years since

inception, the Beira committee identified a potential problem

for the repayment of loans. Often money was borrowed on

the pretext of starting a business, but then used for personal

expenses such as funerals, schooling or food. These expenditures

clearly did not represent the wherewithal for repayment of

the loan and it is not socially responsible to encourage people

to enter into this type of debt situation. Thus, the Beira com-

mittee put in place two processes to try to prevent over-

indebtedness. Firstly, to be granted loans borrowers must

attend initial training and develop a simple business plan. If

the borrowers are illiterate, one of the committee members

provides assistance. Secondly, once borrowers are funded, the

local staffs assist them in setting up the business and provide

support, ensuring the money is spent in such a way as to gen-

erate the ability to repay. Whilst this is a costly process, it

greatly increases the chance of success for new entrepreneurs

and reduces the risk of over-indebtedness.

4.4 New measurements of performanceWhen the emphasis of an NGO is on being financially viable

there is pressure on employees to deliver. This can lead to the

exclusion of those most in need as they present the greatest

risk. Mozambique, like many other poor developing nations,

has very limited employment opportunities and NGOs offer

wages that are highly desirable. Losing such a job can have a

devastating impact on a whole family; hence setting realistic

goals and relevant measures becomes very important.


NIBC is a Dutch financial institution headquartered in The Hague and the bank of choice for talented individuals at decisive career moments. We have offices in Frankfurt, London, Brussels and Singapore.

At NIBC the aim is to get you started in a job with a concrete assignment and clear responsibilities.

At the same time, we will encourage you to develop in the Analyst Program on a financial, pro-

fessional and personal level. You and your fellow analysts will attend our in-company training

program at the Amsterdam Institute of Finance, designed by professors from international

business schools and NIBC professionals. This 12-month Analyst Program consists of four one-

week modules.

As an analyst, new experiences will become business as usual at NIBC. To give you some insight

in the recruitment activities at NIBC, Frouke Röben shows her week schedule.

Monday: In the morning I’m interviewing a candidate, who is interested in our vacancy in the

sectorteam of Industrials. We try to evaluate the candidates on the same day with the team, so

I already scheduled a meeting with the department and we discuss the feedback we had. The

candidate is evaluated positive and I’m going to invite him for a second round. Hopefully I can

make him an offer after that round, it’s always nice to add new ambitious analysts to the group.

While the year progresses more analysts are hired for the coming program, which starts in

January. The nice thing about the fact that analysts start at their position immediately is that

the analysts already know their team and are better able to apply new knowledge from the

program.

tuesday: For the coming module on corporate finance at the Analyst Program I’m planning

to work on some NIBC cases, together with my colleagues from the business and the agency

that is involved in the program. This module is also about commercial skills, so we want to

combine some topics. The modules at the Analyst Program take one week, and are held four

times in the analyst’s first year. I invited one of our responsible members of the Managing

Board to hold a speech during the program about these topics. He made room in his busy

schedule to be present.

Wednesday: A workshop and dinner is planned at a student fraternity. I’ve invited some colleagues

from the M&A team to join me with a case and presentation. They have updated their case and

have put the students into different groups. The cases we use are from different departments

and sometimes tailored to the audience. I made a selection of their resumes and saw quite some

interesting profiles. In this case we have a negotiation part, and luckily the schedule allows us

to have an extensive discussion and negotiation with the whole group. The students leave the

room very energized, however craving for a beer...

At NIBC, entrepreneurial bankers start at the deep end!

Company presentation

Frouke Röben recruiter at NIBC

“It’s always nice to add ambitious analysts to the group”

22 • Company presentation


thursday: I’m working on some trainings and workshops for analysts. Today I have a short

workshop with the Analysts from The Hague and Brussels (by phone) about the do’s and don’ts

of target setting. NIBC is trying to take several trainings in-house. Besides reducing costs on

training venues, we can control the level of expertise in the group, and the topics that are being

handled. We invite external trainers, or consult experts from NIBC to train the groups themselves.

Today I also have a try-out on one of the standard trainings for the Advanced Development

Program. This program is a follow up after the Analyst Program. We give some feedback and

the department will fine-tune the presentations for the actual training next week. I’m happy to

see that 10 analysts have subscribed for the training already.

Friday: This day is usually a good day to have short meetings or review the most recent applications.

Our new website is generating a very good inflow of new applicants. I also have a meeting with

an intern who is considering different departments within the bank. She has had lunches with

several analysts to hear more about their work and department. Many interns start at NIBC

during the year, and we are proud to see that there are always excellent interns who want to

commit themselves to NIBC!

“Managing Board members also present during the analyst program”

Company presentation • 23

Competition, Microfinance, and Credit Information

Craig McIntosh and Bruce Wydick

24 • Competition, Microfinance, and Credit Information


»

1. IntroductionEconomists have nearly always favored policies that foster

competition, as competition typically results in better economic

outcomes for consumers. Thus we would expect an increase

in competition between microfinance institutions would

unequivocally result in more favorable credit contracts for

the entrepreneurial poor in developing countries. However,

we argue that competition may actually prove detrimental to

some or all of the borrowers in a microfinance market, par-

ticularly if credit information systems are not developed

hand-in-hand with the expansion of microfinance. When

credit information systems are developed in parallel with an

increase in microfinance lending, however, some of the negative

effects associated with competition in the microfinance

industry may be mitigated.

In McIntosh and Wydick (1995) we develop a model in which

a solitary client-maximizing microfinance institution (MFI)

competes with an existing informal moneylender to the benefit

of each borrower captured in the microfinance portfolio. We

discuss two potentially adverse effects of the entrance of new

MFIs into the same pool of borrowers. The first is that given

Bertrand competition between MFIs within the subset of

profitable borrowers, competition reduces the ability of a socially

motivated lender to generate rents that support lending to

the poorest and potentially least profitable borrowers. This

diminution of the capacity to cross-subsidize means that the

poorest borrowers in the client-maximizing portfolio are

dropped as competition intensifies.

A second class of negative effects from MFI competition orig-

inates from the likelihood of increasing asymmetric informa-

tion between lenders. With a greater number of lenders in a

market, we would expect information sharing between lenders

to become more difficult, all else equal. We show that this

creates an incentive for some (impatient) borrowers to take

multiple loans. Such instances of multiple contracting both

increase average debt levels among borrowers in the portfolio

and decrease the expected equilibrium repayment rate on all

loan transactions, generating less-favorable Bertrand equilibrium

credit contracts. This makes all patient borrowers worse off,

and again results in the poorest borrowers being dropped

from the loan portfolio. In general, our results show that

while wealthier and impatient borrowers are likely to benefit

from increasing competition among MFIs, very plausible

conditions exist under which an increase in the number of

lenders in a market will lower the welfare of the both the

poor and the patient.

In a companion paper, McIntosh and Wydick (2009), we show

that this second class of negative effects can be mitigated by

the parallel introduction of credit information systems in areas

where microfinance lending has brought about increased

competition between MFIs. In many ways the relationship

between a solidary microfinance lender operating in a village

mimics the relationship a borrower may have had previously

with a moneylender; both the moneylender and the MFI can

often enforce repayment through the threat of denying

future loans to the borrower if there is little supply-side com-

petition for credit. While a personalized credit relationship

that is not subject to competition may check moral hazard

problems via threats of credit termination and/or rewards for

timely repayment, a proliferation of microfinance options

increases the scope for moral hazard in credit markets. This

phenomenon has triggered the rapid emergence of credit

information systems in many countries where microfinance

has brought about great competition between credit providers1,

which allow lenders to share information about borrowers.2

We show that institutions that facilitate credit information

sharing add stability to microfinance markets. Moreover, in

this transformation of the credit relationship from a personalized

one to a relationship with a larger market, borrowers stand

to gain from competition between lenders instead of realizing

many of the losses we discuss that may accrue through com-

petition without information sharing between lenders.

McIntosh and Wydick (2009) analytically decomposes the

overall impact of a credit information system into three effects.

The first two effects lower borrower default rates: a screening

effect and an incentive effect. While the two positive effects of

credit bureaus have been previously discussed in the literature,

the main contribution of our model is that it yields a third

effect: the credit expansion effect--that predicts equilibrium

increases in loan size and a resultant increase in default.

This research offers some insight for international institutions

that are currently financing the development of credit-infor-

mation infrastructures in less-developed countries. While

such efforts are likely to lead to reductions in default from

screening and incentive effects, the resulting lender expansion

of credit that appears to accompany the implementation of

such systems may partially offset some of the stabilizing

benefits that information systems are believed to bring to

credit markets in general and microfinance in particular.

2. the Increasing Competition in the Microfinance Industry

The widespread enthusiasm for microfinance has spawned a

dramatic increase in the number of microfinance institutions

in the developing world. Spurred by an accord reached at the

Microfinance Summit in 1997 to reach 100 million of the

world's poorest households with credit, there is arguably

more widespread support for microfinance today than any

other single tool for fighting world poverty. The microfinance

movement has been both praised and supported by a broad

range of academic scholars, major development finance

institutions such as the World Bank, and development prac-

titioners themselves. As the number of microfinance borrowers

has increased to close to 200 million today, competition

between them has increased.

The rapid early growth of the microfinance movement pri-

marily consisted of non-profit, socially motivated lenders

seeking to reach as many poor clients with credit as they

were able, given their limited budgets. In the process they

demonstrated that through the use of new lending technolo-

gies, such as joint liability contracts and dynamic incentives,

a substantial portion of this new market could in fact be lent

to profitably. This realization has drawn profit-motivated

lending institutions into these markets. The presence of

competition from profit-driven lenders has forced MFIs in

competitive regions to rethink their strategies. Moreover,

donors have questioned the need for continued subsidies,

resulting in the recent focus on “institutional sustainability”

in the MFI sector.

In a detailed analysis of the Grameen Bank, Morduch (1999)

asserts that the failure to account for tradeoffs between sus-

tainability and poverty reduction has hamstrung discussion

about the subsidies necessary for microfinance to move forward.

In a later paper (Morduch, 2000) he challenges the notion

Competition, Microfinance, and Credit Information • 25

that microfinance provides a ‘win-win’ situation for all players

involved. Instead, he argues that subsidized lending to the

poor as well as the creation of sustainable for-profit institutions

should be important, but separate, development goals.

The motivation for our theoretical model stems from evidence

from three areas of the world in which MFI activity reached a

relatively advanced stage by the early 2000s, and where the effects

of competition between MFIs have become increasingly clear.

The Grameen Bank in Bangladesh, long the flagship of the

microfinance movement, has consistently been upheld as a pin-

nacle of stability, self-sufficiency, and effectiveness in using

microfinance as a tool for lifting households from poverty. Yet

the Grameen Bank's well-known successes have encouraged

imitators, which compete for borrowers’ attention along with

two other very large microcredit providers, Bangladesh Rural

Advancement Committee (BRAC) and Rural Development Pro-

ject 12 (RD-12), that have operated alongside the Grameen Bank

for more than a decade. A Wall Street Journal article in Novem-

ber 2001 raised warnings about the financial health of the Gra-

meen Bank, pointing in particular to the Grameen Bank’s lend-

ing in the region of Tangail, in which competitive pressures

reduced interest rates for some borrowers, but where 32.1 per-

cent of the bank’s loans had fallen more than two years overdue:

In Tangail, signboards for rival Micro lenders dot a landscape

of gravel roads, jute fields and ponds with simple fishing

nets. Shopkeepers playing cards in the village of Bagil Bazar

can cite from memory the terms being offered by seven com-

peting microlenders--a typical repayment plan for a 1,000-

taka ($17) loan is 25 taka for 46 weeks. At an annualized rate,

that works out to 30% in interest. Surveys have estimated

that 23% to 43% of families borrowing from microlenders in

Tangail borrow from more than one.

(WSJ: 11/27/2001)

Alarming figures such as these intensified efforts by the

World Bank and CGAP to help bring together a network of

the largest 20 microfinance institutions in Bangladesh to

implement a centrally managed credit information system

during 2004 in the hope that more “centrally managed” com-

petition between lenders in Bangladesh will both help to

foster healthy competition between MFIs while bringing

down arrears rates in MFI portfolios.

