1. VOLUME 2, SEPTEMBER 2011
AS A TOOL FOR POVERTY ERADICATION & ECONOMIC GROWTH IN NIGERIA

2. VOLUME 2, SEPTEMBER 2011 MICRO-FINANCING AS A TOOL FOR POVERTY ERADICATION & ECONOMIC GROWTH IN NIGERIA

4. Welcome to
VOLUME 2, SEPTEMBER 2011
“We must drive far-reaching
changes in the society” AS A TOOL FOR POVERTY ERADICATION & ECONOMIC GROWTH IN NIGERIA
Bisi Onasanya
Group Managing Director/CEO
First Bank of Nigeria Plc.
I
am pleased to welcome you to the maiden edition of
Chief Host
FirstBank Impact Series, a policy and thought leadership His Excellency
initiative of First Bank of Nigeria Plc. The series will be made Mr. Babatunde Raji Fashola (SAN)
up of annual international conferences meant to facilitate The Executive Governor of Lagos State
business and economic growth, drive social change, and Guest of Honour
entrench outstanding values in leadership and governance in Mr. Sanusi Lamido Sanusi, CON
the polity. The series is envisaged to create true impact for socio- Governor, Central Bank of Nigeria
economic growth and development through insightful,
Other Speakers and Panelists
actionable and change-centered conferences, workshops,
Dr. Dalvinder Singh
seminars, strategy sessions, and policy implementation road-
Professor of Law, University of Warwick, UK
shows to drive far-reaching changes in the society.
Stephen Olabisi Onasanya, FCA
As West Africa's pioneer financial services group, the FirstBank GMD/CEO, First Bank of Nigeria Plc.
group is proud of its legendary contributions to national growth
Mrs. Pauline Nsa, MD/CEO
and development over the past 117 years. Our role in ensuring FBN Microfinance Bank Ltd
methodical and rapid economic transformation cannot be
overemphasized. The truism that the citizenry requires Prof. Oyewusi Ibidapo-Obe
commensurate technical progress to achieve the former is a
FAS, FA Eng, OFR
President, Nigerian Academy of Science
matter of course for us. We will persist in initiating and
implementing impactful programmes like this. Bunmi Lawson, MD/CEO, AMFB
With FirstBank Impact Series, we intend to collaborate with you Tokunboh Ishmael, MD/CEO, Alitheia
on a continuous basis in addressing every day challenges
Conference Coordinators
impeding systematic growth and development. The initiative Folake Ani-Mumuney
will provide engaging platforms for evolving strategic outlook
Oze K. Oze
to problem-solving, especially from the capacity building and
leadership perspectives. Chidinma Igbokwe
Chiedozie Mbaogu
This edition of the conference, with its thematic focus on “Micro-
financing as a tool for poverty eradication and economic Conference Consultants
growth,” appropriately addresses our bottom-up approach of Avaizon Consulting Ltd.
engendering change from the grassroots. We are particularly
excited to have Professor Muhammad Yunus, Nobel laureate,
micro-finance icon and banker to the poor, as the distinguished This is a Publication of
First Bank of Nigeria Plc.
FirstBank Impact Series 03

5. PROGRAMME
Conference Director: Folake Ani-Mumuney, Marketing & Corporate Communications, First Bank of Nigeria Plc.
Date: 5th September, 2011
Venue: Shell Hall of the MUSON Center, Lagos, Nigeria
Morning Session
8.00am Registration and Coffee
8.30am Moderator's Introductions
Fela Durotoye, MD/CEO, Visible Impact Consulting
8.35am Welcome Address
Mr. Bisi Onasanya, GMD/CEO, First Bank of Nigeria Plc.
8.45am Opening Speech by the Chief Host
His Excellency, The Executive Governor of Lagos State: Mr. Babatunde Raji Fashola (SAN)
9.00am Micro-financing in Nigeria: Perspectives of the Central Bank of Nigeria (CBN)
Mr. Sanusi Lamido Sanusi, CON, Governor of the CBN
Panelists:
Professor Oyewusi Ibidapo-Obe, The Academia
Dalvinder Singh, University of Warwick
Akin Akintola, Community Development
Edna Ishaya, Credit Registry
Pauline Nsa, FBN Microfinance
Bunmi Lawson, ACCION
Moderator starts conversation: Are MFBs truly lending to micro-entrepreneurs? Are we confusing
SME lending with micro lending? What are the roles of micro-entrepreneurs in Nigeria's
industrial growth? Is CBN creating a regulatory environment that allows MFBs empower micro-
entrepreneurs? Why don't young businesses with innovative ideas spring up and survive in Nigeria?
What should the government's role be in supporting micro-businesses- strategy, structure, funding,
capacity development?
The panel will discuss:
* Are the current CBN stipulated frameworks impeding MFBs from lending to the poor?
* What should be the government's role in enabling suitable frameworks for micro-financing?
* Is the Nigerian model encouraging innovation and creating a supportive environment for venture
start-ups?
* Micro-entrepreneurs: the nail that sticks up should not be hammered down
* MFBs, venture capitalists and NGOs
* Q&A
10.01am The Global Need for Micro-financing and Social Business: The Dangers of Doing Nothing
Professor Muhammad Yunus, Keynote Speaker
Panelists:
Professor Oyewusi Ibidapo-Obe, The Academia
Modupe Ladipo, EFinA
04 FirstBank Impact Series

6. Programme
Fela Durotoye, Visible Impact Consulting
Pauline Nsa, FBN Microfinance
Bunmi Lawson, ACCION
Ndidi Nwuneli, LEAP Africa
Moderator starts conversation: What roles do large corporates have to play in micro-financing
and social investments? Are Nigeria's corporate giants aware of and fulfilling their roles in this
regard? What incentives are being provided by the Nigerian government to encourage social
investments?
The panel will discuss:
* What should the motive for setting-up a microfinance bank be?
* Is it wrong to make profits from micro-financing?
* What should be the priority: profit or social empowerment?
* Are Nigerian MFBs structured with the capacity (human, funding) to engage the poor?
* How can donor funding help?
* How can donor funding be attracted by Nigerian MFBs?
* Q&A
11.31am Micro-financing in Nigeria: Challenges and Opportunities
Mrs. Pauline Nsa, MD/CEO, MFB Microfinance Bank Limited
Panelists:
Professor Oyewusi Ibidapo-Obe, The Academia
Modupe Ladipo, EFinA
Tokunboh Ishmael, Alitheia Capital
Edna Ishaya, Credit Registry
Ndidi Nwuneli, LEAP Africa
Moderator starts conversation: How can MFBs' operations costs be reduced? Is the tax regime
encouraging? How much help can MFBs get from the regulators, donors, capacity development NGOs?
The panel will discuss:
* How can MFBs lend to the non-skilled poor?
* Is collateral over-rated?
* Do Nigerian MFBs hire the right people for the job?
* Where is the collaboration point for NGOs and MFBs?
* Should MFBs just tend to SMEs?
* Is social empowerment beyond the remits of Nigerian MFBs?
* Do we need a different institution for reaching the poor?
* Q&A
12.31pm Lunch Break
Afternoon Session
1.16pm Moderator's Introductions
1.20pm Banking the Unbanked: What Regulatory Frameworks Exist
Dr. Dalvinder Singh, Warwick University
Panelists:
FirstBank Impact Series 05

