University of Helsinki Faculty of Social Sciences. Master's Programme in Society and Change YMV-T517, Microfinance and development, 5 credits

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1 University of Helsinki Faculty of Social Sciences Master's Programme in Society and Change YMV-T517, Microfinance and development, 5 credits Lecture 1 ( ) Course Syllabus and List 1 Part I: Understanding Microfinance Markets Introduction and Overview: Supply and Demand for Financial Services Definition of Microfinance Characteristics of microfinance clients Understanding the demand for financial services Evolution of the supply of financial services Microfinance as a development strategy Microfinance as an industry 1. *Armendáriz, Beatriz, and Marc Labie Introduction and Overview: An Inquiry into the Mismatch in Microfinance. In The Handbook of Microfinance, edited by Beatriz Armendáriz and Marc Labie, 3-7 (excerpt). Singapore: World Scientific. 2. *Cull, Robert, and Asli Demirgüç-Kunt Microfinance Trade-Offs: Regulation, Competition and Financing. In The Handbook of Microfinance, edited by Beatriz Armendáriz and Marc Labie, Singapore: World Scientific. 3. Robinson, Marguerite S The Microfinance Revolution. Sustainable Finance for the Poor. Volume 1. Washington, D.C. and New York: The World Bank and Open Society Institute, Rutherford, Stuart et al Chapter. 2 Clients. In The New Microfinance Handbook. A Financial Market System Perspective, edited by Joanna Ledgerwood et al., Washington, D.C: The World Bank. 1 The reading lists are subject to change. Page 1 of 8

2 Lecture 2 ( ) Why Do Poor People Lack Access to Financial Markets? Efficiency, market structure, competition and distribution issues Agency problems: asymmetric information, adverse selection and moral hazard Limited liability and lack of collateral Non-economic factors: social and cultural barriers 1. *Armendáriz de Aghion, Beatriz, and Jonathan Morduch The Economics of Microfinance. Cambridge, MA and London: The MIT Press, *Robinson, Marguerite S The Microfinance Revolution. Sustainable Finance for the Poor. Volume 1. Washington DC and New York: The World Bank and Open Society Institute, Beck, Thorsten, Asli Demirgu-Kunt, and Maria Soledad Martinez Peria Banking Services for Everyone? Barriers to Bank Access and Use around the World. World Bank Economic Review 22 (3): Demirguc-Kunt, Asli, and Leora Klapper Measuring Financial Inclusion: The Global Findex Database. Washington, D.C.: World Bank Policy Research Paper No Hoff, Karla and Joseph E. Stiglitz. Imperfect Information and Rural Credit Markets: Puzzles and Policy Perspectives. World Bank Economic Review 4 (3): Lecture 3 ( ) Microfinance Contract Innovations to Overcome Financial Market Problems Joint liability: group lending, guarantors Stepped lending and repeat loans Character and cash-flow based lending Flexible approaches to collateral Frequent and public instalments for loan and savings products Mandatory and voluntary savings products Non-financial services 1. *Armendáriz de Aghion, Beatriz, and Jonathan Morduch The Economics of Microfinance. Cambridge, MA and London: The MIT Press, *Robinson, Marguerite S The Microfinance Revolution. Sustainable Finance for the Poor. Volume 1. Washington, D.C. and New York: The World Bank and Open Society Institute, Page 2 of 8

3 3. Ghatak, Maitreesh, and Timothy Guinnane The Economics of Lending with Joint Liability: Theory and Practice. Journal of Development Economics 60: Ledgerwood, Joanna, and Julie Earne Chapter 9. Credit. In The New Microfinance Handbook. A Financial Market System Perspective, edited by Joanna Ledgerwood et al., Washington, D.C: The World Bank. Lecture 4 ( ) Part II: Assessing Microfinance Service Providers Institutional Factors: Governance, Ownership and Legal Form of MFIs The importance of institutions Introduction to the process and tools of institutional assessments for MFIs Types of financial institutions offering microfinance services Strategic decisions in ownership, capital structure, and governance Governance during expansion, growth and transformation 1. *CGAP Appraising Microfinance Institutions. Washington, D.C.: CGAP Brief. 3. *Labie, Marc, and Roy Mersland Corporate Governance Challenges in Microfinance. In The Handbook of Microfinance edited by Beatriz Armendáriz and Marc Labie, Singapore: World Scientific. 4. McConaghy, Peter Chapter 15. Governance and Managing Operations. In The New Microfinance Handbook. A Financial Market System Perspective, edited by Joanna Ledgerwood et al., , Washington, D.C: The World Bank. 5. Mersland, Roy, and R. Østein Strøm Performance and Governance in Microfinance Institutions. Journal of Banking and Finance 33: Fundactión Microfinanzas BBVA Guide for the Adoption of good governance principles in microfinance institutions. Madrid: Fundactión BBVA. Lecture 5 ( ) The People and Market Factors: Leadership and Human Resources Management, Managing Products, Services and Risks The importance of leadership and organizational structures Adequate human resources policies Business planning in MFIs Market research and product development Outreach and competition Page 3 of 8

