Banking and Microfinance, Banking and Microfinance Exercises

Transcription

1 GEST-D-602 Banking and Microfinance, Banking and Microfinance Exercises 1st semester EMP Prof. Laurent WEILL, Prof. Annabel VANROOSE Arnaud GILLIN Planning Date Time Lecturer Guest speaker Place 12/11/ pm 9 pm A. Gillin R /11/ pm 9 pm A. Gillin R /11/ pm 9 pm A. Gillin N. Renier R /11/ pm 9 pm Prof. A. Vanroose Prof. E. De Keuleneer R /11/ pm 9 pm Prof. A. Vanroose R /11/ pm 9 pm Prof. A. Vanroose R /11/ pm 9 pm Prof. A. Vanroose R /12/ pm 9 pm Prof. L. Weill R /12/ pm 9 pm Prof. L. Weill R /12/ pm 9 pm Prof. L. Weill R /12/ pm 9 pm Prof. L. Weill R

2 Part 1: Prof. A. Vanroose Part 1: Objectives of the course Obtain insights in differences and interrelationships between banks and MFIs Go deeper into the regional distribution of banks and MFIs and what this means for access to financial services Expansion strategies of MFIs and banks and link with access to financial services Part 1: Topics covered This first part of the course will provide an overview of the commercialization and increasing interrelationships between banks and MFIs and what this means for access to financial services. Latin American cases will be presented. Additionally, the expansion process of MFIs will be studied and the different expansion logics MFIs may follow. The case of Peru and India will be presented. The following specific topics will be covered: Session 1 and 2 Banking and microfinance: institutions and interrelationships Access to financial services i. Clients ii. Banks and MFIs iii. Geographical spread Differences between banks and MFIs i. Regulation ii. Methodologies iii. Financial and social performance Relationships between banks and MFIs i. Cooperation and linkages: eg SHG program in India ii. Competition: eg. MFIs in Peru and Bolivia Correlation between traditional financial sector development and the microfinance sector from a macro point of view Latin American country cases on financial sector development and the role of microfinance institutions Session 3 Microfinance expansion strategies and access to financial services Location and access to financial services Expansion strategies of MFIs and their logics Case: Peru Case: India

3 Part 1: Recommended Readings Session 1 and 2 - Ahlin, C., Lin, J. and M. Miao, 2011, Where does Microfinance Flourish? Microfinance Institution Performance in Macroeconomic Context, Journal of Development Economics, vol. 95, no. 2, pp Armendariz, B and Morduch, J., 2010, Chapter 8: Commercialization and Microfinance, in the Economics of Microfinance, Second Edition, MIT Press. - Claessens, S., 2009, Competition in the Financial Sector: Overview of Competition Policies, IMF Working Paper, 09/45, The International Monetary Fund, Washington D.C. - Cull R, Demirgüç-Kunt, A. and Morduch, J., 2009, Microfinance Meets the Market, Policy Rsearch Paper, no. 4630, the World Bank. - Demirguc-Kunt, A., Beck, T. and Honohan, P., 2008, Finance for All? Policies and Pitfalls in Expanding Access. World Bank Policy Research Report, World Bank, Washington DC. - Vanroose, A. and D Espallier, B., 2012, Do Microfinance Institutions Accomplish their Mission? Evidence from the Relationship Between Traditional Financial Sector Development and MFIs Performance and Outreach, Applied Economics, Vol 45, no. 15, pp Session 3 - Bebbington, A., 2004, NGOs and Uneven Development: Geographies of Development Intervention, Progress in Human Geography, 28 (6), pp Fouillet, C., 2009, La Construction Spatiale de la Microfinance en Inde, Doctoral Thesis, Université Libre de Bruxelles, Brussels. - Fruttero, A. and V. Gauri, 2005, The Strategic Choices of NGOs: Location Decisions in Rural Bangladesh, The Journal Of Development Studies, 41(5), pp Vanroose, A., 2010, Which Local Factors Drive the Regional Expansion of Microfinance Institutions? Evidence from Peru?, Unpublished Working Paper (will be distributed).

4 Part 2: Laurent Weill Part 2: Objectives of the course Explain the fundamentals of the lending activity Introduce the investment decision criteria Explain the role of the financing decision on the value of the firm Present the fundamentals of Islamic finance Part 2: Topics covered 1) Information asymmetries Presentation o Adverse selection and signalling o Moral hazard Consequences o Credit rationing o The role of the long-term relationships in credit activity 2) How to solve information asymmetries The role of collateral o What is collateral? o The 3 reasons for the use of collateral The role of capital The role of character 3) Investment decision rules Net Present Value o The NPV decision rule o What does NPV depend on? Alternative decision rules o The internal rate of return o Other investment criteria 4) Capital structure policies Capital structure in a perfect market o Equity vs. debt financing o Modigliani-Miller The benefits of debt o The tax shield o Information asymmetries and the pecking-order theory The costs of debt o The costs of financial distress o The agency costs of leverage

5 Empirical evidence concerning capital structure policies 5) Islamic Finance Principles o A finance without interest o Another paradigm Instruments o Mudaraba o Musharaka o Murabaha o Ijara Practice and Criticisms o Practice : figures and reality o Criticisms Part 2: Recommended Readings - Berk, J., De Marzo, P. (2007), Corporate Finance, Pearson, 1 st edition - Greenbaum, S., Thakor, A. (2007), Contemporary Financial Intermediation, 2 nd edition - Iqbal, Z., Mirakhor, A. (2007), An Introduction to Islamic Finance, Wiley, 1 st edition - Ross, S., Westerfield, R., Jaffe, J. (2006), Corporate Finance, McGraw Hill, 7 th edition

6 Part 3: Arnaud Gillin (Exercises) & Noémie Renier Part 3: Objectives of the course Development of MIV (from fund raising to incorporation of the fund) Management of MIVs (from origination to portfolio management) Investment criterias Part 3: Topics covered 1) Fund Development (Case Study) Market positioning: demand versus offer Fund raising Fund structure Investment Policy Risk Management (country diversification, concentration limits, currency risk, liquidity risk) Governance Reporting Servicing (payment collection, custodian, ) Financial modeling Technical Assistance 2) Fund Management Advisory Sourcing/Origination : eligibility criteria Screening :Iinitial desk review Term Sheet Due Diligence (social and financial risk assessment / scoring) Debt versus Equity Decision making - Investment Committee Legal documentation Monitoring 3) Investment criteria Country risk Regulatory context, institutional development and microfinance market Ownership, governance and human resources Products and services Operations and internal control Social and Environmental Risk MIS Loan portfolio development and quality Financial performance Asset & liabilities management (ALM) Liquidity, solvency, currency risk Business Plan and Development Prospects

7 Part 3: Recommended Readings Brealey, R. A. and Myers, S.C., (2000), Principle of Corporate Finance, 7 th edition, Pearson Education Dieckmann, R. (2007), Microfinance: An emerging investment opportunity, Deutsche Bank Research, Frankfurt. Midford Batemen (2010), Why Doesn t Microfinance Work? The Destructive Rise of Local Neoliberalism, Zed Book, Matthaus-Maier, I., von Pischke, J.D. (2006), Microfinance Investment Funds: Leveraging Private Capital for Economic Growth and Poverty Reduction, Frankfurt: Springer. Matthaus-Maier, I., von Pischke, J.D. (2008), New Partnerships for Innovation in Microfinance, Frankfurt: Springer. All parts Evaluation Written exam