Focus Themes Microfinance
At Credit Suisse, we provide leadership and develop innovative solutions to link the top with the base of the income pyramid and promote financial inclusion.
What is Microfinance?
Microfinance is the providing of small or very small loans and other financial services to microenterprises in emerging economies. It is an effective way of helping people to help themselves and makes an important contribution to fighting poverty.
Microfinance started as an amazingly simple concept: to provide working capital loans as small as USD 100 or less to the poor – who have little or no collateral – in groups, so that members guarantee repayments. Over time, the services have expanded from these group loans to individual lending, and from loans to insurance, savings and fund transfers. Microfinance offers interested clients an investment opportunity that generates both a social and a financial return.
- Microcredits of between 50 and 5,000 US Dollars
- Short terms of between three months and two years
- Proximity to customers – close contact between lenders and borrowers
- A detailed knowledge of the circumstances of individual borrowers and in-depth credit analysis instead of traditional forms of collateral
- increased income, social stability and economic participation
- access to financial services and funding for entrepreneurs who are otherwise ‘unbankable’
- improved standard of living
- empowerment, often for women
The close contact between lenders and borrowers is one of the reasons that microentrepreneurs are such reliable clients. More than 90% of them pay their installments back on time. Many take out another microcredit later on to expand their business.
Microfinance continued double-digit growth in 2013-2014. At the end of 2013, the 1,391 institutions communicating data to the MIX platform had reached a credit portfolio of 95.1 billion USD. Anticipated global growth for 2016 is estimated at 10-15% with strong regional differences.
There are actually around 10,000 microfinance institutions world-wide.
According to estimates, there are approximately 500 million microentrepreneurs across the globe. Approximately 200 million of these entrepreneurs currently receive loans from MFI s, which in turn – apart from public funding – are predominantly refinanced from commercial sources such as investment funds in addition to public and private contributions. Among the most important providers of this type of fund is responsAbility Investments AG, which was co-founded by Credit Suisse.
Microfinance has become established worldwide: 2005 was the UN Year of Microcredit, and in 2006 Muhammad Yunus, founder of the microfinance institution Grameen Bank, was awarded the Nobel Peace Prize.
Credit Suisse offers its clients investment opportunities in the area of microfinance. It also gives microfinance institutions access to the capital markets through the investment bank and facilitates market development and innovation through the Microfinance Capacity Building Initiative.
Because of the large and constantly growing demand for small loans and other financial services, microfinance institutions (MFI s) need access to refinancing, for example through so-called Microfinance Investment Vehicles (MIV). Demand for microfinance investments is rising steadily as they yield both financial and social returns.
Credit Suisse was one of the first financial institutions in Switzerland to recognize the potential of microloans. We have been involved in this field at various levels for many years. For example, together with partner banks we founded responsAbility Investments AG in 2001 and now offer a range of microfinance investment funds in conjunction with this company.
- By end of March 2016, the responsAbility Global Microfinance Fund, which reported more than 1.12 billion USD in assets under management, had provided loans to over 784,500 microentrepreneurs in 77 countries through more than 250 microfinance institutions (MFI).
- A private equity fund that was launched in 2007 also enables investors to participate directly in small and medium-sized enterprises and microfinance institutions. At the same time, we offer various investment and advisory services in the microfinance sector.
Credit Suisse has also collaborated to meet the industry’s larger capital needs by providing a variety of advisory services through its investment bank, including the landmark IPO for Banco Compartamos in April 2007 and the Indian microfinance institution SKS in July 2010. Credit Suisse sponsored various international and regional conferences and symposia in the area of microfinance and impact investing.
Developing Microfinance Institutions and Innovation
Around the world, only a fraction of those who need financial services are able to access them. Traditional microcredits and savings programs have proven to be effective solutions for micro entrepreneurs and low-income households in developing countries. However, as their financial needs evolve, so does the demand for more sophisticated products and services from microfinance institutions. Through the Microfinance Capacity Building initiative (MCBI), Credit Suisse works with Microfinance Institutions (MFIs) to strengthen their ability to serve the increasingly diverse financial needs of clients living at the BOP. This is done by developing MFIs’ know-how and expertise to better serve clients and innovate at the BOP and also fostering industry knowledge sharing and exchange of expertise.