7. Programme
Mr. Tokunbo Abiru, Honourable Commissioner for Finance, Lagos State
Tokunboh Ishmael, Alitheia Capital
Lanre Olushola, FATE Foundation
Adesina Ayodele Fagbenro, DFID
Edna Ishaya, Credit Registry
Bunmi Lawson, ACCION
Ndidi Nwuneli, LEAP Africa
Moderator starts conversation: How much can we learn from the international communities
where micro-financing has worked? What can we learn from those that failed? Do we require an overall
policy review? Is government (at all levels- LGA, State and Federal) doing enough? What legal structure
is required to enable government-provided funds disbursed through partner MFBs rather than
political channels?
The panel will discuss:
* Lessons from abroad; what can we take onboard?
* What should the motive for setting-up a microfinance bank be?
* Should MFB lending rate be regulated?
* What regulatory reporting/supervisory system is required for the MFBs
* What is micro insurance and how does it help MFBs in Nigeria?
* How do we make banking attractive to the unbanked?
* Q&A
2.21pm Making a Success of Micro-financing and Social Business: Case Studies from Around the
World, and the Roadmap for Nigeria
Professor Muhammad Yunus, Keynote Speaker
Panelists:
Mr. Tokunbo Abiru, Honourable Commissioner for Finance, Lagos State
Tokunboh Ishmael, Alitheia Capital
Lanre Olushola, FATE Foundation
Adesina Ayodele Fagbenro, DFID
Dalvinder Singh, University of Warwick
Akin Akintola, Community Development
Edna Ishaya, Credit Registry
Bunmi Lawson, ACCION
Moderator starts conversation: Who is responsible for social business incubation? How should
social businesses be funded? Microfinance fund; what, why and how? Where exactly do the problems
lie; regulations, MF Bankers, micro-entrepreneurs, donors?
The panel will discuss:
* What must happen for there to be lasting change?
* What has culture got to do with it?
* Would micro-financing work better under an Islamic banking system?
* Could women (gender) empowerment be the answer?
* What are the effective ways for organizations such as NAPEP work with MFBs?
* CSR and Micro-financing: could there be a strategic partnership?
* Q&A
06 FirstBank Impact Series

8. CONTENTS
Economic Growth
With your active participation in this
conference, we look forward to generating a
visible roadmap for tackling the challenges of
micro-financing and development, as we make
commensurate input to:
Informed Policy making
Structured financial inclusion; and
Impactful socio-economic transformation
Bisi Onasanya, FCA
Group Managing Director/CEO, First Bank of Nigeria Plc.
09 11
41
FirstBank Impact Series 07

9. CONTENTS Speakers
15|
Prof. Muhammad
Yunus
Winner, Nobel Peace Prize (2006)
22|
Dr. Dalvinder Singh
Associate Professor of Law,
University of Warwick, UK
Panelists
29 15
41| Stephen Bisi Onasanya
Group Managing Director/CEO,
First Bank of Nigeria Plc.
42| Prof. Oyewusi
Ibidapo-Obe FAS, FA Eng, OFR.
President, Nigerian Academy of Science
43| Hon. Tokunboh Abiru
Comm. for Finance, Lagos State
44| Mrs. Edna Ishaya
COO, Credit Registry
24 42
45| Adesina Ayodel Fagbenro
DFID
46| Tokunboh Ishmael
32|
Managing Director, Alitheia
FBN Microfinance
Bank Profile
47| Modupe Ladipo
Chief Executive Officer, EFInA
68| Microfinance
Banks Directory 48| Bunmi Lawson
Senior Operational Director, ACCION
99| Participating
Organisations
49| Mr. Lanre Olusola
Life & Executive Coach
50| Mr. Akinyemi Akintola
CEO, Community Development Foundation
Papers 51| Ndidi Okonkwo Nwuneli
Founder, LEAP
Microcredit and Social Business
18| for a Poverty Free World
Prof. Muhammad Yunus
Moderators
The Role of the IMF and World Bank in 53| Fela Durotoye
Computer Scientist & Economist
23| Financial Sector Reform and Compliance
Dr. Dalvinder Singh
54| Ademola Ogunbanjo
Strategy & Execution Management Expert
08 FirstBank Impact Series

10. Babatunde
Raji
Fashola (SAN)
Chief Host
FirstBank Impact Series 09

11. G
overnor of Lagos State, Mr. improving Agriculture and Food undertaking the statutory training for
Babatunde Raji Fashola (SAN) is Security among many others. Barristers and Solicitors.
the recipient of the 2009 Yikzak
Rabin Centre for African Development A passionate lover of children and the For the mandatory National Youth
Governor of the Decade for Peace youth who represent the future of our Service Corps [NYSC] programme
Award and the recipient of the 2010 continent, Governor Fashola has, in [1988-1989], he served in Benin, the
Award of Excellence in Leadership of the three and a half years of his former Bendel State now Edo State.
the Martin Luther King Jnr. tenure, embarked on projects aimed His flourishing private legal practice,
Foundation. at improving their lives and the running into nearly fifteen years, saw
opportunities open to children and him acquiring appreciable expertise
He is the recipient of the 2009 Good youths in the State. They include, the and vast experience in such areas as
Governance Award from the United construction of Maternal and Litigation, Intellectual Property
Kingdom-based African Business Childcare Centres across the State to [registration of trademarks],
Magazine. Here in Nigeria, he is The improve maternal and child health, Commercial Law, Mergers,
Guardian, The Vanguard and The Sun immunization against polio and other Acquisitions, Right of Issues,
newspapers' Man of The Year for child-killer diseases, the revitalization Ownership of Shares and Equity of
2009. of voluntary uniformed organizations Corporations, as well as Land
in the State's public schools to build Disputes and Chieftaincy Matters.
Both nationally and internationally, character and leadership qualities in
he is acclaimed as one of the bright children and provide a choice away In the course of his distinguished
hopes for the future of Nigeria; one of from street gangs, renovation and legal career at Sofunde, Osakwe,
the very progressive Governors rehabilitation of classrooms as well as Ogundipe and Belgore; the law firm of
determined to reclaim Nigeria's past the building of new structures and K.O.Tinubu & Company and as
glories through competent and the provision of educational facilities Managing Partner, Lead Counsel,
transparent leadership. including desks and chairs. Babatunde Raji Fashola successfully
Others are the provision of free pleaded many cases at High Courts,
In the past three and a half years, Mr. uniforms and textbooks to pupils and various divisions of the Court of
Fashola (SAN), has demonstrated students in public schools, provision Appeal and the Supreme Court, and
excellence and uncommon of summer vacation jobs for students, to cap a successful legal career, he
commitment to his avowed pledge to the formation of youth clubs and was elevated to the class of Nigerian
lead the change that would transform societies in schools, including Climate Elite Lawyers in August 2004 when he
Lagos into Africa's model mega-city. Change Clubs and the Be Road was conferred with the rank of Senior
Friendly Club designed to inculcate Advocate of Nigeria [SAN], a
Some of the key projects which his environmental and road traffic leadership position of the Nigerian
dynamic and proactive business- awareness respectively in children at Bar and the nation's highest legal
minded skills have inspired and an early age. These have been distinction and honour for lawyers.
advanced include the Eko Atlantic projected at making school more
City project, the 10-lane Lagos- attractive to children; the school He was appointed Chief of Staff by the
Badagry Expressway, the expansion should also become that real centre former Governor of Lagos State
of the Lekki-Epe Expressway, the of a well rounded learning. [Governor Emeritus], Asiwaju Bola
Lekki Free Zone, the Bus Rapid Transit Ahmed Tinubu who he later
System, massive Infrastructure Born on June 28, 1963 in Lagos, Mr. succeeded in office and served from
Renewal in all parts of the State, that Babatunde Raji Fashola (SAN) is a truly August 16, 2002 to November 6, 2006,
has won the State honours from as far made in Nigeria product. He obtained during which time he served as
as Australia for undertaking the his First School Leaving Certificate Member, State Tenders Board;
fastest infrastructure renewal ever in [FSLC] from the Sunny Fields Primary Member, State Executive Council,
Africa, and the establishment of the School, Adelabu Surulere, Lagos, after Member, State Treasury Board, and
Security Trust Fund. which he proceeded to Birch Member, State Security Council
Freeman High School, Surulere, Lagos amongst several other Ad-Hoc
His other achievements include and later Igbobi College, Yaba from Committees/Panels. With the
Environmental Regeneration that where he acquired the West African experiences he garnered he resigned
helped reduce violent crimes by over School Certificate [WASC]. He, voluntarily to contest for the Office of
70% in (one) year; the massive thereafter, went to the University of Governor of Lagos State under the
cleanup of Oshodi and other Benin, Benin City and graduated with platform of Action Congress [AC]
metropolitan open sores once a Bachelor of Laws [LLB Hons] degree Party now Action Congress of Nigeria.
regarded as irredeemable. Concrete in 1987. He was called to the Nigeria
steps have also been taken towards Bar in November 1988 after With his victory at the April 14, 2007
10 FirstBank Impact Series

