• Czech financiers starting project of financial aid to poor
  • 29 October 2007, TMCnet News
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  • Czech financiers have decided to create an online investment "bank" for the poor in backward areas in Mexico, and the project myELEN.com is about to be launched, Mlada fronta Dnes (MfD) daily said today. Several businessmen and economists, among them Pavel Kohout who was a member of the advisory teams of two finance ministers or Miroslav Zamecnik, former Czech representative at the World Bank, want to address Czech savers to lend money to the poorest people in Mexico through the Internet, the paper said.
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  • (Czech News Agency Via Thomson Dialog NewsEdge) Prague, Oct 29 (CTK) - Czech financiers have decided to create an online investment "bank" for the poor in backward areas in Mexico, and the project myELEN.com is about to be launched, Mlada fronta Dnes (MfD) daily said today. Several businessmen and economists, among them Pavel Kohout who was a member of the advisory teams of two finance ministers or Miroslav Zamecnik, former Czech representative at the World Bank, want to address Czech savers to lend money to the poorest people in Mexico through the Internet, the paper said. A Czech investment worth Kc 5,000 should bear 5 percent interest p.a., or even 10 percent if the investment were higher. Zamecnik said the government's charity projects are less effective and that "microloans help without governments and ulterior motives."
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  • The project can be described as two octopuses, one of them soaking up investment in the Czech Republic and the other represented by microfinance institutions in Mexico whose tentacles will distribute money to villages and people in need. The myELEN portal will be a central brain to decide on ways of distributing money among the institutions. One million crowns will but cut into thousands of crowns to be sent by the institutions to their regions in Mexico, said Tomas Hes, another co-founder of the project. The demand is huge, said Linda Hanykova, executive director of the Czech project, adding that only three-to-five percent have been met so far.
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  • Credit for carpets
    7 November 2007, The Prague Post
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  • Microfinance project allows Czechs to fund Mexican entrepreneurs, with interest.

  • Soon, local financiers will be able to grant loans across the Atlantic to entrepreneurs in rural Mexico.
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  • Beginning this month, the portal myELEN.com will be the first institution to bring microfinance to the Czech Republic. A recently popularized banking innovation, microfinance programs allow impoverished people in the Third World — clientele traditionally seen as unsuitable for investment — to secure loans for their small enterprises.
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  • “We want to be the pioneers of microfinance in the Czech Republic,” said Linda Hanyková, executive director of Microfinance, the company behind the My Electronic Loan Exchange Network (myELEN) project.
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  • Through myELEN, investors can lend money to selected Mexican entrepreneurs — farmers, food venders, weavers, grocers — or associations of entrepreneurs, which are listed on the Web site along with their photos and business plans.
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  • While microfinance has become a relatively common phenomenon in the United States, the myELEN project will be unique in Europe when it launches in several weeks’ time, Hanyková said.
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  • Loans granted through myELEN would range between 5,000 Kč and 157,000 Kč ($267–8,396). The site will also allow investors to make donations or interest-free loans, Hanyková added.
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  • Despite this option, the project should not be seen as a typical charity, shifting money from thickening Czech wallets to the Mexican poor. Rather, “it’s an interesting investment alternative,” Hanyková said.
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  • Though it does bear an ethical streak, most investments made through the site will return annual yields between 5 percent and 10 percent, depending on the amount of money invested.
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  • A typical concern when investing in the poor is the possibility of default, but microfinance investments have proven to be very safe, with only 2 percent of loans unrecovered, Hanyková said.
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  • While small Mexican entrepreneurs have proven reliable, other factors, such as the volatility of currency markets, could jeopardize or lower the investment yields, she said.
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  • Typically, microfinance loans come with one significant catch — the sky-high interest rates that arise from the costs of granting small loans and intensive fieldwork with clients.
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  • Annual rates by microfinance institutions in Mexico run between 40 percent and 110 percent. However, local banks and other lenders charge even higher rates while providing little educational and counseling assistance to borrowers. Rates charged by myELEN would depend on the individual business and amount loaned, Hanyková said.
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  • Today, myELEN cooperates with one partner in Mexico, an NGO named FIPS. But the project’s idea is to work with many other reliable microfinance institutions in Mexico and elsewhere, so that investments are diversified to reduce the risk of unrecoverable loans, said
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  • Tomáš Hes, an economist and one of myELEN’s founders.
    Hes has followed the microfinance field for five years. After a career with the multinational banks Citigroup and Société Générale, he decided to dedicate himself fully to this quickly evolving field. Today, he works for FIPS in Mexico, where he is in charge of capital resources.
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  • For Hes, microfinance is a field with enormous growth potential and the possibility of unleashing that potential is a great motivation.

