Microfinance Anja Elise Ø. Husebø Strømme Microfinance anjaelise.husebo@stromme.org
www.stromme.org
Objectives of the day • • • •
Caracteristics – components of MF MF traditions Methods of MF Questions
www.stromme.org
Microfinance
Empowering people
Microfinance - components
• Demand • Product • Supply
www.stromme.org
Demand - seasonal events /consumption - lifecycle events - emergency - investment
www.stromme.org
Product Product - service - credit - insurance - transfer - saving Microfinance - Microcredit www.stromme.org
Supply • Supply - provider - Non Governmental Organisations (NGO) - Microfinance Institutions (MFI) - Banks - Internal groups
www.stromme.org
Guarantee
• • • • •
Trust Savings Guarantee Signature from well known person Collateral – furniture /TV etc
www.stromme.org
Bank upside down Rich – Poor Man – Woman Large loan – Small loan Large loss – Small loss Papers – Illiteracy Security – Trust You go to the bank – MF comes to you www.stromme.org
12
History • • • • •
1700: Irish loan fund system 1800: Co-operatives in Germany 1900: South America 1970: Micro credit, Grameen and ACCIóN 1980: Developing with interest rates, Bank Rakayat Indonesia • 1990: Microfinance • Now – new markets, new products www.stromme.org
Description �Microfinance comprises financial intermediation targeting the enterprising (economically active) poor. These normally have no access to formal financial services. The target group (mainly women) are offered a number of financial products, like savings, credit and insurance. Loans are given mainly for productive purposes and are repaid after a short period and at (relatively) high interest rates. Guarantees are normal individual or social/group guarantees. Such financial intermediation is offered by a variety of institutions from big banks to small NGOs.� Bistandstorget
www.stromme.org
A beggar
• Clarice
www.stromme.org
Microfinance - types
www.stromme.org
Community Managed MF (CMMF) FGH
$
FGH SMF www.stromme.org 17
Institutional MF $
$
FGH
FGH
$ SMF
www.stromme.org
Types Community Managed Microfinance (CMMF)
Number of products
Bank
SHG/ SfC/ VSLA/Worth/Myrada
MFI
ASCA
MDI
ROSCA
Flexibility
www.stromme.org 19
I am now dressed nicely 20
I am sending my son to school 21
I am fat now 22
I am a business woman
I am dreaming again 24
Strømme Microfinance AS
• CMMF • Institutional MF
www.stromme.org
Strømme Foundation - MF
www.stromme.org
www.stromme.org
www.stromme.org
www.stromme.org
www.stromme.org
Questions
Interest rates
• The alternative ”The most expensive loan is the one you never got.” • Paradox: they return Interest rate: • Cost of capital • Risk • Transaction costs
www.stromme.org
The poor cannot save
• Traditions – in kind saving • ”Savingsled” MF (CMMF) • Saving up • Saving down • Saving through www.stromme.org
Client Protection Principles • Avoidance of Over-Indebtedness • Transparent and Responsible Pricing • Appropriate Collections Practices • Ethical Staff Behavior • Mechanisms for Redress of Grievances • Privacy of Client Data www.stromme.org
So… is it working
• How well is it working – could it be better? • Expectations • Contextual differences
www.stromme.org
It doesn’t matter where you’re coming from. What matters is where you’re going.
Abbreviations
• • • • • • • • •
MF – Microfinance CMMF – Community Mangaged Microfinance MFI – Microfinance Institution MDI – Microfinance Deposittaking Institution ROSCA – Rotating Savings and Credit Associations ASCA – Accumultaing Savings and Credit Associtaion SHG – Self Help Groups SfC – Saving for Change (EPC – Epargne pour changement) VSLA – Village Savings and Loans Associations
www.stromme.org