Microfinance Capacity Building Initiative
The Microfinance Capacity Building Initiative aims to strengthen the microfinance industry by providing financial and human resources to train the management of MFIs, and to drive further market development.
This is done by:
- Enabling product and services development and innovation across sectors
- Developing strong industry partnerships and knowledge sharing
- Effectively leveraging Credit Suisse’s skills, expertise, financial and social capital
- Continuous measurement and optimization of impact
The Microfinance Capacity Building Initiative (MCBI) is the bank's grant and technical assistance initiative for microfinance institutions (MFIs). Launched in 2008, the MCBI aims to strengthen the microfinance industry, its institutions and their management.
Selected Figures for 2016
local employees of microfinance institutions trained
thousand people with access to new or improved products and services
microfinance institutions and fintech start-ups benefited from our support
Implementation of the Initiative
Grants fund the implementation of projects with our global partners. Through the MCBI, partners engage experts and develop new financial products and services in collaboration with Credit Suisse across their global network. They then ensure that the knowledge and expertise built up in one MFI is replicated, adapted and applied in other MFIs in different regions, building on the acquired know-how, in order to achieve even greater impact. Our partners also share their knowledge at industry conferences and events, as well as through publications. In addition, the MCBI supports industry coordination and development efforts and training and industry thought leadership.
The Initiative provides financial and human resources to train and develop management and to drive product and process innovation – enabling organizations to meet their social and financial goals in an efficient and responsible manner. In doing so, in addition to serving the needs of low-income households, the Initiative and our partners are building new market opportunities and mechanisms for innovative microfinance and impact investing efforts at the BOP. Our employees also contribute to this capacity building through our virtual and field volunteering efforts, such as the Global Citizens Program, in which they share their skills and knowledge directly with our partners in the field. The MCBI is the final link between Credit Suisse’s clients, experts and employees and the base of the economic pyramid. Together with our partners, we are finding new ways of facilitating poor people's access to financial services and advice.
Our Partners and Programs
Credit Suisse works with five carefully selected partner organizations to enable microfinance institutions to develop the people, products and processes they need to meet the increasingly diverse financial needs of people living at the base of the pyramid, including housing, agriculture and education.
Accion is a global nonprofit organization dedicated to building a financially inclusive world with access to economic opportunity for all, by giving people the financial tools they need to improve their lives.
- Ongoing partnership with Center for Financial Inclusion (CFI), a unique "solutions lab" for the industry, icluding the leading industry initiative on consumer protection;
- Support of Venture Lab, an investment initiative that provides seed capital and support for early-stage start-ups in financial inclusion
Advance financial inclusion globally by expanding quality financial services
Over time, Accion has helped build 65 microfinance institutions in 32 countries on four continents
- Support of the Center for Financial Inclusion (PDF)
- Training and Capacity Building Unit (PDF)
- Support of Venture Lab (PDF)
FINCA provides socially responsible financial services to underserved and low-income communities around the world. FINCA’s microfinance operations span 23 countries in Africa, Eurasia, the Middle East, South Asia and Latin America, and enable more than 1.8 million clients to build assets, create jobs, and raise standards of living for themselves and for their families.
Sustainable Agriculture Finance Initiative
Improvements to livelihoods of underserved or financially excluded rural poor
Strengthening of the agricultural sector through financing of agricultural businesses
Opportunity International is a microfinance organization that invests philanthropic and social impact capital in order to spark and scale innovative solutions to global poverty, particularly in the area of education. The organization has increased the number of loans available to improve the quality, availability and affordability of education in impoverished regions.
Empowers Generational Change through Education Finance
Improved economic growth through greater access to high-quality education
Students and families are better equipped to afford educational costs and schools are more accessible
Africa, Asia, Latin America
Swisscontact is a business-oriented independent foundation for international development cooperation. Represented in 32 countries with more than 900 employees, it has promoted economic, social and environmental development since 1959.
Microleasing expansion and international replication from Africa to Latin America
Reduced poverty of excluded rural poor people
Market enhancement by improving the supply of micro leasing products and services
Africa, Latin America
Women’s World Banking works closely with 40 financial institutions from 29 countries to create new credit, savings and insurance products designed for the unique needs of women.