While East Africa is at an earlier stage of competition, the

major urban centers of Uganda and Kenya are becoming sat-

urated by competition among numerous MFIs (see Kaffu and

Mutesasira, 2003). Markets for the more wealthy borrowers

that were previously dominated by grant-funded, socially

motivated lenders are now being contested by private institu-

tions. For example, CERUDEB and CMF, two private lenders

with access to subsidized external lines of credit, have begun

competing with existing MFIs for larger microcredit borrow-

ers. In response, there is increasing competitive pressure on

socially motivated MFIs, whose interest rates may be more

than 1% per month higher than the new competition.

FAULU, one of the few major MFIs to operate in both Uganda

and Kenya, is troubled by the increasing presence of borrow-

ers unknowingly receiving loans from multiple lenders.

FAULU reports that such behavior has become increasingly

prevalent as the intensity of MFI activity increases. The

Kenya office is able to employ a risk management network

based on the country’s national ID system to detect clients

within their own portfolio with multiple loans. Uganda, how-

ever, has no such national ID system, and so they are powerless

to monitor the problem, even within their own institution.

The increase in both the size and number of MFIs operat-

ing in Central America since the mid-1990s has been

astounding. Growth in MFI activity has been particularly

heavy in Guatemala, El Salvador, and Nicaragua.

The case of Nicaragua is typical of the region. FAMA, an

ACCION International affiliate, enjoyed a virtual monopoly

in microfinance lending in the Managua area for the few

years after it commenced operations in 1992. However, by

1996 approximately six other major MFIs entered the market,

though even by 1997 no MFIs in the region had a portfolio of

more than 4,000 borrowers. Moreover, according to ASOMIF,

the association of Nicaraguan microfinance institutions, the

portfolios of Nicaraguan MFIs grew at an annual rate of 47%

between 1997 and 2001 (La Prensa, 10/02/2002). By 2001 the

largest MFIs were carrying portfolios in the range of 15,000-

25,000 borrowers, with considerable overlap in geographical

operating regions.

Guatemala and El Salvador have experienced similarly

dramatic growth in MFI activity. FUNDAP in Quetzaltenango,

Guatemala, like its sister ACCION institution in Nicaragua,

experienced very little competition from other MFIs since its

inception in 1988 until the mid-1990s. New entrants into its

regional market, such as FUNDESPE and Fe y Alegria, have

forced FUNDAP to cut interest rates on its larger loans from

3% to 2.5% per month. To remain solvent under competi-

tion, it has pulled away from its initial mission of offering

smaller loans in the form of group-based credit, and instead

now lends to a wealthier, more lucrative segment of the

market. While average initial loan size was US$135 and aver-

age monthly sales were US$291 for borrowers receiving their

first loans between 1988 and 1993, by 1999 these figures for

new clients had grown to US$543 and US$672, respectively.3

Asymmetric information between lenders over borrower

quality and indebtedness has been a mounting issue in all

three countries, but there have been great differences

between the three countries in the level of cooperation real-

ized between MFIs to mitigate the problem. El Salvador, with

its internet-driven Info-Red borrower database4, represents

the best example of a case where a network of independent

MFIs have built information-based institutions reminiscent

of those in developed countries, where nearly instantaneous

credit checks are possible. In Guatemala, multiple contract-

ing by MFI clients had become so damaging by the late 1990s

that REDIMIF, an association of 19 MFIs embarked on an

effort to establish CREDIREF, a centralized microfinance

credit bureau, which though now functional, is still in its

nascent stages. Cooperation between MFIs during the mid-

1990s was fairly strong in Nicaragua; institutions regularly

shared information on poorly performing borrowers with

New entrants into its regional market forced FUNDAP to cut interest rates.



»

one another. However, as MFIs poured into the market in the

late 1990s, cooperation has deteriorated to such an extent that,

as one loan officer put it "our information-sharing consists of

a trip to the local cantina to ask neighbors if loan officers

from other MFIs have been paying visits to a potential client.”

3. Summary of Results from the Full-Information ModelThe model we develop in McIntosh and Wydick (2005) considers

an MFI operating in a large pool of potential borrowers who,

for well-established reasons, are denied access to credit in

the formal financial sector. New lending technologies such as

group lending, community banking, and dynamic incentives

(as well as the possibility of grant funding) have allowed an MFI

access to these borrowers. We allow for the possibility of both

for-profit and non-profit lenders, and rank the potential pool

of borrowers along an index in terms of initial capital assets.

Our model considers Bertrand competition between micro-

finance lenders over a pool of borrowers with heterogeneous

levels of capital. Poor borrowers, with less initial capital, are

less lucrative because they can only handle small loans with-

out increasing the probability of default. Wealthier borrowers

have higher existing levels of initial capital, and thus can be

given larger loans that are more lucrative for lenders. Here

we present only the basic conclusions flowing from the

model, and we refer interested readers to the original paper

for the formal mathematical set-up and proofs.

PROPOSITION 1: Bertrand competition between MFIs benefits

wealthier borrowers, but makes a group of poorer borrowers

worse off.

The intuition is that faced with entry by a profit-maximizing

MFI, the client-maximizing MFI is forced to respond by con-

forming to the behavior of a profit-maximizing MFI. Profits

to competitors go to zero in equilibrium for both rich and

poor borrowers (based on initial levels of capital). All surplus

is captured in higher profits to the wealthiest borrowers. The

poorest borrowers are dropped from the lending portfolio of

non-profit lenders because competition in microfinance

eliminates the cross-subsidization that is possible when non-

profit lenders, whom we assume are client maximizers, operate

without competition from other lenders.

PROPOSITION 2: The presence of a client-maximizing MFI

with a non-targeted subsidy will prevent the entry, or force

the exit of, any unsubsidized MFI.

We show that in this case equilibrium contracts are bid down

in favor of borrowers below the zero-profit constraint of any

non-subsidized lender, forcing the lender out of the market.

The implications are that subsidized lenders can be detrimental

to the internal financial viability of a domestic microfinance

market unless subsidies are limited to loans for poor borrowers.

PROPOSITION 3: Competition between two client-maximizing

MFIs with non-targeted subsidies will lead to a Bertrand-Nash

equilibrium in which the market share of each MFI will be

proportional to its level of grant funding.

The intuition to the proof is that since Bertrand competition elim-

inates profits on each profitable borrower, all borrowers must be

captured through competitive subsidy in the client maximization

process. One can think of each subsidized MFI as “purchasing”

borrowers for its portfolio, where in equilibrium, arbitrage behavior

takes place such that the “market price” of capturing each borrower

is equilibrated across all those with access to MFI credit.

PROPOSITION 4: Market entry of a client-maximizing, sub-

sidized MFI with funding specifically targeted to poor borrowers

may cause poor borrowers to lose access to MFI credit.

The intuition behind the proposition is that unsubsidized

lenders, even those that lend to the poor, can be undercut by

a subsidized lender, forcing some poorer borrowers to lose access

to credit. The subsidized lender eliminates the cross-subsidies

that are essential to serving poorer, less profitable borrowers.

Summary of Conclusions from the Basic Competitive Model:

• Incompetitivemarkets,profit-maximizersandunsubsidized

client-maximizers always behave the same way. Thus, under

competition it is not the motivation, but rather the extent

and the nature of the grant funding of a lender that matters.

• Targetingofsubsidiesisunimportantinamarketwitha

single client-maximizing MFI; the distinction only becomes

important under MFI competition.

• Lenderswithnon-targetedsubsidiescanalwaysdriveany

unsubsidized competitor out of the market altogether, whereas

targeted subsidies can never eliminate a competitor from

the market.

• Everycompetitivescenarioinvolvingalenderwithtargeted

subsidies results in a market that is both competitive and

in which some of the poor receive loans.

• Competitionnevermakesanyprofitableborrower(witha

higher level of assets) worse off.

• Theonlyway inwhichthepoorcanbereachedwithout

subsidies is if a client maximizer exists as a solitary MFI in

the market and competes only with a moneylender. How-

ever, in this case subsidies are merely being generated

from amongst the other, less poor borrowers.


4. Extended Model: Asymmetric Information between Lenders

In the previous section, we discussed our basic model in

which information about borrower heterogeneity was common

knowledge between borrower and lender. However, we now

assume that each borrower is characterized by a personal

rate of time preference per lending period, information that

is hidden to the MFI, whose per period profit function we

assume is unchanged and homogeneous across institutions.

We now bring into our analysis the issue of dynamic incen-

tives. Dynamic incentives provide motivation for repayment

when borrowers lack collateral to secure loans by implicitly

promising continued credit access as a reward for loan repay-

ment. They are routinely used by MFIs (and other lenders) in

poor areas of developing countries to mitigate issues of

moral hazard involved with credit transactions. The present

value to a borrower of the continued access to MFI credit is

positively related to the advantage offered by MFI financing

relative to the alternative (moneylender) contract, and a neg-

atively related to a borrower’s rate of time preference.

Hoff and Stiglitz (1998) show that dynamic incentives are

weakened by new market entrants as this improves the reser-

vation loan contract available to borrowers in the case of

default. Their results imply borrowers must somehow be

punished for default by the financial system as a whole,

through a system of negative borrower information-sharing,

i.e. each lender sharing its lista negra (as it is often referred

to in Latin American MFIs--the blacklist).

What we illustrate in this section is that even within a system

that identifies defaulting borrowers, other gaps involving

asymmetric information between lenders must be bridged.

We show that it is also critical for lenders to share positive

borrower information with one another, even regarding well-

performing loans, i.e. that a lista blanca (a list of positive

information) is also necessary. This is true even in a model

without strategic default. In order to concentrate on this

issue, we take as our informational benchmark market with

Bertrand competition in which all lenders fully share the

lista negra, where defaulters are denied future formal credit

access, but no positive information is shared.

PROPOSITION 5: If asymmetric information between lenders

increases as the number of competing lenders increases, borrowers

receive less favorable loan contracts after entry of new lenders.

The proof to the proposition shows that the lower-information

equilibrium with more lenders in the market results in an

equilibrium lending contract that is characterized by a higher

interest rate. This is due to the increased costs of lending in an

informational environment where lenders are uncertain about

existing debt loads of borrowers, and where some borrowers

(with a high rate of time preference who care less about the

future consequences of default) have an incentive to take loans

from multiple lenders. Moreover, once the competing MFIs

respond to multiple contracting by adjusting equilibrium contracts

for all clients, it is unclear whether or not the these impatient

have indeed benefited. The interest rate “discount” received

though multiple loan contracting may or may not compensate

for the fact that every individual loan contract is marginally

worse. What is unambiguous is that patient borrowers, who find

it optimal to borrow only from a single lender, have been hurt by

reduced informational flows between lenders, and the ensuing

instances of multiple contracting by other borrowers. By

undertaking action clearly observable to only one lender, the

impatient create a classical externality whose costs are

spread across the whole population of borrowers.

PROPOSITION 6: As asymmetric information between lenders

increases, the poorest borrowers are dropped from the lending

portfolio.

The intuition to the proof is straightforward. Increasing

information asymmetries increase the cost of lending to the

entire portfolio of borrowers such that the least profitable

borrowers (those with the lowest amount of initial assets) are

dropped from the pool.

Conclusions from extended model with asymmetric information:

• With asymmetric informationbetween competingMFIs,

every loan contract yields a lower profit to the borrower

than under the full information benchmark. Patient bor-

rowers are always worse off with reduced information

sharing, perhaps the impatient borrowers as well.

• Ifasymmetricinformationbetweenlendersincreaseswith

the number of MFIs in the market, competition has an

unambiguously negative effect on both the most poor and

the most patient borrowers in the portfolio.

• Optimalinformationsharingbetweenlendersmustinclude

not only data on defaulting borrowers, the lista negra, but

also continually updated information on current borrowers,

even those who are not defaulting, or the lista blanca.

