MicroFinance Upgrading

Group Presentation ,[object Object],[object Object],[object Object]

Table of Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],A. The need behind ‘NGOs as Alchemist for the poor’ The main constraint is their insuficient access to credit

[object Object],[object Object],[object Object],[object Object],[object Object],A. The need behind ‘NGOs as Alchemist for the poor’

[object Object],[object Object],[object Object],[object Object],MICROFINANCE INSTITUTIONS A. The need behind ‘NGOs as Alchemist for the poor’ ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Regulation Capital Requi. Impact Sustainability

Source: From NGOs to FFIs in Microfinance Services: Conversation Road Map and its challenges – Comparative study of nine Eastern European MFIs A. The need behind ‘NGOs as Alchemist for the poor’

“ Promoters are those who help the poor set up their own poor-owned and poor managed systems, while providers are those who sell financial services to the poor” Rutherford, 2000 Financial system vs. Poverty lending approach Serves 32 Million out of a potential of 500 Million to 1.7 Billion ,[object Object],[object Object],[object Object],Becoming more commercial: NGO’s and banks MFI A. The need behind ‘NGOs as Alchemist for the poor’

[object Object],[object Object],B. Advantages and Disadvantages of Credit Granting NGOs Are NGOs a promising option for solving the financial problem faced by small and micro enterprises? QUESTION

MF services were mainly provided by non-profit organizations aiming at transforming the lives of poor people and enabling them to develop and sustain income-generating and job-creating enterprises Main goals: outreach, financial viability and impact on their beneficiaries Constraints: legal barriers and governance limitations Solution: set up as regulated/formal MFI Outcomes: access to capital, capturing savings, reducing donor dependence and expand client outreach Serving clients not beneficiaries Funding problems through investor not donors B. Advantages and Disadvantages of Credit Granting NGOs

Basic precondition ensure that t he organization is sustainable ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],B. Advantages and Disadvantages of Credit Granting NGOs

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],B. Advantages and Disadvantages of Credit Granting NGOs

B. Advantages and Disadvantages of Credit Granting NGOs Advantages Disadvantages ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],B. Advantages and Disadvantages of Credit Granting NGOs Offer their services to small and micro enterprises Be stable,long-lasting and financially viable. Develop long-term relationships with small and micro enterprises. INSTITUTION BUILDING STRATEGY AS AN NGO

B. Advantages/Disadvantages of Credit Granting NGOs INSTITUTION BUILDING STRATEGY AS AN NGO ,[object Object],[object Object],[object Object]

[object Object],[object Object],C. Understanding the UPGRADING process UPGRADING and what it means… Pre-conditions of the UPGRADING Process ,[object Object],[object Object],[object Object],[object Object],[object Object]

C. Understanding the UPGRADING process PROCESS OF CHANGE up to 10 years ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

C. Understanding the UPGRADING process Phase 1 Childhood up to 4 years ,[object Object],[object Object],[object Object],[object Object],[object Object],Phase 2 Adolescence up to 3 years ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Phase 3 Early Adulthood up to 3 years ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

D. From MFIs to RFIs. A CRITICAL OUTLOOK Why transform to RFIs? ,[object Object],[object Object],[object Object],[object Object],[object Object],Transformation is a variety of transactions in which a Microfinance business is transferred from one institution to another.

[object Object],[object Object],D. From MFIs to RFIs. A CRITICAL OUTLOOK ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],D. From MFIs to RFIs. A CRITICAL OUTLOOK Factors that may interfere

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],E. BANCO SOL. A successful case study

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],E. BANCO SOL. A successful case study Short-term loans Average size of $273 Provides working capital for small scale production, commercial activities and services. Brief Seminars Introduces the concept of credit, investment, and loans from the Central Bank of Bolivia.

[object Object],[object Object],[object Object],[object Object],E. BANCO SOL. A successful case study PRODEM had to find another legal and financial way to deal with this Voluntary Savings became a viable source of funds for expansion as well as loans for investment capital, housing and education; term deposits; and dollar accounts.

[object Object],[object Object],[object Object],E. BANCO SOL. A successful case study PRODEM decided to create a bank to become independent from donated funds HOW? ,[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],E. BANCO SOL. A successful case study 4 PHASES

[object Object],E. BANCO SOL. A successful case study ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],E. BANCO SOL. A successful case study ,[object Object],[object Object],[object Object],PHASE 3 Legal Process ,[object Object],[object Object],[object Object]

[object Object],E. BANCO SOL. A successful case study ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Created in 1998 Originates from NGO Accion Comunitária del Peru (ACP) Motto: Doing one thing and doing it well ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],NGO’s can be successfully transformed into financial entities (with supportive legal framework) and serve the poor better Lessons Learned F. Other successful examples

Source: From NGOs to FFIs in Microfinance Services: Conversation Road Map and its challenges – Comparative study of nine Eastern European MFIs F. Other successful examples

Literature Schmidt, R.H., C.P. Zeitinger (1996): Prospects, Problems and Potential of Credit-Granting NGOs, in: Journal of International Development, Vol. 8, No. 2, 241-258. Glosser, A. (1994): The Creation of BancoSol in Bolivia, in: Otero, M., E. Rhyne (eds.):The New World of Microenterprise Finance. Building Healthy Financial Institutions for the Poor, Chapter 12, Kumarian Press. Lauer, K. (2008): Transforming NGO MFIs: Critical Ownership Issues to Consider, CGAP, Occasional Paper, No.13, from http://www.cgap.org/gm/document-1.9.4213/OP13.pdf Fernando, N.A. (2004): Micro Success Story? Transformation of Non-Government Organizations into Regulated Financial Institutions, ADB Aghion, Beatriz A. and Morduch, Jonathan: The Economics of Microfinance, the MIT Press, 16-23. From NGOs to FFIs in Microfinance Services: Conversation Road Map and its challenges – Comparative study of nine Eastern European MFIs Web Banco Solidário http://www.bancosol.com.bo/ References

Thank you for your attention ! University Meets Microfinance Planet Finance www.planetfinancegroup.org [email_address] www.universitymeetsmicrofinance.eu www.ies.org.pt

MicroFinance Upgrading

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MicroFinance Upgrading