The 15 others finalists projects
C - Community Lending Against Environmental AssetsAdvanced Conservation Strategies & Yayasan Pulau Banyak & Australia's CSIRO
www.advancedconservation.org Country of implementation: Indonesia
The rural poor’s most valuable assets are often intact environmental resources. A fundamental gap exists between the conservation and extractive value placed on those assets.More
An ‘environmental mortgage’ narrows that gap by melding innovative microfinance approaches with incentive structures that encourage environmental stewardship. It does so by explicitly linking a lending program focused on livelihood improvement to the quality of an environmental asset, resulting in long-term incentives for stewardship. Working with local partners, we will provide seven Indonesian fishing communities access to an economic development fund to help transition them to more sustainable fishing practices, while incentivizing the creation and stewardship of a local marine reserve network.
F - Fighting Poverty One Ton of Carbon at a TimeThe Wildlife Conservation Society (WCS)
and EcoTrust Uganda
www.wcs.org Country of implementation: Uganda
Poverty reduction requires effective management and protection of ecosystems which provide food, water, and other goods and services. WCS and Ecotrust Uganda propose the creation and capitalization of a carbon bank that will purchase More
carbon from small-holder farmers who plant trees for food, fodder, and fuel wood. The bank will make partial up-front payments and sell the aggregated sequestered carbon on the voluntary market to generate sustainable income, recapitalize itself and expand farmer participation. It will offer a highly replicable and scalable model for improving livelihoods and ecosystem services through smallholder farmer participation in the carbon markets.
H - Insurance & PlaNet Guarantee & Mercy Corps
to face Climate Risks
www.planetguarantee.org Country of implementation: Sri Lanka
In Sri Lanka climate change has a large impact on its 3 million subsistence farmers. Crop failure risk is important, and farmers have no access to formal risk management or even weather data. Thus project proposes to develop weather index-based crop insurance to provide paddy farmers with a More
protection against crop losses and access to credit thanks to mobile banking. The project would find a new way of managing small farmer risks, increase risk and insurance awareness insurance among the population, and strengthening the impact through a combined early-warning system.
J - Linking SMEs with internet bankingCoalition of Socially Responsible SMEs in Asia
(CSRSME Asia) Banco De Oro (BDO)
Shared Vision Cooperative (SVC)
www.aa4se.com Country of implementation: Philippines
The project establishes a special Bayanihan (Solidarity) Banking Window (BBW) within Banco de Oro, the largest universal bank of the Philippines. This window will facilitate financial intermediation among its small-and-medium More
enterprise member-clients through a Banco de Oro Cash Card (BaCC). BaCC is a debit card connected to the corporate internet banking system, ATMs, mobile phone and point of sale facilities. BaCC will provide an opportunity for micro-entrepreneurs and low-income households to pool small savings for investment in projects of SMEs, thus helping to create jobs and increase household income.
L - Mobile Authentication for Indo-Nepal RemittanceEkgaon Technologies and Nirdhan Utthan Bank
www.ekgaon.com Country of implementation: Nepal and India
Ekgaon Technologies and Nirdhan Utthan Bank are building a mobile remittance authentication system to facilitate small-scale remittance transfers for workers in South-South migration corridors. Remittances are transferred and saved in investment vehicles in receiving countries and smoothen otherwise unpredictable income streams. Using mobile More
technology remittance, service providers can access new customers in areas where operating margins are small and ensure more security than physical cash transfers. Mobile-based remittance services may change the landscape of remittance provision and enable a new segment of wage earners to access formal financial services.
N - Natural Catastrophe Protection for Rural Poor Caribbean Risk Managers Ltd. (CaribRM) and Development Bank of Jamaica (DBJ)
www.caribrm.com Country of implementation: Jamaica
Our concept is to utilize the recently-developed tool of parametric insurance to address loan portfolio stability. Our proposal seeks to develop a parametric (index-based) product that will transfer an important portion of the catastrophe risk of the Development Bank of Jamaica’s (DBJ) agricultural loan portfolio into international markets. Utilizing insurance toMore
smooth volatility in loan default rates due to catastrophic events will enable DBJ to provide a more stable flow of funds to clients and increase the lending portfolio, whilst attracting further investment from the wider community. This initiative could enhance conditions for the sustainable development of micro-finance and is potentially replicable regionally and globally.