5. Introduction of Credit Information SharingIn the previous section we showed that in a microfinance



market plagued by asymmetric information between lenders,

interest rates and loan sizes adjust endogenously to account

for the possibility that any borrower, ex-ante to borrowing,

may possess hidden debt. In McIntosh and Wydick (2009) we

model the impact of a credit information system that decreases

the degree of asymmetric information between microfinance

lenders in the market.

PROPOSITION 7: Positive information sharing between lenders

leads to larger equilibrium loans at lower interest rates.

The intuition to the second part of the proposition is that

greater positive information sharing allows lenders to screen

applicants with hidden debt more effectively so that default

becomes a weaker signal of hidden indebtedness. This makes

the expected level of hidden debt among defaulting borrowers

as well as clean borrowers lower, allowing access to better

credit terms.

PROPOSITION 8: Credit information systems that facilitate

positive and negative information sharing between lenders

yield three distinct effects: 1) a screening effect that arises

from improved borrower selection, 2) an incentive effect that

comes from fear of detection, and 3) a credit expansion effect

whereby larger loans create a perverse effect on default rates.

The borrower screening effect of a credit information system

mitigates adverse selection problems; it is the direct effect of

a lender having better information about potential defaulters.

The borrower incentive effect also reduces default rates by

mitigating problems of moral hazard. As borrower informa-

tion increases, there is a higher probability of being caught

in an over-indebted state, and more borrowers choose to take

single rather than multiple loan contracts, thus reducing the

higher default associated with hidden debt. The credit expan-

sion effect occurs as borrowers are given larger equilibrium

loans. Because default is an increasing in loan size, and

because lenders make bigger loans when they are more

certain of a borrower’s existing debt, this credit expansion

increases default rates, but does not overwhelm the stronger

effect on default of lower expected debt, consistent with what

we find in Luoto, McIntosh, and Wydick (2007).

6. ConclusionWe believe that a number of policy conclusions flow from

this research. At the broadest level, the results of the full-

information version of our model may extend to other

instances in which altruistic motivation induces a non-profit

institution to cross-subsidize. Examples may include medical

or health services, socially motivated education programs, or

provision of low-income housing, in which there exists some

degree of competition between for-profit and non-profit entities.

More specifically to microfinance, our research implies that

the structure of funding is unimportant in monopolistic

markets, whereas the motivation of lenders is less important

in competitive markets. Therefore, as competition increases,

the onus for the inclusiveness of the market passes from the

practitioners of microfinance to the donors. Yet the very

existence of competitive markets hinges on the idea that

grant funding be used in a competitive market only to subsi-

dize the cost of lending to the poor. In light of this, our

research supports the notion put forth by Morduch, that

financially self-sufficient MFIs should co-exist with their

subsidized counterparts, provided that these subsidies are

carefully restricted to the poorest borrowers.

A clear implication from the asymmetric information version

of our model is the need for credit bureaus, or internet-based

central risk-management systems, which identify outstanding

debt in addition to cases of default. In general the astounding

growth in MFI lending in many areas has vastly outpaced the

ability of MFIs to monitor borrower quality and indebtedness.

Among the Central American countries, for example, there

remains great heterogeneity in informational infrastructure.

While some countries have established reasonably well-func-

tioning centralized risk-management structures, others lag

far behind in this area, although the density of MFI activity is

extremely high across the region. At this stage in the micro-

finance movement, the establishment of such centralized risk

networks must become a leading priority to ensure the success

and sustainability of the microfinance movement in LDCs.

Our field experiment evidence from Guatemala (Luoto,

McIntosh, and Wydick, 2007) shows that the introduction of

a credit bureau induces a strong screening effect and a more

muted incentive effect. One of the factors that makes a credit

bureau an attractive intervention from a policy perspective is

its modest cost compared to its substantial benefits, which

other work related to this project has demonstrated. In car-

rying out a cost-benefit analysis of the CREDIREF system, we

determined that implementation of the system within the

MFI branch offices yielded a net present value to the micro-

finance institution of US$185,570 over three years with an

annual internal rate of return of 96.5%, generated primarily

from lower defaults.

Lower-information equilibrium with more lenders in the market results in an equilibrium lending contract that is characterized by a higher interest rate.


w w w.ga a an.nU

© 2011 KPMG N.V., alle rechten voorbehouden.

Je kunt als bedrijf nog zo veel willen, je krijgt pas wat voor elkaar met goede mensen

KPMG biedt accountancy- en adviesdiensten aan

uiteenlopende organisaties. Alleen al in Nederland

hebben we 4.000 medewerkers, verspreid over

15 kantoren. We zijn ambitieus: we willen op zo

veel mogelijk terreinen de nummer één zijn in

ons vak.

Gááán!

We zijn dan ook voortdurend op zoek naar talentvolle

mensen met dezelfde passie. Zit jij zo in elkaar?

Dan wordt het tijd om kennis te maken. Dat kan via

www.gaaan.nu, ons talent- en ambitieplatform. Gááán!

helpt je bij je studie en je carrière en stelt je in staat

contacten te leggen met KPMG’ers. Je vindt er ook

alles over je carrièremogelijkheden.

Aan de slag als accountant

Bij KPMG Audit start je na je universitaire studie of

hbo-opleiding als trainee. Je gaat direct aan de slag

bij alle soorten klanten. Tegelijk volg je een opleiding

tot registeraccountant. Daarna ben je gekwalificeerd

registeraccountant en beëdigd om de financiële

rapportage van ondernemingen te verzorgen.

Of als adviseur

Bij KPMG Advisory begin je als junior adviseur en start

je direct met adviesopdrachten. Je volgt ook doel-

gerichte opleidingen. Afhankelijk van je universitaire

studie en interesse kun je kiezen uit verschillende

richtingen. Van organisatieadvies tot fusies en over-

names en van het kwantificeren van complexe risico’s

tot IT-advies.

Waar je ook voor gaat: kansen genoeg om samen

met je collega’s aan iets moois te bouwen. Wij zouden

zeggen: Gááán!

Meer informatie

Ga naar www.gaaan.nu of maak een afspraak met

het KPMG Recruitment Centre (020) 656 7162 of mail

naar [email protected].

-04473_BP_210x297mm_OF.indd 1 10-11-2011 12:15:58

w w w.ga a an.nU


Je kunt als bedrijf nog zo veel willen, je krijgt pas wat voor elkaar met goede mensen

KPMG biedt accountancy- en adviesdiensten aan

uiteenlopende organisaties. Alleen al in Nederland

hebben we 4.000 medewerkers, verspreid over

15 kantoren. We zijn ambitieus: we willen op zo

veel mogelijk terreinen de nummer één zijn in

ons vak.

Gááán!

We zijn dan ook voortdurend op zoek naar talentvolle

mensen met dezelfde passie. Zit jij zo in elkaar?

Dan wordt het tijd om kennis te maken. Dat kan via

www.gaaan.nu, ons talent- en ambitieplatform. Gááán!

helpt je bij je studie en je carrière en stelt je in staat

contacten te leggen met KPMG’ers. Je vindt er ook

alles over je carrièremogelijkheden.

Aan de slag als accountant

Bij KPMG Audit start je na je universitaire studie of

hbo-opleiding als trainee. Je gaat direct aan de slag

bij alle soorten klanten. Tegelijk volg je een opleiding

tot registeraccountant. Daarna ben je gekwalificeerd

registeraccountant en beëdigd om de financiële

rapportage van ondernemingen te verzorgen.

Of als adviseur

Bij KPMG Advisory begin je als junior adviseur en start

je direct met adviesopdrachten. Je volgt ook doel-

gerichte opleidingen. Afhankelijk van je universitaire

studie en interesse kun je kiezen uit verschillende

richtingen. Van organisatieadvies tot fusies en over-

names en van het kwantificeren van complexe risico’s

tot IT-advies.

Waar je ook voor gaat: kansen genoeg om samen

met je collega’s aan iets moois te bouwen. Wij zouden

zeggen: Gááán!

Meer informatie

Ga naar www.gaaan.nu of maak een afspraak met

het KPMG Recruitment Centre (020) 656 7162 of mail

naar [email protected].

-04473_BP_210x297mm_OF.indd 1 10-11-2011 12:15:58

Van scriptanttot trainee

w w w.ga a an.nU

KPMG

Recruitment Centre

Laan van Langerhuize 1

1186 DS Amstelveen

(020) 656 7162

[email protected]

www.gaaan.nu

een groep studenten in de afstudeerfase bij elkaar zit,

kun je met elkaar sparren en informatie uitwisselen.

Ook kreeg ik een coach toegewezen die mij wegwijs

heeft gemaakt in de organisatie en waarbij ik met al

mijn vragen terechtkon.

Je krijgt de tijd en mogelijkheden om het bedrijf, de

werkzaamheden en de collega’s te leren kennen.

KPMG organiseert bijvoorbeeld diverse activiteiten

voor scriptanten, zoals de Landelijke Scriptanten

dagen, etentjes, borrels, etc. Daarnaast heb ik via

KPMG kunnen deelnemen aan golflessen en kon ik

binnen een paar maanden mijn GVB halen.”

En nu aan de slag als trainee?

“Ik kijk terug op een geslaagde scriptiestage bij KPMG.

Mijn Master is met succes afgerond en ik heb een

geweldige werkgever leren kennen. Sinds september

werk ik fulltime als trainee; ik ben sindsdien al veel

leuke ervaringen rijker. Ik werk in wekelijks wisselende

teams aan opdrachten voor verschillende bedrijven.

Hierdoor leer je snel veel collega’s kennen en is het

werk erg divers. Mijn scriptie is dus een mooie eerste

carrièrestap geweest en ik kan iedereen dan ook

aanraden om met KPMG kennis te maken en te gaan

voor je scriptie!”

Wil jij ook je scriptie bij KPMG schrijven? Neem dan

contact op met het KPMG Recruitment Centre via

[email protected] of schrijf je in op www.gaaan.nu.

Kijk voor tips op facebook.com/kpmgscriptiecoach.

Stijn van der Heijden (27) heeft zijn scriptie bij KPMG

geschreven en is onlangs gestart als trainee in

Rotterdam. We vroegen Stijn naar zijn stageervaring

en start bij KPMG.

Waarom heb je ervoor gekozen om je scriptie bij

een bedrijf te schrijven?

“Ik heb na mijn Bachelor Economie de Master

Accounting, Auditing and Control gedaan. Tijdens een

inhousedag ontdekte ik de mogelijkheden om je scriptie

bij een groot accountancykantoor te schrijven.

Naast de theoretische kennis die ik in ruim vijf jaar

had opgedaan, wilde ik graag praktijkervaring op

doen. Ik ben daarom alvast op zoek gegaan naar een

potentiële werkgever om daar mijn scriptie te schrijven.”

Waarom KPMG?

“Tijdens mijn studententijd was ik erg actief als

wedstrijdroeier bij ARSR Skadi. Ik zocht een werkgever

waar je mensen vindt met dezelfde drive en passie.

Tijdens mijn kennismaking met KPMG vielen de

gedrevenheid en nononsensementaliteit mij op.

Niet alleen mooie verhalen, maar vooral daden.

Ook de Talentpool van KPMG vind ik erg aansprekend.

Dit houdt in dat je eerst een heel divers klantenpakket

hebt en dat je daarna een keuze maakt voor de sector

waarin je je gaat specialiseren. Voor mij voldoende

redenen om mijn scriptie bij KPMG te schrijven.”

Hoe heb je de scriptiestage ervaren?

“Ik kreeg alle ruimte om mijn eigen plan te trekken.

Zo kon ik het schrijven aan mijn scriptie afwisselen

met het opdoen van praktijkervaring. Doordat je met

“Ik heb een

geweldIge

werkgever

leren

kennen.”