4 Managing operational and credit risks 1. *Stuart, Guy Microfinance A Strategic Management Framework. In The Handbook of Microfinance, edited by Beatriz Armendáriz and Marc Labie, Singapore: World Scientific. 2. Campion, Anita Improving Internal Control. A Practical Guide for Microfinance Institutions. Microfinance Network with GTZ, Technical Guide No Galema, Rients, Robert Lensink, and Roy Mersland Do Powerful CEOs have an Impact on Microfinance Performance? Journal of Management Studies 49 (4): Holtmann, Martin Designing Financial Incentives to Increase Loan Officer Productivity: Handle with Care! MicroBanking Bulletin 6: McConaghy, Peter Chapter 15. Governance and Managing Operations. In The New Microfinance Handbook. A Financial Mar-ket System Perspective, edited by Joanna Ledgerwood et al., Washington, D.C: The World Bank. Lecture 6 ( ) Financial Factors: Analysing and Managing Financial Performance of MFIs Analysing financial statements Financial performance ratios Selected aspects of managing financial performance and risks: efficiency and productivity; liquidity and capital adequacy; asset and liability management Benchmarking Rating MFIs 1. *Ledgerwood, Joanna et al Chapter 14. Monitoring and Managing Financial and Social Performance. In The New Microfinance Handbook. A Financial Market System Perspective, edited by Joanna Ledgerwood et al., Washington, D.C: The World Bank. 3. *Cull, Robert, Asli Demirguc-Kunt, and Jonathan Morduch Financial performance and outreach: A global analysis of lending microbanks. Economic Journal 117: F107-F Balkenhol, Bernd, and Marek Hudon Efficiency. In The Handbook of Microfinance, edited by Beatriz Armendáriz and Marc Labie, Singapore: World Scientific. 4. Cull, Robert, Asli Demirgüç-Kunt, and Jonathan Morduch Microfinance Meets the Market. Journal of Economic Perspectives 23 (1): Microfinance Information Exchange (the MIX) Defining responsible financial performance article series (How to think about growth; The role of Page 4 of 8

5 profits; Understanding efficiency; How to think about social performance). MicroBanking Bulletin, May June. 6. CGAP Definitions of Selected Financial Terms, Ratios, and Adjustments for Microfinance. Washington, D.C.: CGAP Consensus Guidelines. Lecture 7 ( ) Financial Factors: Analysing and Managing Financial Performance of MFIs (continued) Social Performance Measurement and Impact Assessments Why measuring social performance and impact? What do we know about the impact of microfinance? Methodological aspects of social performance measurements and impact assessments Common sets of indicators used in practice A closer look at selected tools and studies 1. *Armendáriz de Aghion, Beatriz, and Jonathan Morduch The Economics of Microfinance. Cambridge, MA and London: The MIT Press, *Cull, Robert, Asli Demirguc-Kunt, and Jonathan Morduch Financial performance and outreach: A global analysis of lending microbanks. Economic Journal 117: F107-F * Ledgerwood, Joanna et al Chapter 14. Monitoring and Managing Financial and Social Performance. In The New Micro-finance Handbook. A Financial Market System Perspective, edited by Joanna Ledgerwood et al., Hashmeni, Syed Beyond Good Intentions: Measuring the Social Performance of Microfinance Institutions. Washington, D.C.: CGAP Focus Note No Social Performance Task Force Universal Standards for Social Performance Management. [online at Lecture 8 ( ) Part III Policies to Build Inclusive Financial Systems Microfinance Policy Issues and Choices Macro effects of microfinance Financial systems levels and microfinance The role of governments in microfinance and national microfinance policies Institutions at the meso level: networks, credit reference bureaus, rating agencies Page 5 of 8

