microfinance focus march 2009

www.microfinancefocus.com Microfinance Focus [ March 2009 ] 1

Technology: Who Needs Training? The Marketing Dept & Training Social Responsibility and MFIs

Market Segmentation Approach Self Sustaining Micro-enterprise

Interview

Peter Ryan, Microloan Founda-tion

Institution Spotlight

enda inter-arabe Best Practices

Performance Based Training I-Focus

A Transformative Model

www.microfinancefocus.com

March 2009

Human Capital

ExpandingExpandingExpanding HumanHumanHuman Capital Capital Capital through through through

TrainingTrainingTraining Distribution of Performance


Cover Story : Training and Expanding Human Capital

21... Expanding Human Capacity through Training Focus on Training and NOT Educations, The Rewards are Measurable By, Jerome Peloquin

Horizon

14...The Market Segmentation Approach of MFIs By, Priyanka Jayashankar 18...Self Sustaining Micro-enterprise : Dairy Cow project By, Mr. Jastus Suchi Obadiah

Interview 33.. The Importance of Training ... Perspective of Peter Ryan, Founder and CEO of the Microloan Foundation

I Focus

29...Micro Venture Capital : A Transformative Model for Traditional Microfinance

Best Practices 24..Performance Based Training

Disclaimer Views expressed in the article/s are author’s own views. It does not necessarily represent those of Microfinance Focus . Microfinance Focus does

not take any responsibility of correctness of those data. Readers are free to use the info contained in the MICROFINANCE FOCUS for educating the stakeholders in the micro finance sector however you must acknowledge MICROFINANCE FOCUS and original source for the same.

Reflection 07...Since How to Use Good : Technology is Obvious, Who Needs Training? By, Bruce Meraviglia 09. The Marketing Department’s Proper Role in Developing Training By, Bruce Meraviglia

Perspective 11...Social responsibility is organic need of business strat-egy for micro financing institutions By, Dr. Souren Ghosal


26..Micro-finance in Tunisia The story, so far, of “enda inter-arabe”

36… News 06… Editorial—The US Desk 05... Editorial-India Desk

February 2009 Contents


BOARD OF ADVISORS Mrs. Frances Sinha Mr. Sitaram Rao Dr G. Gandhi EDITORIAL BOARD Dr. N Jeyaseelan Dr. Amrit Patel GOVERNING BOARD Mr. Suresh K Krishna , Chairman Mr. Ashish Gupta , Member Mr. M. V. Raman, Member Vikash Kumar , Executive Director ,

© copyright 2008-09 www.microfinancefocus.com

Team India Managing Editor Vikash Kumar Principal Associate - Knowledge Management Dr. Souren Ghosal Associate Editor Christina Weichselbaumer

The US Managing Editor Jerome Peloquin Associate Editor Pamela Faulkner Associate –Knowledge Management Raghunand Makonahalli Correspondent : New York Peter Burgess Marketing & Technology Editor Bruce Meraviglia Correspondent : Nairobi [ Africa ] Jastus Suchi Obadiah Magazine Design & Cover Page Pamela Faullkner

Microfinance Focus—India Avalahalli, Anjanpura Post , Bangalore( India)-62 P: +91.80.28436237 |f: +91.80.28436577 Email: [email protected] Web: www.microfinancefocus.com

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Editorial Office

Our People


Happily Announce

MICROFINANCE CONFERENCE-2009 Organized by Sa-Dhan

31st March 2009 at Delhi

Sa-Dhan, with help of its members and government agencies, endeavors to facilitate the growth process through creating collective learning opportunities. As part of such effort, Sa-Dhan is or-ganizing “Microfinance Conference-2009” in New Delhi on 31 March 2009. We are happy to inform you that Prof. Muhammad Yunus, the Nobel Laureate of 2006 and our Chair Smt. Ela. R Bhatt have given their kind consent for the conference. The conference is set to bring the policy makers, mainstream financial institutions, donors, financiers, practitioners, academicians, re-searchers, parliamentarians and international participants in one platform. Amongst others, the conference would specially focus on Effective Microfinance, Linkages, Opportunities, Gap in Gov-ernance, Ethics/Values, Code of Conduct etc. As a supporter of Sa-Dhan in it’s strive to serve the low-income households, particularly women in both rural and urban areas through facilitating and building the field of Community Development Finance Institutions.

Contact for Further Information

National Conference Desk Email: [email protected]

Sa-Dhan The Association of Community Development Finance Institutions 12 & 13, 2nd Floor, Special Institutional Area, Shaheed Jeet Singh Marg, New Delhi - 110067 Tel: +91-11-26852436, 41688036, 65650787, 26966518, Fax: +91-11-26518276 Website: www.sa-dhan.net

Or

Microfinance Focus , A Global Magazine on Microfinance and Sustainable Development

Avalahalli, Anjanpura Post, Bagalore—560062 (India), Tel: 080-28436237 | Fax: 91.80.28436237 | Mobile: +91.9731983650 | Email : [email protected]

Speakers & Special Guests

Prof. Muhammad Yunus, The Nobel Laureate of 2006

Smt. Ela. R Bhatt, Founder, Sewa Bank

Official media partner

Download Session Plan At www.microfinancefocus.com


Training in Microfinance : Are we different ? Microfinancing is growing both in space and application therefore looking for up gradation of technology and expertise. In fact some bright and enlightened people promoted these institutions but with the rapid growth the need for more and more such people is increas-ingly felt now. It has therefore highlighted the need to give more stress to build up appropri-ate human resource through training and to equip them with latest technology to enable team to deliver services to poor with least cost and maximum benefits. It has therefore be-come imperative to impart training for human resource development that would help to enhance organizational performance and sustainability of these institutions. There are two key factors in Micro financing that distinguish these from other mainstream businesses or even institutions promoted for developmental activities. First, Microfinance Sector represents a unique blend of corporate and social culture because of its operative principles, target clienteles and empathize on sustainability. The issue is just not about the development of competence among staff but how they could ensure a quality service deliv-ery along with the mission set for these institutions and also ensuring sustainilibilty of the institution. Second one is that Microfinance clients themselves represent a major training source for MFIs. Access to financial services, if added with skill and capacity building services could enhance client’s income and consequent economic growth. However, client training is a separate major stream, which we would like to cover in our subsequent issues of Microfi-nance Focus. In this month, we have put our modest effort to concentrate on training for human capital development from the organizational point of view. In this issue you would able to read lots about our expert’s comments on various aspect of training. I talked to several MFIs in India; it is good to found that, all of them see training is a good investment for the organization. Many of the MFIs, having a separate training wing, realize that it helps to enhance staff effi-ciency, and reducing attrition rate of employee. There is another very important aspect, which need close attention of all MFIs .It is to develop leadership within the organization. Leadership role is going to be critical not for the organization only but for the industry as a whole. Keeping the importance and relevance of the subject, we have brought out many in-depth articles on this theme in our March issue. I would also like to highlight some of our recent initiatives in Microfinance Focus, we are trying to get closer to your knowledge need from the sector, thus we have added many new features, like best practices, I –Focus, reflection on Marketing and technology and many more in-depth article and cover stories. We will be soon launching a Knowledge partnership initiative worldwide, through this partnership; we will try addresses the various develop-ment issue of Microfinance by facilitating information exchange and also we will established communication channels for exchanging news and other important knowledge resources. We will update you with its detail in coming issue. Overall, Microfinance Focus wants to establish its foundation in line with “social business enterprise” and will stress on the benefit maximization principle. Our effort will also to bring the voices of the last people. Indeed in this Your Support is very important for us, as our reader community is the most important stakeholder of this initiative. We look forward to our long term readership and would welcome your feedback preferably a critical appraisal of this edition of Microfinance focus. Enjoy Reading and Love Learning

- Vikash

From India Desk About the Issue

Vikash Kumar

[email protected]

Managing Editor-India

Write to the Editor


What is the Purpose of Training? Training is the topic of choice for this month’s issue: March, 2009. Microfinance Focus Magazine is dedicated to providing a knowledge as a strategic asset to our readers and to all MFI’s and NGO’s who serve the poor. We are totally dedicated to Dr. Yunus’s mission of ending poverty. If we are to succeed where others have failed then we must be better than those who have gone before us. We must do more and we must do it with less. This means we must have first class Training. Today, In this magazine we begin the task of moving that agenda forward. Training is not an end in itself. Although doing well in the training program is a good thing. It is possible that people do very well in training but still cannot do the job once in the field? It is not only possible. It happens all the time. Why? Well for one reason the training is not constructively valid, that is there is not a one-to-one match between the objectives of our training and the tasks of the job. The goal of training is not to pass a written test. It is not to prove knowledge of arcane and seldom used formulas. It is to lean one’s job as fast and comprehensively as possible. We measure the success of training not by how well the trainees perform in the classroom but how well they perform on the job. Training has only one purpose: Performance! The Train-ing department’s principle purpose is to produce competent performers. Another means for evaluating your training is to apply the Kirkpatrick evaluation model as shown here: 1. Did the trainees like the training?

2. Did they learn from it?

3. Did they apply what they learned on the job?

4. Did job performance measurably improve? From a business profit perspective only number 4, improved job performance is relevant. If you would another measure of how your training department rates in the performance department, try this. Ask three of the best supervisors (Branch Managers?) this question. “How long is it from the time a new trainee arrives at your branch before they are as good as the average performer. In this month’s cover story “……..” we address the cost factors associated with training, we also show how critical training can be and how expensive it is to train staff and management. Today, when all resources are being reduced it is more important than ever to assure effi-cient and effective training. Training is an investment in Human Capital it expands Capacity and creates profit. Microfinance Focus Magazine is dedicated to helping you reach those goals. Unquestionable the avowed purpose of Training is measurably improved job performance and enhanced human capacity. That is the purpose of Training.

From US Desk About the Issue

Jerome Peloquin

[email protected]

Managing Editor –US

Write to the Editor


One of the failings that is commonly found when a new device is introduced is that the development of training materials to support it is either viewed as unnecessary, since every-one will automatically understand how to use the new technology, or is viewed as too costly to be worth developing. This is unfortunate, and something that I and many others have seen re-peated over and over again. When discussing the introduction of new technol-ogy, whether it be it a mechanical apparatus, an electronic device, or a piece of software, it is of-ten appropriate to keep in mind something as simple as a piece of rope. If one has ever been

around boats, or has gone sailing, then you may be aware of the many ways that a rope can be tied into a knot, and that every knot has a differ-ent use. Beyond boating, there are still more ways, and purposes, that a rope can be tied into a knot – so much so that there are books whose only function is to show the reader how to tie the many different types of knots, and to discuss the purposes of each one. While it can be argued that nothing can be sim-pler to use than a piece of rope, the fact that a market exists for such books shows that even knowing how to properly use a rope, or how to tie the proper type of knot, cannot be considered “obvious.”