  • “I’m working in uncharted finance territory, in a financial avant-garde,” he said. “The huge dimensions of this field, the volume of the demand and the social impact [of microfinance] are fascinating.”
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  • Microfinance at a glance
    Microfinance is a growing sector focused on providing banking services, such as loans, to entrepreneurs looking to lift themselves out of poverty The concept dates back to the 1970s work of the Bangladeshi economist Muhammad Yunus. He advocates granting loans worth several hundred dollars to the poor, accompanied by educational and counseling support Despite a spike in microfinance over recent years, about 400 million people live cut off from any financial services, according to the Grameen Foundation.
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  • Beyond Yunus
    Traditional banking has long ignored the poor in forgotten parts of the globe, claiming it is too risky to give credit to penniless people. Yet even small bank loans — called microcredit — can be enough to help impoverished people escape destitution by establishing self-sustaining businesses.
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  • Struck by this paradox, Bangla-deshi economist Muhammad Yunus founded the Grameen Bank in 1976 to tackle poverty through small loans to “insolvent clients.” Three decades later, Yunus and the Grameen Bank received the Nobel Peace Prize, helping popularize the microfinance concept throughout the world. Today, the microfinance sector stands at a crossroad. There is a new breed of microfinanciers who want to commercialize the field, freeing it from its ties to donations and charity as a way of broadening its impact. Yunus, on the other hand, sticks to his original slogan — “credit is a human right” — and is skeptical of profit-oriented microfinance.
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  • Hes stands somewhere between these poles. “In the future, nonprofit microfinance institutions must cooperate with commercial banks,” he said. Separately, neither will be able to cover the huge demand for microloans: Ninety percent of the potential demand has so far gone untapped, he said.
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  • Hes says myELEN will help establish microfinance as a widely accessible vehicle for ethical investment in the country. These types of local investments are even more important in light of the subprime-mortgage crisis, as local markets can help hedge against the risk that arises out of increasingly interconnected global markets.
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  • “Every global financial crisis caused by falling stock markets will increase the attractiveness of investments into closed, local systems,” he said.

  • By Victor Velek
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  • New microfinance lending site: myELEN.com 
  • 7 November 2007, Paris Microfinance Network
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  • Launching in November, the online portal myELEN.com will be the first institution to bring microfinance to the Czech Republic. While microfinance has become a relatively common phenomenon in the United States, the myELEN project will be unique in Europe when it launches in several weeks’ time, says Linda Hanyková, executive director of Microfinance, the company behind the My Electronic Loan Exchange Network (myELEN) project.
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  • Loans granted through myELEN would range between 5,000 Kč and 157,000 Kč ($267–8,396). The site will also allow investors to make donations or interest-free loans. Through myELEN.com, investors can lend money to selected Mexican entrepreneurs — farmers, food venders, weavers, grocers — or associations of entrepreneurs, which are listed on the Web site along with their photos and business plans. Though it does bear an ethical streak, most investments made through the site will return annual yields between 5 percent and 10 percent, depending on the amount of money invested.
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  • Annual rates by microfinance institutions in Mexico run between 40 percent and 110 percent. However, local banks and other lenders charge even higher rates while providing little educational and counseling assistance to borrowers. Rates charged by myELEN would depend on the individual business and amount loaned, Hanyková said.
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  • Today, myELEN cooperates with only one microfinance partner based in Mexico, an NGO named FIPS. But the project’s idea is to work with many other reliable microfinance institutions in Mexico and elsewhere, so that investments are diversified to reduce the risk of unrecoverable loans, said Tomáš Hes, an economist and one of myELEN’s founders.
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  • Angelo SantaMaria
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  • EU plans European microcredit fund
    19 November 2007, EUbusiness

    (BRUSSELS) - The European Commission unveiled plans on Monday for a new fund to encourage microcredit or small loans popular in the developing countries, in Europe.