P - POF – an Innovative Financial Product for MSMEsCrimson Capital Corp.
www.crimsoncapital.org Country of implementation: Bolivia - Northern Amazon Region
Through this initiative, Crimson Capital Corp. will work with a selected financial institution to establish a presence in Bolivia’s Northern Amazon Region (at least two full-service branches) and to develop, market and offer an innovative financial product -Purchase Order Finance (POF) - specifically More
designed to provide much-needed working capital to the regions bio-trade value chains. POF takes into consideration all the actors in the value chain: input and equipment suppliers, producers, processors, distributors, traders, wholesalers, retailers and end consumers rather than just the individual enterprise. The approach leverages existing relationships among those actors to guarantee loans without physical collateral requirements.
S - TAMADERA microinsurance & savings for the future Allianz Life Insurance Indonesia, MBK Ventura and The SMERU Research Institute
www.allianz.comCountry of implementation: Indonesia
In Tamadera 75% of the target population lives below the local poverty line. Allianz Insurance Indonesia is developing a microsavings-cum-insurance product in cooperation with local microfinance institutions. The planned product will provideMore
low-income families in Indonesia with access to two new financial services: systematic savings and insurance. The product consists of a 5-years savings plan targeted at financing children’s education, with weekly premiums of US$ 1, a capital guarantee, and life insurance cover. With further grant assistance the project scope could be significantly extended to include health insurance benefits; innovative Electronic Data Capture based data processing, and longitudinal impact research.
Efficiency of Public
Managing risks affecting development efforts.
Developing countries face the real risk of unpredictable capital flows that can hamper long-term budget planning and investment. Commodity price shocks or natural disasters may suddenly deplete a government’s main source of revenue just when its citizens need assistance most. Development assistance may vary from year to year, or may not be flexible enough to accommodate changing needs. Governments often have little flexibility to address volatility of financial flows at the national level. Read more
Financial instruments can help stabilize capital flows and mitigate aggregate risks. For example, counter-cyclical tools, such as forward contracts and specific types of debt,guarantee, and insurance instruments can serve as hedges. As an illustration, the Caribbean countries have developed a regional climate catastrophe risk insurance mechanism. Malawi has mobilized financial weather derivative instruments to help manage the effects of weather on agricultural production and food security. These derivatives provide farmers with insurance against the risk of drought.A number of other countries, mainly middle-income countries, have piloted innovative programs to manage macroeconomic shocks. These include bonds indexed to GDP, commodity prices, and inflation; counter-cyclical loans whose terms (maturity, grace period or interest rates) can be easily adjusted in response to export shocks; local currency bonds; and currency swaps. Mexico and Colombia, to give just two examples, have used strategies such as asset liability management, commodity hedging, local currency and contingent financing to help weather the current financial crisis.
The MIF seeks project proposals that would, for example, help governments/public entities hedge against specific risks and volatility through the use of innovative financial instruments such as specific types of debt, guarantees insurance mechanisms or forward contracts.
by and for the Enterprise
and Private Sector
Private sector investment plays an important role in developing economies, providing essential goods and services and stimulating growth. However,enterprises operating in developing countries often face severe hurdles in financing their activities.This is true of a range of players, including Small and Medium Enterprises (SMEs), larger corporations, non-profits, social enterprises, communityorganizations, and local NGOs. Enterprises also often lack incentives to invest in products whose demand is limited to developing countries for example, vaccines for tropical Read more
diseases, crops for tropical climates, and technology adapted to local infrastructure. They may be challenged by real or perceived barriers, such as operational risk, political risk, and lack of a sizeable market. Innovative financial mechanisms may help companies overcome some of these barriers.