Since How to UseSince How to UseSince How to Use Good Good Good Technology is Obvious, Technology is Obvious, Technology is Obvious, Who Needs Training?Who Needs Training?Who Needs Training?

Reflection: Technology

-Bruce J. Meraviglia, Technology & Marketing Editor-US (Microfinance Focus)


While it is not possible to know how many good inventions, pieces of equipment, or software ap-plications have been poorly used, or rejected completely, due to the lack of appropriate train-ing, there are far too many stories in the MFI community about simple items such as a water pump for a village that was installed by an out-side group who failed to train the villagers in its proper use or repair (because, after all, it was “obvious”), and when the pump eventually failed, it was ignored rather than repaired by the villag-ers – none of whom felt any ownership or re-sponsibility for the pump. When training is accomplished by one person showing another, or a group, how to perform a task or use a piece of equipment, any organiza-tion will quickly realize that this form of training may quickly become too costly and limited in the number of people they can reach. Additionally, the more people you train as trainers, the greater the degree of variation in how each eventually passes on their knowledge. If that same training is accomplished by the use of books with illustrations and text, the organiza-tion passing them out will be faced with the issue of illiteracy. Can they afford to develop enough illustrations of the task to be performed that it will be understandable even if the “reader” can-not read? It may be that with the increasing penetration of portable computers into even remote areas, with some form of Internet access, that the Internet may prove to be the cheapest and most flexible medium for delivering training. When using soft-ware, over the Internet, the organization provid-ing the training can effectively provide for a con-sistent learning experience for every person who views the training. Additionally, the organization providing the training can provide an adequate number of illustrations, animated simulations, videos of the task to be performed, or audio de-scriptions of what and how to perform the task so that each individual, regardless of their ability to read and write, can gain a minimum level of understanding of how, and when, to perform the task described. If the training over the Internet is provided using a Learning Management System (LMS), then the organization providing the training can begin to gain an understanding of how often their training

is viewed, or re-viewed, when and where it was viewed, and what portions of the training were viewed the most, and to what extent the viewer completed each portion of the training. By ena-bling some degree of questioning of the user, via the training software, the organization providing the training can also begin to determine if the nature of the training is adequate or requires ad-ditional enhancements. In the US, where I am writing this article, the first widely used, and accepted, LMS was a soft-ware application called “BlackBoard.” While BlackBoard (http://www.blackboard.com) is still the leader in the US market, it may not neces-sarily be appropriate in developing countries. What is appropriate, though, is to view this com-pany’s product offerings as a path towards un-derstanding what can be accomplished with this type of software. After reviewing the BlackBoard site, you may also wish to review the LMS pack-ages offered for free use on the SourceForge community website (go to: http:/ source-forge.net, and enter “lms” in the search box). Either way, you will be more informed on how this type of software may improve your organi-zation’s training efforts, as well as being more informed as to what this type of software is ca-pable of doing for you. I look forward to hearing back from you as to how your organization delivers training, what you have found to be the most effective method(s) for delivery, and whether or not you have considered this type of LMS technology for use within your organization. **************

Reflection || Since How to use good technology...

Bruce is an expert and commentator on both tech-nology and marketing. He is former Marketing Di-rector for several high Tec start ups. Bruce cur-rently serves as CTO (Chief Technology Officer) for a well known NGO. He may be reached at [email protected]


The Marketing Department’s Proper Role in Developing Training

Reflection: Marketing

-Bruce J. Meraviglia, Technology & Marketing Editor-US (Microfinance Focus)

I n the marketing department of a typical company, the topic of training is usually

discussed in only one of two ways. The first is when the marketing department has decided that they should run an internal seminar to pre-sent an overview of their marketing campaign and branding activities to the sales force, along with any new marketing literature that they be-lieve will assist the sales force in closing new sales. If there is a product marketing function in the company, then the second is when the prod-uct marketing group has decided that they should run an internal seminar so as to educate the sales force as to the features, benefits, prod-

uct positioning and suggested sales strategies for new or enhanced products in order to help close more sales. What is missing in the paragraph above is any mention of who the real “customer” is. Essen-tially, the focus of the traditional options above is on how to sell to the external customer. What the average marketing department, whether in a commercial company or an MFI, seldom recognizes is that they have two dis-tinctly different “customers” they need to serve. When a new product is introduced, the organiza-tion looks to the marketing department to prop-erly position it in the minds of those individuals who may choose to purchase it, to create a


brand identity for the product that will allow it to be recognized among other alternatives in the marketplace, and to create a marketing cam-paign that will introduce the product in such a way as to lead people to select that product from others that it may compete with. These activi-ties are targeted towards the external customer, and implicitly include a strategy to educate the customer as to the value of selecting that prod-uct,. What the above paragraph does not consider, nor do most marketing departments, is the inter-nal customer. Every marketing department has as their internal customer the organization’s sales force. In the case of the MFI, the sales force is the loan . The need of the internal cus-tomer is not the same as the external. While the external customer will benefit from an educa-tional strategy in the marketing activities, the internal customer requires a training strategy in order to properly accomplish their function. There is a distinct difference between education and training, which is addressed in our Cover Story (see “Expanding Human Capacity Through Training”), so I will not repeat it here. What I say, from the perspective of having been in both marketing and sales functions, is that the mar-keting department needs to provide effective training on the key aspects of any new product the MFI has chosen to introduce. In a typical internal “training” program, the marketing de-partment typically presents their new marketing strategies or products to the sales force, and at-tempts to “educate” them as to the features, benefits, sales strategies, etc. that the marketing department believes will be valued by the exter-nal customer. This type of an overview, in real-ity, will do little more than create an awareness of the products presented, but nothing to effec-tively help the sales force perform their function. In the case of the MFI, what the loan officers need is effective training in how to properly pre-sent, position and defend the value of the MFI’s products, whether the products consist of a new type of microloan, an enhancement to the MFI’s business development services, or a new type of microfranchise opportunity. This type of training approach is intended to create a capability for the loan officers rather than an awareness. The purpose of any training program is to develop the necessary skills that will allow the job func-

tion to be successfully accomplished, not to pro-duced an awareness of what is supposed to be accomplished. The participant in a training program should never have to determine at a later date, on their own, what information that was presented to them is useful, or how to use that information to execute the requirements of their job. At the completion of a properly run training seminar, the loan officers should feel capable presenting the new products, the use of any tools (such as new forms or literature describing the products), and how to follow any new processes or proce-dures to complete the “sale” to the MFI’s cus-tomers. And, not only should the loan officers leave the training seminar confident in their new capabilities, but the marketing department should be able to confidently state to the senior management of the MFI that the loan officers will be able to perform as expected. If neither the loan officers or the marketing de-partment can feel this level of confidence at the end of the training seminar, then the marketing department has failed both the MFI and the loan officers. I look forward to hearing from you on our blog as to what types of training, if any, your organi-zation provides to its loan officers, how effective you think it is, and if you believe you could confi-dently tell your senior management that every-one will be able to meet or exceed their perform-ance expectations. ***************

Reflection || The Marketing Department`s Proper role...

Bruce is an expert and commentator on both tech-nology and marketing. He is former Marketing Di-rector for several high Tec start ups. Bruce cur-rently serves as CTO (Chief Technology Officer) for a well known NGO. He may be reached at [email protected]


In recent years there is some lurking evidence that generally micro financing institutions look for commercial success only and overlook the organic social objective of alleviation of poverty of large number of poor people living in the so-ciety for whom these institutions in fact were conceived and established. This is apparent from the fact that most of these institutions generally limit their span of activities that would generate immediate cash flow to bor-rower and would help them obtain repayment within a short span generally a week. It does help borrower to overcome their immediate need arising for making an advance or full pay-ment to buy their raw materials or inputs to be used for their productive activities in farms or firms for trading or for other odd economic ac-tivities like tailoring, printing and or designing jobs. It would be evident that such funding though helps them to overcome their immedi-ate financial crunch but generally fail to uplift them from their present economic status. If any one objectively study these institutions it would be obvious that most of them act as fa-cilitator in remittance of money rather than acting as funding agent for economic growth and consequently extending helping hand to borrowers to grow in social hierarchy by be-coming prosperous entrepreneur.

Sustainable Banks In some of the recent research work under-taken by the World Bank—Sustainable Bank-ing with Poor (SBP) has revealed that with few exceptions these institutions could hardly outreach the poor and or create financial stabil-ity nay even fail to create sustainability as the strategy they have been adopting so far either concentrating to outreach the poor or help some people to acquire or develop some ven-ture. But they have failed to attain both to-gether due to the erroneous strategy so far pursued by them. It is true that these institu-tions should develop sustainable strategy but it is equally wrong to assume that if they adopt any strategy that takes care of the social re-sponsibility would make them unprofitable or economically nonviable. Recent Efforts It is true of late some efforts are going on among some MFIs to enlarge their activities besides lending by providing insurance cover and or health care. These are no doubt laud-able innovations but definitely not covering gamut of social responsibility that would have given them more space and revenue along with

Social responsibility is Social responsibility is organic need of business organic need of business strategy for strategy for micro financing institutionsmicro financing institutions

