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11.2010 0528 tbli_lip
1. Disclaimer : Living in Peace, a Japan-based NPO does NOT
solicit investments or sell financial products.
2. Key Messages
About Living in Peace
•Mission
•Organization
•History
How to minimize due diligence costs
•Economics of predatory lending
•Initiatives of LIP to minimize DD costs
•Challenges
5. Organization
Representative Director Taejun Shin
Project Manager (Microfinance) Akiko Sugiyama
Project Manager (Education) Noriko Matsuda
Number of full-time employee 0
Number of directors 7
Number of part-time workers +50
Number of supporters +800
Email transaction / day (incl. weekend) +100
Range of working hours /day (incl. weekend) 0 – 20
Main office location Cloud
Cup of coffee I had since the establishment +5,000
6. History
Launched “Microfinance Fund for
MDGs”
Closed collaboration agreement
with CARD MRI
Closed collaboration agreement
with Music Securities
Hosted microfinance forum
together with World Bank
Fund closed; JPY 40+
million from 400+
Established investors sent to MFI in
Cambodia
9. Predatory lending under way
“Now a second line of attack has been launched, in
which for-profit microfinance firms are accused of
lending recklessly to people too poor to repay the
loans.”
The Economist (UK)
“Froth at the bottom of the pyramid”
10. Increase in investments should not be accused
USD Bn
Less than
10% of
market’s
cash needs
Source : CGAP
18. Tend to be high-cost / high-performance
High Normal Research
Performance
Low
Performance
Low Cost High Cost
19. We seek “Alpha”
High Normal Research
Performance
LIP
α
Low
Performance
Low Cost High Cost
20. System spec
LIP MFI Evaluation System (LMES)
Evaluation target Small-to-mid size MFI
Evaluation cost Less than $100
Lead-time One week
Evaluation contents Credit risk and social performance
Evaluation methodology Scoring based on logit analysis
Data source 1 Information provided by MFI
Data source 2 Answers to the questionnaire
System completion target year 2013
Accessibility High (web-base system)
21. Strength of part-time organization
12%
10%
8%
6%
4%
2%
0%
Gross Return Ticket Hotels etc Payroll Net Return
22. Purpose of the system
12%
10%
8%
6%
4%
2%
0%
Gross Return Ticket Hotels etc Payroll Net Return
23. Components of the research
•Strategy
•Management Capability
Management Quality •Information Management System
•HR / Governance
•Portfolio Quality
•Operation Sustainability
Financial Performance •Balance-sheet Quality
•Cash Flow Stability
•Macro-economic Performance
•Political Stability
Country Performance •Quality of MFI Regulation
•MFI Competitive Situation
•Operating Area
•Borrower Type
Social Performance •Contents of Service
•Social Responsibility
24. The biggest challenge – information risk
Contents of Risk Mitigation
•Require several source of information that should tie out
Fraud
•Come up with the questions-mix to detect fraud
•Evaluate quality of the system given its output and then
System Capability
impose stress test
Input Quality •Evaluate the quality given the several information resource
(Human-error) and impose stress test
26. We believe in modeling
“The arguments often heard that because of the human
element, of the psychological factors etc., or because there
is –allegedly- no measurement of important factors,
mathematics will find no application, can all be dismissed
as utterly mistaken. Almost all these objections have been
made, or might have been made, many centuries ago in
fields where mathematics is now the chief instrument of
analysis.”
Von Neumann and Morgenstern
“Theory of Games and Economic Behavior”