Leadership and Diversity for Innovation Program
Expands access to quality financial services for low-income women
Equipping leaders of microfinance institutions with the training and tools to better serve the women's market
Credit Suisse strives to increase social results by understanding and managing resources more effectively. Through a systematic program management and impact measurement approach the Microfinance Capacity Building Initiative is able to support economic growth in emerging markets and developing countries and create more value and impact for clients, microfinance institutions and micro entrepreneurs.
1. Establish mission and objective of program and/or foundation
2. Identify specific impact intended
3. Select partners and/or specific project according to established criteria e.g.
- innovation potential
- ability to share knowledge
- replicate (bigger impact!)
4. Structure project and implementation plan with clear outputs, outcomes and impact indicators
5. Design impact measurement tool and defined control processes
- 6 month reports
- Monthly/weekly update calls
- Annual field trips
- Annual (re)evaluation
6. Provide external communications e.g. website, articles, program fact sheets, blogs;
7. Annual reporting through formal publication e.g. Corporate Responsibility Report and external ratings e.g. DJSI, Sustainalytics;
Industry Initiatives and Thought Leadership
Credit Suisse participates in key industry initiatives and networks to foster the exchange of knowledge, stimulate innovation and provide thought leadership.
Credit Suisse is Part of Key Networks and Industry Initiatives
- Global network dedicated to increasing the scale and effectiveness of impact investing
- Addresses systematic barriers to effective impact investing by building critical infrastructure and developing activities, drives education and research.
- European network to promote co-operation amongst microfinance bodies working in developing countries, by facilitating communication and the exchange of information
- Drives innovative and inclusive financial sector policy, development strategy, and development modeling, based on research and good practice.
- Swiss public-private development partnership to assist financial institutions in significantly scaling up their outreach to poor people in developing countries
- Drives development and retention of skilled and dedicated management and staff and mobilizes funding from investors in order to maintain and grow their institutions.
- The Smart Campaign is a global campaign committed to embedding client protection practices into the institutional culture and operations of the microfinance industry
- Goal is to provide microfinance institutions with the tools and resources they need to deliver transparent, respectful, and prudent financial services to all clients.
- International network to put principles for Responsible Investment into practice contributing to the development of a more sustainable global financial system
- Addresses obstacles to a sustainable financial system that lie within market practices, structures and regulation.
- The Asian Development Bank aims for an Asia and Pacific free from poverty. Economists, sociologists, engineers, gender experts and environmental scientists are amongst the hundreds of professions at the bank working together to reduce poverty, and ensure growth across the Asia and Pacific region is sustainable and inclusive.
Read more about how Microfinance Robustness program upgrades risk management in the Chinese microfinance sector:
- The Chinese micro and small lending sector: paving the road for sustainable growth
- Publication on "Emerging Risks on China's Path towards Financial Inclusion" (PDF)
- Joint research study with the People's Bank of China on "Microcredit Companies Accessing the Short- and Medium- Term Bond Market in China"
A key objective of the MCBI is to leverage the skills and enthusiasm of employees in order to build partner capacity, raise awareness and advance microfinance and impact investing at the firm.
Credit Suisse employees can actively support the Microfinance Capacity Building Initiative (MCBI) reaching these objectives through a variety of exciting skill sharing programs:
Supporting partners with specific organizational or business challenges
in the field/international
- Development of new savings products for microfinance clients in Ghana
- Development of financial forecasting and budgeting tools for an education NGO in Colombia
Contribute to cutting-edge research and thought leadership projects
at your work place/virtual
- Frameworks for Social Investing: Cross-Country Comparisons
- Smart Campaign (Client Protection) Endorser Feedback
- What Makes Certification Work? Case Studies and Key Lessons for the Smart Campaign (Client Protection)
Contribute to a global network of +2.000 members, plan regional events and awareness-raising activities
at your work place
- Regional events and awareness raising activities
- On April 12, 2016 the NY Microfinance Advocates and the Impact Investment Advisory Council hosted a lively discussion focused on the impact of digitalization on financial inclusion attended by over 80 clients and employees