6 1. *Ahlin, Christian, Jocelyn Lin, and Michael Maio Where does microfinance flourish? MFI Performance in macroeconomic context. Journal of Development Economics 95 (2): *CGAP The Role of Governments in Microfinance. Washington, D.C.: CGAP Donor Brief No *Hermes, Niels, Robert Lensink, and Aljar Meesters Financial Development and the Efficiency of Microfinance Institutions. World Development 39 (6): Barr, Michael S Government Policies to Expand Financial Access. In Building Inclusive Financial Systems. A Framework for Financial Access, edited by Michael S. Barr, Anjali Kumar, and Robert E. Litan, Washington, C.C.: Brookings Institution Press. 5. United Nations Building Inclusive Financial Sectors for Development. New York: United Nations, ; Porteous, David Competition and Microcredit Interest Rates. Washington, D.C.: CGAP Focus Note No. 33. Lecture 9 ( ) Microfinance Regulation and Supervision When is microfinance regulation and supervision needed? Key principles of microfinance regulation and supervision Regulatory issues from the MFI s perspective 1. *Rosengard, Jay K Oversight is a Many-Splendored Thing: Choice and Proportionality in Regulating and Supervising Microfinance Institutions. In The Handbook of Microfinance, edited by Beatriz Armendáriz and Marc Labie, Singapore: World Scientific. 2. *Hartarska, Valentina, and Denis Nadolnyak Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence. Applied Economics 39: Basel Committee on Banking Supervision Microfinance activities and the Core Principles for Effective Banking. Basle: Bank for International Settlements. [ 4. Christen, Robert Peck, Timothy R. Lyman, and Richard Rosenberg Guiding Principles on Regulation and Supervision of Microfinance. Washington, D.C.: CGAP Microfinance Consensus Guidelines. 5. Peck Christen, Robert, and Richard Rosenberg The Rush to Regulate: Legal Frameworks for Microfinance. Washington, D.C.: CGAP Occasional Paper No. 4. Page 6 of 8

7 Part IV: Financing Microfinance - Trends in Commercializing Markets Lecture 10 ( ) The Role of Subsidies and Donors Subsidizing microfinance: why or why not, what, and how Measuring subsidy dependence Traditional microfinance donors and instruments The growing involvement of socially responsible investors in microfinance Capacity leads, capital follows : success factors, do s and don ts of subsidizing microfinance in practice 1. *Armendáriz de Aghion, Beatriz, and Jonathan Morduch The Economics of Microfinance. Cambridge, MA and London: The MIT Press, CGAP Good Practice Guidelines for Funders of Microfinance. Washington, D.C.: CGAP. 3. Abrams, Julie, and Damian von Stauffenberg Role Reversal: Are Public Development Institutions Crowding Out Private Investment in Microfinance? Arlington, VA: MicroRate MFInsights. 4. El-Zoghbi, Mayada, Barbara Gahwiler, and Kate Lauer Cross-border Funding of Microfinance. Washington, D.C.: CGAP Focus Note No Stauffenberg, Damian von, and Daniel Rozas Role Reversal Revisited: Are Public Development Institutions Still Crowding Out Private Investment in Microfinance? Arlington, VA: MicroRate. Lecture 11 ( ) Socially Responsible and Commercial Microfinance Investments Socially responsible investors and commercial investors: Equity and debt financing options Microfinance investment funds and microfinance investment vehicles Mission drift through commercialisation? 1. *Reille, Xavier, and Dan Rozas Foreign Capital Investment in Microfinance: Reassessing Financial and Social Returns. Washington, D.C.: CGAP Focus Note No *MicroRate. The State of Microfinance Investment The MicroRate MIV Survey Survey and Analysis of MIVs 8th Edition. Arlington, VA: MicroRate MFInsights. 3. CSFI Microfinance Banana Skins The CSFI survey of microfinance risk. Staying relevant. London: Centre for the Study of Financial Innovation. Page 7 of 8

8 4. Glisovic, Jasmina, and Louise Moretto How Have Market Challenges Affected Microfinance Investment Funds? Washington, D.C.: CGAP Brief. 5. Pouliot, Robert Governance, Transparency and Accountability in the Microfinance Investment Fund Industry. In Microfinance Investment Funds. Leveraging Private Capital for Economic Growth and Poverty Reduction., edited by Ingrid Matthäus-Meier and J.D. von Pischke, Berlin, Heidelberg, New York: Springer. Lecture 12 ( ) Financial Market Instruments for Commercial Microfinance Commercial institutions and the choice and valuation of equity Portfolio diversification through microfinance? Trends in a changing environment Current challenges in microfinance Burning questions Expanding the frontiers of microfinance 1. *Galema Rients, Robert Lensink, and Laura Spierdijk International diversification and Microfinance. Journal of International Money and Finance 30: *MicroRate. State of Microfinance Investment The MicroRate MIV Survey Arlington, VA: MicroRate MFInsights. 3. *Symbiotics. Microfinance Investments. The 2012 Symbiotics MIV Survey. Geneva: Symbiotics. 4. O Brian, Barclay Valuing Microfinance Institutions. Savings and Development (Fondazione Giordano dell Amore) 4: Walter, Ingo, and Nicolas Krauss Can Microfinance Reduce Portfolio Volatility? Economic Development and Cultural Change 58 (1): Page 8 of 8