For example, vaccines for tropical diseases, crops for tropical climates, and technology adapted to local infrastructure. They may be challenged by real or perceived barriers, such as operational risk, political risk, and lack of a sizeable market. Innovative financial mechanisms may help companies overcome some of these barriers.
Tailored financial instruments can provide incentives for private sector- led development results, for example through smart equity funds, guarantee orinsurance mechanisms.An example of global level mechanism responding to such challenges is the pilot Advance Market Commitment (AMC) for pneumococcal diseases which wasrecently launched. It is targeted at a global market failure: the reluctance of the pharmaceutical industry to develop and produce vaccines against diseases that primarily affect those in poor countries. It was designed specifically to accelerate the creation of a viable market: it provides a financial commitment to pharmaceutical companies to subsidize the future purchase of vaccines needed in poor countries. The AMC is funded by long-term donor grants and enhanced by an IBRD guarantee. It only applies to vaccines that meet the needs of developing countries and is explicitly “country-owned.”
Another example is the recently launched Africa Health Fund, set up withcontributions from development or philanthropic institutions. This fund provides new sources of equity to SME health care businesses targeting the poor in Sub-Saharan Africa. Fund managers’ compensation is based on two bottom lines:the fund’s financial return, and whether the businesses receiving funds meetspecified targets for reaching the poor.
Unpredictable and irregular incomes, coupled with little cushion to absorb the impact of unexpected events are among the challenges poor households face. As a consequence, many poor households struggle to have cash when they need it, to pay for the things that are most important to them, whether it be daily needs like food and shelter, taking advantage of opportunities including education and investment in productive enterprise, or managing during illness or natural disaster. Read more
The World Health Organization estimates that as many as 5 percent of families worldwide are pushed into poverty each year by sudden health calamities. Making incomes more predictable, enabling households to manage their financial resources more efficiently and mitigating risks related to unplanned expenditures could help smooth cash flow, which is as critical at to households as it is to the public sector. In recent years, microfinance, including microinsurance, has helped protect poorer households from income shocks and improved their access to finance. Initiatives have been launched to facilitate the flow and to reduce the costs of financial transfers, including migrants remittances.
The examples quoted above should not be seen as defining or limiting the scope of the competition, they are only illustrative.
The above categories are purposefully organized around the problems which proposals should seek to solve.They do not specify the actors that will be involved in the effort. As examples, solutions to public sector problems which fall into theme (1) may very well include private sector players (such as banks or insurance organizations putting out new products), and efforts for catalyzing private investment which fit in theme (2) may be implemented by public sector entities(such as governments providing investment guarantees).
Results of the 2010
The 5 winners have now been chosen from a pool of 20 finalistes. 800 applicants that responded to the open call for proposals during the autumn of 2009. 110 specialists in innovative finance together with development experts from inside and outside of the organising institutions (Agence Française de Développement, The Bill & Melinda Gates Foundation and the World Bank) selected the most promising as finalists.
The proposed projects cover more than 15 developing countries across five continents and were submitted by a variety of organisations ranging from small local NGOs to large multinational corporations to international development organizations.
The 5 winners
WINNER A - Affinity Macrofinance: Financial GuaranteesResults for Development Institute (R4D),
Corporación Andina de Fomento (CAF)
www.resultsfordevelopment.org Country of implementation: 100 Developing World Nations
Affinity MacroFinance (AM) will finance health, education, SMEs, micro lending, insurance, infrastructure and other development activities by providing AAA guarantees to bond investors in 80 emerging world capital markets. It will also serve poorer countries without local bond markets by More
structuring guaranteed international financings. Owned by a community of Development Finance Institutions, foundations, and local development agencies, AM will tap the nearly $1 trillion in emerging world pension funds, providing low-cost, fixed-rate, long-term, local currency funding for development. Doing so will help emerging nations become increasingly financially self-sufficient in their development activities.