-04459_Interview_210x297mm_OF.indd 1 27-10-2011 14:44:29

Interview Klaas Molenaar: Lector Finanicial Inclusion and New Entrepreneurship 19-06-2012 Haagse Hogeschool, Den Haag

By: Jeroen van Oerle and Anne van Driesum

Klaas Molenaar (1949), (MA Management Science – Rotterdam University) is an enterprising consultant and trainer crossing borders in search of new ways to apply entrepreneurship and development concepts in society. he has more than 35 years of experience in Small Enterprise Development and microfinance worldwide. he is lector in Financial Inclusion and New Entrepreneurship at the hague University of Applied Sciences, and director of timpco Consultants specialized in Entrepre-neurschip Development and financing in support of micro and small enterprises. he is also founder and chairman of the SEoN Foundation which specializes in business creation, migration and development. he wss founder and former general director of triodos Facet (1990), a triple bottom MSME consultancy and training company with special expertise. he conceptualized, founded and built up IntEnt Foundation, which supports migrant entrepreneurs setting up business across borders, linking Migration, Development and Entrepreneurship. Among other functions: former Member of the National Council for Microfinance in the Netherlands, and member of the Board of Directors of MISFA, Afghanistan. he is vice president at the European microfinance network.

What is microfinance? Microfinance is a rather broad concept. The most well known

element is micro credit, where individualloans are distributed.

Next to credits, microfinance also covers savings, insurance,

pensions and the transfer of money in general. Many of these

activities are also provided by “regular” institutions. Whether

or not we can classify something as microfinance is more a

matter of looking to the accessibility of the financial service.

It is a new way of thinking. A terminology that seems to capture

the core of microfinance nowadays is “financial inclusion”.

The main goal is to try to include those who fall outside the

services of regular institutions.

Who enables microfinance?Every institution thatpursues Financial inclusion enables

microfinance. This can go from Self Help Groups to general

banks. Microfinance has always been initiated by people who

are socially involved. Examples are Raiffeisen and Yunus.

Such personal initiatives can result in real financial institutions

and general polities. What you see is that own initiatives are

developed (like the Grameen bank in Bangladesh) or that the

personal initiatives are being used as policy in large financial

institutions. And that is not only for profit. Those who initiate

the microfinance way of thinking in large institutions develop

a whole change in mindset. Sometimes large banks develop

their own microfinance department. This is either an integral

part of the bank or a standalone enterprise.

One of the current issues in microfinance is that the whole

industry has become extremely lucrative and might attract

people who try to make quick money, which is not in line with

the mindset of financial inclusion. The loss of focus is one of the

risks nowadays. It is not anymore about financial inclusion,

but in the eyes of those investors it is merely about profits.

They may push MFIs in to lending too much at too high a pircie

(and cost) to the clients leading to unwanted over- indebtedness.

Who makes use of microfinance?Everyone who has no access to regular financing. When people

are rejected from financing by formal financial institutes but

were able to receive credits, they make use of microfinance.

There are certain elements that are important for the acceptation

or rejection of regular financing. People who are rejected often

have a too low education, live in the wrong neighbourhoods or

have no collateral. The unsecured lending to those who face

problems like the before mentioned are covered by microfinance.


32 • Interview

»

In your opinion; is microfinance an undervalued field of financing?Microfinance shows that it is of vital importance to keep an eye on the relationship between

people and money. This relationship is off balance currently in the financial sector, so in that

sense the exemplary role of microfinance is undervalued. It is also undervalued when looking

at the number of people that can be reached via microfinance. It concerns millions of people

worldwide. And there is little notion of the impact microfinance has on individual lives. When

looking at the balance sheet totals of microfinance institutions, it is not seen as “serious”. The

amounts are simply too small. When looking at the political impact, microfinance is also

undervalued because of the incapability of politicians to recognize the impact of microfinance

to individuals. Look at what happened to Yunus in Bangladesh. Politicians forced him to leave

his position at the Grameen bank. The true reason was not his work for the Grameen bank but

the impact he had on the population via this microfinance institution. Over eight million

people were brought into contact in several ways with microfinance. You can imagine the politi-

cal influence is also very large.

There is also a misconception of the true meaning of microfinance within the financial field.

Too often it is thought microfinance is only a financial instrument, while in fact it should be

viewed as an empowerment instrument. People are much more important than money. Without

people money has no value. I think a good conclusion is that, contrary to mainstream financial

institutions, within microfinance people are not numbers but individuals.

What is the main goal of microfinance in developing countries? We have to make a distinction between what the goal was, approximately thirty years ago, and

what the goal is today. The goal was social inclusion and empowerment. The current goal is

sustainable economic activities via the development of sustainable financial institutions. The

question how much self sustainability is enough depends on your personal way of thinking.

Those who value the Anglo-Saxon model will emphasis the financial independence of the

organization through revenues generated from the sale of credit to the clients as main goal.

Those who belief in the Rhineland model (stakeholder model) accentuate that self sustainability

is determined by the support of all stakeholders. Speaking of a goal is always tricky. One has to

be concise in what the exact goal is, and be explicit about it. When you value customer sustainability,

you have to set low interest rates. However, when your emphasis lies on creating self sustainable

institutions, the interest rates need to be high(er)…..

how did microfinance evolve in developing countries?Microfinance has become more complex. It used to be very straight forward. Social self-organized

aid organizations made it possible that small, micro loans were offered to limited number of

poor people locally. With the growth in numbers of clients reached complexity increased expo-

nentially as well; new administrative, management information systems and HRM models were

needed. Then other services such as savings were added. This made the structure even more

complex. Nowadays , also micro insurance and micro pensions are offered by some organizations.

Figure 1 shows how the microfinance institutions transformed in developing countries. Starting

as informal loan and savings groups, they ended becoming specialized and even general banks.

The focus point of the organization also shifted with this transformation from attending

primarily to the financially excluded to small entrepreneurs. This as well was caused by the

change of organizational structure. There used to be many locally rooted socially active people

A terminology that seems to capture the core of microfinance nowadays is “financial inclusion”.

Interview • 33

within the microfinance organization. Gradually they had to make place for professionals and

managers. This weakenedthe interconnectedness between microfinance and society.

The role of microfinance institutions might eventually change in that of of a broker. They leave

the specialized financial services to those who are professionally able to deal with the complexity

of the products, for instance insurance companies, and on the other side of the spectrum they

advise those who require micro financing in their search for financial aid.

What are the results of microfinance in developing countries?In some countries the impact is very high. You often hear the story of Bangladesh, but there are

more countries in which microfinance was really able to make a difference. In Bolivia and

Kenya the increase in self awareness can be fully traced back to the attention for individuals via

microfinance. The social value added in the form of self awareness is substantial. However, it

remains a question whether the subsistence entrepreneurs reached with microloans will

indeed become the new small entrepreneurs society needs as well for sustained growth . Little

empirical, validated evidence exist for this claim(Schoar 2010)

As becomes apparent from figure 4, there is a larger outflow than inflow to business owners in

the period 2001 to 2007. This implies that microfinance is not per se the basis of the transition

to business owner, but rather a facilitation of entrepreneurs in the broadest sense of the word.

But it is debatable if we must look at this transition as a measure for success. At the moment it

is better to look at the increase in self awareness instead of the transition of poor to rich(er).

In your opinion, Is microfinance in developing countries a success story?You have to define the goals before you can state whether something is a success or a failure.

From the perspective of social goals, microfinance is a success story. When purely looking at

financial and macroeconomic figures, one might come to a different conclusion. There is a

Figure 1: Micro finance institutions and the evolution of their custom-ers. Retrieved from: Molenaar (2011) “Microfinance, evolutions and challenges Are we still in tough with the real client?” P37.

Figure 2: transition between occuptations in combination with microfinance. Retrieved from: Schoar (2010), “the Divide between Subsistence and transformational Entrepreneurship”.


34 • Interview

»

subconscious mission drift towards economic financial activities which implies a loss of contact

with the target group. This is mainly caused by the lack of clear goal setting. Personal goals and

institutional goals have become disentangled. What is also important to understand is that

every country is unique. One cannot claim microfinance works for all developing countries, but

country specific conclusions are possible. There is probably a universal way of thinking about

microfinance but there is no universal microfinance model.

how does Microfinance look like in Europe?When looking into the evolution of microfinance in Europe one has to make distinction

between e Western and Northern countries and former communist countries of Eastern and

Central Europe. Actually, one has to separate between a Europe with and without social welfare

benefit systems. After the fall of the Berlin wall, the financial sector crashed in the former com-

munistic countries and neo-liberalism gained ground. The problem of poverty was big and the

banking system did not work anymore. Microfinance grew rapidly there and operated with

other objectives than those adhered to by the MFIs in the West.

Today the divide within Europe is less prominent. There arehowever trends towards uniformity

in approaches within Europe in microfinance . There is a towards financing micro enterprises

on the one hand quite similar to small enterprise financing ; on the other hand programmes

focusing on social microfinance are emerging . And there MFIs investing in the development

of informal savings-credit and insurance schemes.

What is the role of the European microfinance network?

The European Microfinance Network (EMN) tries to get microfinance on the political agenda.

“The mission of EMN is to promote microfinance as a tool to fight social and economic exclusion

by developing self-employment and micro entrepreneurship. This will be achieved by supporting

the development of microfinance organizations through the dissemination of good practices

and by improving the regulatory framework at European Union and country level” (Molenaar,

2011 P49).

Within the financial sector as a whole, the EMN and its members are only small players. But

when the EMN can establish a connection with the banking industry, they can become complemen-

tary. Within some countries (e.g. Germany), the savings banks fulfill the role of microfinance

institution. But, as in other parts of the world, many banks have lost their social roots. The

EMN focuses on putting microfinance on the agenda in order to regain focus. The complemen-

tary function of microfinance sector is also to demonstrate that the direct contact with the

client has a tremendous value;. Personal contact needs to become a central focus point again.

In your opinion; Is microfinance in Europe a success story?When looking at what we have achieved over the past five years, then yes, it has been a success.

Microfinance was put on the European political agenda, technical and political decisions were

put through and funds, time and people were made available. Despite the great achievement

over the past years, it must be concluded that it remains a weak sector still. If the expectations

are too big, a failure is very likely due to disappointing results.

Do we need microfinance in the Netherlands?There are still many people in the Netherlands who are excluded from financing, so yes. Studies

have revealed that there are about 2.5 million people in the Netherlands with the idea to start

There is probably a universal way of thinking about microfinance but there is no universal microfinance model.

Interview • 35

a business. Around 1.2 million of them are serious about it. In the “Raad voor Microfinanciering

2008” we set the goal of having at least 10.0000 businesses started per year. In the Netherlands

so far only the system of extending micro loans (in combination with coaching) for micro and

small businesses has now been developed.. However, the needs within society are larger than

that. Self employed have the need for new forms of insurances. Migrants have a strong need for

new gfrms of transferring money and new types of pension schemes. The needs for financial

services will only increase in the years to come. Our society has become more transnational

and less restricted by boundaries ; financial services have to adapt to that as well.

how does microfinance in the Netherlands compare to microfinance in developing countries? In the Netherlands, the result of the earliest example microfinance is the Rabo bank. Rabo bank

is the result of a merger of “Coöperatieve centrale Raiffeisen bank” and “Coöperatieve central

boerenleenbank” in 1972. In both settings, farmers formed a group. Within this group, mem-

bers could get loans and they could stack their savings. Farmers, at that point in time, were

excluded from society with regard to their financial needs, so they cooperated in a group and

formed their own access to financing. Next to access to financing, they also needed insurance

against fire (most importantly of haystacks). Achmea is the result of the merger of several

insurance companies initiated by, amongst others, Draisma in Friesland. By means of grouping

together, the farmers insured each-other for compensation in case of fire. The next important

pillar of microfinance in the Netherlands resulted in Fortis bank. People needed to save their

money somewhere. Also the poor had their savings. Relatively, the poor save more than the

rich. In order to safeguard this money, savings banks were developed. Again, this started from

the necessity of a group of people who were excluded from participating in their financial needs.

Currently, the microfinance funds are relatively high (about 80 million euro). When we speak

about micro credit we are fully developed. In the Netherlands the average loan sum is about

18.000 euro. For comparison; in Europe this amount is about 7.700 euro. When we speak of

insurances, pensions and other micro finance activities we are only at a starting stage and we

have much to learn (also from developing countries).

