Mainstreaming

1
Mainstreaming Microfinance Issues
and challenges
2
Demographics

• Latin America
• Large and growing population
• High unemployment and skewed income distribution
• Little improvement in GDP/per Capita

• United States
• 22 million Latin America-born citizens live in
  US
• Hispanic population in US increases by 5,000
  each day
• 50 million Hispanics in US (largest minority
  group)

3
Migration Effects

• Latin America
• Similar to women on the homefront who did work
  of men during WWII women make big contributions
  but experience great suffering
• Remittances are largest source of hard currency
  and often exceed export income

• United States
• Entrepreneurial work multiple hourly jobs
• Maintain close financial ties with family
• 54B sent to Latin America in 2005 far more
  than US foreign assistance (IADB)

4
Financial Marketplace
Opportunity to bridge the two markets

• Latin America
• Growing microfinance industry serving poor
  people
• Microfinance profitability and portfolio quality
  better than banks
• 2006 Nobel Peace Prize awarded to microfinance

• United States
• 25M unbanked Hispanics
• Expensive, fragmented industry of mom-and-pop
  and non-financial providers
• Few first-movers to help establish a credit
  history
• Little/no access to credit

5
Microfinance Intl Corp.

• United States
• HQ in Washington, DC
• 9 MFIC-owned branches
• Bank and MTO partners

• Overview
• For-profit led by 27-year Bank of Tokyo veteran
• Financed by private investors and OPIC
• Specialized to serve bi-national families on
  both ends of remittance chain

• Latin America/Worldwide
• Distribution in 90 countries
• Financing for MFIs
• Transnational products

6
Alante Financial

• One-stop shop offering integrated, affordable,
  value-added services and products and
  professional, bi-lingual service

• Transactional Services
• Money transfer
• Check cashing
• Bill payment
• Phone cards
• Help building credit history

• Loans and Insurance
• Microloans
• Car loans
• Small business loans
• Mortgage brokering
• Health and life insurance

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• Turn-key remittance platform for banks, credit
  unions, and money transmitters

• Distribution
• 90 countries
• MFIs Banks with rural and urban coverage

• Compliance
• Compliance features at the front-end of
  transactions
• System built post 9/11

• Technology
• Built on banking software used by 70 Latin banks
• Secure online interfaces and real-time payout

• Unique Advantages
• Marketing support
• First-hand appreciation of money transfer
  operations, since Alante uses ARIAS

9
Microfinance Challenges

• Requires sophisticated financial expertise
• For-profits face access to capital issues to
  serve the poor
• More enabling regulatory environment
• Cumbersome and divergent State Laws
• Impractical usury laws for making small loans
• Restrictions on providing multiple services
  under one roof

10
Costs of Microlending

11
For More Information

• Joseph Smith (North Carolina Commissioner of
  Banks), Savings for the Poor The Hidden Benefits
  of Electronic Banking (NC Banking Institute,
  February 2005)
• Joseph Smith, The Federal Banking Agencies
  Guidance on Subprime Lending Regulation with
  a Divided Mind (NC Banking Institute, March 2002)
• Craig Churchill, Client Focused Lending The
  Art of Individual Lending (Accion International,
  1999)