12. Sanusi
Lamido
Sanusi CON
Guest of Honour
FirstBank Impact Series 11

13. Mallam Sanusi Lamido Sanusi was appointed Governor of President Umaru Musa Yar'Adua nominated Sanusi as
the Central Bank of Nigeria on 3 June 2009. He is a career Governor of the Central Bank of Nigeria on 1 June 2009 and
banker and ranking Fulani nobleman, and also serves as a his appointment was confirmed by the Senate on 3 June
respected Islamic scholar 2009, in the middle of a global financial crisis. Based on his
past record it seemed probable that as governor of the
Birth and Education central bank he would impose strict controls.
Sanusi was born on July 31, 1961. His father was a Permanent
Secretary in the Ministry of Foreign Affairs in the 1960s and In August 2009, Sanusi bailed out Afribank, Intercontinental
his grandfather was Emir of Kano and Islamic Scholar, Alhaji Bank, Union Bank, Oceanic Bank and Finbank with 400 billion
Muhammadu Sanusi. Sanusi graduated from King's College, Naira of public money, and dismissed their chief executives.
Lagos in 1977 and studied at Ahmadu Bello University (ABU), He said "We had to move in to send a strong signal that such
Zaria earning a BSc in Economics in 1981. He obtained an recklessness on the part of bank executives will no longer be
MSc in Economics in 1983, and then taught economics at tolerated." 16 senior bank officials face charges that included
ABU from 1983 to 1985. fraud, lending to fake companies, giving loans to companies
they had a personal interest in and conspiring with
Banking Career stockbrokers to boost share prices. In September 2009 he
In 1985, Sanusi joined Icon Limited (Merchant Bankers), a said that 15 of the current 24 Nigerian banks might survive
subsidiary of Morgan Guaranty Trust Bank of New York, and reform in the banking sector.
Baring Brothers of London. He moved to the United Bank for
Africa in 1997 in the Credit and Risk Management Division, In a wide-ranging interview with the Financial Times in
rising to the position of a General Manager. In September December 2009, Sanusi defended the extensive reforms that
2005, he joined the Board of First Bank of Nigeria as an he had initiated since taking office, dubbed by some as the
Executive Director in charge of Risk Management and "Sanusi tsunami". He noted that there was no choice but to
Control, and was appointed Group Managing Director (CEO) attack the many powerful and interrelated vested interests
in January 2009. He was also the Chairman, Kakawa Discount who were exploiting the financial system, and expressed his
House and sat on the Board of FBN Bank (UK) Limited. Sanusi appreciation of support from the Presidency, the Economic
is recognized in the banking industry for his contribution and Financial Crimes Commission, the Finance minister and
towards developing a Risk Management culture in the others.
Nigerian banking sector. First Bank is Nigeria's oldest bank
and one of the biggest financial institutions in Africa. Sanusi In January 2010, Sanusi said that banks will only want to give
was the first Northerner to be appointed CEO in First Bank's credit to the Nigeria's Small and Medium Enterprises (SMEs) if
history of more than a century. the government gives adequate attention to the provision of
infrastructure. In January 2010 Sanusi admitted that since
Governor of the Central Bank
12 FirstBank Impact Series

14. Follow Us on:

15. t he
ee t s
a
M k e r
S p e
14 FirstBank Impact Series

16. Professor
Muhammad
Yunus
FirstBank Impact Series 15

17. Profile
Professor
Muhammad
Yunus
Recipient of the 2006 Nobel Peace Prize, Professor
Muhammad Yunus is internationally recognized for
his work in poverty alleviation and the empowerment
project in 1976, Grameen Bank has
grown to provide collateral-free loans to
His Grameen Bank spread from village to 5 million clients in Bangladesh, 96% of
village as a lender of tiny amounts of who are women. Over the last two
money (microcredit), primarily to decades, Grameen Bank has loaned out
I
magine a bank that loans money women. Yunus heard that “all women over 5 billion dollars to the poorest of the
based on a borrower's desperate can do is raise chickens, or cows or make poor, while maintaining a repayment
circumstances -where, as baskets. I said, 'Don't underestimate the rate consistently above 98%. The
Muhammad Yunus says, “the less talent of human beings.' ” No collateral is innovative approach to poverty
you have, the higher priority you have.” required, nor paperwork—just an effort alleviation pioneered by Professor Yunus
Turning banking convention on its head to make good and pay back the loan. in a small village in Bangladesh has
has accomplished a world of good for Now the bank boasts 5 million inspired a global microcredit movement
millions of impoverished Bangladeshis, borrowers, receiving half a billion dollars reaching out to millions of poor women
as the pioneering economist Yunus has a year. It has branched out into student from rural South Africa to inner city
demonstrated in the last three decades. loans, health care coverage, and into Chicago.
other countries. Grameen has even
What began as a modest academic created a mobile phone company to His autobiography, “Banker to the Poor:
experiment has become a personal bring cell phones to Bangladeshi Micro-lending and the Battle Against
crusade to end poverty. Yunus reminds villages. Yunus envisions microcredit World Poverty,” has been translated in
us that for two-thirds of the world's building a society where even poor French, Italian, Spanish, English,
population, “financial institutions do not people can open “the gift they have Japanese, Portuguese, Dutch, Gujarati,
exist.” Yet, “we've created a world which inside of them.” Chinese, German, Turkish and Arabic. It
goes around with money. If you don't was published in 1998 and it became a
have the first dollar, you can't catch the Biography New York Times Best-Seller.
next dollar.” It was Yunus' notion, in the Professor Yunus has successfully melded In 1957, he enrolled in the department of
face of harsh skepticism, to give the capitalism with social responsibility to economics at Dhaka University and
poorest of the poor their first dollar so create the Grameen Bank, a microcredit completed his BA in 1960 and MA in
they could become self-supporting. institution committed to providing small 1961. Following his graduation, Yunus
“We're not talking about people who amounts of working capital to the poor joined the Bureau of Economics as
don't know what to do with their for self-employment. research assistant. Later he was
lives….They're as good, enterprising, as appointed as a lecturer in economics in
smart as anybody else.” From its origins as an action-research Chittagong College in 1961. He was
16 FirstBank Impact Series