Dr. Souren Ghosal , Microfinance Focus

Perspective


fulfillment of social obligation. It has to be clearly understood that CSR is not just knee-jerk efforts to provide some so called support to poor entrepreneurs. However, increasingly some awareness in this regard is visible. In fact some enlightened MFIs have already started realizing that social responsibility is more an opportunity than a problem for their organic growth and for obtaining greater advocacy of their borrowers. In fact the general assump-tion that there exist conflict of interest in busi-ness development and endeavor to provide so-cial needs of customers is gradually waning. Developing Trend Of Inter-Relationship In fact today’s business scenario it would be fatal to overlook this implicit truth of intimate relationship that exists in business and social development. It is true that alleviation from poverty would be possible when institutional help become all pervasive encompass all that ameliorate poverty and neglect. This is not only true for MFIs as history tells that many pros-perous companies fell due to wrath of consum-ers who felt cheated or neglected. Hence for obvious reasons most of the international com-panies have suo-motto started polishing their CSR strategy and increasingly making it a part of their business strategy. JOHN EHRENFELD therefore rightly observed in his book ‘BEYOND SUSTENABILITY’ that first and foremost thing we must conceptualize that sustainability is a measure that includes the thoughts, beliefs and values of men and women. In fact he has de-fined sustainability as the possibility that hu-man and other life flourish on the earth for-ever. It is the sustainability of welfare and commercial activities that help growth of soci-ety and the environment. This is the ultimate view and does not in any way deprave or de-grade commercial objective of any institution. In fact HARTMAN GROUP’S report observed that few consumers have deep or extensive knowledge of expertise, policy or even corpo-rate discourses with regard to sustainable so-cial development. Truly speaking hardly a few borrowers/customers has any clear idea with regard to corporate social responsibility and consequent its sustainability. However despite this it is interesting to note that most of the borrowers/customers are conscious of what they have been missing over the years and therefore remain poor and neglected despite

their hard work and honest desire to come out of the groove. Some of the recent researches have revealed that a visible cultural shift is tak-ing place in semi-urban towns and big villages. But unfortunately politicians provide lip sympa-thy to this growing awareness or suppress the same with doles, grants and waiver of loans and taxes. However in recent years some shift in this re-gard is also visible as could be seen in their ef-forts to create employment opportunities and education and health facilities in rural areas. This is not enough as because the delivery model chosen are mostly political institutions manned by highly corrupt individuals. The re-searches have revealed that expectations and realization of perceived neglect is growing and consequent perceived risks are also surfacing due to transformation of personal behavior of rural poor particularly the youth. Shift from Present Mindset Of Self Interest PHILLIPA CHARES, a SWEDISH technologist and thinker has rightly called for a shift from set of values based on self interest to set of values based on common interest and good for all. It does not mean that commercial institu-tions should become philanthropic organization. In fact by taking stock of policy, practice and profitability with due weight age on social re-sponsibility would make the institution more viable and acceptable. One very prominent ex-ample is INFOSYS in I.T. industries. MFIs how-ever still have to walk miles to reach that level but gradually this would be adopted by MFIs also as that way only they would become more responsive to society and help alleviation of poverty and just not an organization to provide temporary liquidity or even relief to the poor and look for profit only. Transformation Of Strategic Thinking It is obvious therefore there is need of total transformation of mindset of promoters of MFIs. The general concept prevailing among the entrepreneurs that the business floated by them is ‘my business’ need to be changed and concept that is emerging even in big business that business belongs to all stakeholders and not only to shareholders; MFIs should also con-sider their institution belong to whole group of people around whom they have formed the in-

Perspective || Social Responsibility is organic need ...


stitution. Hence their business strategy should be taken care of all their needs so that their ‘mai-bap’ no longer would be the state but their own institution. Such a model is feasible and workable as group lending is prevalent in al-most all such institutions and therefore they have already built in advantage of working with group and keeping close contact with the group but they have been using group contacts for loan assessment and repayment only but do not avail the opportunity to know their expec-tations and aspirations and therefore fail to ab-sorb social responsibility in their business strat-egy. This could have been done without much cost if would have changed the prevailing mindset of treating group as insurer of repay-ment only and would have formed the group on cluster basis for a given type of business or for farming on a compact plot of land. It would ob-viously helped them to develop a project that is feasible and viable and also helped them to de-velop appropriate agencies to supply inputs and sale outputs along with that they could also run a training institute to help then to learn their crafts and provide them suitable health care facilities. This would have made their business strategy socially and economically sustainable. To make these services available they could have joined with state governments and availed their funds and estate facilities. Assessment of proposed Delivery Model This delivery model would prove beneficial to the state also as it would have been managed and run by the institutions having stake of all concerned and also would have the necessary management and fund raising ability. It would obviously minimize the loss and unspent return of grants for various schemes of state for pov-erty amelioration. It has to be clearly under-stood that long term success of a business de-pends not only on quantum of financial gain but also on qualitative improvement achieved by the society. Indeed it looks rosy but needs con-siderable spade work to convince people and

form a group that could take up a viable pro-ject for farming or business or both and have a comprehensive plan to provide all felt needs of the group at an affordable cost and expected efficiency. It is obvious that activities including education, training, supply chain development, marketing and even housing and hospital facili-ties could be commercially viable if a compre-hensive project with cot benefit analysis en-compassing all these activities could conceived in collaboration with banks and state and cen-tral government. In fact banks could play a nodal role and help developing such projects identified by NGOs and or state/central govern-ment planning agencies. It would be worthwhile to develop some SEZ for agriculture and rural industries and try out this model for ultimate adoption for inclusive growth. In fact enough resources have been wasted in the name of poverty alleviation but poverty level has not gone down much. The present MFIs also have failed to achieve this mission though some lukewarm efforts could be seen here and there. Present Status It is unfortunate that only a few exceptional endeavors made by say GRAMEEN BANK in BANGLADESH and SEWA in India hardly any comprehensive efforts have yet been made by micro financing institutions to adopt this role model despite immense potentiality that exist in such models even if one looks for commer-cial success. It is therefore imperative that more attention should be given by NABARD and SIDBI in INDIA to introduce a comprehensive policy measures. In fact as has been emphati-cally brought out that there is no conflict of in-terest with commercial viability as often as-sumed generally by these institutions when they think of building their business strategy with stress on social perspective. Sooner this is realized better would be the future of these in-stitutions and deeper would be the impact on people whom they serve.

About the Author: Dr. Sourendra Nath Ghosal holds a PhD in Finance and holds Master degrees in both commerce and Economics. He has ex-perience taught for 18 years in colleges and university of Jodhpur Rajasthan; Worked as principal cooperative training col-lege for about 2 years at kalyani w. b. He worked with United Bank of India FOR 22 years and retired AS G.M. credit. He has also authored several books and Papers published in several national and International journals & newspaper. You may reached him at [email protected]

Perspective || Social Responsibility is organic need ...


“Heavy Emphasis on standardization of products, has hindered MFIs’ Financial And Social Performance”

T he Indian microfinance sector has witnessed an intensification of competition with the foray of commercial banks, international credit cooperatives and a

host of fledgling MFIs. Client desertion and multiple borrowing pose serious chal-lenges to microfinance players. There’s a growing thrust on product diversification and customization to satiate the needs of discerning microfinance clients. In such a scenario, time-tested concepts of marketing would assume greater signifi-cance amongst microfinance practitioners and researchers. A case in point is that marketing functions have become the mainstay of the financial services industry due to the growing homogeneity of financial services and the lack of differentiation in pricing and promotion.I It would be relevant to investigate how MFIs glean out market intelligence on clients’ consumption patterns and livelihood models and undertake promotional activities. Impact assessment on clients would enable MFIs to pinpoint the factors that bring about low retention rates. Contemporary microfinance research is replete with debates on client outreach and product standardization. Academic researchers have drawn a distinction between the product centric and client centric approaches used by microfinance institutions (MFIs). The product centric approach, wherein there’s scant information on clients and heavy emphasis on standardization of products, has hindered MFIs’ financial and social performance. ii

Horizon

The Market Segmentation Approach of MFIs - Priyanka Jayashankar


Overview of segmentation approaches

MFIs adopting a product-centric approach have witnessed abysmally low client retention rates, as the clients’ financial needs are not factored into the product design. On the other end of the spec-trum, client-centric MFIs typically collect informa-tion on:

-clients’ usage of products

-household economic portfolios

-integration of financial products and services into the household economic portfolio

In this context, it would be pertinent to study how MFIs segment their target clientele due to the spurt in competition and the emergence of corporatised microfinance business models.

Segmentation variables in the financial services sector can be categorized on the basis of:

i) Demographics: gender, income level, literacy, family size, scale of business, geographic location of family/ business

ii) Consumption patterns

iii) Psychographics: activities, interests, values iii

iv) Buying factors: loan size, tenor, pricing, ser-vice attributes

Researchers also attach significance to the cus-tomer’s perceived knowledge of financial services and level of involvement (interest) in financial services. iv Market segments in the microfinance industry may be characterized by high price-sensitivity. Microfinance clients’ product prefer-ences such as the loan tenor, interest rates and repayment terms can also be considered as mar-ket segmentation proxies. There’s also likelihood of customers basing their borrowing choices mostly on loan approval speed.

Sectoral segmentation

Market segmentation is a core focus area for NEED, an NGO-MFI based in Lucknow. Audits are conducted regularly on the sectoral break-up of micro-enterprises. The staff members have also

been sensitized to handle different market seg-ments.

NEED has an appraisal system wherein the sec-toral break-up of the number of micro-enterprises and livelihood initiatives has to be submitted by the general manager to the CEO on a monthly basis. The staff members are trained accordingly to handle different segments of cli-ents, such as dairy farmers, embroidery workers and artisans. Staff meetings and seminars are organized to give loan officers and managers in-sights into servicing clients hailing from diverse sectors. “The staff members are specifically trained to handle clients with a service driven at-titude,” pointed out Anil Singh, the CEO of NEED.

NEED’s livelihood service advisors undergo rigor-ous training to manage self-help groups across rural areas. To start with, the livelihood advisors have to identify the poorest individuals in vil-lages/ urban areas prior to the formation of self-help/ joint-liability groups. They outline the fea-tures of microfinance schemes during field visits and collect data on potential clients.

Client monitoring and appraisal systems are also in place to ensure that the funds disbursed are invested in productive activities. Loan officers check whether the loans provided are used for setting up/ expanding micro-enterprises within one week of disbursement. SHG officials are also advised by loan officers to monitor the use of funds to avoid difficulties in loan repayment.

Asasah , a South Asian MFI, v which had a core competency of servicing home-based businesses, was unable to reach out business owners due to the lack of training of its staff members in han-dling SMEs and lack of diversification of products. Hence, one can infer that staff members in a mi-cro-finance organization have to categorize cli-ents into various segments and the delivery ap-proach has to be in sync with segmentation, which can lead to higher client retention rates.

Segmentation based on consumption pat-terns

The Chennai-based MFI, Samastha undertook a market survey two months prior to the launch of the MFI. “We attempted to study the require-ments and consumption patterns of micro-entrepreneurs in both developed and backward districts of Karnataka and Tamil Nadu,” explained

Horizon || The Market Segmentation approach of MFIs


TV Padmanabhan, the CEO of Samastha. The initial market research revealed three major fi-nancial requirements of micro-entrepreneurs:

- Working capital requirements for running a mi-cro-enterprise

- Expenditure incurred on education

- Expenditure incurred on social/religious func-tions

In many cases, the micro-entrepreneurs end up depleting their working capital for organizing family functions or funding their children’s pri-mary education. “MFIs clients, particularly those in India, attach a lot of importance to their fami-lies and traditions,” pointed out Samastha’s CEO. Low-income families often spend a substantial amount of their savings on functions such as marriages, religious ceremonies to honour village elders/ ancestors and pilgrimages to distant shrines.