WINNER B - Ch@ng€ for Babyloan
www.babyloan.orgCountry of implementation: Beneficiaries countries : Benin, Togo, Nicaragua, Ecuador, Philippines, Vietnam, Cambodia, Tadjikistan, Vietnam. Area of action: Worldwide
The French online lending platform babyloan.org - proposes to develop a “money box” (l’A Peu Prêt) for e-commerce transactions. The money box would be a voluntary option for consumers to round up online payments and to lend these More
funds to micro-entrepreneurs of their choice in developing countries. Consumer turned lenders would lend through the online micro-lending site babyloan.org. After repayment of the loan the lender could either reinvest in a new project or choose to get the money back. L’A Peu Prêt is a new way of consuming responsibly and an easy opportunity to help through microcredit.
WINNER D - EcoTRA: IIEC (International Institute for Energy Conservation)www.iiec.orgCountry of implementation : India
EcoHousing Trust and
EcoTRA attempts to finance energy efficiency retrofits in existing residential buildings. EcoTRA proposes to establish trust and retention (escrow) accounts to finance climate-friendly interventions in common areas of co-operative housing societies. The escrow mechanism will reduce the risk More
of lending, giving banks access to a large number of new clients. Co-operative housing societies will have increased access to finance and lower utility bills; energy efficiency service providers will receive additional business, and large-scale implementation will lead to lower green house gas emissions. The model will be tested in Thane city (pop. 1.2 million, Mumbai Metropolitan Region).
WINNER Q - Proving the Value Grameen Foundation
of Mobile Money for Microfinance
www.grameenfoundation.org Country of implementation: Kenya
Technology offers Micro Finance Institutions (MFI’s) powerful new ways to become more efficient and effective in the delivery of financial services to the poor. In partnership with KEEF, a mid-sized Kenyan MFI, Grameen Foundation will be working to integrate technology systems and processes to More
build out a model for enabling MFIs to fully leverage the power of technology in their operations, lower their overall costs, and expand their client base and product offering. The solution has three components: a back-end microfinance portfolio management system; an integrated front-end mobile money solution; and a business process optimization to fully leverage this end-to-end technology solution.
WINNER T - Weather Securities, Reducing Risk International Food Policy Research Institute
Nyala Insurance S.C.
www.ifpri.org Country of implementation: Ethiopia
Developing simple and transparent weather insurance products is a key input for developing micro insurance markets. Weather index based products have provided new opportunities for insurance provision; however effectiveMore
demand for these products has been limited. The innovation of our approach is to move from a single index-based insurance policy, to a system of several simple weather securities with fixed payments. The securities have three characteristics—simplicity, flexibility and inclusivity—that encourage stronger take up rates than the ones observed for current weather index based insurance policies. Providing these securities in Ethiopia can improve the welfare of millions of rain-dependent farmers.
E - Ethical financing for pro-poor carbon projectsNexus, GERES
www.nexus-c4d.org Country of implementation: South East Asia
Nexus, Carbon For Development is an alliance of pro poor project developers whose vision is to use the carbon market to combat climate change and alleviate poverty in a sustainable manner. Low cost clean technologies contribute to both alleviating poverty and mitigating climate change. More
However they lack appropriate funding mechanism for scaling up and mass dissemination. Current carbon market practices result in poor deals for social project developers, high transaction costs, inequitable risks and liabilities. Nexus is the answer from development practitioners to these challenges. As a member-based not for profit cooperative, Nexus proposes a new vertically integrated approach to carbon finance. Our solution is based on three components: access long term affordable financing, leverage traditional finance by reducing risk and costs, structure the sell side of the market in a fair trade way.
G - Financing results UC Development Services
www.yousee.in Country of implementation: India
UC brings a post-pay and result-based approach to development finance in the areas of Education, Health and Energy & Environmental services for the poor. We first apply our own funds to provide services to beneficiaries. Results which are measured and visible from such investments are More
then made available as “Certificates”, which donors and financers can buy “off the shelf”. Thus development funding becomes the purchase of a completed project or project phase. Funding would then be based on claiming actual outcomes rather than expected outcomes. By reducing the risk of opportunity cost for social returns, the post-pay model aims to attract more individual and institutional donors and funders, to create a larger and efficient market for philanthropy and development finance.
