UNITED NATIONS CAPITAL DEVELOPMENT FUND    Microfinance

Issue 12 / May 2005

Issue Table of Contents

Update

on the International Year of Microcredit 2005

Marketplace

Made by Microentrepreneurs

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Past Issues

1. Sponsoring the International Year of Microcredit is just one of the ways that Visa is demonstrating a commitment to improving the delivery of financial services to small entrepreneurs in developing countries. Why is Visa interested in this market?

   The impact that microfinance institutions have by encouraging economic development is astounding. As microcredit grows, village by village, so grows the economy. Microfinance programs today serve approximately 100 million people. Through highly scaleable electronic payment solutions, the burden of collecting, distributing and managing microcredit funds can be reduced allowing microfinance institutions (MFIs) the time and resources to focus on serving the needs of the over two billion people who could benefit from microcredit. Many of our Member banks already see the potential of this market and we want to work with them to jointly use our technology and systems to serve entrepreneurs and microfinance institutions alike.

2. How will Visa's electronic payment products play a role in expanding access to financial services to poor people around the world?

   Many people living in the informal economy are highly vulnerable to theft and fraud, do not have the ability to save or invest in their future and when they need to borrow are frequently victims of predatory moneylenders. Visa's debit and prepaid card systems solve these problems and help bring the unbanked into the formal economy allowing more productive use of capital, increased growth and economic development. Education is also key. It is important to realize that Visa does not have direct relationships with the end user of our service, or in most cases even with the microfinance organization. Our role, therefore is to educate MFIs about the benefits of electronic payments and to encourage our member banks to work more closely with MFIs to spread the benefits of electronic payments more widely.

3. How will Visa implement its technology to achieve outreach on a mass scale?

   In terms of technology, we're working with a host of technology partners who are developing with us the payment platforms of tomorrow. Some like smart cards and wireless communications leapfrog over traditional infrastructure barriers in developing economies to electronic payments. The role of electronic payments will expand as people gain a better understanding of the benefits of electronic payments and the wide range of products and solutions that are now available

4. Do you expect that adaptations of Visa's electronic payment technology may be required to serve this market? To put this another way, are there innovations that are being driven by the demand side?

   The strength of Visa has always been its global network but we also have strong roots in local communities. This allows us to tailor payment solutions to the unique demands of particular countries and market segments. For example, right now we are working closely with FINCA on microfinance pilot programs in Central America. Our participation in the UN International Year of Microcredit has extended our knowledge of the wide range of initiatives going on around the world and we are actively responding to them.

5. The theme of this issue of Microfinance Matters is innovation and the future of microfinance. How do you encourage innovation at Visa? How can Visa's approach be applied to the microfinance industry?

   The fact that you are talking to me about Visa's role in microfinance is a clear demonstration of innovation in action. Through product innovation and technology, we've transformed our business from being about credit cards to providing a wide range of efficient electronic payment solutions to markets all over the world. What started as a simple credit card business now offers over 70 debit, credit and prepaid products to meet the electronic payment - money transmission needs of individuals, companies and governments around the world.

6. What is your vision for the future of microfinance?

   I want to see microfinance institutions have access to the benefits of electronic payments that will enable them to serve their customers better, to manage their own resources more efficiently, and extend the benefits of microfinance to a larger percentage of people. I'd like for Visa's Member banks to use existing systems and understand how partnering with MFIs can help them reach new markets safely and efficiently.

7. Is there anything else you would like to comment on?

   As we become more involved in microfinance, we realize that there are other needs that Visa can help meet. We need to look at potential microentrepreneurs and all the services that would benefit them, we need to work on more efficient ways to receive money from abroad through remittances and so forth. Working with local on-the-ground organizations in many countries, as well as through umbrella efforts spearheaded by the UN, we believe that Visa can play a meaningful role to support economic development goals and build business for our members. It's the proverbial win-win.