In your opinion; what should be the goals of microfinance in the Netherlands?We need more microfinance. Definitely when we look to the lower part of society. We still did

not succeed in reaching out to those people. In the Netherlands we are too busy with every-

thing around the notion of lifelong employment. This needs to change. We need to focus on

hybrid solutions too. For example, when someone who receives social welfare benefits starts up

his own company for 2 days per week, he looses his social welfare benefit. Instead, we should

support these people to start up their business and work out a hybrid solution. When looking

to insurances, we have to determine which new insurances are needed in the Netherlands and

we have to facilitate such processes. When looking at pensions there is also a large area to be

covered. I told about the goal of 10.000 new micro businesses to be set up with microloans.per.

In the Netherlands we do not yet reach this goal. Only 2500 businesses are now supported. It

would help if we think more in people rather than in businesses , in enterprising people sup-

ported. In other words; we need to reach out to 40.000 individuals per annum via microfinance

in the Netherlands.

If the expectations are too big, a failure is very likely due to disappointing results.

36 • Interview


You’re a mix of the best qualities

International Trainee at Ahold Europe

1090122-A4-krat.indd 1 27-09-11 11:14

te zijn. Waar komt die verontreiniging vandaan? Ik beluister

de laatste tijd dat we in Europa geen “eiland” zijn. Komt die

viezigheid binnen gespoeld uit de ons omringende landen?

Als de vervuiler betaalt, zou dat wel plezierig zijn.

Het lijkt me niet zo vreemd dat het water in de dichtbevolkte

geïndustrialiseerde landen meer vervuiling heeft dan dat in

de paradijselijke vakantieoorden. Maar we hebben alleen die

ene Europese norm. Zwemwater staat in de vereiste kwaliteit

model voor heel Europa. Net doen alsof dat Europa een

homogeen geheel is. Gelijkschakeling en nivellering. Cultu-

rele verschillen zijn natuurlijk wel interessant en boeiend:

reden om - behalve voor de zon - verre reizen te maken. Taal;

eten; drank; armoe. Met al die verschillen heb je een heerlijke

vakantie. Maar weer thuis stellen we uniforme eisen aan

elkaar. Gemeten naar dezelfde maatstaven. Dat lijkt heel

eerlijk. Je moet gelijke partijen gelijk behandelen, anders

ontstaat discriminatie. Maar de partijen zijn niet gelijk;

integendeel. Meting met uniforme maatstaven – zoals de

Euro - is de beste manier om de bestaande heterogeniteit tot

uitdrukking te brengen. En dat lukt tegenwoordig dus erg

goed. Verzet lijkt te groeien.

Vluchten in de drachme, de lire of de peseta kan niet meer.

De onderlinge ongelijkheden worden steeds duidelijker en de

onhaalbaarheid van de gestelde eisen ook. We helpen elkaar

op deze manier aardig in de puree. Van medestanders worden

we elkaars tegenstanders. En dat gaat echt niet alleen om de

Euro. Schoon zwemwater staat voor al die andere dingen die

aanpassing behoeven.

Neem zoiets eenvoudigs als een de aanstaande Europese

kampioenschappen voetbal. In feite een toernooi van de EU

zelve. Toegegeven, Oekraïne en Rusland zijn buitenbeentjes,

maar verder zijn alle deelnemers lid van de EU-club. We zijn

daar dus eigenlijk vrienden onder elkaar. Of niet? Een paar

voorvallen brengen me aan het twijfelen.

•DeItaliaansepolitie–dieonderzoekdoetnaaromkopingin

het voetbal – doet in de week die aan het EK voorafgaat

invallen (onder andere in het trainingscentrum van de

Italiaanse voetbalploeg in Coverciano) en arresteert 19 ver-

dachten terwijl enkele anderen onder huisarrest worden

geplaatst. Dat lijkt daar traditie te worden.

•AleenpaarwekeneerderbeslotenEuropesepoliticidatze

toch maar liever niet naar Oekraïne moeten afreizen omdat

een voormalig eerste minister daar slecht wordt behandeld.

NRC handelsbad, 24 mei 2012: “Calciumpillen zijn slecht

voor het hart”. Als je de krant zo eens leest, zijn dat niet

alleen die pillen. Enkele koppen: “Hollande kalmeert de

markten niet”, “Ook in Nederland schade Facebook”, “Dibi:

Onveilig gevoel in partij sinds Kunduz”, “Golfstaten zijn als

de dood voor Iran”. Maar het echt schokkende nieuws staat

bij een foto op de voorpagina, namelijk “dat in Nederland

ruim tien procent van het zwemwater niet voldoet aan de

eisen, of van matige kwaliteit is. … Uiterlijk eind 2014 moet

al het Europese zwemwater aan de richtlijnen van de Euro-

pese Unie voldoen”. De beste jongetjes uit de klas worden ook

genoemd: Cyprus, Kroatië, Malta en Griekenland. We zullen

met onze vakanties dus toch die kant op moeten.

Je vraagt je af hoe het kan. Daarom heb ik dat rapport van de

Europese Commissie eens opgezocht. En dan blijkt dat

onderscheid is gemaakt tussen zwemwater in het binnenland

en aan de kust. De beste jongetjes hebben per 1.000 Km2

(vrijwel) geen binnenlands zwemwater. Zij hebben dus wat

dat betreft geen probleem. Nederland steekt daarin qua

aantal met kop en schouders boven alle andere landen uit.

Maar per miljoen inwoners zit Nederland ongeveer op het

Europese gemiddelde. De braverikken zitten daar ver boven:

ze hebben kennelijk niet zo veel inwoners om te laten zwem-

men. Zonder toerisme ziet dat er ginds dus heel goed uit.

Anders gezegd: ze hebben relatief veel overcapaciteit om die

miljoenen toeristen te laten zwemmen. Maar dat wisten we

eigenlijk wel.

Bij ons is het onbehoorlijk mis. De vraag is natuurlijk wie er

voor gaat zorgen dat Nederland binnen twee jaar aan de

Europese eisen voldoet. De eenvoudigste methode is waar-

schijnlijk om het vervuilde water niet als zwemwater te

kwalificeren. Alleen water dat aan de eisen voldoet, is zwem-

water. En dan hoeven we alleen een paar paaltjes te slaan:

“geen zwemwater”. We heten van oudsher een proper volkje

Drs. Joost G. Groeneveld

RA RV is directeur van

Wingman Business

Valuators B.V. te Breda en

voorzitter van de Stichting

WBO (register van

business valuators).

Hij was hoofddocent aan

de Economische Faculteit

van de Erasmus

Universiteit te Rotterdam.

Europees “zwemwater”

K(r)anttekening | Drs. Joost Groeneveld RA RV1

Zwemwater staat in de vereiste kwaliteit model voor heel Europa.

38 • Europees “zwemwater”


Alleen is het nu nog de vraag of zelfs onze minister van sport maar moet thuisblijven. Nuance

zit in een klein hoekje.

•Nadatinonslandcommotieontstondoverdenationaledodenherdenkingdieop4mei(te)

ruime(re) vormen leek aan te nemen met een gedicht over een vernoemde SS-oudoom in het

programma, laat de BBC een filmpje zien over “stadions van haat” in Polen en Oekraïne. In

dat filmpje gaat het niet over het wel of niet herdenken van de vijanden van vroeger, maar

over “Hitlergroeten, hakenkruizen, apengeluiden richting zwarte spelers en in elkaar gesla-

gen supporters van Aziatische afkomst”.

Hoe is het mogelijk? Sport heet te verbroederen. Het zijn voorbeelden van onaanvaardbare toe-

standen. En dat is ons Europese “zwemwater”. Het lijkt me zo hier en daar onbehoorlijk ver-

vuild. Wie gaat daar schoonmaak houden? Is daarvoor een uiterste datum vastgesteld? Ik zou

er maar liever niet op speculeren dat we wel naar elkaar toegroeien of dat bij toenemende wel-

vaart alles vast wel veel beter gaat. Voorlopig zie ik trouwens vooral keiharde bezuiniging. En

daarmee zijn we weer terug bij de Euro. Heeft die echt prioriteit? Om welk Europa gaat het ons

eigenlijk?

1 Directeur Wingman Business Valuators B.V., Breda

Vluchten in de drachme, de lire of de peseta kan niet meer.

Europees “zwemwater” • 39

Inclusive finance and access to health care for all

Prof. dr. Leo de Haan - Rector ISS*

On the initiative of H.R.H Princess Máxima of The Netherlands, in her capacities as the United Nations Secretary General’s Special Advocate for Inclusive Finance for Development (UNSGSA) and Chair of the Curatorium of the Prince Claus Chair, and Professor Stella Quimbo, the current Prince Claus Chairholder at the International Institute of Social Studies (ISS) of Erasmus University Rotterdam an Access to Health Insurance Conference was held on the Woudenstein campus on June 5. The conference was organized by ISS, the Institute of Health Policy and Management, the Rotterdam Global Health Initiative, the Curatorium of the Prince Claus Chair, PharmAccess International, the Dutch Ministry of Foreign Affairs and the Office of the UNSGSA.

The conference originated from the joint interest of H.R.H.

Princess Máxima and Professor Quimbo in inclusive finance

and health insurance and was designed to bring together

experts from these two fields for the first time ever. Their

idea was that closer collaboration between these two fields

would result in cross-fertilization and synergies and bring us

closer to finding workable solutions to a seemingly intractable

problem. The conference succeeded in bringing together some

100 experts in financial systems, health care and development

in an attempt to move forward the agenda on developing

equitable health insurance mechanisms that are available

and accessible to all populations around the world.

The problem statement for the conference made clear that

“health care insurance – whether public or private –is not

common in developing countries. It accounts for a fraction

of health expenditure— only 4% in Sub-Saharan countries.

Without health insurance, people endure high out-of-pocket

expenditures. Especially among lower income households,

these expenses result in adverse effects on food consumption

and other basic needs. Or, people simply forgo care altogether,

which can lead to longer-term health issues, even bigger

expenses and, potentially, reduced earning capacity and

incomes. On the supply side, health systems are too often

fragmented. They may lack quality standards and a financial

basis that facilitates the development of services that can

meet the needs of the population”.

Recently, the ISS expertise in research and teaching on

access to health care and health insurance was reinforced

with the appointment of Professor Stella Quimbo from the

Philippines, as the new ISS Prince Claus Chairholder in

Development & Equity. Her inaugural address dealt with the

effects of various policy measures in the Philippines on the

health of children. She demonstrated convincingly how a

number of policy measures in health care had a positive

effect on children’s health. Her findings also formed an

important input for the Access to Health Insurance conference.

Professor Quimbo’s work is a fine example of what makes ISS

strong. The driving force is the combination of excellence in

academic research and teaching, with the will to make a

difference in practice. Put simply, a key element of the ISS

mission is to contribute to solving major social challenges

such as the eradication of poverty and the provision of

universal health care coverage.


40 • Inclusive finance and access to health care for alll

In her opening speech HRH Princess Máxima identified four objectives: the identification of

knowledge gaps; the identification of areas for new pilots; agreement on successes and failures;

and finally a call for more attention for the importance of Access to Health Insurance.

With respect to the knowledge gaps it became clear to me that context specificity is key. What

works in Thailand is not likely to work in Nigeria. What works in Ruanda is not likely to work

in the Philippines. We do not yet know how to combine local and donor money in such a way

that the sum of the parts is greater than the whole. We also do not know how to ensure donor

coordination. Examples of confusing and conflicting advice from donors abound. In the course

of the day, it became abundantly clear that integrated and comprehensive knowledge on what

works best and why it works, is not yet available.

With respect to areas for pilots, the message I took home is that pilots must spring from bottom-

up initiatives and ideas. Instead of relying on ‘experts’ to suggest areas for pilots top-down, we

should identify ‘local’ ideas that might work and then use the expertise we have to help design

pilots, evaluate data and then disseminate the results.

With respect to successes and failures, I sensed a growing awareness that the definition of success

and failure must be based on evidence and rigorous evaluation of data and not on hopes and

good intentions. We need both rigorous quantitative analysis and solid qualitative assessment.