18. offered a Fulbright scholarship in 1965 to study in the USA. He x Human Rights
obtained his Ph.D. in economics from Vanderbilt University in x International Affairs
1969. x Entrepreneurship
x Visionaries
Besides Grameen Bank he has created a number of x Women's Issues
companies in Bangladesh to address diverse issues of poverty x Feed the World
and development. Among the companies are: x Making Poverty History
Grameen Phone (A Mobile Telephone Company) Some Speech Titles
Grameen Cybernet (Internet Service Provider) x Social Entrepreneurship - A Different Business Model
Grameen Communications (Rural Internet Service Provider) x The Total Eradication of Poverty from the World
Grameen Software Company x Global Advances in Health Care
Grameen Information Technology Park x Halving Poverty by 2015 - We Can Actually Make It
Grameen Fund (Social Venture Capital Company) Happen
Grameen Capital Management Company
Grameen Textile Company Advisor and Board Memberships
Grameen Knitwear Company x International Crisis Group, Washington D.C., USA
Grameen Renewable Energy Company x Patron, United Kingdom Social Investment Forum,
Grameen Health Company London, UK
Grameen Education Company x Board of Directors, United Nations Foundation,
Grameen Agriculture Company Washington, USA
Grameen Fisheries and Livestock Company x Founding Patron, C21: Tomorrow's Leaders for a Safer
Grameen Business Promotion Company Planet, Oxford Research Group, Oxford,United
Kingdom
Professor Muhammad Yunus serves on the boards of many x Board of Directors, Schwab Foundation for Social
national and international organizations. Entrepreneurship, Cologny, Geneva, Switzerland
x Board of Directors, ManyOne Foundation, Canada
Topics x Board of Trustees, Coexist Foundation, University of
x Economy Cambridge, UK
x Finance x Board of Directors, Prince Albert II of Monaco
Foundation, Monaco
FirstBank Impact Series 17

19. Microcredit and Social Business
for a Poverty Free World
Muhammad Yunus
Lagos, Nigeria
September 2011
Grameen Bank After all my efforts, over several months, It is 30 years now since we began. We
I became involved in the poverty issue failed I offered to become a guarantor for keep looking at the children of our
not as a policymaker or as a researcher. I the loans to the poor. When I gave the borrowers to see what has been the
became involved because poverty was loans, I was stunned by the result. The impact of our work on their lives. The
all around me, and I could not turn away poor paid back their loans, on time, every women who are our borrowers always
from it. time! But still I kept confronting gave topmost priority to the children.
difficulties in expanding the program One of the Sixteen Decisions developed
In 1974, I found it difficult to teach elegant through the existing banks. That was and followed by them was to send
theories of economics in the university when I decided to create a separate bank children to school. Grameen Bank
classroom, in the backdrop of a terrible for the poor, I finally succeeded in doing encouraged them, and before long all
famine in Bangladesh. Suddenly, I felt that in 1983. I named it Grameen Bank or the children were going to school. Many
the emptiness of those theories in the Village bank. of these children made it to the top of
face of crushing hunger and poverty. I their class. We wanted to celebrate that,
wanted to do something immediate to Today, Grameen Bank gives loans to so we introduced scholarships for
help people around me, even if it was nearly 7.00 million poor people, 97 per talented students. Grameen Bank now
just one human being, to get through cent of whom are women, in 76,848 gives 30,000 scholarships every year.
another day with a little more ease. That villages in Bangladesh. Grameen Bank
brought me face to face with poor gives collateral-free income generating Many of the children went on to higher
people's struggle to find the tiniest loans, housing loans, student loans and education to become doctors, engineers,
amounts of money to support their micro-enterprise loans to the poor college teachers and other professionals.
efforts to eke out a living. I was shocked families and offers a host of attractive We introduced student loans to make it
to discover a woman in the village, savings, pension funds and insurance easy for Grameen students to complete
borrowing less than a dollar from the products for its members. Since it higher education. Now some of them
money-lender, on the condition that he introduced them in 1984, housing loans have PhD's. There are 15,754 students
would have the exclusive right to buy all have been used to construct 644,965 on student loans. Over 7,000 students
she produces at the price that he houses. The legal ownership of these are now added to this number
decides. This, to me, was a way of houses belongs to the women annually.
recruiting slave labor. themselves. We focused on women
because we found giving loans to We are creating a completely new
I decided to make a list of the victims of this women always brought more benefits generation that will be well equipped to
money-lending n the village next door to to the family. take their families way out of the reach of
our campus. poverty. We want to make a break in the
In a cumulative way the bank has given historical continuation of poverty.
When my list was complete, it had the out loans totaling about US $6.1 billion.
names of 42 victims who borrowed a total The repayment rate is 98.28%. Grameen Free Market Economy
amount of US $27. I was shocked. I offered Bank routinely makes profit. Financially, Many of the problems in the world today,
US $27 from my own pocket to get these it is self-reliant and has not taken donor including poverty, persist because of a
victims out of the clutches of those money since 1995. Deposits and own too narrow interpretation of capitalism.
money-lenders. The excitement that was resources of Grameen Bank today
created among the people by this small amount to 155 per cent of all Capitalism centers around the free
action got me further involved in it. If I outstanding loans. According to market. It is claimed that the freer the
could make so many people so happy Grameen Bank's internal survey, 64 per market, the better is the result of
with such a tiny amount of money, why cent of our borrowers have crossed the capitalism in solving the questions of
shouldn't I do more of it? poverty line. what, how, and for whom. It is also
claimed that the individual search for
That is what I have been trying to do ever This idea, which began in Jobra, a small personal gains brings collective optimal
since. The first thing I did was to try to village in Bangladesh, has spread around result.
persuade the bank located in the campus the world and there are now Grameen
to lend money to the poor. But that did type programs in almost every country. The theory of capitalism assumes that
not work. They didn't agree. The bank entrepreneurs are one-dimensional
said that the poor were not creditworthy. Second Generation human beings, who are dedicated to one
18 FirstBank Impact Series