Samastha’s market research revealed scant dif-ferences between the poverty levels in urban and rural areas. However, the urban BoP has more employment opportunities across a range of sec-tors compared to their rural counterparts, who mostly rely on the agricultural sector. Samastha Microfinance solely targets micro-entrepreneurs in Tamil Nadu and Karnataka. The clients are segmented on the basis of their credit require-ments, not their occupational background:

i) Income generation loans, which are targeted at micro-entrepreneurs

ii) Education loans, which are provided to mem-bers having school going or college going children

iii) Social commitment loans provided for mem-bers incurring expenditure on marriages and fu-nerals

At a grassroots level, the field welfare officers play a pivotal role in enrolling clients and carrying out market research. They constantly educate the clients to use the micro-loans judiciously and to curtail unnecessary expenditure on consumption activities. “The field welfare officers strive to identify themselves with the clients,” explained Padmanabhan. The officers are also trained to handle various client segments. As of now,

Samastha targets only married women in the age-group of 18 to 50, which is a relatively stable and non-migratory client segment. Potential members should have been residents of the same target area for at least three years.

This is a pre-emptive measure against a rapid churn of clients, which may de-stabilize self-help groups. In the long-run, the policy would also ensure greater cultural and socio-economic ho-mogeneity of self help groups. It is also pre-condition for all members to be involved in some form of micro-entrepreneurship. Though the MFI is yet to innovate its product design strategies, the top management is mulling the launch of mi-cro-loans targeted at the agricultural sector in the long-run.

Reaching out to graduated clients

There’s high probability of micro-enterprises growing into small and medium enterprises. Un-der such circumstances, an MFI would have to scale up its product portfolio to meet the growing capital expansion requirements of its clientele. For instance, flagship microfinance players such as Grameen Bank and BRAC could no longer ca-ter to the requirements of a single market seg-ment and consequently, they had to upgrade their financial services to meet the requirements of growing businesses. BRAC initially used the same staff to service small-scale borrowers and small enterprises. However, it later used a differ-ent approach for marketing the MELA pro-gramme, vi which was targeted at small enter-prises.

Larsen & Toubro Microfinance has adopted a two-pronged strategy to target micro-entrepreneurs and SMEs in South India:

i) Gram bandhu programme:

The scheme is meant to facilitate financial inclu-sion of the BoP. Micro-loans in the range of Rs 5000 to Rs 50,000 are disbursed to joint liability groups consisting of 4 to 6 members. Only women from families earning a monthly income of less than Rs 5000 a month are eligible to join the liability groups. The following kinds of activi-ties are funded under the scheme:

- Farm sector : agri-inputs, dairy farming, goat rearing, nurseries



- Non farm sector – small grocery shops, hawk-ers, vegetable vendors, traders

Only projects yielding a 24% internal rate of re-turn are selected. The credit decision is taken based on a village appraisal and a scoring model. L&T has fixed a year-long tenor for the Gram Bandhu scheme. The loan repayment can be made in monthly and weekly installments.

ii) Gram Udyog

L&T has attempted to bring about financial ad-vancement through this scheme by providing loans in the range of Rs 50,000 to Rs 500,000 to small businesses. Currently, business models for dairy financing, warehouse financing, Emu and goat farming are being evaluated. “LTF will straddle financing opportunities in rural value chains, in a profitable and scalable manner,” ex-plained Kishore Mangalvedhe, who is heading the initiative. The Gram Udyog scheme will be opera-tional in the same geographic areas in which Gram Bandhu has been launched. However, the credit appraisal, documentation and security pro-cedures would be more advanced for the Gram Bandhu clients.

To enhance long-term customer loyalty, success-ful micro-entrepreneurs who have profited from the Gram Bandhu scheme can graduate to Gram Udyog, which would enable them to scale up their businesses. “Clients of Gram Bandhu can aspire to graduate to Gram Udyog, which will not only take them out of poverty, but will make them financially independent.” L&T’s research activities are centered on viable livelihood models and it has sought to bring about a change in the lives of the BoP and the base of the pyramid segments. Jonathan Morduch (2000 ),vii the noted micro-finance researcher, has pointed that several NGOs/MFIs conduct inadequate research on the loan use and income generation activities of end-users. However, Grameen Equity bucks such a trend, as it carries out substantial field work on micro-entrepreneurship and development issues. Samastha too, for its part, has carried out an ex-tensive study on the consumption patterns and micro-enterprises in economically backward re-gions. L&T is undertaking the study of various livelihood models before launching its services in target markets.

It is evident that the MFIs are taking full cogni-zance of market intelligence inputs to launch or

fine-tune their service portfolio. The organiza-tions are unlikely to standardize their products without understanding the nuances of key client segments.

From the above cases, one can infer that a clear-cut market segmentation strategy would enable MFIs to gain in-depth understanding of their cli-ents’ credit requirements (for both enterprise de-velopment and consumption). The livelihood models prevailing across the unorganized and agricultural sectors have to be segmented accu-rately so that the financial products can be cus-tomized in accordance with the clients’ cash flows. Customer loyalty and retention can also be enhanced by developing schemes, which can meet the requirements of rapidly growing enter-prises. This would ultimately enhance the sus-tainability of MFIs and boost the profitability of micro-entrepreneurs.

Note: The inputs from NEED, Samastha and L&T Microfinance were obtained through semi-structured interviews.


References i. Javalgi, Rajshekar and Dion, Paul, A Life Cycle Segmen-

tation approach to Marketing Fmancial Products and Ser-vices, The Service industries Journal, Vol.19, No.3 -July 1999, pp,74 96

ii. It pays to know the customer: addressing the informa-tion needs of client-centered MFIs; Elizabeth Dunn; Jour-nal of International Development; 14, p 325-334 (2002)

iii. Chen, Gregory and Weiss, Kirsten; Lessons from South Asian MFIs moving up market, Enterprise Development and Microfinance, Vol. 18, No. 4

iv. Financial services marketing, Tina Harrison, Pearson Edu-cation, (2000)

v. Chen, Gregory and Weiss, Kirsten; Lessons from South Asian MFIs moving up market, Enterprise Development and Microfinance, Vol. 18, No. 4

vi. Chen, Gregory and Weiss, Kirsten; Lessons from South Asian MFIs moving up market, Enterprise Development and Microfinance, Vol. 18, No. 4

vii. Morduch, Jonathan (2000), The Microfinance Schism, World Development Vol. 28, No. 4, pp. 617-629

The author holds a basic degree in economics, and is a trained journalist. She holds an International MBA from the Maastricht School of Management, The Netherlands. Cur-rently, she is undergoing a Doctoral program in Business Ad-ministration from the same institute with a special focus on marketing of microfinance in India. An alumna of the Asian College of Journalism, Chennai, Ms Priyanka had worked for Business Line where she has published several articles. e-mail id: [email protected]


Horizon

Self Sustaining Self Sustaining Self Sustaining Microenterprise Microenterprise Microenterprise DAIRY COW PROJECTDAIRY COW PROJECTDAIRY COW PROJECT

Mr. Jastus Suchi Obadiah , Correspondent –Africa ( Microfinance Focus)

INTRODUCTION SHIEBU is a Network groups from Butere District that consists of ten self help groups.. Most mem-bers of these groups are peasant farmers; they know what they want, and have decided to move from survival to sustainability through dairy farming, which is one of their strategies of eradicating poverty.. The groups is made up of diversity in human resources, there is a well management structure that has an accountable leadership. The group compost of people of all background, yet they share same challenges of poverty. The main goal of the groups is to help its members be self reliant, thus moving from mere survival to sustainability. It should be known that the group is en-gaged in other development activities, Dairy cow is just one of their project aimed at empowering their members economically. OPPORTUNITY EXPLOITED BY THE SHIEBU. Butere District is one of the districts in Western Province of Kenya, the area is abundantly blessed with natural resources that can be tapped. Climate is excellent for farming, rain is well distributed through out the year, there is a lot of sun shine being located near the equator and local people have the potential to grow exploit these resource for better lives. It is sad that most of these have been underutilized and poverty cases remain high. The area livestock potential is high though un-tapped, there are high demand of milk in the area, according to Mr Nelson, an area Agricultural ex-tension officer, the area produces only 20% of its demand, the story is the same in the neighboring districts of Mumias Vihiga and Kakamega. SHIEBU believes that by engaging some members in dairy farming, both economical and social change will take place in their families.


Methodology RTC found out that it is easier for the farmers who have received cows to donated two born calves to another two families before a farmer can own fully the cow. This method is easier to manage, affordable and gives a sense of own-ership to a farmer who has donated the calves to another. It also builds the spirit of helping one another in the community. Since the failure of one farmer affects the rests, there is a group monitoring and helping one another to ensure success and results into an effective team work in the community. This one cow donated to a family can reproduce and give birth to about one calve every two years if well managed, meaning one cow has the capacity of producing over ten cows every ten years, and the rate increases by genera-tion. One cannot imagine the impact of how donation of one cow can have to a community of poor families within a long time. This offer does not only offer direct help or improve lives as discussed above, a family is able to get money to buy farm inputs, education will also be supported as parent will be able to either pay fees or purchase other education needed items. The community is able to face others challenges such as HIV/AIDS orphans and pro-mote family based orphan care. This capital formation will give rise to development of en-terprises in the community. Local Contribution, Participation and Sus-tainability of the Project Some of the motivating factors in this area are that, the Lake Victoria Basin climate offers the favorable conditions that favor growth of fod-ders for zero crazing method, the preferred method of farming in the area due to high den-sity of population. There is presence of live-stock government officers in the area, and they offer there services within the area, Bukura Farmers training Center is just two kilometers a way and the government has offered agricul-tural extension officers to give free trainings. Most people are also able to construct units us-ing local available material to allow the animal live in a favorable environment and thus the contribution of both the community and gov-ernment is motivating. Farmers are willing to grow grass, attend livestock management training, pay other vet related costs of the cow.

Moreover farmers are willing to donate at least two female born cows to other two families as a way of paying back the cow donated.