Although everyone agreed that access to health insurance is a good thing, we disagree, often

fiercely, about how to move forward to universal coverage. I think that if we act wisely, we can

use this very disagreement as a catalyst for progress. Disagreement, when handled intelligently,

can lead to diversity of approach, and this diversity is sorely needed.

A call for more attention for the importance of Access to Health Insurance is basically a call for

action. It means that policy makers, practitioners and scientists need to continue this dialogue

and translate the words into action. One delegate said that access to health insurance is 97%

politics and only 3% technique. We might quibble about the exact percentages but the message

is that we need each other to move the agenda forward. It is also clear that we need to do this

with a combination of approaches. Bottom-up approaches like Community Based Health Insurance

are an important step on the road towards universal social health insurance, but only one step

on the road. Large scale nation-wide programmes are desperately needed.

What struck me throughout the day, is that the conference – not by coincidence – was a tribute

to the thoughts on development & equity of the late Prince Claus, a legacy that also underpins

the Prince Claus Chair. He stressed time and again that development as “progress” and

“improved standards of living” often go together with growing disparities and inequalities. By

adding the concept of equity to the concept of development, Prince Claus spurred us to focus

on fairness in terms of distribution of returns among social groups and across generations.

Fairness is, without doubt, the fundament on which the pursuit of financial inclusiveness and

the drive to provide access to universal health insurance for all, are based.

* ISS is the International Institute of Social Studies of Erasmus University Rotterdam.

Inclusive finance and access to health care for alll • 41

De weg naar de top is minder lang dan je denkt.Academisch toptalent Met je titel op zak wil je natuurlijk zo snel mogelijk een absolute topbaan. Maar de weg naar de top

is lang, en de kans op fi levorming groot. Behalve als je een alternatieve route durft te nemen. Op veel topfuncties bij multinationals

en de overheid werken mannen en vrouwen die hun carrière gestart zijn bij Deloitte. En dat is niet toevallig. Bij ons werk je

namelijk al vanaf dag één aan innovatieve oplossingen voor én met toonaangevende organisaties. En ondertussen aan je eigen

loopbaanversnelling. Dus als jij wilt dat de topbedrijven straks voor jou in de rij staan, kun je nu het beste bij ons beginnen.

Zoek jij de beste start van je carrière? Begin eerst hier: werkenbijdeloitte.nl.

DB-000-adv-regulier-basis-210x297-v10.indd 2 23-12-10 15:29

Dear members,

The end of the academic year is near and many of us are busy with the final exams of their study

year. We have been busy as well the last period organising some of the last but certainly not the

least FSR events in cooperation with our partners. The participants of our prestigious Interna-

tional Research Project had a great two weeks in Bangkok and Ho Chi Minh City and all

returned safely home. The Investment Banking Masterclass proved to be a great success organised

for the third time in a row this year and the battle during the Corporate Finance Competition

was fierce.

The participants of this year initiated Cleantech Challenge did above everyone’s expectations at

the global finals in London. The Dutch team won the global finals including a lot of prize

money. We as organisation can look back at another successful event in the FSR portfolio. For

the next year this events will advance even further and hopefully we are able to deliver another

winning team for the finals.

For the orientating bachelor students we held the Finance Day and the Bachelor Accountancy

Day in cooperation with some other study associations at the university. Not to forget a lady

like Female Business Tour, the nationwide Multinational Battle and an Italian European

Finance Tour to Milan which took place the last couple of months.

As you can see a lot of events have taken place this year and new membership enrolments keep

coming in. We foresee that this trend will continue in the future, not only because of the

growth in numbers of starting students but also because of our coverage at several faculties.

Our position at the Erasmus School of Economics is strong as always since most of the finance

and accountancy students are members of our association.

For many years, we see more and more students with a Business Administration background

becoming members of the FSR. As an International Business Administration student myself I

am glad to see this development increasing its pace. Our association has many events to offer

for the finance and accountancy interested RSM student.

There is more important news I would like to share with you. Next year the FSR will organise

a brand new Erasmus Banking Congress. This congress will take place before the start of our

well-known International Banking Cycle at the beginning of the academic year. The subject of

the congress will be about political influence and the future of banking. I am looking forward

to some interesting speakers and though debates!

As mentioned above the academic year is coming to an end and so is our board year. We have

been looking for talented and enthusiastic successors and are very pleased with the six ambitious

students we found to form the XVth FSR board. They cannot wait to start and I am sure they

will give everything to make the fifteenth year a great succes. I wish you all success with your

last exams and hope you have a great summer period.

FSR News

48

49

50

56

Column Marco van Vliet

Column Ard Boonstoppel

European Finance Tour

Female Business Tour

Word of the chairman

Wessel Ploegmakers


FSR news • 43

De weg naar de top is minder lang dan je denkt.Academisch toptalent Met je titel op zak wil je natuurlijk zo snel mogelijk een absolute topbaan. Maar de weg naar de top

is lang, en de kans op fi levorming groot. Behalve als je een alternatieve route durft te nemen. Op veel topfuncties bij multinationals

en de overheid werken mannen en vrouwen die hun carrière gestart zijn bij Deloitte. En dat is niet toevallig. Bij ons werk je

namelijk al vanaf dag één aan innovatieve oplossingen voor én met toonaangevende organisaties. En ondertussen aan je eigen

loopbaanversnelling. Dus als jij wilt dat de topbedrijven straks voor jou in de rij staan, kun je nu het beste bij ons beginnen.

Zoek jij de beste start van je carrière? Begin eerst hier: werkenbijdeloitte.nl.

DB-000-adv-regulier-basis-210x297-v10.indd 2 23-12-10 15:29

At NIBC, entrepreneurial bankers start at the deep endAs a trainee banker at NIBC, you also have a daily job. Your assignments and responsibilities start from day one. And you’ll

have the chance to specialise, in for example mergers and acquisitions. You and your fellow analysts will follow our in-

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A flying start at the bank that thinks and acts like entrepreneurs. For more information, visit www.careeratnibc.com.

0185.10.003 NIBC_Arbeidsmarkt_Adv.indd 3 22-11-11 15:05

At NIBC, entrepreneurial bankers start at the deep endAs a trainee banker at NIBC, you also have a daily job. Your assignments and responsibilities start from day one. And you’ll

have the chance to specialise, in for example mergers and acquisitions. You and your fellow analysts will follow our in-

company training programme at the Amsterdam Institute of Finance, led by professors from international business schools.

A flying start at the bank that thinks and acts like entrepreneurs. For more information, visit www.careeratnibc.com.

0185.10.003 NIBC_Arbeidsmarkt_Adv.indd 3 22-11-11 15:05

ERASMUS BANKING CONGRESS

12 SEPTEMBER 2012

“SHIFTING POWERS”

Part 1: Political Influences

Part 2: Future of Banking

FSR.NL

Lex Hoogduin

SUPERVISION

Former Director DNB Professor Monetary Economics and Financial Institutions,University of Amsterdam

Onno Ruding

Harald Benink Peter Verhaar

Annerie Vreugdenhil

MONETARY POLICY

CURRENT SITUATION RISKS

FUTURE VISION

Former Minister of FinanceFormer Executive Director IMFFormer CEO Citibank

Professor Banking and Finance, Tilburg University

Founder Alex Beleggersbank

Head of Commerical Banking Netherlands, ING

EBC Advo.indd 1 1-6-2012 13:45:41

Meer weten over de carrière van Marc en zijn collega’s? Of benieuwd naar onze mogelijkheden? Scan de QR of surf naar onze website.

“Groeien tot het hoogste niveau dat voor mij haalbaar is. Dat is mijn toekomstvisie.”

Marc Buijs, gevorderd assistent accountant

Onze ruimte, jouw groei

www.carrierebijGT.nl

News UpdateClinton backs Bangladesh microfinance pioneer Muhammad YunusMicrocredit 'death trap' for Bangladesh's poor

(Business Daily, BBC World Service 3Nov 2010)

Bangladesh's Yunus fears for graMeen Bank future(APF May30th 2012)

Microloans for Mental-health patients rolling out across ontario the gloBe and Mail(Business daily, Jun 1st 2012)

US Secretary of State Hillary Clinton gave her support

Sunday to the microfinance pioneer Muhammad Yunus on a

visit to Bangladesh, calling the embattled Nobel laureate a

global inspiration. Clinton invited Yunus, the founder of the

Grameen Bank, which provides small loans to the poor, to

morning tea before waiting cameras at the US ambassador's

residence, a day after she met Bangladesh's bickering political

leaders.

The other invitee for the meeting was Fazle Hasan Abed, the

head of the Bangladesh Rehabilitation Assistance Committee

(BRAC), a major development group. Founded in 1972,

BRAC has become one of the most important providers of

Microfinance in developing countries. Rural development

and woman empowerment are listed high on the agenda of

BRAC. Both Yunus and Abed are able to unite Microfinance

investments and poverty reduction together with a high level

of self-sustainability. For that reason, Clinton called them

"two of my favourite men in the world" during the meeting.

Despite winning the 2006 Nobel Peace Prize and becoming

friends with former US president Bill Clinton, Yunus was

removed from the helm of his bank last year in a move widely

seen as engineered by an envious government. Hillary Clinton,

speaking to students after her meeting with Yunus, said Gra-

meen Bank and BRAC were "viewed internationally as the

two best development organisations in the world." "I can only

hope that nothing is done that in any way undermines the

success of what Grameen Bank has accomplished on behalf

of many millions of poor women," Clinton said to cheers at

the International School Dhaka.

Clinton, a staunch advocate of women's empowerment, said

that Grameen Bank had uplifted Bangladeshis through the

generations, saying she met a woman who was able to attend

university after her mother earned a livelihood through a

microloan. "That's the story of America. I want it to be the

story of Bangladesh," Clinton said, calling on Bangladesh to

preserve Grameen's independence and "unique organisational

structure" in which loan recipients themselves are considered

owners.

Bangladesh's central bank fired Yunus, 71, in March last year

after saying that he had exceeded the mandatory retirement

age of 60. Supporters say the step was retaliation after Yunus

previously hinted at joining politics to break

the logjam in a country bitterly divided for

decades between two political parties. With

a direct clientele of roughly eight million

Microfinance users, Yunus could have

gathered a large stake in Bangladeshi poli-

tics in 2007. Although it was claimed Yunus

had voluntarily retreated from the elections, insiders say

Yunus was “urgently requested to let go of his political ambi-

tions”. In December last year, Prime Minister Sheikh Hasina

accused Yunus of treating Grameen Bank as his “personal

property” and claimed that it was “sucking blood from the

poor”. The last statement comes from the disability of Gra-

meen bank to cut interest rates in loans. The average thirty-

five percent interest is considered disproportionate by many

critics. The Bangladeshi government owns twenty-five per-

cent of Grameen bank. A fact which Hasina was willingly

sharing with Clinton in a meeting. Clinton urged to put

aside the differences between Sheikh and Yunus’ for the good

of the impoverished country. "In a strong democracy, every-

body has to be rowing in the same direction because you're

all in the same boat," she said Saturday at Hasina's office.

"We want to see Bangladesh succeed.”

Clinton is the first secretary of state to visit Bangladesh since

2003. She earlier put off her trip due to concern over Yunus,

even though the world's third-largest Muslim-majority

country is friendly with the United States. Clinton, speaking

to students on Sunday, renewed a call for Bangladesh to

investigate recent disappearances of activists and abuses

against labour. "You don't want to get a reputation as a place

where labour activists are murdered or taken advantage of,

because in today's world that will cause big manufacturers of

clothing to be afraid to stay or come to Bangladesh," she said.

Part of this text was written by Shaun Tandon and published in AFP-news on may 6th 2012.


FSR news • 47

Microfinance Works -

for the rich(IPS news November 8th 2011)

Meer weten over de carrière van Marc en zijn collega’s? Of benieuwd naar onze mogelijkheden? Scan de QR of surf naar onze website.