20. mission in their business lives − to new type of capital market of its own, to Bank shares with their own money, and
maximize profit. This interpretation of raise capital. these shares cannot be transferred to
capitalism insulates the entrepreneurs Young people all around the world, non-borrowers. A committed
from all political, emotional, social, particularly in rich countries, will find the professional team does the day-to-day
spiritual, environmental dimensions of concept of social business very running of the bank.
their lives. Many of the world's appealing since it will give them a
problems exist because of this challenge to make a difference by using Bilateral and multi-lateral donors could
restriction on the players of free-market. their creative talent. easily create this type of social business.
When a donor gives a loan or a grant to
We have remained so impressed by the Almost all social and economic problems build a bridge in the recipient country, it
success of the free-market that we never of the world will be addressed through could create instead a "bridge company"
dared to express any doubt about our social businesses. The challenge is to owned by the local poor. A committed
basic assumption. We worked extra hard innovate business models and apply management company could be given
to transform ourselves, as closely as them to produce desired social results the responsibility of running the
possible, into the one-dimensional cost-effectively and efficiently such as company. Profit of the company will go
human beings as conceptualized in the healthcare for the poor could be a social to the local poor as dividend, and
theory, to allow smooth functioning of business, financial services for the poor, towards building more bridges. Many
free market mechanism. information technology for the poor, infrastructure projects, like roads,
education and training for the poor, highways, airports, seaports, utility
I have said that capitalism is a half told marketing for the poor, renewable companies could all be built in this
story. By defining "entrepreneur" in a energy − these are all exciting ideas for manner.
broader way we can change the social businesses.
character of capitalism radically, and Grameen has created two social
solve many of the unresolved social and Social business is important because it businesses of the first type. One is a
economic problems within the scope of addresses very vital concerns of mankind. yogurt factory, to produce fortified
the free market. Let us suppose an It can change the lives of the bottom 60 yogurt to bring nutrition to
entrepreneur, instead of having a single per cent of world population and help malnourished children. It is a joint
source of motivation (such as, them to get out of poverty. venture with Danone. It will continue to
maximizing profit), now has two sources expand until all malnourished children
of motivation, which are mutually We cannot cope with the problem of of Bangladesh are reached with fortified
exclusive, but equally compelling − a) poverty within the orthodoxy of yogurt. Another is a chain of eye-care
maximization of profit and b) doing capitalism preached and practiced today. hospitals. Each hospital will undertake,
good to people and the world. With the failure of many Third World on an average, 10,000 cataract surgeries
governments in running businesses, per year at differentiated prices to the
Each type of motivation will lead to a health, education, and welfare rich and the poor.
separate kind of business. Let us call the programs efficiently everyone is quick to
first type of business a profit-maximizing recommend: "hand it over to the private Social Stock Market
business, and the second type of sector". I endorse this recommendation To connect investors with social
business as social business. whole-heartedly. But I raise a question businesses, we need to create social stock
with it. Which private sector are we market where only the shares of social
Social business will be a new kind of talking about? Personal profit based businesses will be traded. An investor
business introduced in the market place private sector has its own clear agenda. will come to this stock-exchange with a
with the objective of making a difference It comes in serious conflict with the pro- clear intention of finding a social
to the world. Investors in the social poor, pro-women, pro-environment business, which has a mission of his or
business could get back their agenda. Economic theory has not her liking. Anyone who wants to make
investment money, but will not take any provided us with any alternative to this money will go to the existing stock-
dividend from the company. Profit familiar private sector. I argue that we market.
would be ploughed back into the can create a powerful alternative - a
company to expand its outreach and social-consciousness-driven private To enable a social stock-exchange to
improve the quality of its product or perform properly, we will need to create
sector, created by social entrepreneurs.
service. A social business will be a non- rating agencies, standardization of
loss, non-dividend company. terminology, definitions, impact
Grameen's Social Business measurement tools, reporting formats,
Once social business is recognized in law, Even profit maximizing companies can and new financial publications, such as,
many existing companies will come be designed as social businesses by The Social Wall Street Journal. Business
forward to create social businesses in giving full or majority ownership to the schools will offer courses and business
addition to their foundation activities. poor. This constitutes a second type of management degrees on social
Many activists from the non-profit social business. Grameen Bank falls businesses to train young managers
sector will also find this an attractive under this category of social business. It how to manage social business
option. Unlike the non-profit sector is owned by the poor. enterprises in the most efficient manner,
where one needs to collect donations to and, most of all, to inspire them to
keep activities going, a social business The poor could get the shares of these become social business entrepreneurs
will be self-sustaining and create surplus companies as gifts by donors, or they themselves.
for expansion since it is a non-loss could buy the shares with their own
enterprise. Social business will go into a money. The borrowers buy Grameen Role of Social Businesses in Globalization
FirstBank Impact Series 19

21. Muhammad Yunus
Debates Microfinance
Models at Annual
Meeting of Clinton
Global Initiative (CGI)
At the annual meeting of the Clinton Global August 16, 2010. Equity investors include
Initiative, a forum on international development Quantum Hedge Fund, Sequoia Capital, Vinod
founded in 2005 by former US President Bill Khosla, Small Industries Development Bank of
Clinton, Nobel laureate Muhammad Yunus and India, Bajaj Allianz, Yatish Trading, Kismet
Vikram Akula, founder of Indian SKS Capital, Sandstone Capital, Silicon Valley Bank
Microfinance, which recently went public, and Unitus. SKS Microfinance reported total
discussed different models for microfinance assets as of March 31, 2010, of USD 791 million.
institutions (MFIs). As of March 2010, according to the Microfinance
Information Exchange (MIX), the microfinance
Dr Yunus claims that he does not oppose MFIs information clearinghouse, SKS Microfinance
making a profit, but stresses that there should reported a return on assets of 4.96 percent,
be a cap on profits. In addition, Dr Yunus also return on equity of 21.56 percent, gross loan
urges SKS Microfinance to convert from being a portfolio of USD 961 million and 5.8 million
non-bank finance corporation (NBFC) into a
bank, a process that would enable SKS
Microfinance to accept deposits and place them
under the deposit guarantee scheme of the
Reserve Bank of India (RBI). On the other hand,
Mr Akula emphasizes that having access to
commercial capital markets is the only way to
raise sufficient funds to meet the needs of the
poor. In addition, he argues that it is extremely
difficult to secure a banking license in India. In
response, Dr Yunus warns of the volatility of the
commercial capital markets and argues that the
“microcredit is not about exciting people to
make money off the poor.”
About SKS Microfinance:
SKS Microfinance is an Indian microlender that
delivers microfinance products through a group-
lending model to impoverished women in India.
It is a for-profit, non-banking finance company
which converted to a public limited company in
May 2009 and launched an initial public offering
on July 28, 2010, after which trading
commenced on the Bombay Stock Exchange
and the National Stock Exchange of India on
20 FirstBank Impact Series

22. FirstBank Impact Series 21

23. Profile
Dr.
Dalvinder
Singh
D
r. Dalvinder Singh is the Associate Professor of Bank Resolution, London: Informa Law, Lloyds Commercial
Law at the University of Warwick's School of Law Library; D Singh with W Shan & P Simons (eds)
Law, 2007. He has given technical assistance Redefining Sovereignty in International Economic Law,
to the IMF on micro-finance legislation for the Oxford: Hart Publishing 2008; D Singh with A Campbell, JR
Republic of Guinea and has also participated in a bank LaBrosse & DG Mayes (eds) Deposit Insurance, Basingstoke:
insolvency workshop organized by CARTAC. He is also Palgrave Macmillan (2007).
Senior Associate Research Fellow, Institute of Advanced
Legal Studies, University of London; Managing Editor of Articles and Chapters: D Singh, 'The US Architecture of Bank
the Journal of Banking Regulation, since 2003 and Regulation and Supervision: Recent Reforms in their
Historical Context', in D Singh with JR LaBrosse and R
Financial Regulation International, since 2006; Editorial
Olivares-Caminal (eds) Managing Risk in the Financial
Advisory Board Member, Journal of Financial Regulation
System, Cheltenham, Edward Elgar, (2011); D Singh, 'The UK
and Compliance (Emerald). He has acted as a technical Banking Act 2009, pre-insolvency and early intervention:
advisor to the International Monetary Fund. He was policy and practice' Jan, Journal of Business Law, (2011) 20 –
invited in 2008 to be a member of the International 42; D Singh, 'UK approach to financial crisis management,'
Association of Deposit Insurers, Research and Guidance, Transnational Law and Contemporary Problems, Iowa Law
Expert Advisory Panel. He is also External Examiner at the School, Vol. 19 (Winter), (2011) 872 – 926; D Singh & JR
LaBrosse, 'Northern Rock, Depositors & Deposit Insurance
Centre for Commercial Law Studies, Queen Mary,
Coverage: Some Critical Reflections' Jan, Journal of Business
University of London, for several of their postgraduate
Law, 2010 55-84; D Singh & D Walker 'The European Deposit
programmes, and the University of Strathclyde, Scotland. Guarantee Directive: An Appraisal of the Reforms', in
Financial Crisis Management and Bank Resolution, D Singh,
He is author and editor of several monographs: D Singh, with RJ LaBrosse, & R Olivares-Caminal, London, Informa Law
Banking Regulation of UK and US Financial Markets, (2009); D Singh 'The Role of the IMF and World Bank in
Aldershot: Ashgate Publishing 2007; D Singh with R Financial Sector Reform and Compliance? ', in Redefining
22 FirstBank Impact Series

