Microfinance, the provision of loans and other financial services to low income families and small business owners, is an effective way of helping people to help themselves. It makes an important contribution to fighting poverty and increasing financial inclusion around the world.
Credit Suisse has been engaged in microfinance for many years through the development of innovative solutions to link the top with the base of the income pyramid and enabling people to access financial sources.
Bayport Financial Services Botswana, Africa’s first smart-certified MFI, Botswana. Image: Credit Suisse
Some two billion people, more than a third of the world’s adult population, are financially excluded according to the World Bank. Access to capital is vital for economic activity as it enables people to afford education or healthcare, as well as build up and run their own businesses.
In the field of microfinance and impact investing, Credit Suisse was the first major bank to leverage both its financing and management expertise by combining the bank’s corporate citizenship and core business. The growth and evolution of the microfinance industry is closely linked to the area of investment referred to impact investing.
Impact investing is about actively placing private capital in enterprises that generate a positive social and/or environmental impact alongside financial returns. Credit Suisse has been a leader and innovator in impact investing since 2002, when it co-founded social investment firm responsAbility Investments AG. One of the largest sectors of impact investing is microfinance.
Since 2002, Credit Suisse, in partnership with responsAbility and other impact asset managers have offered has offered its clients the opportunity to invest in debt and equity investment products which provide microfinance institutions (MFIs) with the capital they need to offer financial services to people such as microentrepreneurs, who face difficulties in accessing credit to grow their businesses.
Microfinance Capacity Building Initiative
In addition to its investment activities, the Swiss bank also contributes to developing the microfinance industry through its Microfinance Capacity Building Initiative (MCBI). Besides investment capital, an important industry need is the strengthening of management and strategic capabilities such as new product development. Therefore, the MCBI started to provide financial and human resources to train the management of MFIs and to drive further market development. In 2016, over 4,000 local employees of microfinance institutions were trained and over 380,000 people received access to new or improved products and services.
In addition, over 75 microfinance institutions and fintech start-ups have benefited from the initiative. Credit Suisse’s partners in this initiative are organisations such as Accion, FINCA, Opportunity International, Swisscontact and Women’s World Banking with whom it delivers a number of programmes focused on staff training and on new product development for clients at the base of the pyramid. One of these programmes is the Leadership and Diversity for Innovation Program (LDIP). The percentage of women holding influential positions in the financial services sector is still very low, whether in mainstream banks or in microfinance institutions.
Released in 2016, the Credit Suisse Research Institute study The CS Gender 3000: The Reward for Change states that in the analyzed financial businesses only 11.6 per cent of management positions were occupied by women. This is particularly an issue if a bank seeks to effectively serve female clients, as the microfinance industry does. LDIP aims at training female high-potential employees of microfinance institutions and their supervisors in leadership and gender diversity in a year-long programme to ensure that they in turn can keep women front and center of their business model.
Sharing expertise to build capacity
The MCBI is part of Credit Suisse’s Corporate Citizenship and Foundations team. In addition to financial support, the bank’s own employees contribute to capacity building through virtual and field volunteering efforts, for example through the Global Citizens Program (GCP), in which they share their skills and knowledge directly with Credit Suisse’s partners in education and microfinance around the world. Since its launch in 2010, over 250 specialists from various areas of Credit Suisse’s business have shared their expertise in assignments that last from one week to three months.
Internal and external partnership is also key when it comes to communications: the MCBI has an active internal communications and awareness raising campaign, including newsletters, events and participation in key elements of programmes such as LDIP. Externally the bank communicates via social media with the general public and through more traditional print materials with clients seeking to invest in the space. Finally, MCBI partners also leverage their social media communications to raise awareness for their joint programming.
Bayport Financial Services Botswana, Africa’s first smart-certified MFI, Botswana
Bayport Financial Services Botswana is a lending organisation with the goal of helping people achieve financial wellness through responsible access to credit. In 2015, the lender became the first African institution to be awarded a Client Protection Certification in recognition of its strong standards of client care. Bayport, which serves more than 10,000 clients, uses a mobile agent distribution model to take its services directly to the customer. It is also involved in initiatives aimed at education and dignified housing for all.