“Groeien tot het hoogste niveau dat voor mij haalbaar is. Dat is mijn toekomstvisie.”

Marc Buijs, gevorderd assistent accountant

Onze ruimte, jouw groei

www.carrierebijGT.nl

FSR Former board member

Marco van Vliet

It has already been more than three years since I finished my

active period at the Financial Study association Rotterdam.

Currently I still face the benefits of this remarkable year,

both in my personal as in my professional life!

Well before I became a board member, I got in touch with the

FSR through their activities. What attracted me to the FSR

was the inspiring group of people, passionate about finance

and the corporate world. The drive to become successful in

business is something people within the FSR share. This was

exactly the environment that interested me; therefore I

decided to apply for a position in the FSR board. In that year

I wanted to develop myself further and have a great time with

all the awesome people within the FSR.

In the FSR board, my function was External Relations. In

this position I was responsible for all commercial contacts of

the FSR: maintaining and expanding relationships with all

the business partners. Within this function I had the oppor-

tunity to turbocharge my commercial and negotiation skills.

Besides, I also got in contact with many companies that were

potential employers for a finance student. During my year as

a board member, I was responsible for some major FSR-

events as well. By organizing great events such as the

National Corporate Finance Competition I developed more

leadership skills and learned really well how to motivate my

colleagues.

Beside the career-focus of the association, the social network

of the FSR largely contributed to my great experiences

during the time as a board member. The life as a FSR board

member stays not confined to participation in formal activi-

ties. We had tons of great parties, dinners and drinks as well.

Some of my highlights were the active members weekends in

Brussels and Milan.

While working closely together with my fellow board mem-

bers for more than a year, we build a strong friendship. This

friendship lasts until today; we organize drinks and dinners

with each other on a regular base. Currently, one of my

fellow board members is also one of my roommates!

After having finished my FSR board year I resumed my studies

in Econometrics and Dutch law. In the meanwhile, I continued

looking for potential employers. The diverse and challenging

PassPort

Name

Marco van Vliet

age

25

residence

Amsterdam

Employed at

McKinsey&Company

Current position

Consultant

Which Fsr Board

11th FSR Board

Board function

External Relations

study

Econometrics

(Quantitative Finance)

and Dutch law

Year of graduation

2011

Which car do you

drive

Lexus CT200h

What do you drink

on a Friday night

Heineken (preferably in

De Pijp, Amsterdam)

Life Motto

Life isn't about fitting in,

it’s about standing out!

work of strategy consultants seemed very interesting, there-

fore I applied for an internship at McKinsey&Company.

During my internship I had a fantastic time at that firm,

while serving a large client in Johannesburg, South Africa.

This was a great experience, particularly because I was in

Johannesburg during the 2010 Worldcup. After this intern-

ship I was 100% positive: McKinsey would be my ideal first

employer. What attracted me in this employer is the open

and internationally oriented culture, combined with both

challenging client engagements and working together with

very bright and inspiring colleagues. Luckily, my dream

came true because in January 2012 I started working at McK-

insey and I am having a fantastic time. Now I also realize that

the skills which I learned during my FSR board year are very

useful throughout my consultancy projects.

I have to say that I am still amazed by the professionalism of

the FSR and the way all the activities are organized. I am

proud to have been a part of this association.


48 • FSR news

FSR Member

Ard Boonstoppel

I joined the FSR in my master year as member of the

Accountancy Committee. During my pre-master I went to

some social drinks of the FSR and heard some good stories

about FSR events and coming into contact with the Big Four

and other audit firms. As master student the end of studying

was nearby and the moment of applying for a job came close.

I realized that it should take some time to find out which

audit firm I wanted to work at. Becoming an active member

of the Accountancy Committee was a way to understand the

business of audit firms and make a choice between the different

audit firms.

With the Accountancy Committee we organized inhouse-

days at the Big Four companies. Through the inhouse-days

the first contacts were made with recruiters and people

already working at audit firms. Almost at the same time I also

participated within the International Research Project 2011,

one of the best projects of the FSR. This project was well

prepared and organized by the FSR. This project gave 20 stu-

dents the opportunity to conduct academic research in Kuala

Lumpur and Singapore. Before we went we visited the com-

panies that supported the project, which included the Big

Four companies, BDO, Varova investments and Chartis.

The companies organized sessions to prepare us for our jour-

ney to Asia. One of the first sessions we met an audit partner

that stayed in Singapore for some years. This partner talked

about interesting facts of Singapore and what he liked about

living there. With another session at KPMG we received etiquette

training to upgrade our skills on Asian business etiquettes

and dining etiquettes, which was a great experience. After the

session there was an Asian buffet to bring our training into

practice. During this buffet I had an interesting conservation

with the recruiter and people of KPMG, which gave me a

good impression and feeling about working at KPMG. So, I

made use of the opportunity and asked for an internship to

write my master thesis at KPMG. I was confident because I

already met the people of KPMG and knew what I liked about

the company that was different than other audit firms. In

just a short period of time I applied for an internship and

signed a contract.

The internship was for five months and at the same time a

group of other master students started. KPMG offered us the

facilities to write our master thesis and the chance to meet

all different people within the company. Besides working on

our master thesis there were good opportunities to know

more about the culture of the company and all interesting

aspects of the work that is carried out. Five months of writing

master thesis passed very quickly and in those months I had

become encouraged to finish my master thesis and start

working.

Finally in September last year I started working at KPMG.

The first months were great! To some extent I knew what to

expect, because I already had some working experience.

However, in the first weeks you get many presentations and

trainings and you receive an overload of information. You go

directly to the client and you meet people at clients and your

new team members. Every day is quite different, because you

get different tasks and assignments to perform. It is remarkably

that every team member is keen on giving training on job

and explaining how to get the work done. On every assign-

ment you work in teams with intelligent colleagues that have

different levels of experience. Even if you’re starting as

trainee you get involved and are stimulated to take on a pro-

active attitude.

I noticed that it is important that you’re self-driven and

motivated to develop your skills and knowledge, because

after one year of working you already need to explain things

that you have learned to new trainees that are starting. When

you’re good team player and with the right attitude you can

accomplish much. Participating in the FSR events helps you

to already explore what it is like to work at different organi-

zations. I advise everyone to join some FSR events and

explore you future career path and find out what you’re

ambitions are.

PassPort

Name

Ard Boonstoppel

age

25

residence

Rotterdam

study

MSc Auditing,

Accounting en Control

Fsr event

International Research

Project

Internship

at/job at

KPMG

stationed at

which department

Audit

Year of graduation

2011

What car do you

drive

Peugeot 307

What do you drink

on a Friday night

Beer

Life motto

‘If everything seems

under control, you're

just not going fast

enough’


FSR news • 49

European Finance tour 2012:Milan

with in the past. For instance, he told us about the consid-

erations of the product-mix to increase the profits of PepsiCo

Italy. In the evening we went out for diner and afterwards we

visited the club ‘Circle’. Many Bocconi students go there, so

we had the opportunity to experience the nightlife of the Italian

student.

On Wednesday Heineken was on the planning. We were

picked up by a bus from Heineken and traveled to the brew-

ery in Bergamo. After having arrived at the brewery, we were

welcomed by two Dutch expats –among which Heineken’s

CFO Italy - and we had a tour through the whole brewery. It

was very impressive to see the complete supply chain and at

the end their unique product: a bottle of beer! We then had to

After a long preparation for the European Finance Tour, we

finally went to Milan with a spectacular week in view. Very

early in the morning, we travelled by taxi to the airport for

departure. About nine o’clock we arrived in Milan and took

the airport shuttle to the city center. After a short check-in

and a lunch we bought the tickets for the public transport

and went to our first company: Unilever! After a warm wel-

come we had several presentations from different finance

departments interspersed by a few coffeebreaks. After this

visit we decided to have a taste of a real Italian kitchen, so we

went to a small pizza restaurant close to Duomo. Being satis-

fied we went for a quick break in the hotel followed by our

first night in the ‘fashion capital of the world’. Conclusion:

an exciting first day!

Tuesday we had to wake up at 7 for an all day visit at PepsiCo.

Across the street from the hotel, there was a typical Italian

bakery where we had breakfast among the many people who

went for a quick coffee before work. When we arrived at Pep-

siCo we were welcomed by the CFO, Dario Zangrandi and a

few other financial employees. The first presentation was

quite general about the financial aspects of PepsiCo’s busi-

ness. It was a very interactive day and around 1 o’clock Dario

invited us for a ‘quick’ lunch. We expected a half-an-hour

lunch, but in Italy they are used to a little bit more time.

After lunch we went back to the office and meanwhile we

could ask about all the aspects of PepsiCo. Back at the office

we started on a case study. This was really interesting while

we worked on different activities and projects Dario dealt


50 • FSR news

solve a case study about an investment decision whether

Heineken should import or produce ‘Sol’ in that particular

country. These decisions are very usual pursuits for the

financial team. On the way back we ended up in a traffic jam,

so we could only watch the second half of the Champions

League quarter finals between AC Milan and Barcelona.

Afterwards we had some drinks in local pubs and went home.

Thursday after breakfast, a visit to the Consulaat-Generaal

was planned. At their office, the Consul-General Kramer gave

us a short view on his daily activities and focused particularly

on the current economic situation in Italy and the good work

of Prime Minister Monti. In the afternoon we had a typical

Italian lunch at a pizzeria and then went to Leonardo & Co.

for end presentations of the case study we had prepared in

The Netherlands. For the assessment of the cases, Johan

Dubbeldeman had come from The Netherlands and acompa-

nied us at the Leonardo drink afterwards as well. After the

aperitivo we went for a quick stop at the hotel to refresh and

then went out.

Friday morning we went to KPMG. At the office we had an

interesting presentation about the Italian business and the

current condition of the Italian economy. Thereafter we had a

presentation from people who worked at Transaction Services

and at the Corporate Finance department. The last company

visit of the week was planned at CONSOB, the Italian equivalent

of the Dutch AFM. At the CONSOB they told us about the leg-

islation and control of the banks and insurance companies.

Afterwards there was some time left for sightseeing and visit-

ing ‘Il Duomo’, the famous cathedral in the center. The ladies

could indulge themselves with shopping and about 8 o’clock

we went out for dinner. As last evening we decided to go out

at Club Old Fashion. This is one of the most prominent clubs

in Milan and despite of the tiredness everybody had a spec-

tacular last evening!

Saturday morning we had to wake up at 6am. Tired but satis-

fied we went back to Rotterdam. With the help of the com-

mittee but also the participants we had a fantastic experience!

Thank you all!

FSR news • 51

the Cleantech Challenge

cial side of the business plans. How to attract funding, where

should you look for funding and how do you negotiate your-

self a favorable deal. Kempen & Co is becoming one of the

top players in the clean technology market. After these two

consults the business plans had to be taken a step further and

a jury of four partners made a selection of eight teams that

could go through to the third round.

In this round consultant Mckinsey & Company assisted the

teams with their presentation skills and tested the plans by

firing some critical questions at the teams to see if they

would hold their ground. During the All Energy Day organ-

ized by organizing partner the Delft Energy Club the teams

all had to pitch their idea in front of a Mckinsey & Company

jury. The consultants carefully addressed the weaknesses of

every plan and they provided some valuable feedback. The

teams started working on their plans for the Dutch final held

at the YES!Delft incubator building on the 30th of March.

The Dutch final was a big happing with a though jury to con-

vince. The jury consisted of Hero Prins from Climate-KIC,

Peter Westerhuis from Valorisation Centre TU Delft, Jeroen

Kroes from Kempen & Co, Theun Baller from Delft Energy

Initiative and Elderd Land from GIMV.

All the teams worked hard for this moment and gave their

best during the presentations for the jury. Finally only one

can be the best and Sunuru proved to be the true winner and

went home with e3000,- and a ticket to the global final in

London. Sunuru has designed a netting construction to

attach solar panels. Via this netting construction they can

track the sun efficiently and reduce production cost enor-

mously. Empower People and aQuista came in close behind

This event was new to the FSR portfolio and we are very

pleased with the results and the opportunity we can now

offer to the Erasmus students. The Cleantech Challenge orig-

inated in London in 2009 as a student competition designed

to nurture innovative ideas. For the first year this competi-

tion had a Dutch counterpart and after completion of the

challenge here in the Netherlands the winning team got an

opportunity to fly to London to compete at the global finals

to win an amount of £10.000!