24. The Role of the IMF and World Bank
in Financial Sector Reform
and Compliance
DALVINDER SINGH
The IMF and the World Bank have crisis resolution and macro-policy purposes to ascertain whether they
responsibility respectively for advice; and the Bank on longer-term pose a risk to the stability of the
exchange rate and currency stability, development—including micro- international monetary system. It
and reconstruction and economics and trade and industry seeks to provide financial assistance
development. The post-war agenda issues—and poverty reduction'. This to members experiencing balance of
of exchange rate stability and move from the traditional remits of payment problems, on the basis that
reconstruction has been broadened responsibility is evidence of a the individual member complies
to assist members with their efforts growing influence of the two in the with the conditions set for such
to achieve monetary and financial arena of a country's domestic policy; assistance so the IMF can be assured
stability, create sustainable this is achieved through the the money will be repaid.
economic growth to reduce poverty, conditions attached to their financial
and enhance development; focusing and technical assistance when This invariably requires the member
on their capacity to improve the domestic policies and legal and country to adjust its economic and
domestic infrastructure that is regulatory infrastructure are not monetary policies, giving rise to a
necessary in most cases to deal with sufficient to prevent or manage a considerable level of coercive and
the prescribed assistance the crisis. unfettered leverage by the IMF to
institutions provide. The evolving role of the IMF and ensure changes are indeed made.
World Bank The final function of the IMF is to
The responsibilities of the two are The responsibilities and functions of provide technical assistance to its
distinguishable by the period over the IMF centre on its key purpose: to members, but without the same
which they assist their members. The deal with 'international monetary degree of compulsion as is attached
IMF's assistance has tended to be on problems' by acting as the forum for to the other activities. Conditionality
a short-term basis, focusing on its members to 'consult' and which generally refers to the
macro-economic matters; whereas 'collaborate' with it so as to 'facilitate' designated policy and procedures
the World Bank has concentrated on and 'promote' 'international attached to the assistance the IMF
long-term development projects monetary co-operation', 'growth of provides ensures to a certain extent
that focus on the micro-economic international trade' and 'exchange the objectives of the assistance is
side. In the pursuit of these rate stability' to achieve financial and achieved. It has, in many respects,
interdependent goals a considerable economic stability. The IMF seeks to generated a considerable level of
level of cooperation between the achieve these broad purposes controversy in light of the expansion
two institutions has evolved, through its core functions: of its policy remit to include matters
notwithstanding an inevitable surveillance, financial assistance and at a micro level such as
degree of tension on occasion when technical assistance to ensure its infrastructural reform. As Lastra
their policies seem to conflict with members continuously adhere to its notes the rationale for this
one another; this occurred especially underlying purposes. expansion was the fact that the crisis
during the 1990s and the financial stricken countries discussed above
crises experienced by a number of The traditional objective of exposed considerable problems in
countries. surveillance is ensuring orderly this area thus exacerbating the
exchange arrangements' among financial problems they experienced.
This has resulted in more formal members. The IMF, in 'consultation'
coordination over the years to deal with its members by both bilateral The traditional functions as noted
with such matters, although both and multilateral means, assesses above have expanded considerably
still concentrate on their 'core asks'. individualmembers' economic and over the years, both formally
Gilbert et al propose the core foci as monetary policies against its through amendments of the Articles
'the Fund on macro-economic and
FirstBank Impact Series 23

25. of Agreement and informally regulation reform—especially given
through policy pronouncements, to However, when a country is seeking that weaknesses in this area were
encompass a broader set of issues financial support from the IMF the part of the reason for the Asian
that underpin the stability of the picture is very different: here the financial crisis.
international monetary system. This issue of financial sector reform The World Bank is primarily made up
has widened the IMF's role from features frequently, in addition to of two main agencies: the
macro-economic policy matters to the traditional areas of IMF International Bank for
include microeconomic policy, to responsibility, in the Letters of Intent Reconstruction and Development
achieve inter alia 'financial and prepared by the member seeking (IBRD), and the International
economic stability in its broadest support. For example, the Letter of Development Association (IDA) and
sense' by acting as a forum for Intent of the government of affiliate agencies. The role of the
'international cooperation to Thailand dated 1997 contained IBRD is aimed at reduction of
monitor economic developments on numerous references to its intention poverty and sustainable
a global scale' and specifically of making changes in the financial development, although its initial
addressing weaknesses in the sector, such as legal and regulatory responsibility was for assistance with
overseeing of domestic financial reforms. the reconstruction of countries
markets. affected by war. The World Bank acts
To obtain financial support from the for its members as a facilitator for
The key issue highlighted is the risks IMF these changes were of a short- investment and technical assistance,
now posed by such weaknesses in and long-term nature, and designed broadly speaking to assist with the
the financial system, both internally ultimately to restore confidence in 'development of productive facilities
and externally to others. The the financial system by closing and resources in less developed
traditional role of surveillance has insolvent banks, putting in place a countries'. The investment (or loans
been broadened from what Lastra deposit protection system and as the case may be) it provides
coins ' “macro-surveillance” to improving the approach to comes from both private means and
microsurveillance” specifically enforcement sanctions. These issues its own resources, but the principal
focusing on financial system form part of the adjustment policy objective is to give financial
soundness by placing particular the member seeking assistance must assistance to members on the most
attention on 'weak financial put in place and adhere to in order reasonable terms and conditions.
institutions, inadequate bank to give the IMF the assurance to The IBRD raises most of its funds by
regulation and supervision, and lack provide such assistance. selling its AAA-rated bonds to
of transparency' as a result of its financial intermediaries in the
broad discretionary mandate The IMF's technical assistance international markets. The traditional
articulated in the Articles of function has also evolved in light of objectives it tries to 'promote' are of
Agreement, These issues form part its broader agenda to include a long-term nature: the 'growth of
of the broader agenda of bilateral financial sector reform, which international trade', 'equilibrium of
and multilateral surveillance the IMF incorporates the FSAP, by providing balance of payments' and
undertakes periodically with technical assistance on a voluntary 'investment for the development of
members to 'lessen the frequency basis. In more recent Letters of the productive resources of
and diminish the intensity of Intent, such as Turkey in 2006, the members, focusing on raising
potential financial system problems'; letter not only referred to the productivity, the standard of living
members are required to cooperate measures put in place to effect and conditions of labor in their
with the IMF, outlining how they will financial sector reform, but also territories', but avoiding interfering
attempt to deal with any issues by expressed the intention to 'use the in the political affairs of the country.
drawing up a programme of reform. findings of the FSAP for Turkey to The purpose of the IBRD is relatively
For example, the Article IV staff guide our future reform efforts in the narrow in terms of its Articles of
report for Tunisia in 2002 illustrated financial sector'. This indicates the Agreement, but has obviously been
the work the authorities were link between the compulsory and interpreted broadly to cover the
undertaking in the financial sector the voluntary parts of the IMF's role whole spectrum of development,
area and progress towards and the importance attached to from economics to health,
implementing the findings from a financial sector reform, if necessary, education, environment,
Financial Sector Assessment in seeking financial support from the infrastructure and poverty
Program (FSAP) assessment. IMF. The voluntary aspect is alleviation: 'The Articles must
important because not all members receive a great measure of
Despite the perception that financial will require formal assistance but purposive interpretation to reflect
sector reform is a 'wholesale' part of may nevertheless pose a threat to the Bank's changing role as a
Article IV consultation, in fact only domestic or international stability, so development institution'. The
two reports explicitly refer to some form of voluntary assessment objectives are continuously
financial sector matters, namely programme was needed that evolving rather than static and rigid,
Tunisia and Iceland. specifically focused on bank and need to be interpreted in the
24 FirstBank Impact Series

