Creating a Successful MFI in a Small Remote Low Income Nation

South Pacific Business Development Foundation (SPBD)

Samoa

Greg Casagrande

What is SPBD?

SPBD is a Samoan based NGO dedicated to eliminating poverty in the South Pacific.

SPBD provides micro credit to the poor for the purpose of starting a small business.

SPBD follows the Grameen Bank methodology to micro finance.

SPBD currently serves the island nation of Samoa. www.spbd.ws

The South Pacific

Total Population – about 7 million. Most people in the South Pacific live in

rural villages on small islands. Most live on a GDP of less than US$2,000 per year.

Major Countries– Papa New Guinea, Fiji, Samoa, Solomon

Islands, Tonga, Vanuatu, Micronesia, Marshall Islands, Kiribati

The South Pacific

Samoa

Samoa

Samoa has been an independent nation since 1962 and is governed by an elected parliament.

Samoa consists of two main islands, Upolu and Savaii, and covers 1,100 square miles.

Samoa has a population of 204,000 people. Samoa is very rural. Apia, the capital, is the only

town of any significance in Samoa. Samoa is considered the cultural heart of

Polynesia.

Samoan Economy

Economy– 75% of Samoans are involved in subsistence agriculture.– There are few major employers providing traditional waged

employment.– The economy is very dependant upon foreign aid. – There is mass migration of the brightest to New Zealand,

Australia and the USA to pursue better opportunities. – GDP - US$930 per year - similar to Pakistan.– Poverty – In 1999, the UNDP estimated that 48% of all

Samoans live beneath the poverty line.– WHO rates Samoa’s Health system as one of world’s worst –

similar to Yemen.

Typical Lives in Samoa and the South Pacific

Poverty of Opportunity– No jobs (75% of families not in waged sector)– No Credit available for the poor

Typical living condition– Grass roof– Pebble floor– Poor sanitation– Poor access to running piped water and electricity

Childhood education is not free Unsophisticated, little experience with banks

Samoan living conditions

Samoan Living Conditions

Samoan Living Conditions

History of Microfinance in the Pacific

The Pacific is littered with failures Samoa has had several failures

– UNDP, SPC, MoWA– Church run– Government run– Volunteer run

Continuing Failures– Fiji – Samoa – WIB

Bee keeping Handouts Forced solutions

Competition

SPBD has no direct competition in Samoa. The three commercial banks and the Development

Bank each require collateral or steady income for loans. They do not serve the poor.

SPBD Advantage: – SPBD is the only financial institution in Samoa able to

DELIVER credit throughout Samoa.– SPBD is the only financial institution in Samoa able to

provide on a large scale completely unsecured credit to the poor.

SPBD - Business Practices Target poor women. Provide unsecured credit for :

– micro entrepreneurial purposes, – home improvements and – childhood education.

Businesses are based on existing livelihood skills. Encourage and train self-formed groups of five. Organize groups into village based centers. Members guarantee one another within a group. Deliver credit directly to the villages. Charge market rates of interest. Collect small repayments at weekly center meetings in the villages. Strive to achieve financial self-sufficiency via strong financial

planning and effective use of technology.

SPBD Business Practices

Very structured program with clear rules Helps counter:

1.  A very laid back culture2.  Low levels of education3.  No experience with financial institutions

Train staff and motivate them– Huge task because skill levels are low

Have strong local government support

SPBD in ActionPreliminary Meeting

SPBD in ActionPayment at Center Meeting

SPBD has a Business / Banking Mentality

Privately and commercially funded Started and maintained on commercial

enterprise principals Trustee, management and staff have

business and banking backgrounds. Funders – we speak your language

Cost Structure

Very low Lean organization CM’s to reach 500-800 clients each Yet very competitive and comprehensive

compensation and benefits structure

SPBD Methodology & Innovation

Created a Culture of Continuous Improvement

Client Identification– Formal invitation into the villages from local

matai (chiefs)– Poverty assessment tool

Identify the poor Measure impact

SPBD Methodology & Innovation

Product/Service Design– Variable loan sizes– Variable repayments– Flexible loans– Housing improvement loans– Childhood education loans

SPBD Methodology & Innovation

Delivery Methodology– CM’s support >400 clients each– In-house training program– In house loan utilization forms– Individualized weekly center reports– Center secretaries have professional

bookkeeping– Ongoing business education

SPBD Methodology & Innovation

In the pipeline– Process

Move from weekly to fortnightly meetings Group sizes to become flexible 4-7 members

– New Services Health Education series Improved Business Training Modules Savings Insurance Money Transfer

SPBD - The Leadership Team

The Trustees– Greg Casagrande – Founder and Managing Director

Education: – BA (Economics) - Colgate University – MS (Accounting) - Stern Graduate School of Business, New York University– MBA (Finance and Marketing) - JL Kellogg Graduate School of Management, Northwestern

University

Work Experience– CPA with Coopers and Lybrand in New York.– Several financial and general management positions with Ford Motor Company in Detroit,

Chicago and Japan. – Founder and Managing Director of SPBD.