Impact Most local breed of cows can produce an aver-age of about 2 liters of milk a day, an improved or exotic cow can produced an average of 15 liters of milk per day. Bearing in mind that most rural families in Kenya live on less than a dollar a day, giving a cow to a family means that the family is now able to earn about 6 dol-lars a day. This is a huge difference and with only this, the living standard of that family im-proves. RTC has so far given 14 cows to SHIEBU group so far, and these cows have been distributed to 14 families, one extra fam-ily have already received a calve from the first cow to be donated, making a total of 15 fami-lies with cows. Most of these cows have already delivered and family selling milk. It was found through the evaluation that was done in No-vember 2008 that this project has created an-other enterprise in the community. As more family get cows, there is need for grass, woman neighboring a farmer who received the cow said that she appreciate the project be-cause she has found out that she can earn more money selling the grass from her plot that what corn/maize gives. This is because she is able to cut her grass every one month unlike corn that takes over four months. ***************

About the Author: He graduated with a diploma in Medical Laboratory in 2002. He was later in 2003 employed by Reach The Chil-dren where he has worked as a trainer, Program man-ager, Country Director and now as the East Africa Re-gion Supervisor. He has participated in some interna-tional seminars, conferences like he presented an ob-struct on HIV/AIDS prevention among children in Afri-can in the Global Health Council Conference at Wash-ington DC in June 2006. He has also participated in Phil-anthropic Quest International Workshop that exploits the use of Appreciative Inquiry approach of energizing people. Email : [email protected]

Horizon || Self Sustaining Microenterprise


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“The truth is that after thirty plus years working in busi-ness, industry, and the public sector I have come to under-stand the wisdom of those words. Training is not education and education is not training. If the goal is to produce staff and managers who can perform the job tasks for which they are being hired then they need to be trained to do them.”

Expanding Human Capacity Expanding Human Capacity Expanding Human Capacity Through TrainingThrough TrainingThrough Training Focus on Training and Focus on Training and Focus on Training and NOT Educations, The Rewards NOT Educations, The Rewards NOT Educations, The Rewards are Measurableare Measurableare Measurable

Cover Story

BY, Mr. Jerome Peloquin , Managing Editor –US ( Microfinance Focus)


A friend of mine who is the CFO of a major faith-based MF investment fund told me that he was finished hiring MBA’s. “Because”, he said with some asperity,” they can explain everything, but they can’t do anything.” After a moment’s reflec-tion. I noted, “… that ‘s because they have been educated, but not trained.” And that led me to the following: I am one of the last people to speak ill of education. I am the product of some 18 years of formal education along with a four year fellowship (but that was training, actually) I am however arguing that the proper place for education is in the Schoolhouse, College, or Uni-versity and not in the workplace. The new employee must soon apply specific task and procedure performance in the workplace. It must be performed accurately and repetitively. In the workplace there is no grading on the curve. Everyone must learn to perform effec-tively. There is no place for the politics of educa-tion in the workplace. It is a time for direct skills training. It is a time for. need to know. There is no time for. nice to know. Because as you will see in our article titled appropriately, “The Learn-ing Curve, “ training is one of the most ex-pensive investments an MFI will ever make. My teacher once described the difference between education and training.” He said that education is essentially concept driven and applications free. That was a bit of a revelation to me at that time. The truth is that after thirty plus years working in business, industry, and the public sector I have come to understand the wis-dom of those words. Training is not education and education is not training. If the goal is to produce staff and managers who can perform the job tasks for which they are being hired then they need to be trained to do them. Training in the MFI should be ten percent educa-tion and ninety percent training. Much of what we teach is “nice to know, but not necessary to know.” For example, teaching a new Loan Officer financial management makes as much sense as teaching a taxi driver mechanical engineering. Recently, I spent ten days at a well known MFI teaching Business Process Management to the department management. At lunch one day the HR Manager quite confidently and proudly stated that he had the best-trained loan officers in Af-rica. Why, I asked, because he said, “… I give them 24 weeks of training before they go to a branch”. Earlier other managers had been com-

plaining about slow company growth and the problems opening new branches. In comparing the company’s PAR it was quite unexceptional. What was the value of teaching financial analysis to a first level loan officer who would never do anything but fill out forms and collect payments? If you want to educate your staff, send them to the University, otherwise keep costs down and focus on training. NOW FOR THE HARD PART… Improved Performance – Through a more di-rected training methodology, that is by focusing less on teaching concepts and focusing more on training specific tasks it is possible to improve both the effectiveness and the quality of training. If, furthermore, we analyze the behaviors of those who are the best performers (loan officers, branch managers, etc) and we teach those be-haviors to the rest of the staff, then we will im-prove overall performance. Let us explore a sim-ple example. If an MFI has thirty loan officers and we plot their weekly productivity on a stan-dard distribution curve (see figure #1) if we ana-lyze the jobs of the exemplary performers (“A”) and use that as content for training the average performer, (“B”) then we can move the perform-

Cover Story || Expanding Human Capital through training


ance of the average loan officer up closer to the exemplars. If we use completed loan applications as a unit of measure, some performers will be on low end to the far left of the bell curve, (see fig-ure #2) perhaps only two or three applications per week (“C”) (new hires, new markets, poor performers) most loan officers will be in the mid-dle of the curve. (“D”) These are the average performers. However at the brow of the curve on the right hand side, the high-end (“E”) will be a cluster of three or four excellent performers. We call these the exemplars. The difference in loan applications performance between the average and the exemplars is an opportunity for perform-ance improvement. A relatively small improve-ment in performance for a large loan officer staff can result in a significant increase in organiza-tional productivity and profit (‘F”)That difference between the average performer and the exem-plar performer is called the PIP (performance im-provement potential) A simple set of calculations (see inset box) will clearly demonstrate the sig-nificant return on investment to be leveraged through such strategic training. PIPs and STAKES Calculating the PIP – A Measure of Opportunity. The PIP (Performance Improvement Potential) is the ratio between average performance and ex-emplary performance. Stated in mathematical terms the PIP looks like this: PIP = E/A That is, where (A) means “average,” and (E) means, “exemplary.” The PIP is the difference between average and exemplary. Let’s construct a simple example using the loan officers' job. If we as-sume a weekly production of 31 applications as the average performance for loan officers. Lets also assume that the performance of the exem-plary loan officers is 50 completed loan applica-tions per week. If we divide the average produc-tion number into the higher number of the ex-emplars we will get the PIP for loan officers. The PIP being calculated by dividing the average performance of most loan officers (31 applica-tions per week) into the exemplary performers 50 loan applications per week. Dividing the pro-ductivity of the “average performers,” into the productivity of the “exemplar,” group we get a performance ratio, or PIP of 1.6 The PIP is a measure of opportunity for perform-ance improvement. To determine the value or the economic

STAKES involved of that improvement, we need to look at our unit of measure - the loan applica-tion. Assumptions: Given the average gross profit of a typical $500 loan is $200 and the difference in performance between exemplar and average is 19 units per week, the potential Stakes for eliminating the PIP (see Figure 2, D & E) is $3800 per week. As-suming only a 50% reduction in the PIP, the STAKES of the improved performance amortized over a year is $98,800. A proposition: what would you be willing to invest to achieve an al-most $99,000 increase in profits? This is an ex-

ample of the tremendous economic gain avail-able by expanding human capital in your MFI. To find out exactly how this training should be de-signed and delivered, read Best Practices arti-cle in this issue and watch the Help Desk feature in this and future issues. *************

About the Author : Mr. Jerome J. Peloquin Mr. Peloquin is an experienced organizational consult-ing practitioner, whose focus is the relationship be-tween technology and human performance. As former director of Sylvan Learning System’s Human Perform-ance Consulting Practice, he consulted on business process modeling and organizational design for numer-ous private and public sector organizations. He is also a former consultant to The Grameen Foundation USA. Contact: [email protected]

Cover Story || Expanding Human Capital through training


PBT is a highly efficient and effective means to train staff in perform-ing procedural tasks in the workplace (loan officer, branch managers, etc). It permits dramatic reduction in training time while simultaneously im-proving the performance of the trainees. The PBT methodology was devel-oped by Dr. T.F. Gilbert, a colleague of B.F. Skinner at Harvard University’s Behav-ioral Science Laboratory in the mid-1960’s. The basic theory and structure is described in his book, Human Competence, NSPI Press, 1995. The president of Agidigm Corporation, Jerome Peloquin, was Dr. Gilbert’s student and associate. The concept is both elegant and simple. PBT eliminates the need for rote memorization by applying a combination of improved learning strategies and high performance reference tools called Job Aids. The strategy behind the approach is to train to recall only those tasks and procedures that are critical and/or frequent. Non critical and non-frequent tasks are placed in a graphic, easily used on-the-job reference tool: the Job Aid.

Why PBT?

In the workplace it is usually more important that a task be performed correctly than quickly. Speed, or flu-ency, comes naturally with familiarity and experience. The Job Aid overcomes the natural limits of short-term

Best Practices

- By, Staff Writer, Microfinance Focus

Performance Based Training

(PBT)


memory and virtually eliminates the need for rote memorization. The Job Aid represents the “best practices” used by the workplace exem-plars, those who are the incumbent experts. The Job Aid provides a bridge between the learning and working environments. Use of the job aid as the focus of the training assures construct validity; that is, it assures that there is a direct relationship between the objectives of the training and the tasks of the job. Much of what is called training is really excessive information that causes ‘memory competition’ and actually interferes with learn-ing the job. The real value of PBT is that it en-ables a new hire to do the job effectively in the shortest possible time.

The Value of PBT In a time of uncertainty, when every resource must be carefully scrutinized and expenditures closely monitored, PBT assures that only rele-vant tasks that contribute value to the organi-zation are taught and that every training dollar is maximized. As upward pressure on interest rates begin to hit the MFI community and commercial banks look to the bottom of the pyramid for short-

term, high recoverable investments, competi-tion will quicken. PBT assures a continuing supply of effective trained staff in spite of pirat-ing practice of the commercial banking sys-tem. Performance Based Training is a rational and practical answer to that challenge.

Element Explanation

Teach the Concept Adults need only a simple, block-diagram level concept to gain a high-level understanding of the system or project.

Teach Critical and Frequent Tasks

Train to recall only those tasks that will be performed frequently or that are critical and/or dangerous.

Teach Use of the Job Aid Use the Job Aid as the focus of the task training. W the trainees leave the class it will assure they use approved accurate procedures.

Provide for Practice Allow the trainees to practice the job tasks using the Job Aid. Wherever necessary, simulate actual job conditions.