26. broad spirit rather than to the letter. The IMF and World Bank Financial
For example, in the period Sector Assessment Program:
The primary functions of the World 1993–2003 the World Bank provided A Diagnostic Tool
Bank as a whole are said to be to act $56 billion of assistance for financial The FSAP diagnostic tool was
as a financial intermediary, a sector reform projects, which introduced by the IMF and World
development research institution equates to about 24 per cent of its Bank after the Asian financial crisis
and a development agency.66 The budget, to improve economic on a voluntary basis. This prompted
IBRD and the IDA provide long-term growth and reduce poverty by the international community to
finance for specific programmes enhancing the mobility of savings respond with a whole host of
over 15–20 years and 35–40 years and investment across as broad a initiatives to mitigate the risk of
respectively, depending on whether sector of the economy as possible to such episodes occurring again. The
the individual country is classified as make it more inclusive. The size and IMF and the World Bank set up the
middle-income or low-income—the complexity of the projects mean that FSAP so their respective strengths
former do not have the financial the World Bank acts as the overall and specialisms could be harnessed
need to seek assistance from the 'lead manager', with other donors, together to identify financial sector
IBRD. The World Bank also assists especially regional development 'vulnerabilities' and deal with the
members by providing what are banks, providing assistance such as 'development needs' of their
termed 'knowledge services' technical and financial support. In members to reduce the likelihood
through assessments and technical these projects the state is at the of further financial crises and the
assistance on development matters; centre and advocates the reforms, disruption they cause to financial
this is one of its most important while the central bank and stability. Another objective of the
roles. The loans provided by the government departments are FSAP is to determine the extent to
World Bank fall into two broad responsible for implementing the which members comply with
categories: goods and services, and changes; this is in contrast to the international standards of financial
adjustment loans or 'structural general perception that changes in regulation and supervision in
adjustment loans'. The latter are for banking regulation and supervision banking, securities and insurance
policy and institutional reforms: the are implemented by the central business; this is either incorporated
'programme of reforms . . . proposed bank rather than being state led. under the Assessment of Financial
by the country and negotiated with Sector Standards or in an individual
the World Bank to ensure the Support has focused on numerous Report on Observance of Standards
objective of the projects and the projects relating to the infrastructure and Codes (ROSC). The joint
outcomes are achieved under the of the financial system; for instance, programme aims, 'to help countries
aegis of conditionality'.67 Non- in the case of Egypt in 2006, which is to enhance their resilience to crises
compliance can ultimately lead to no exception, the goal was to and cross-border contagion, to
the withdrawal of a loan, or in most modernise bank regulation and its foster growth, by promoting
cases the threat of it being enforcement so as to comply with financial system soundness and
withdrawn, notwithstanding the international standards. The changes financial sector diversity'; its
fact that a country is not obliged to were aimed at improving the synergy connects the macro/micro
fulfill the measures set out in the efficiency of the banking system by prudential aspects of financial
programme; this is seen as its enhancing market confidence and stability by linking it with the
sovereign prerogative given the accountability of individual banks. In regulatory infrastructural needs of a
political, social and economic Paraguay in 2002 the focus was on country. The diagnostic focus of the
implications of the programme for mechanisms to deal with efficient FSAP then forms a platform for
the country. Financial sector reform bank resolution and provide an remedial work under the direction
has been on the World Bank's effective safety net to avoid small of the assessed country.
agenda for a considerable length of depositors losing their money when
time (a lot longer than it has a bank fails or is closed. In Mexico in a) FSAP process and tools
featured at the IMF), either through 199575 and the Philippines in 1998, The FSAP process has focused on
financial support for structural technical assistance to strengthen the needs of developing, emerging
reform projects or technical financial sector oversight by and industrialized countries. It
assistance to a country's authorities improving their capabilities to deal concentrates on what it terms
to develop this area of the economy with financial crisis was one of the 'systemically important countries',
and improve the capacity to main features of the loan. In the case as well as countries at various
oversee the financial system of Pakistan where the reform efforts stages of development that pose a
through legislative changes and have been in place for a significant systemic threat to international
training. Structural adjustment length of time compliance with the financial stability. For example, in
loans have focused on a broad Basel Core Principles now stands at the case of developed countries a
range of areas, including reducing 22 out of the 25 Core Principles. 'vulnerability assessment' is
government ownership and undertaken to gauge the extent to
strengthening bank supervision.
FirstBank Impact Series 25

27. which the banking system can 'mission chief'. The assessment of financial sector
withstand macro-economic shocks; standards is the other significant
In the case of emerging economies The mission involves an in-country part of the overall assessment of the
the FSAP process has to pay Financial System Stability financial system. The focus of the
particular attention to the quality of Assessment (FSSA) of the banking FSAP is on three areas: '(i) financial
regulation after financial crises and system and its regulation and sector regulation and supervision;
the diversity of the financial system, supervision. The team hold (ii) institutional and market
to assess whether the non-bank discussions with institutions such as infrastructure; (iii) policy
sector, for instance, can pose the central bank and the bank transparency'. It consists of
systemic risks to the overall well- regulator and supervisor, and have assessing countries' financial
being of the financial system. The meetings with figureheads in the systems in light of a variety of
priority set for developing countries banking industry. international standards in banking,
is different, focusing on building securities and insurance business.
the infrastructure of the financial The stress test forms a significant
system. part of the FSAP process. It consists The international banking
of assessing the extent to which a standards devised by the Basel
The response by those deemed country's financial system can Committee are a significant part of
systemically important differs from withstand instability arising from the FSAP process, which adopts the
that of countries at other stages of 'plausible shocks to key Basel Committee methodology to
development. For example, the macroeconomic variables'. The evaluate compliance with the Core
former consider the FSAP as an assessment focuses on macro- Principles. Through the assessments
external review from an economic shocks to the financial a number of issues have over time
international perspective to gauge system to judge its robustness to been identified which would call
whether they could weather withstand them. Stress tests could into question the effectiveness of
episodes of international financial examine the implications of the regulatory regime in a country:
instability; the latter consider it as changes to interest and exchange examples are political interference
an opportunity for identifying gaps rates for financial services firms. in the authorization process or lack
in existing regulation and of legal immunity from law suits; a
supervision and initiating reforms The stress test is not a single, lack of powers to deal with
with development objectives in uniform model that is simply unauthorised activities; a lack of
mind. applied to all countries, ignoring criteria to ascertain whether a bank,
the level of development; each shareholders or individual director
According to observations made assessment is designed around the are fit and proper; capital adequacy
after the pilot programme, most country relative to the 'complexity rules which are not adhered to or
countries that participated wanted of the financial system, and data monitored effectively on either an
more attention to be paid to the availability, while also being individual bank basis or a
'implications of missing, mindful of the resource burden consolidated basis; large exposures
incomplete, or informal markets for imposed on the central bank and which are not monitored or
the stability and the development supervisory authorities'. reported; insufficient on-site
of a assessment of banks; limited
diversified financial sector'. The For example, in the case of Gabon consolidated supervision of cross-
most recent review highlights the stress tests focused on issues sector or cross-border activities;
similar sentiments wanting such as a government default on ineffective enforcement by the
improvements in the assessment to domestic debt repayments as a regulators of standards and rules
reflect the development issues that result of changes to oil production that actually exist; and limited
are integral to the reform process. in the country and their effect on cooperation between respective
commercial banks servicing their regulators to oversee banks that
The process of assessing debts. In Mexico the focus was on operate across borders.
observance of codes and standards the resilience of the banking sector
consists of a premission, the to withstand a slowdown to the US The degree of compliance with the
mission and a post-mission economy, which would have a Basel Core Principles makes
assessment involving an significant effect on banking interesting, yet unsurprising,
international team of consultants profitability. The position in Sweden reading. The level of compliance is
and IMF and World Bank officials. was assessed by testing the in many respects commensurate
The country first completes a resilience of the banking sector to with the stage of development the
questionnaire on its system of bank real estate, exchange and interest country is at. Indeed, the forms of
regulation in conformity with the rate shocks; it was found that banks 'noncompliance' are also associated
Basel Core Principle methodology; were resilient to such changes. with the stage of development.
this is then submitted to the Developing countries evidence a
26 FirstBank Impact Series