– Jerry Casagrande – Trustee Education

– BA (Political Science) – Dartmouth College – MBA, MA (Latin American Development) - Stanford University

Work Experience– UNHCR, World Bank, Ashoka – Various management positions– 3D Life Adventures – Founder and Executive Director

SPBD – The Leadership Team (cont’d)

Jim Young – Trustee– Education

BA (Economics) – Princeton University

– Work Experience Goldman Sachs – Vice President – Institutional Equity Sales

Minh-Huy Lai – General Manager– Educated with MBA from Thunderbird School.

– 7 years of investment banking experience with JPMorgan in NY, Hong Kong and Singapore.

– MF experience in Kosovo.

– Lived in worked in many developing nations.

SPBD – The Local Team

All of our professional staff have strong prior work experiences (several with local commercial banks).

All are proficient in both Samoan and English. All staff are proficient on the PC and have been

trained in micro finance best practices. All staff are eligible for performance bonuses

based on individual and team performance.

SPBD - Achievements to Date

Building an Organization – We have a team of 10 full-time, well trained and dedicated

professionals. Infrastructure and Processes in Place.

– Our loan officers have vehicles to access rural villages. – We have a strong set of documented operating and administrative

processes and procedures. Villages Served

– We serve over 60 villages throughout Upolu, Samoa. The Poor Trained and Funded

– We have trained and funded over 2,100 businesses.– Distributed over US$800,000 of unsecured credit.

Achievements

SPBD has demonstrated that:– Poor Samoans are creditworthy– They are receptive to financial products– Capable of starting and sustaining small

businesses Leading academic opinion in the region

said contrary.

Measurements of Success.

Successful businesses for all of our micro entrepreneurs.– Food preparation – Clothing production – Copra (coconut oil) production– Vegetable farms, Plantations– Chicken and pig farms– General Stores, Roadside stands, market place trading– Weaving– Traditional arts and crafts– Tourist operators

Successful SPBD Micro-Businesswoman Bakery Business

SPBD Successful Micro-Businesswoman

Village Store

Measurements of Success

Quality of life indicators– High quality roof on the home– Proper flooring – Electricity in the home– Easy access to clean water– Easy access to good sanitation– Children in school

SPBD Ensures quality of life improvements by also providing: – Housing improvement loans– Childhood Education loans

SPBD has staying power

Where other regional MFI’s have failed, SPBD has persevered, learned, improved and grown.

We’re still here after 3 years We have handled internal corruption and theft.

– Cleaned out and strengthened controls and processes We have continually refined our process to reflect

the local realities. Aggressively pursuing Institutional Financial

Sustainability

SPBD Complaints

The South Pacific is not on the world’s radar screen– Too small– Too remote– Obscure cultures– Difficult to administer

The voice of the poor is not heard – Region is misunderstood

No Funds for MFI in regions– UNDP, USAID, IFC, SPPF, Major MFI corporate and

other donors are not interested in MF in the region.

Current State of Development in the South Pacific

Most development agencies have abandoned the region. (e.g. USAID has left the region due to difficulties in serving a remote population).

The need for economic development remains. Most of the population lives in rural poverty.

South Pacific nations are small and remote. None are currently served by a world class micro finance organization.

SPBD is now the largest micro finance organization in the region, despite the fact that it only serves Samoa.

Opportunities

There is now an excellent opportunity to create a:– well-managed, – large – efficient,– region-wide micro finance organization in the South

Pacific A region-wide, micro finance organization could

leverage a larger base of talent and financial resources and could thus help more people than could several struggling small organizations.

Major Constraints

Ongoing violence and instability in Papua New Guinea and the Solomon Islands is a major constraint in those nations. SPBD will initiate efforts first in stable nations.

Due to the small populations on each island, a successful organization must be exceptionally well managed and efficiently run. This is a key item for SPBD.

Funding is also a major constraint since most international funding organizations do not operate in the region.

Plans for the Future

Growth in Samoa– Expand to the island of Savaii

Growth in the region– Tonga – Vanuatu – Micronesia

Outreach– Could grow to 50,000+ long term

Capital is the key constraint

Concerns of Funders

SPBD is too small – We can breakeven with less than 5000 active clients

and an average loan size <US$300 Area is too small

– Samoa is small but the region is big– Many LDC’s in the region, totally neglected by world

class MFI’s– We have developed a replicable model that can be

replicated throughout the region and reach out to over 50,000 people

Wants

Look for opportunity to affiliate with large networks– Financial assistance– Share procedures/ processes– Share technology– Staff development

Looking for Capital Looking for Technical partners

Thank you

South Pacific Business Development Foundation– PO Box 1614 – Saleufi, Apia, Samoa– Phone: 011-(685)-20189– Email: greg@spbd.ws– Web: www.spbd.ws