Economic development report august 2012 by Scott Beech

ANNUAL STEWARDSHIP REPORT ECONOMIC DEVELOPMENT Summary World Vision seeks to advance economic development in 16 priority countries—through microfinance, savings groups, and market development. This report highlights accomplishments to date by microfinance institutions (MFIs) in Armenia, the Dominican Republic, Ethiopia, Honduras, Mexico, Rwanda, Uganda, and Zambia. Many of these achievements would not have been possible without help from partners like you. Thank you for your support.

BENEFICIARY STORIES

A DESIRE TO LEARN—AND TEACH Efeli, 11, comes from a very disadvantaged family and counts herself lucky to be in school. Her mother was too poor to feed her children, let alone send them to school. But Efeli was taken in by Matildah Sikagoma, a woman who sympathized with her mother’s situation. Matildah is one of the most successful beneficiaries of VisionFund Zambia within the Sinazongwe community development area. With less than $100 in capital, she started a business now worth around $25,000.

When Matilda took Efeli in, she planned on giving her room and board, but had no intention to take her to school. However, as Matilda recounts the story, Efeli “started requesting me to take her to school, and after a while I gave in to her persistence.” She continues: “As I accompanied Efeli on her two-kilometer walk to school, I could not help but be impressed by the 11-year-old. Her dream, and her determination to realize that dream, impressed me the most”—a point underscored by Efeli’s teacher, as well. Speaking for herself, Efeli says that she wants to be a teacher. “I want to help educate poor children,” she explains, “whose parents don’t have the means to take them to school.” Although she misses her mother and siblings, who live far away, she is spurred on by her desire to learn—and to help her family. “When I complete my education, I want to take care of my mother and siblings,” she said with tears in her eyes. I furtively wiped mine.

World Vision is heartened by Matildah Sikagoma’s financial success as a client of VisionFund Zambia and the employment she has given others on her two fishing boats. We are especially pleased, however, by the education she has made possible for a vulnerable young girl whose heart’s desire is to contribute to the well-being of her family and community.

FROM SMALL-SCALE FARMER TO GRAIN DEALER Two years ago, Taddesse Awonew’s father died, putting Taddesse, 28, into the position of having to support his mother, a brother, and a sister. However, his income as a farmer, growing garlic, was not adequate for the family’s needs. Having long dreamed of starting a business as a grain wholesaler, he decided that the time was right to pursue his dream. He began by taking out an in-kind loan from a grain wholesaler. He also received some support from his two older brothers, both married and living on their own. And before long he was working as a grain trader. Taddesse Awonew, a client of WISDOM microfinance in Ethiopia, arranges bags of grain in his storehouse for customers to view and select. With a loan from WISDOM, Taddesse has begun to realize his vocational dream of becoming a successful grain wholesaler. In doing so, he is now able to support his mother and younger brother and sister, currently in school.

“Though income from the retail trading was good,” he said, “I wanted to expand my business to trade in a shop, which could serve as a store[house], as well as sales point.” For that, he would need additional capital. It was then that he learned from a friend about WISDOM, a World Vision-affiliated microfinance institution, which has a branch in Durame. He joined a group of other men interested in developing businesses with WISDOM’s help, and was able to take out a loan of $150. He used the money to buy a scale and additional grains, diversifying his inventory. “I thank God and WISDOM,” Taddesse said. “I have expanded my business, and my average income is almost tripled than before.” Taddesse now buys corn from a nearby town and sells it in Durame, where demand is high. He also lends grain to retailers.

Thanks to his increased income, Taddesse recently was able to buy needed appliances for his family’s home and is now preparing to construct his own house in Durame. In addition to being able to support his mother and younger siblings, Taddesse is able to pay for his sister’s education in high school and send his brother to college.