Certify and Release to the Job Once the trainee is observed using the Job Aid to correctly perform the job tasks without instructor intervention they are certifiable

To Know more about Performance Based training , write to us at [email protected]

Best Practices || Performance Based Training


Last December, enda inter-arabe was classed as the world’s 18th highest-performing MFI by the Mix Market. And yet, its micro-credit activities came into being almost by chance in what was then a hostile environment. In 1990, Essma Ben Hamida, a Tunisian, and her husband, Michael Cracknell, a Brit, decided they wanted to actually do something concrete about de-velopment, something they had been writing about for years. And where better to go than Essma’s home country, Tunisia? For the first few years, they organised international or regional conferences aligned with the UN’s the-matic conferences of the ‘90s (social development, water, women…). At the same time, they set up a

youth vocational training centre and ran a women’s health education project, among others. Micro-credit raised its ugly head in 2004 when a sur-vey of women showed they had income-generating skills, such as traditional weaving and sewing, but not the first bent cent to purchase supplies. After one year studying, visiting and reading, thanks to a Ford Foundation grant, enda inter-arabe added micro-credit to its other activities. It began with a capital of just $20 000 contributed by Emmaüs inter-national, based in France. For the next five years, enda inter-arabe continued on its original course, with grant-funded projects in the area of youth, women and micro-credit. All were basically limited to the same poor suburb of the capital, Tunis, and the “beneficiaries” were essen-tially women “without work” (apart from raising sev-


Micro-finance in

Tunisia The story, so far,

of “enda inter-arabe”

- Staff Writer , Microfinance Focus

Tunisia is a small North African State of 10 million inhabitants, nearly all Muslims. A middle-income developing country, its GDP per caput is some $ 8 000. It has had a steady growth rate of 5% over the past several years. The “market” for micro-credit is estimated at roughly 1 million people.


eral children and keeping the home on a shoe-string budget…) or working as cleaners in better-off neighbourhoods or as poorly-paid unskilled labour in textile factories. As time went by, and enda’s staff rose from two in 1990 to 35 in 2000, it became clear that it would be difficult to do a good job with micro-credit while maintaining the other activities. From 2001, enda therefore has been concentrating its activities on providing financial and non-financial services to mi-cro-entrepreneurs, with a focus on women. Eight years on, and 14 years after the micro-credit activity began, the wisdom of that decision taken in 2000 has been proven. If enda inter-arabe had re-mained a grant-dependent NGO as at its beginnings, it would probably have had a positive influence on the lives of a few hundred young Tunisians, some would have found jobs, many would have been more sociable, a couple of thousand women would be more conscious of how to care better for their own and their family’s health. The decision to concentrate on support for micro-entrepreneurs has meant enda-ia’s impact has been infinitely greater, including, indirectly, its impact on health and youth. Today, to the never-ending astonishment of the co-founders, enda inter-arabe is serving 100 000 micro-entrepreneurs throughout Tunisia (77% women), from 52 branches and with a full-time staff of over 500, mainly young university graduates. Moreover, it has been self-sufficient since 2003 – income from the micro-finance activity covers all the expenses as well as the cost of borrowing from fi-nancial institutions in order to keep up with demand.

Those first $20 000 – a paltry amount for start-up capital compared to several million dollars that many other MFIs begin with – were added some $ 2 million received through projects over several years, mainly from the European Commission and the Spanish co-operation agency (AECI). With this, enda inter-arabe has provided 420 000 loans worth $ 172 million (at today’s exchange rate) to a total of 140 000 Tunisian micro-entrepreneurs. It has a retention rate (people who renew their loan at least once) of 92% and a repayment rate of 99.6% since it began providing loans 14 years ago. On-time repayment is 95%. Over the past five years, the organisation has grown by an average 53% per year, showing how strong the demand for micro-credit is in the country (indeed throughout the world among deprived communities).

Business Development Services at Enda inter-arabe Enda inter-arabe provides its clients not only with financial services but also with Business development services, defined broadly. These include various types of training, including simple book-keeping and management and product improvement, enterprise diagnosis usually resulting in a business plan, aid with marketing (local and national trade fairs and, more recently, international trade fairs and con-tracts), encouraging networking among clients, and “enda circles” organised at the branches where a wide range of topics are presented by specialists and discussed: business-related legal questions, in-heritance, violence against women, relations with children, health and many more. Enda-ia enlists the collaboration of official institutions for certain activities, mainly training. Clients pay a contribution - sometimes symbolic, sometimes the full cost - for most BDS activities, and enda also seeks donor fund-ing.

Enda inter-arabe’s co-founders Essma Ben Hamida, Tunisian, the executive director, studied history and geography before becoming a school teacher while also being a newscaster on Tuni-sian television. She later opened the first office in North America of the official Tunis Afrique Presse (TAP) and then joined the only Third World press agency, Inter-Press Service, based in Rome. Michael Cracknell, British, the Secretary General, has degrees in Arts, in Political Science and in Law. He has worked for the UN (FAO but also as a consultant for IFAD, UNEP and UNCTAD). Prior to setting up enda inter-arabe, he ran the Paris-based International Federation of Agricultural Producers, which represents the world farming community at international level.

Institution Spotlight || Enda inter-arabe


During the first 12 years, enda-ia operated almost exclusively in peri-urban areas, essentially the poor suburbs of Tunis (the first branch outside the Greater Tunis area was opened in 2003). But as branches opened in smaller towns, they acted as a magnet for surrounding rural communities though no special loans were developed. In 2008, the French Development Agency (AFD) pro-vided a grant to study demand for micro-credit in the rural and agricultural sectors, based on eight rural counties representative of the types of system we were seeking. 2009 will see enda-ia providing an increasing share of its loans to rural and agricultural activities. This will be assisted by a hoped-for loan on soft terms from the AFD. That soft loan will be the first end-ia has received. To date, the $ 32 million it has borrowed from finan-cial institutions has all been at commercial rates. Six of Tunisia’s ten mainstream banks have made loans to enda-ia, several renewing their loans before the current one had expired, and several also with no more collateral than the loan portfolio (divided be-tween 100 000 tiny borrowers). Three international financial institutions are also among enda-ia’s lenders: the International Financial Corporation (part of the World Bank group), the European Investment Bank with two loans, and Oikocredit, the largest private social investor in mi-cro-finance, based in the Netherlands, with three loans. All these international loans are at market rates, and in each case, the lending institution has taken on board the exchange risk (estimated at around 3% per annum in the case of Tunisia). The international financial crisis is already affecting Tunisia like the rest of the world. But the effect is indirect since Tunisia’s strict exchange controls (the Tunisian Dinar is unconvertible) have shielded Tuni-sia’s banks from imprudent investments in complex,

and fatal, international financial instruments that have seen financial giants tumble. Indeed, Tunisia’s banks are reportedly awash with liquidity. But for being indirect, the crisis will nonetheless have a negative impact on an economy rather de-pendent on agriculture and tourism with an as-yet flourishing construction industry. The outlook for the micro-enterprise sector is as hard to predict as for any other. However, it can be assumed that the vast majority that works for the local market, especially those providing essentials, will be less hard hit than the crafts sector since crafts are a luxury during hard economic times. Doubtless, remittances will decline but we have no information on the depend-ency of micro-entrepreneur families on this source of income. Normally, micro-enterprises survive and flourish on their own merits, not thanks for subsidies from whatever source. To date, enda has noticed no increase in its (very low) default rate. Enda inter-arabe’s projections call for 350 000 active clients by end-2012, with a portfolio of some $ 200 million (at today’s exchange rates) served from 130 branches. But to attract sufficient capital to pur-sue these ambitious expansion plans, it will need to turn to investors, not just lenders. Enda inter-arabe is therefore destined to follow the path of most rapidly-expanding MFIs. In the near future, both national and international banks will begin to feel they are sufficiently exposed to enda loans. Although one factor in its favour is its low debt-to-equity ratio (1 : 2), it is already envisaging setting up a fully-fledged micro-enterprise bank. The path to this outcome is long and enda-ia has just embarked on it, expecting to complete the process within four years. It hopes to attract true social in-vestors rather than the type of sharks who, having seen their high-risk, high-return investment oppor-tunities dry up, would now like to earn 20% return off the backs of the poor. While the co-founders of enda inter-arabe are proud of their achievements to date, they are only too aware of the dangers of successfully managing rapid expansion. And every day they realise the weak-nesses of the institution and the need for greater professional competences to negotiate those dangers and fulfil the commitment towards their borrowers (and indeed their lenders): a strong and reliable in-stitution providing ever less expensive and more ef-ficient services into the foreseeable future. ****************

Enda Third World Enda inter-arabe is a member of the enda Third World fam-ily of organisations, founded in 1974. One of enda-tm’s ob-jectives is to engage in the “battle of ideas” on economic and social development and to fight poverty and its causes. With half of its activities in Senegal where it is based, enda-tm is active in 14 countries world-wide. Each member is autonomous and pursues activities suited to local needs.

In 2008, enda inter-arabe was given an « α-» for its financial rating and « excellent » for its social rating by the specialised microfinance rating agency, MicroRate.

Institution Spotlight || Enda inter-arabe


I-Focus

From Lending

Investment

Micro Venture Capital A Transformative Model for Traditional Microfinance

To

Linda Yahr, For Microfinance Focus

“…policies should consider not only aggregate economic impact but also the distribution of employment. Socially responsible venture capital and microcredit initiatives can foster em-

ployment-generating businesses that complement the local culture and environment”

The Causes of Poverty: Addressing the Underlying Causes of Poverty

Global Development Research Council

Microfinance has spawned a revolution in global finance, and moved millions out of poverty. As of 2007, microfinance reaches at least 77 million borrowers, with US$17Bi in loans. We believe that the model used by the Microfinance Institutions (MFI) presents an opportunity to expand the present schema of lending to the poor. Microcredit effectively serves the sustainable capital needs of 90% of the borrowers. There is another 10% who, if provided adequate support, could grow their microenterprises to provide a greater level of market impact and jobs creation in the community….