Housed at the Center for Financial Inclusion at Accion, the Smart Campaign is a global effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry. In 2013, the Smart Campaign launched the certification programme – a rigorous third-party evaluation – to publicly recognise financial institutions that adhere to standards of client protection. As of early 2016, institutions serving more than 22 million clients have been certified. Source: Microfinance: Building Capacity for Inclusive Growth, Credit Suisse.
Innovation and new financial solutions
Innovation is an important aspect of microfinance and impact investing. The introduction of digital financial services has dramatically increased the reach of financial services and has contributed to increased financial inclusion of people who previously had no access to financial products and services. Formal banking services can be difficult to use for people at the base of the income pyramid as they are usually not a target audience of traditional financial institutions, or are facing other financial inclusion barriers such as accessibility, security, privacy, convenience and costs of digital services.
Part of Credit Suisse’s MCBI therefore focuses specifically on fostering fintech innovation. The MCBI has for example partnered with Accion’s Venture Lab since 2014. The organisation provides patient seed capital and non-financial support for financial services start-ups worldwide focused on improving services at the base of the economic pyramid. It focuses on digital lending, the use of alternative data for credit scoring, digital payments, and customer engagement technologies. Credit Suisse grants are used to enhance Venture Lab’s organisational capacity and sometimes the bank’s volunteers contribute specific expert advice.
“Access to financial services is vital for economic activity and to access basic healthcare, education, food and shelter.”
While some digital financial services are initially developed for clients at the base of the wealth pyramid, they could also be adapted for target groups at the other end of the wealth spectrum such as ultra-high-networth individuals (UHNWI). Lara Warner, chief compliance and regulatory affairs officer at Credit Suisse summarises: “The next revolutionary fintech solution shaking the UHNWI segment could at the outset have been developed for the base of the wealth pyramid.”
Guada May Brion, Marketing Manager at Card Bank, The Philippines
Guada May Brion is committed to ensuring that poor women have access to a bank account, in the same way that CARD Bank granted her mother a loan when she was a child. Guada is now a marketing manager at the bank and recently completed Women’s World Banking’s Leadership and Diversity for Innovation Programme. The one-year programme brings together senior executives from institutions that are committed to serving low-income women.
Each senior executive chooses a high-potential female employee to work with them on a strategic business initiative while also receiving leadership training and coaching. The strategic initiative chosen by Guada was to increase savings rates among her bank’s clients, more than 1.6 million low-income Filipinos. “The knowledge and experience I have gained means that I’m now more strategic in making decisions and more open to innovation. These are important factors in pursuing business initiatives that will benefit women. I already had the passion to help, but putting it into reality needs knowledge and skills as a leader,” says Guada. Source: Microfinance: Building Capacity for Inclusive Growth, Credit Suisse.
Aiming for impact
Over the years, building on the success of its work in microfinance, Credit Suisse has developed new themes besides microfinance. A dedicated team of impact investing specialists structures, manages and offers a suite of impact investing products across a wide range of innovative financial vehicles and sectors such as education, agriculture, nature conservation, and SME financing. The impact investing team and capacity building from the bank’s Corporate Citizenship activities work hand in hand to advance these new products.
15 years of investing for impact
2017 marks the 15th year of microfinance and impact investing at Credit Suisse – a field in which the bank has long played a pioneering role. During the past 15 years, there have been numerous notable achievements. Recent examples include the first Higher Education Note (2014), winning the Environmental Finance Deal of the Year Award for our Nature Conservation Notes (2014), and winning a special commendation in the FT/IFC Sustainable Finance Awards in 2012. 2017 will see a number of external events around the globe, promoting Credit Suisse‘s partners, successes, current projects, and future goals within the field of impact investing. For more information, visit www.credit-suisse.com/microfinance and www.credit-suisse.com