STRENGTHENING MICROFINANCE WORLDWIDE Working with individuals and groups, World Vision’s 36 microfinance institutions provide loans to farmers and entrepreneurs in impoverished regions, enabling them to start or expand small businesses. They also provide basic business coaching for active borrowers, and in some locations offer savings and insurance programs. As a result of these small loans and related services, children’s needs are met. VisionFund International (VFI), a World Vision subsidiary, oversees our network of microfinance institutions, VFI also leverages donations through commercial lending institutions, increasing the value of the donations. As loan capital builds over time, more people are able to obtain loans and other financial services. From October 2010 through September 2015, World Vision U.S. is giving priority funding to the microfinance institutions featured below. Performance figures are through March 2012. ARMENIA • Total active borrowers more than doubled since September 2010. • Loan portfolio grew 77 percent. • Portfolio at risk over 30 days (PAR) and operational sustainability* are healthy at 0.8 percent and 109 percent, respectively. DOMINICAN REPUBLIC • Active borrowers rose from 2,674 in September 2010 to 4,674 in March 2012. • In the same period, loan portfolio grew from $1.4 million to $2.2 million. • PAR (3.0 percent) and operational sustainability (100 percent) remain solid. ETHIOPIA • Active borrowers declined somewhat (2.2 percent) since September 2010, but outstanding loan portfolio increased significantly (25.9 percent). • PAR continues to improve, dropping from 9.1 percent in September 2010 to 1.5 percent in March 2012.

World Vision Microfinance

—2011— Children Impacted: 2,722,000 Jobs Impacted: 1,541,000 Loans Disbursed: 842,000 Active Borrowers: 688,000 Client Savings: $15.9 million Female Clients: 68% Loan Portfolio: $361 million Portfolio Repayment Rate: 95.5%

• Operational sustainability also improved significantly—now 98 percent. HONDURAS • Operational sustainability is trending upward, and PAR is trending downward. • Moreover, PAR for the 1,325 new clients in the target area is zero. MEXICO • The number of active borrowers has gone from 19,249 in September 2010 to 23,212 in March 2012, a gain of 20.6 percent. • Outstanding loan portfolio during this same period rose from $7.5 million to $9.5 million, an increase of 26.3 percent. RWANDA • Active borrowers increased by more than 50 percent since September 2010. • In response to high PAR (18.2 percent), directors instructed credit officers to reduce PAR at the branch level and have authorities follow up on defaulters.

*PAR is measured by dividing the total outstanding balance of loans by the active portfolio. Operational sustainability is measured by dividing total operating revenues by total administrative and financial expenses.

UGANDA

ZAMBIA

• The number of active borrowers continues to climb steadily, rising from 9,893 to 10,794 since September 2010.

• Active borrowers increased from 6,817 last December to 7,345 in March.

• During the same time period, outstanding loan portfolio grew from $2.4 million to $2.8 million.

• Outstanding loan portfolio also grew, from $1.3 million to $1.5 million, and PAR improved from 7.3 to 3.0 percent.

• PAR is up slightly this quarter, but still healthy at 4.3 percent.

• Operational sustainability fell slightly, from 64 percent in December to 63 percent in March.

• Operational sustainability declined somewhat this quarter, from 92 percent to 88 percent.

• To improve operations, VisionFund Zambia extended the coverage of mobile banking service to 100 percent of its branches—up from 62.5 percent in September and just 8 percent at the start of the project. In addition, VisionFund Zambia obtained a provisional deposit-taking license from the Bank of Zambia, positioning VisionFund Zambia to provide integrated financial services (loans, savings, and insurance).

• To improve service for its clients, VisionFund Uganda recently rolled out a money transfer service, Mobile Money, enabling rural clients to make loan repayments through mobile transfers, avoiding the risk and cost of transfers via ground transport. Anticipating needs in the area of infrastructure, VisionFund Uganda hired outside consultants to evaluate MED-Net’s current management information system and took steps to procure new software.

Performance Figures for Supported Microfinance Institutions—March 2012 Outstanding loan portfolio ($)

Active Female borrowers (#) clients (%)

Portfolio at Operational risk>30 days (%) sustainability (%)

Armenia

11,739,566

13,066

0.8

109

Dominican Republic

2,198,563

4,686

3.0

100

Ethiopia

7,021,335

46,943

1.5

Honduras

5,481,194

11,486

Mexico

9,463,975

23,212

1.3

100

Rwanda

5,065,979

21,548

18.2

N/A

Uganda

2,819,697

10,794

4.3

Zambia

1,479,718

7,345

“I thank God and WISDOM, I have expanded my business, and my average income is almost tripled than before.” —Taddesse Awonew, microfinance client in Ethiopia On behalf of Taddesse and countless other microfinance clients who are driven by the desire to overcome hardship through hard work, thank you. May God bless you as you have blessed others. For more information about economic development programs and the impact of your giving, please contact your World Vision representative.

World Vision is a Christian humanitarian organization dedicated to working with children, families, and their communities worldwide to reach their full potential by tackling the causes of poverty and injustice.