The Cleantech Challenge provides entrepreneurial students

with all backgrounds first and foremost with an incredible

opportunity to test the strength and viability of their start-up

concept on both a local and international platform. You do

not need a brilliant idea to make it happen, the challenge is

there to provide the opportunity to look at an idea critically

and see what it takes to make it to the next level. In order to

create a powerful team the competition encourages students

with technical and business backgrounds to integrate their

experience and expertise. The Dutch challenge consisted of

three rounds, the first round with a kick-off of inspiring

speakers and a motivating speech of last year worldwide

winner Black Silicon Solar. After a selection process in the

first round, 22 teams started the second round of the chal-

lenge.

First these teams got a technical consult of Alstom, the

world’s leading energy solutions and transport company. For

the business and finance students interesting due to the

insight about how these large companies like to buy up suc-

cessful developing new ventures and make them part of their

businesses. The second consult was organized together with

the merchant bank Kempen & Co and focused on the finan-


52 • FSR news

at the second and third place and also received venture capital

for their business plan.

Sunuru and the committee went to the London Business

School for the global finals of the Cleantech Challenge. We

had to prove ourselves as we were a new country to take part

in the challenge and as you all know a first impression

counts. Ten diverse teams from England, China, Denmark,

America, Belgium, Italia, Denmark and the Netherlands

would battle for the £10.000 prize money and the honor of

winner of the global Cleantech Challenge 2012. The finals

consisted of a boot camp set-up of two days. In this boot

camp the teams got a difficult situation to deal within their

potential startup and had to figure out how to convince the

jury of their strength. The competition was tough but we

were very proud to see that Sunuru performed as the best

team of this international group. The jury was amazed by the

idea, business plan and strength of the concept of Sunuru.

They deserved the victory and were very happy with their

achieved result.

Although the Cleantech Challenge is new to the FSR portfolio

we can all agree that it is a great success already. We would

like to thank our organizing partner YES!Delft Students and

the Delft Energy Club. Furthermore we would like to thank

the partners that took part in the three round of the Dutch

challenge, without them it would not be possible to setup

this event. We look forward to next year and have to work

hard to deliver a winner in the global finals!

FSR news • 53

Investment Banking Masterclass

large investment banks in London. Because of his experience,

he was able to clarify all the theory with examples from the

real world. The several topics he covered were:

- Public Comparables Analysis

- Acquisition Comparables Analysis

- Discounted Cash Flow Analysis

- Merger Consequences Analysis

- Leveraged Buyout Analysis

- Imputing Valuation Ranges

To make sure everybody could start with the same knowledge,

we started with an overview of the main concepts used in

valuation, like differences between equity and enterprise

value, the several financial performance measures as EBIT(DA),

EPS and Free cash flow. After this introduction we started

On May 7, the FSR organized for the third consecutive

time the Investment Banking Masterclass. From

London, Training The Street came over to teach the

participants an in-depth valuation course. Training

The Street is the world’s leader in providing instruc-

tor-led courses in financial modeling and corporate

valuation. These courses are offered at investment

banks, business schools and universities around the world at

for example Harvard Business School, New York University,

INSEAD and several investment banks at Wall Street and in

London. The FSR is the first study association in the Nether-

lands that organizes masterclasses like these in the Nether-

lands. Training The Street’s corporate valuation training

explores the common valuation techniques used by Wall

Street firms. Developed by their employees who are instructors

who possess the direct training and experience “on the job”,

the curriculum provides practical application of the applied

standards and methods that a new hire within an Investment

Bank needs to know to perform effectively. Course also

explores the common valuation techniques used by Wall

Street firms. The primary focus of the program is to teach

participants the practical applications of the theoretical

methodologies.Mr. D. Zane Hurst was the instructor for this

day. He is a former investment banker who worked at several


54 • FSR news

with the first valuation methodology, Public Comparables

Analysis. With all the methodologies we followed the same

path. First there was an extensive theoretical introduction to

the specific methodology. All the formulas and for instance

where to find the needed data, how to select relevant peers

and which posts on the balance sheets are relevant for each

method. When this all was clear to everybody, the theory was

followed by a (numerical) example given from a real world

example. Finally all the taught methodologies were used to

value a company which was actually acquired a while ago, so

participants could really compare their valuations to those

done by actual Investment Bankers. Eventually there were

also given some other considerations regarding mergers and

acquisitions. For instance political and regulatory powers

which might influence the way the deal is closed. For exam-

ple whether stocks can be included in the deal or not. In an

example given by Zane Hurst, it was clear that this is not

always the case as institutional investors may be limited in

their investment policies.

Overall, these valuation techniques will be a valuable asset

when applying for internships or for participating in one of

the upcoming events organized by the FSR. During events

like the International Banking Cycle (September-October),

Financial Business Cycle (January) and the Corporate

Finance Competition (May) this knowledge will be very

useful and will definitely help you in getting a job. So for

those of you, who missed out on the Investment Banking

Masterclass this year, should really use this excellent oppor-

tunity and apply for the Investment Banking Masterclass

next year to boost your career.

TRAINING THE STREET SM

FSR news • 55

Female Business tour 2012

a real life case. The case consisted of advising a charity organ-

ization in teams, with help from BCG employers, after which

the results had to be presented. The BCG employers were

very helpful in solving the case and challenged the students.

Besides that, a number of female employers told us about

their experiences at BCG. The visit gave the students a good

understanding on what it is like to work as a consultant and

more specifically, to work at BCG.

After the company visit in the afternoon, we traveled to Bras-

serie van Baerle for informal drinks and a delicious dinner

together with employers of the participating companies.

During the dinner, which consisted of three courses, groups

of students rotated between the three participating companies.

In this way, each student had the opportunity to talk to the

employers of the companies in an informal setting. At the

end of the dinner we had the possibility to ask our last ques-

tions during the drinks. Together with the students we

traveled back to our hotel where we could rest and prepare

for the second day.

Thursday morning, we visited ING’s office. After a coffee we

were talked through the opportunities at ING and had the

chance to ask our questions to a woman at the top of ING,

one of the Managing Directors Equity Capital Markets, which

was very interesting. ING as well showed us what kind of

cases they have to deal with. We solved a case that focused on

On Wednesday the 4th and Thursday the 5th of April, the

Female Business Tour 2012 took place. This year’s partners

of the event are the Boston Consulting Group, Deloitte M&A

and ING. Nowadays an increasing number of companies

focus on female leadership and women at the top. Therefore,

last year the FSR initiated this event, exclusively for women.

The event focuses on a broad range of financial companies

that have a special interest in attracting the top female stu-

dents. Twenty female students from Rotterdam travelled

together to Amsterdam for an exclusive and interesting tour.

On the first day, we visited the office of the Boston Consult-

ing Group. During the visit, we had the chance to meet the

employers of BCG, learn about your opportunities at BCG

and experience what it is like to work as a consultant by solving


56 • FSR news

Risk Management. We had to work under high time pressure

and work together in teams to maximize the profit of ING

but at the same time meet the restrictions of the Basel III

standard. A very topical and interesting subject that learned

the students how difficult it is for banks to manage conflicts

of interests with such regulations. The team with the highest

profit received an ING goodie.

Finally, the tour went on to the office of Deloitte in the Crystal

Tower. At Deloitte a female partner told us about her life and

choices regarding her work-life balance and growing to the

top as one of the few women in a men’s world. Furthermore,

a couple of female employers introduced themselves after

which we started with a case. The case focused both on M&A

and Transaction Services and clearly showed us what the pro-

cess of a merger or acquisition incorporates. The enthusiastic

women helped us solving the cases and explained what it is

like to work at Deloitte. After the presentations of the findings

of the case, the winning team received a prize and we ended

this visit with an informal drink. More Deloitte employers

were present so we had the opportunity to meet even more

people and get to know the company even better.

After this final visit, we went back to the hotel to pick up our

bags and travel back to Rotterdam, tired of all the new infor-

mation but satisfied. We want to thank all of the partners and

participants for making this event such a huge success!

FSR news • 57

ℜς ϓ℘ ΞΒ⇓ ∗ ∨ ⎥⎦W.we∼kΨn bij mΕzars. ⇔ ←.

Mazars is ontstaan uit een fusie tussen Mazars en Paardekooper&Hoffman

Ga verder met Mazars.

0475.00.596 WT Niets BS_210x297_FC.indd 1 21-08-2008 11:14:10

The FSR is looking for enthusiastic committee members for the academic year 2012-2013. As a committee member you have the opportunity to distinguish yourself from other students and to get connected to the corporate world. Are you a Bachelor 3 or a Master’s student the coming year and do you have affinity with finance, accountancy or controlling? Grab this chance to become an active member at the FSR in one of the following committees:

Accountancy Committee Female Business Tour CommitteeCleanTech Challenge Committee Finance CommitteeCorporate Finance Competition Committee FSR Forum Editorial CommitteeEuropean Finance Tour Committee International Banking Cycle CommitteeFAN Committee International Research Project Committee More information on FSR.NL

Interested? Mail to [email protected]

WANTED: COMMITTEE MEMBERS

Committee_members12.indd 1 4-6-2012 14:46:59

FSR Activity Agenda 2012-2013

September/October/November BIG 4 CycleGet to know the 4 leading accounting firms

Erasmus Banking CongressThe official kickoff of the International Banking Cycle

International Banking CycleThe investment in your career

November Accountant Firms DayGet familiar with the world of accounting at a top class loca-

tion in Rotterdam!

Investment Banking MasterclassLearn to valuate, like an investment banker

December Traders TrophyCan you handle the pressure?

January/February Financial Business CycleExplore the financial opportunities

January-April CleanTech ChallengeGrow your green ideas!

February Banking DinnerGet acquainted with the world of banking

March Corporate Finance CompetitionFive star event: hotel, companies and participants!

Multinational BattleFive multinationals, five battling cities, are you part of it?

April Female Business TourIt might be a men’s world but it would be nothing without women

April/May International Research ProjectDoing research from an international perspective

National Investment CompetitionInvest and be a winner!

May European Finance TourExploring European financial world

Cartoon: Deef Smits www.coolgraphix.nl


60 • FSR news

© 2012 PricewaterhouseCoopers B.V. (KvK 3412089) Alle rechten voorbehouden.

www.werkenbijpwc.nl

Soms weet je precies wat je wiltSoms sta je open voor suggesties

Kom verder op werkenbijpwc.nl

Je hebt tijdens je studie alle mogelijke kennis opgedaan. En nu wil je aan de slag. Op een plek waar je al je ambities kwijt kunt. Waar de lat hoog ligt en waar je samenwerkt met professionals. Je start je carrière vliegend en gaat recht op je doel af. Dat is: het beste in jezelf naar boven halen.

Neem voor meer informatie contact op met een recruiter:

Volg werkenbijpwc op Facebook en Twitter

088 792 87 [email protected] www.werkenbijpwc.nl/contact

4872-20 PwC RC Adv. Precies A4 FSR Forum.indd 1 3/28/12 5:40:54 PM

Blijkt de universiteitineens een vooropleiding.

Een succesvolle carrièrestart is meer dan een goede cijferlijst. Het begint met karakter en inzicht in jezelf. Ontdekken wie je bent, weten waar je naartoe wilt groeien én hoe je dat voor elkaar krijgt staat altijd aan de basis. Ernst & Young coacht jou actief op weg naar jouw succes. We bieden je volop kansen in de wereld van assurance, tax, transaction en advisory. Ontdek ze op ey.nl/carriere

Diederik van de ScheurConsultant TAS

Piet-Hein TouwStaff FSO

E&Y_210x297mm_potentials.indd 2 23-09-10 14:50

FSR Forum 14-04

Documents

Transcript of FSR Forum 14-04