28. BRIEF Microinsurance:
What Can Donors Do?
Poor people in developing countries enjoy few safeguards against the
numerous perils of life-illness or injury, natural disasters, and loss of property.
Microinsurance is growing in popularity among donors as one means of
Governments in developing countries are
often unable provide adequate social Few donors agencies have insurance
protection for their poorer citizens. At the expertise. Agencies that make significant
same time, formal insurers in many markets investments in micrinsurance should have
do not see low-income people as viable access to staff with appropriate technical
clients. (However, there has been recent skills. Donors can either invest in in-house
progress with some simple products, such as expertise or ensure program staff have
life insurance.) enough “insurance literacy” to outsource
intelligently and select the best implementing
HOW CAN DONORS EFFECTIVELY SUPPORT partners. Some funders, like the Aga Khan
MICROINSURANCE? Agency for Microfinance, have recruited full-
time experts from leading insurance
In most countries, reaching scale and companies.
providing real value to clients will likely
require donor involvement in the medium Determining when and how to deploy the
term. donors will need appropriate expertise appropriate instrument-from technical
and resources to engage effectively in assistance to grants, loans, equity, guarantees,
microinsurance because it is relatively new, and policy support-requires good knowledge
complex, and risky. of market conditions. In many instances,
relatively small amounts of funding provided
Donors have diverse reasons for wanting to over longer periods are needed. In markets
support micrinsurance. Even within the same where commercial insurers show interest,
agency, different units may have varying donors should focus on brokering
views on how subsidies can be used best, how relationships with organizations close to
much clients should pay for insurance target clients.
services, and what roles the government and Donors can also support public goods like
the private sector should play. Strategic clarity research and consumer education. However,
on the reasons for engaging in in the numerous markets where formal
microinsurance affects how a donor’s insurers are not yet willing to step in, donor
objectives are set, how expertise is recruited, funding can help build the institutional
and what type of monitoring is implemented. capacity to provide insurance services. the Bill
FirstBank Impact Series 27

30. PAULINE
WANDOO A.
NSA FirstBank Impact Series 29

31. Profile
PAULINE
WANDOO
NSA
P
auline Nsa is the pioneer MD/CEO of FBN Microfinance Bank Ltd. She was actively involved
Microfinance Bank Limited, a fully owned in the market research that led to UBA/AfriCap
subsidiary of First Bank Nigeria Plc, the decision to invest in a microfinance initiative.
leading financial services institution in Nigeria.
She holds a BSc degree in Business Pauline Nsa has attended numerous training
Administration from the Ahmadu Bello programmes within and outside the country
University, Zaria, Nigeria (1983) and a Masters in including the Risk Management course
Business Administration (MBA) in Finance from organized by Euromoney, London (1986); Best
the University of Ibadan (1992). and Brightest Bankers Programme of
IFESH/USAID in New York (2002); WAIFEM
She has over 25 years work experience spanning Microfinance programme for Technical Service
Bank Examination, Credit Risk Management, Providers in Accra, Ghana (2004); Boulder
Consumer Banking, Training and Microfinance microfinance course by ILO in Turin, Italy (2005);
Operations. Her experience in financial analysis Cracking the Capital Markets, sponsored by the
follows her 12 years in the Risk Management Grameen Foundation, New York (2007); Building
function, first at International Merchant Bank new ventures in established companies at the
(IMB) Plc, and then United Bank for Africa (UBA) Harvard Business School (2008); Strategic
Plc. These followed four years experience in Leadership in Microfinance by Accion/ Harvard
Nigeria Deposit Insurance Corporation (NDIC) as Business School (2009) to name a few.
an examiner.
Her key strengths are strong leadership abilities,
Prior to joining the First Bank Plc, Pauline was presentation and analytical skills. Pauline is
responsible for the set up of the defunct UBA passionate about microfinance and works
30 FirstBank Impact Series

32. FirstBank Impact Series 31

33. Corporate
Profile
32 FirstBank Impact Series

34. v i s i o n
To be Nigeria's micro finance services provider of 'first' choice
FirstBank Impact Series 33

35. Mission
34 FirstBank Impact Series

36. FBN Microfinance Bank Ltd incorporated Key
(FBNMFB) March 2008 and duly licensed by the
Central Bank of Nigeria under the BOFIA (Banks Strengths
and Other Financial Institutions Act No 25 of 1999)
commenced operations January 2009 with a fully
paid up capital of one billion naira.
FBNMFB is a state microfinance bank, licensed to
operate in the 36 states of the federation
including FCT. A fully owned subsidiary of
FirstBank, FBNMFB is committed to providing
financial access to small scale industries, petty
traders, artisans and individuals to meet their day-
to-day business aspirations and create wealth.
FBNMFB is also dedicated to providing financial
and business advisory services to serve this target
segment with a range of financial products
designed for the growth of their businesses. The
bank as at December 31, 2009 had a customer
for the country's economically active poor. Thus,
base of 36,654 and disbursed micro loans
we serve the family income earners and the self
amounting to N2,308,568.81 to 7,539 clients.
employed micro entrepreneurs with our stock of
financial products aimed at growing their
As a commercially sustainable microfinance
businesses and consequently producing
institution FBNMFB is committed to delivering key
significant economic multipliers with positive
infrastructure to help build up financial inclusion
FirstBank Impact Series 35

37. BRANCH The Bank currently operates in seventeen
(17) locations within Lagos state, due to
NETWORK regulatory requirement to cover two-third
of its chosen state before launching out to
AND other states of the federation. Our
CONTACT approach to branch expansion is
systematic, growing organically until we
PERSONS provide microfinance services to every
Branch/Customer Agege Branch/Customer Ketu
Meeting Points Meeting Points
contact persons Adetokunbo Ope contact persons Olawale Oluyemi
Address 77, Old Abeokuta Road, Agege, Lagos Address Ketu Market, Yam Section
Telephone numbers +234-1-8103327, +234-7029082131 Telephone numbers +234-7029743501
Branch/Customer Ikotun Branch/Customer Iyana Ipaja
Meeting Points Meeting Points
contact persons Oderinde Remi contact persons Ihuoma C. Chuks-Ugwuegbu
Address Block YK 10, Irepodun Market, Ikotun Lagos Address Old Iyana Ipaja Road, Iyana Ipaja, Lagos.
Telephone numbers +234-1-8103325, +234-7029082111 Telephone numbers +234-7028145494
36 FirstBank Impact Series