We see a gap in the service delivery of the MFI. This gap is caused in part by the lending mind-set that drives the MFI to a rapidly expanding portfolio, while keeping the growth of service costs to a minimum. This imperative, coupled with the profit motive, limits the breadth of services available to the borrower. In order to optimize these small business enterprises, the proprietors need to acquire the management skills necessary to grow and run a business, and a long-term capital resource to fund that growth. We see the proposed model as addi-tive, not competitive, with the MFI and a logical part of the SME economic development cycle. This transformative model integrates micro-credit into a comprehensive, community-based solution. It expands the set of resources: both expertise and capital are provided, a growing successful business provides an economic en-gine necessary to a sustainable community. There are two principal differences between the traditional MFI and The Transformative Model. One is the patient capital needed for sustain-able business growth is now part of the MFI op-tion. The Transformative Model supports the sustainability and growth of the fledgling micro enterprise. The second is focus upon providing the venture partners with the knowledge, skill, counseling, mentoring and expertise unavail-able through most MFI’s. Furthermore, The Transformative Model seeks achievement of a larger social mission and re-inforces the original mission of the MFI as an instrument for economic development. Its mis-sion is to create and support those key busi-nesses that will provide the sustainable eco-nomic base for community development to blossom. MicroFinance to MicroVenture: Ex-tending the Linkages

Specific Strategy: We see a broad-spectrum effort that employs not one, but three strategic modalities. These are:

MicroFinance

MicroVenture Development

MicroVenture Creation & Support

Microfinance is a crucial first step in the allevia-tion of poverty through microenterprise. We believe that it is time to extend that model to a more committed and involved experience for those who have the ability and desire to ex-pand and grow their enterprise. Our argument is a simple one. The MFI is a lending institu-tion. It makes many, many, small loans, and cannot reasonably afford to provide the per-sonal and involved effort needed to identify and support the most promising. Once a loan is made, the MFI is rewarded by making more small loans, and not by providing time and re-source intensive support. The MFI model was created to address the needs of the poorest of the poor. It is focused upon making suste-nance loans and alleviating financial pressures on poor families, not for creating value and supporting a growing business enterprise.

The candidates for the ventures described be-low will largely come from the pool of MFI bor-rowers, and will be identified by loan officers and management of the MFI as the borrowers who have potential to develop a business as an ongoing concern. These entrepreneurs will have gone through the business management training that see, “advanced Training,” with our assistance if need be, and will have shown their willingness to implement their lessons learned, and the skill to use them, to help their busi-nesses succeed. This approach will democra-tize the selection process, so that we are not helping only those entrepreneurs who already have the skills and training to succeed.

Micro-lendingPOOR

$

$

Micro-ventureSupport

Grant-basedFunding

DevelopingEnterprises

Mgmt Support$ AdvancedTraining

I Focus || Micro Venture Capital


Our Model for MFI Transformation simply dif-fers. While the MFI serves the individual fam-ily, our effort focuses upon the enterprise as a potential economic engine.

The Transformation of Microfinance

Beyond Micro Loans. Micro Investment. There is a critical distinction. In this model clients are not borrowers who make payments. The client business is a partner in whom one has an in-vestment, and a vested interest. The focus shifts from payments each week, to the achievement of development goals that will im-prove and enhance that investment. This model for investment is a partner-centric, per-formance enhancement approach. It is also designed to maximize control of the investment asset. This is accomplished by a well planned and structured selection process coupled to an aggressive staff development, mentoring, and consulting program. Our selection process op-erates on several levels. Performance evalua-tion and intervention points are predetermined, with objective measurement and evaluation criteria that are both culturally balanced and fiscally responsible. Rational and appropriate application of technology, and effective feed-back mechanisms, provide real-time informa-tion on performance.

MicroVenture Creation

Due to a lack of investment capital and general economic stagnation, many developing nations have an excess of educated and talented peo-ple who eventually leave the country to provide opportunity for themselves and their families. In fact, there are often educated people with ability who would be suited to enterprise man-agement if they had the opportunity and re-sources to engage in such commercial ven-tures. In many parts of Africa there are uni-versity educated people, who have no hope of starting a business for lack of markets, capital, and specific expertise. The situation is not un-common in developing countries. The Transfor-mative model provides for a third level of com-mercial opportunity: MicroVenture Creation.

Where no business exists, a franchise model for new business creation is employed.. Essen-tially a “business-in-a-box,” This approach uses a standard set of policies, processes, and pro-

cedures that can be implemented by novice management, with the initial support of our team.

These three development strategies form the basis of our overall transformative model: The Ladder of Prosperity. This is a four-tier ap-proach that ties micro-lending into micro-ventures, and provides a realistic linking mechanism from the MFI to Commercial Bank-ing, and even to Global Capital Markets. This approach forms the foundation of our Transfor-mative Model.

fact, within the borrower community knowledge assets may even be more important than capi-tal assets.

A Transformative Model for Microfi-nance

This model reflects a growing sense within the greater Microfinance community that it is time to expand the outreach effort, to refocus upon the success of the borrower, and to recognize that the expansion of human capacity is as necessary as capital credit in the larger MFI equation. In fact, within the borrower commu-nity knowledge assets may even be more im-portant than capital assets.

The Transformative Model builds an economic partnership that permits consultation, mentor-ing, training, and investment in these microen-terprises. Mentoring and investment extends and enhances the partner's human capacity, building new expertise and capabilities.

Commercial Banking: Whenever the partner

Micro-ventureCreation

InvestmentFunding

Entrepreneur

Training Consultation $VenturePackage

New BusStart -up



reaches the stage of economic stability where it can qualify to participate in the commercial banking system, MVS continues to mentor and support the partner until they can stand alone and do not need further assistance. This is the goal of MVS: the creation of independent, sus-tainable businesses, operating on their own, creating jobs in the community, and operating with an established management team.

Capital Markets: Only a very few microenter-prises will ever reach the capital markets level. Successful attainment of this level will be an economic miracle equal to the Grameen Bank’s elevation of illiterate village women to the board of an international bank. Still, we are certain it will happen; but without this ladder of opportunity, without the mentoring, education, and capacity development of MVS' transforma-tive model, such accomplishments will only re-main dreams.

Conclusion

Investment in local microenterprises will pro-vide jobs and sustainable community develop-ment. Microventure investment is not revolu-

tionary, nor is it without precedent in the bur-geoning microfinance sector. What is unique and innovative is the manner in which our model seeks to advance and empower the en-terprise, not merely as a means to personal enrichment of the principals, but as a means to leverage the community. The provision of capi-tal is a key resource, but more important is the need for knowledge and skill. Our focus upon human capacity development and the level of training and mentoring devoted to the manage-ment team is not commonly part of the tradi-tional venture management paradigm.

Finally, we believe that the underlying venture management methods provide far greater con-trol over the operational and financial outcomes than has, up to now, been possible in conven-tional Venture Capital engagements. This pro-vides the venture partners with an unprece-dented advantage in the commercial and capi-tal markets.

***********

To Know more about , Write at [email protected]



Interview

The Importance of Training ... Perspective of

Peter Ryan, Founder and CEO of the Microloan Foundation By, Peter Burgess, Correspondent , New York ( Microfinance Focus) , March 2nd, 2009

I caught up with Peter Ryan last month in Boston. Peter is the founder and CEO of Micro-Loan Foundation (MLF), a UK charity that has established a successful growing microfinance organization in Malawi, and now starting to expand into neighboring countries. Peter was visiting the Boston area to celebrate the first anniversary of the MicroLoan Foundation USA that is helping to fund the growth of MLF. Peter Ryan first saw the potential of microfinance when traveling with friends in the Philippines. A small loan got paid back and did some visible good. In 1997 Peter saw the depth of poverty in Africa during a business visit to Malawi and recognized that microcredit could be the catalyst for development and poverty reduction that was not mere charity but truly sustainable. Because Peter had a business background, and had started a number of businesses, he was aware of some of the critical issues that cause business to fail ... and the MLF program he designed reduced these risks.

MLF Malawi opened its first office in 2002 in Nkhotakota, a small fishing town that combined the greatest need with the least provision of microfinance services. The first loans were made in 2002 and by 2003 the MLF had a staff of five, had made over 600 loans and had a 97% repayment rate. A second office was opened in Dwangwa, north of the first office in 2004 and more offices added over the next five years so that there are now 15 offices, with 5 more to be opened this year. In addition MLF is expanding into neighboring countries starting with Zam-bia. It will start in other countries in Southern Africa: probably these will be Mozambique, Namibia and Bot-swana . The Zambia program will be headed up by the Kenson Chiphaka who was MLF Malawi CEO who built up the Malawi operation so successfully. The new Malawi CEO will be another Malawian. James Kajama with strong development and banking credentials.


By some standards the interest rates charged by MLF in Malawi are high ... maybe around 66% per annum ... but this interest income makes it possible for MicroLoan to be sustain-able over a long period while having a substan-tial microloan portfolio and providing critical training to its clients. Because people in the rural areas of Malawi are poorly educated, the people have little opportu-nity for progress. While the lack of money is one constraining factor, in Malawi, according to Peter Ryan, there is in addition a big deficit in education and knowing the basics of business. This is why MLF is very committed to the idea of training as an integral part of its program. Almost all of the MLF loans are made to women who are starting their own businesses. But be-fore they may take a loan they must go through a training course. The women are re-quired to form into business groups electing a Chairman, Teasurer and secretary and are then given a six to eight week crash course on key aspects of business management. During the initial stages of the business, they are pro-vided with constant guidance as their modest business takes off. This includes support in practical training for very basic business skills like cash-flow planning that enables people to get businesses up and running very quickly. Within 4 months MLF trainees are running real businesses and usually have repaid the initial loan in full. Many of the businesses are trading businesses, such as buying fish from the lake (Lake Nyasa), rice or tomatoes, and selling them in the capi-tal, Lilongwe, where they earn a profit. Others are small production or “value adding” busi-nesses, such as bread or knitted products which are hand-made and then sold in the local street markets. Without MLF these people would have no access to the money needed to buy the equipment and materials to start these businesses.

------------------ // ------------------ During the MLF training the potential clients are given the opportunity to learn something of what it is that they need to know to be suc-cessful. It is a comprehensive curriculum. Many businesses start ups fail because of they do no know or understand the market. Borrow-ers starting up a business must know about the product or service, the competition, the prices, and all sorts of hidden problems and issues. People in a poor community need the basics.

They need food, and clothes, and also things like medicine, fishing lines, firewood, spare parts, and such. A good business satisfies real needs and will succeed if it supplies the goods or service at a low cost. Market research need not be complicated, but there must be a sound analysis and application of common sense. MLF helps to ensure that the potential clients know how to start the business in accordance with local custom. In Malawi, setting up a small business requires consulting with the local chief or village head man. This may not be written in the national law and regulation, but it is a cus-tomary requirement and is an important part of the ‘due dilgence’ that the MLF carries out be-fore loans are given as it helps ensure high lev-els of repayment. In real estate there are only three things that matter ... location, location and location. The same goes for a small business. The place where the business is set up makes a big dif-ference. This may not be obvious ... it is part of the training. Customers must be able to get to the business easily, and it must be possible for the business owner to bring the products. Con-venience is a big value in a society where walk-ing is the norm for most travel! Growth is not the top priority ... first of all learn how to have a sustainable small business keep-ing costs as low as possible, and grow because there is demand for the goods and services not because there is an overly big overhead cost to be covered! It is much better to have low over-head and low costs and low prices and a grow-

About Microloan Foundation

Micro Loan Foundation is a London-based charity established in 2002, providing microfinance ser-vices in Malawi, Zambia and the Philippines. They have a large and committed volunteer base who help to run the organisation which allows us to operate with very low overheads in the UK. This means that a huge proportion of the donations we receive goes straight to the people who need it most. They provide small loans (otherwise known as microloans), basic business training and continuing guidance to groups of women in sub-Saharan Africa. This enables them to de-velop self-sustainable livelihoods, feed, clothe and educate their families, and work their way out of the poverty trap.