I - Lao’s offshore Asian Development Bank and Clifford Chance
debut with revenue
www.adb.org Country of implementation: Lao PDR and Thailand
This cross-border bond project aims to facilitate Lao PDR's debut in offshore market in order to access an alternative funding source, by issuing Thai Baht denominated asset-backed securities in Thailand. The bond will be secured More
by the future royalty fee receivables which will be earned based on the electricity produced by existing hydropower dams in Lao PDR that sell electricity to Thailand. If structured properly, Lao PDR can benefit from attractive terms which are incomparable to those of traditional commercial borrowing. The bond proceeds will be utilized to finance infrastructure projects to achieve Lao PDR's economic development and poverty reduction.
K - Making saving an impulse purchaseCenter for Innovative Financial Design
www.ifmr.ac.in/cifd Country of implementation: India
Recent studies show that the poor struggle to build up real savings over a longer time period. Saving requires discipline to forgo immediate gratification for future consumption. Building this discipline would need to shift consumption oriented to savings oriented behavior. One of the unsolved puzzles of development. IFMR India proposes to provide access to More
savings instruments without changing the behavior of the poor by creating a savings card that can be used for shopping consumption goods. The concept of the savings card would encourage savings even when people are in a “consumption mode".
M - Mobilizing Private Insurers for the rural poorRéseau solidaire de microassurances rurales (Redsol) & Acting for Life Country of implementation: Mexico
RedSol offers microinsurance products to poor families in rural areas which are adapted to their needs. The objective is to reduce their vulnerability. Redsol has created an innovative model that mobilizes capital and know-how from a major private insurance company, and distributes through a big network of rural organisations close to the beneficiaries.More
More than 97,000 micro life insurance policies have been written since end of 2005. Our challenge is to transform this successful experiment into a scaled-up sustainable social enterprise that develops new products and financial education.
O - Pay it Forward Carbon Bundling & Energy LendingSNV
www.snvworld.org Country of implementation: Nepal
Linking Carbon Finance and Microfinance to accelerate access to renewable energy technologies in Nepal, Pay it Forward utilises future capital from the country’s emerging carbon trading market as collateral for new renewable energy lending. This initiative aligns players from across the lending More
spectrum—multilaterals, commercial banks, carbon brokers, Micro Finance Institutions—thus spreading risk and reward and, critically, motivating local lending. Working on a revolving basis, the carbon revenues realised through Pay it Forward will be channelled back into the programme for future Renewable energy technologies lending, thereby returning liquidity into the system and ensuring its sustainability.
R - Seed Capital: Smallholder farmer joint venturesMcCall MacBain Foundation
www.supportliberia.com Country of implementation: Liberia
Outgrowers to Shareholders (OtS) will fight poverty and chronic unemployment by accelerating the reconstruction of Liberia’s natural rubber industry. The microfinance revolution has largely bypassed agricultural activities including tree crop farmers which lack access to adequate capital. OtS combinesMore
existing financial instruments into a new, creative package, which allows long-term investment capital to reach decentralized smallholder farmers. By partnering with OtS in joint venture partnerships, smallholder farmers will acquire advantages bestowed to larger plantations to become a powerful force in Liberia’s development.
Promoting incentives for development results: Project proposals in this area could involve the use of innovative financing mechanisms to help public entities achieve greater impact, and improve incentives for the public sector to achieve better results, in particular, for programs benefiting the poor.
Proposals on this theme could seek to utilize innovative financial instruments to help create incentives forfirms to provide goods and services for the poor and to increase the comfort level of private players investingin risky political environments, for example, through the use of guarantees.
Project proposals in this area could include the provision of safe, high quality,low-cost and accessible financial products to help households or family-based economic activities from the farming and informal sectors counter a precipitous drop in household income from shocks caused, for example, by price shifts, a death, accident, disease, drought, flood, or other unexpected, catastrophic event. In practice, these proposals might therefore be aimed at reducing risks faced by households or individuals at the “Bottom of the Pyramid.”