    EU Regional Policy Commissioner Danuta Huebner said the new fund would have about 10-15 million euros (15-22 million dollars) to be used to "finance the loan activities of non-bank microcredit financial institutions."

    The money, which would come from contributions from the European Investment Bank and other sources, would be managed by a new body whose staff would also provide expertise to microcredit lenders.

    The initiative aims to make credit more easily available to small companies and unemployed or inactive people looking to set up a business, who are often overlooked by traditional banks.

    "Microcredit is a highly effective way to develop new businesses or to help the unemployed back into the mainstream economy through self-employment or micro-enterprise development," Huebner said.

    The Commission estimated that there was 6.1 billion euros of pent-up demand in Europe for microcredit, with such loans typically averaging 7,700 euros in the European Union.

    Microcredit has been in the spotlight recently since Muhammed Yunus, an economist from Bangladesh, won the Nobel Peace Prize last year for pioneering such lending through his Grameen Bank.
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  • Microloan project starts
    5. 11. 2007, Czech Business Weekly

    Czech financiers have decided to create an online investment “bank” for the poor in backward areas in Mexico, and the project myELEN.com is about to be launched.

    Several businessmen and economists, among them Pavel Kohout who was a member of the advisory teams of two finance ministers and Miroslav Zámečník, former Czech representative at the World Bank, want to address Czech savers to lend money to the poorest people in Mexico through the Internet. A Czech investment worth Kč 5,000 should bear 5 percent interest per year or even 10 percent if the investment were higher. Zámečník said that microloans help without governments and ulterior motives.
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  • Peer-to-peer lending - Crunchless credit
  • Oct 25th 2007, The Economist

    Social lenders seek to take advantage of bank turmoil

    IF THE banks won't lend you money, might a stranger? Probably not, to judge by recent data from Prosper, an American peer-to-peer lending marketplace (a place where people can lend their own money to other people).

    The website, which lets lenders bid against each other on the interest rates they are prepared to offer to specific borrowers, has seen an increase in demand from subprime borrowers as access to credit has tightened. But lenders have responded in turn. Chris Larsen, Prosper's boss, reports a sharp drop in the number of subprime borrowers who are getting funded, from just under a quarter of borrowers in September 2006 to a mere 8% last month. Homeownership, which used to weigh positively on a borrower's creditworthiness, no longer casts such a magic spell.

    So far, so like the outside world. But the credit crunch is also reinforcing areas of difference between social-lending firms and the mainstream market. Without the costly paraphernalia of a normal bank (branches, staff and regulatory costs), social-lending marketplaces have always claimed to offer borrowers cheaper credit than they could get elsewhere. That price gap has widened recently as mainstream lenders have hiked their rates and social lenders have largely failed to follow suit. Asheesh Advani, founder of a social-lending business that relaunched under the Virgin Money brand this month, says that its loan volumes have grown rapidly over the past year largely because they are seen as more affordable as credit terms elsewhere have become tougher.

    Why aren't social lenders raising their rates? One reason is that, unlike banks, they are not facing higher funding costs caused by the seizure in money markets. Another clue lies in that word “social”. Mr Advani, whose business is designed to facilitate loans by family and friends, points out that parents tend not to foreclose on mortgages but to restructure them. Even when strangers are involved, lenders are usually not seeking solely to maximise returns. Let's not get too misty-eyed, though. The relative immaturity of the market may also play its part, says Giles Andrews of Zopa, a British peer-to-peer lending site.

    Most intriguing of all is the possibility that social-lending sites do a better job than their mainstream counterparts of assessing risk. Zopa, which takes a stringent approach to credit assessment and will let only prime borrowers onto the site, boasts a default rate of just 0.1%. Prosper, which is more laissez-faire and has a default rate of 3%, provides measures of “social capital”, such as endorsements by friends, that help lenders to judge the risk of a specific borrower.

    That sounds promising. The volumes of loans being processed by peer-to-peer marketplaces remain tiny, however. And default rates will rise as portfolios age. But at least the credit crisis has given social lending a friendly pat on the back.

 

 

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