Interview || Peter Ryan founder & CEO, Micro Loan Foundation


ing business than to have high prices, high costs and no business. Basic business know-how and financial disci-pline is a cornerstones of MLF training philoso-phy and success. Potential borrowers are re-quired to demonstrate that they can manage money by saving up a small sum themselves – 10% or 15% of the loan - before receiving their money. MLF does not walk away as soon as the loan is disbursed, rather they stay very much in-volved. The business training goes on for six weeks so that the clients can learn to run meetings, have elections for their group leader-ship: chairperson, secretary, treasurer, etc., keep records, bank money, manage their cash-flow, budget for their business and ensure that they make a profit. Many of these people do not read or write, and they do not have calcula-tors. All of this has to be done using talk and using mental arithmetic. MLF business start up borrowers meet every two weeks with their loan officer to review their business progress, and to make repayments against their loan. This is a tight schedule and borrowers find it difficult, but the discipline is extremely valuable. Critical problems can be identified quickly and steps taken to solve the problem with the help of the loan officer. The role of the loan officer is crucial. The loan offi-cer's experience can be used to help a strug-gling business and do something to correct the problem. This is a level of engagement that is costly, but incredibly valuable. MLF uses a group lending model with business start up groups of between eight and fifteen women. The group is collectively responsible for the repayment of each individual loan. If one member of a group gets into trouble, the others have to be prepared to help her out. This happens, for example, if one member of a group becomes ill and they cannot operate the business for a while. In the case of a group member dying before her loan is repaid the loan is written off, but where someone is suf-fering from an illness other members of the group take responsibility for carrying her through the period of the illness.

------------------ // ------------------ MLF provides know-how, start-up capital, and on-going support but the individual borrowers design and run the businesses for themselves. 97% of the loans are re-paid in full. But it ap-pears from what Peter Ryan talks about that

the results are really a whole lot better than these financial results. Small rather remote communities that were doing nothing more than existing ... and declining ... have found ways to have businesses that satisfy needs and earn income. The 3% failure rate results from factors that are out of MLF control, mostly that the bor-rower has died. With life expectancy of only 37 years, mainly because of the high incidence of HIV/AIDS, it is a sad fact of life that some of the businesses will fail because the borrower dies. MLF Malawi is demonstrating that a very basic sensible approach to development can be sus-tainable and make a big impact. Training is central to the success of the MLF in Malawi. The approach does not use rocket science ... just very advanced common sense. ****************

The MicroLoan Foundation website is http://www.microloanfoundation.org.uk/ or www.mlf.org.uk

Find … More Interviews … Visit Our Website www.microfinancefocus.com

Interview || Peter Ryan founder & CEO, Micro Loan Foundation


Acumen Fund Releases The Blue Sweater, CEO's Memoir

Source: PR Web Acumen Fund has announced the release of The Blue Sweater: Bridging the Gap between Rich and Poor in an Interconnected World," a deeply personal and inspiring memoir by its CEO Jacqueline Novogratz. "I wrote 'The Blue Sweater' to inspire more people to become engaged in working to solve the problems of global poverty," said No-vogratz. "The private, public, and nonprofit sectors must all work together. Markets play a role in the solution, as do public policy and philanthropy." Read More: Click

World’s First Cell-Phone-Based Carbon Micro Credit System

Source: marketwire Carbon Manna Unlimited has announced the initiation of a worldwide strategic-partnering campaign to support the roll-out of its cell-phone-based Carbon Micro Credit system in Kenya. The System employs SMS and unique identifiers to allow millions of families in the developing world to claim on a bi-weekly or monthly basis the carbon offsets they produce by using more efficient cooking methods such as a modern charcoal stove or solar cooker. As a re-sult, each family is able to monetize directly its own contri-bution to mitigating global warming, while also reducing nationwide rates of deforestation and desertification. Read More: Click Blue Orchard, responsAbility and Cyrano Manage-ment selected to manage facility launched by IFC and KfW to support microfinance industry and pro-tect access to finance for the poor Source: Blue Orchard Geneva (BlueOrchard), 5 February 2009 — The World Bank Group President, Robert B. Zoellick, and the German Devel-opment Minister, Heidemarie Wieczorek-Zeul, launched a new USD 500 million investment fund today, 5 February 2009, designed to support the growth of microfinance in-

stitutions that are in need of refinancing since availability of funding became scarcer on the financial markets. The Microfinance Enhancement Facility, created by the Interna-tional Finance Corporation (IFC), a member of the World Bank Group, and German development bank KfW is ex-pected to provide refinancing to over 100 strong microfi-nance institutions in up to 40 countries. Read more: Click MicroPlace Launches First Microfinance Investment Yielding 5 Percent for Everyday Investors People can help the working poor out of poverty with a healthy investment as low as $20. SAN JOSE, Calif., Feb. 17 /PRNewswire/ -- MicroPlace (www.microplace.com), a website that enables everyday people to invest in the world's working poor, an-nounced today the launch of a new investment opportu-nity that offers a 5 percent return, a first in the microfi-nance investment industry for everyday investors. Through MicroPlace (www.microplace.com), anyone can make mi-crofinance investments that lift people from poverty and offer a 5 percent rate of return. Investors don't have to compromise their financial goals to help people escape poverty. By visiting MicroPlace, people can invest as little as $20 and have the opportunity to earn 5 percent interest. With money market funds currently offering an average of 1 percent(1) and the stock market yielding negative returns over the past year, MicroPlace investments offer a health-ier return while simultaneously making a positive impact in the world. Read More: Click

Crisis Hitting Poor Hard in Developing World

Source : The World Bank The World Bank group has said that the spreading global economic crisis is trapping up to 53 million more people in poverty in developing countries. With child mortality rates set to soar, the crisis is posing a serious threat to achieve-ment of the Millennium Development Goals (MDGs). New estimates for 2009 suggest that lower economic growth rates will trap 46 million more people on less than US$1.25 a day than was expected prior to the crisis. An extra 53 million will stay trapped on less than US$2 a day. This is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices.

News


In a policy note issued in the run up to the Group of Seven finance ministers meeting on February 14, 2009, the World Bank said almost 40% of 107 developing countries were highly exposed to the poverty effects of the crisis and the remainder was moderately exposed, with less than 10% facing little risk. It states that it is critical for the exposed countries to finance job creation, the delivery of essential services and infrastructure, and safety net programs for the vulnerable. Yet three quarters of these countries can-not raise funds domestically or internationally to finance programs to curb the effects of the downturn. One quarter of the exposed countries also lacked the institutional ca-pacity to expand spending to protect vulnerable groups. The note urges financial support in the form of grants and low or zero interest loans for these countries. World Bank Group President Robert B. Zoellick had re-cently called for the establishment of a Vulnerability Fund in which each developed country will devote 0.7% of its stimulus package to the fund. Three priority areas for the Fund include safety net programs, infrastructure in-vestments, and support for small and medium-sized enter-prises and MFIs. Read More: Click

Social Performance Reporting Begins for Micro-finance Industry

Source: The Mix The Microfinance Information Exchange, Inc. (MIX) launched the first set of social performance indicators for microfinance institutions (MFIs) to begin reporting on the social impact of their work. The English version of the re-port, with 22 indicators for reporting, was sent to MFIs throughout Asia, Eastern Europe and sub-Saharan Af-rica. The Spanish version of the report, which will go to MFIs in Latin American countries, and the French version, for countries in francophone Africa, will be distributed to MFIs the week of February 23. The indicators were developed by the Social Performance Task Force, a group aimed at advancing social performance through the development of a common social performance reporting and rating framework, the establishment of a core set of indicators and standards to measure social per-formance, and the creation of tools for monitoring and assessing social performance. MIX expects to begin posting the MFI social performance data by the middle of March to www.themix.org. Read More: To learn more about the SPTF, visit the Micro-

finance Gateway (www.microfinancegateway.com) and click on Resource Center. $500 Million Microfinance Facility Backs Lenders to the Poor Devayanai used to work in the fields in the southern Indian state of Tamil Nadu. That was before she got a loan of 15,000 rupees ($307) to buy a cow. Today she makes as much money selling milk as she did as a day laborer. “Now I can work from home and be with the children.” For millions of people around the world, being able to get a small or even tiny loan has made a big difference in their quality of life. But some of the microfinance institutions that lend money to low-income people with no or little collateral have come under increasing pressure. Once-plentiful foreign capital has dried up or become too expensive in the wake of the financial crisis sweeping the world. In the next 18 months, microfinance institutions face a potential refinancing gap of at least $1.8 billion, putting as many as 150 million microfinance customers, most of them poor people, at risk, according to the World Bank Group’s private-sector arm, IFC. Read More : Click FC, Private Sector Explore Ways to Create Opportunity for India’s Small Entrepreneurs

Source : IFC Private sector leaders in India agreed at a discussion hosted by IFC, a member of the World Bank Group, that businesses tend to be most successful when they find ways to create opportunity for small entrepreneurs and make markets work for the country’s poor. The three-day discus-sion, organized in partnership with Harvard Kennedy School and the International Business Leaders Forum, brought together representatives of several prominent Indian companies—including Idea Cellular, ITC, Jain Irriga-tion, Unilever, Cairn India, and ICICI Bank. Several interna-tional companies with a large presence in India, including GlaxoSmithKline and Syngenta, also participated. Read More : Click

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Create standard effective MFI management practices among a group of MFI Partners ...Build a World Class Management Team ...Reduce operating costs immediately! Accelerate hiring and training of new staff…

Microfinance Focus with a Global Group of Microfinance Experts

Introduces A Global Programme on

“Business Process Management” For MFIs Business Process Management is an integrated, interactive and performance based training program that produces a competent and certified internal process man-agement team. Process Management promotes cooperation and reduces conflict and lost time. With effective business processes in place senior managers can read-ily track performance, analyze problems easier, understand the business better,

and direct the application of technology so as to really improve operations and profit. Everyone who participates in the program will be able to create effective functional process models. Our performance based learning uses the Consult, Train, Mentor method. We work with each and every manager on the team so that they are fully confident and capable of creating, monitoring, and modifying their processes as change and performance improvement

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