Economic change powered by Microfinance

and SMEs

Transformational Business Network

National Conference

Poverty – the facts

Approximately 790 million people in the developing world are still chronically undernourished, almost two-thirds of whom reside in Asia and the Pacific

2.6 billion people around the world do not have access to toilets or basic sanitation, causing fatal illnesses that could easily be prevented

1.1 billion people do not have access to clean drinking water. Instead, they are forced to drink, cook with and wash in contaminated water sources every day

Every 3.6 seconds, someone in the world dies from starvation. The majority are children under five years old

90% of starvation deaths happen where food is plentiful, but people simply cannot afford to buy it. War, disaster and famine account for only 10% of all starvation deaths Nearly a billion people entered the 21st century unable to read a book or sign their names

800 million people go to bed hungry every night, 300 million are children

1.6 billion people – a quarter of humanity – live without electricity

A London parking meter makes more money in one hour than each of the 2.7 billion people living in poverty make in one day.

Poverty – the facts cont’d

What Opportunity International Does

Opportunity International exists to give people living in poverty opportunities to transform their lives. This is done through small loans (microfinance) that help them start a business, earn an income and provide for their families.

Where Opportunity works

28 Countries40 Implementing Partners(incl. 15 regulated banking

institutions)

Opportunity Vital Statistics

~3 million clients (incl. > .6 million savings clients)• > 1 million in India• > •75 million in Philippines• > •75 million in Sub-Saharan Africa

> 3.0 million micro insurance clients 84% of loans made to women US$285 average loan size US$138 average initial group loan US$122 average savings balance

As at March 31, 2010

Income Distribution Pyramid

Individual Lending/SME

Solidarity Groups (3-7)

Trust Groups (15-25)

Self-Help Groups (20-30)

Microfinance moving people up the poverty pyramid

Positioning of market participants

Transformation Maximizers

Economic

SocialSpiritual

Profit Maximizers

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Transformational Impact Perc

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CommercialBanks

NGOs

Holistic transformation

Transformational Microfinance

Community Centre And Safe Drinking Water Supply

Microfinance / SME Initiatives

The Waterhope Project….

Leverages a strong network of OI NGO’s in Philippines

Is integrated with existing OI micro finance network

Each station provides clean water to over 12,000 people every week

Requires US$96,000 start-up investment per station

Waterhope builds sustainable local entrepreneurship….

Reinvests in local community building

Supports new water businesses for local community members

Is an ideal focus for local PepsiCo employee CSR efforts

Has a sustainable, scalable and proven business model

Waterhope Harnesses Entrepreneurs For Sustainable Community Building

Community Water Station

Each Water Station Provides Clean Water to over 12,000 People Weekly

• 90% of water sold to Dealers; 4,860

jugs/week

• Average Dealer Route is 25 homes, 2

jugs/week

• Supply 4,860 households = 12,150

people/week

• 10% water given free to schools and

clinics (540 jugs per week)

water source

5,400 water jugs (5 gallons)

per week

Livelihood impacts for community

• 4 direct employees

• 60 dealers to date with water

businesses

• Access to micro finance loan funds

benefiting approximately 250

households

• 1,500 individuals community

development services

Excellent Water Quality Meets All Government Purity Standards

Municipal water or spring water

Pilots use carbon filter with UV treatment

Water quality government tested monthly

Risk of water contamination limited by jug design and heat seal

Pilot equipment supplier: Waterhealth and Aqua Add on

Pure water rinsed

Heat sealed for

safety

The Water Station Becomes A Community Focal Point

Community gathering

place

Microfinance

Centre

Pre-School and

library

Community

Services

Rubbish dump in Manila

“Give a man a fish, he’ll eat for a day. Give a woman microcredit, she, her husband, her children and her extended family will eat for a lifetime” – Bono, U2

Agriculture Microfinance- SME

Agriculture initiatives in Africa

3/4 of population live in rural areas

Agriculture is key sector in economies, but low productivity

Food shortages and insecurity remain high

Smallholder has impaired access to technical assistance and credit

Our Response

Strong commitment to the sector

An integrated rural finance and banking strategy:

Agricultural finance Rural savings Banking Infrastructure Ancillary credit programs (e.g., health, education, etc.)

A prudent approach – achieve sustainability

Development

Agriculture’s impact on development is profound: labour goods (food, inputs) market for manufactures financial resources; and foreign exchange

Binding constraint on industry; output growth crucially dependent on agriculture

Relative importance of sector declines in the course of economic development

FARMER

Market Information Systems

Infrastructure•Communications•Power•Roads•WaterSupport

•Extension Services•Technical Support•R&D

Inputs•Seed•Tools•Fertilizer•Chemicals

Microfinance•Savings•Loans•Insurance

Output Market•Contract•Auction•Trader

Interconnected Web of Essential Relationships

The difficulty in finding a large number of examples of successful providers of agricultural microfinance shows how susceptible the field is to factors beyond its control—and how necessary it is for agricultural lenders to adopt the most important lessons of the microfinance industry to minimize controllable lending risks. It also serves as a cautionary tale for micro-lenders moving into rural areas and lending to households that depend on agriculture for their livelihoods.

- CGAP 2002

CGAP conducted thorough review of agriculture microfinance programs in 2002. Out of 80 ‘promising’ projects, less than 30 were considered to have potential for sustainability. NONE were considered to be an unqualified ‘success.’

CGAP’s View

Education Microfinance - SME

School building in Malawi funded by Opportunity

Supported an additional 100 students paying nominal fees of $15 each per

Semester

Headmaster Explaining Model & Success

Students achieving results in top 10%for grade in country after two years

School children during break

Microfinance WORKS – but...

Microfinance improves health, increases school enrolment, and helps the poor work their way out of poverty

It is highly effective in countries with high rates of poverty and stable political and economic environments

The industry is currently serving over 133 million borrowers, Microfinance is rapidly increasing to meet massive demand

Recent recognitions of the power of microfinance: 2005: UN declares “Year of Microcredit” 2006: Muhammad Yunus, Grameen Bank

awarded Nobel Peace Prize

Sources: Microcredit Summit Campaign 2007, the Microfinance Gateway, Deutsche Bank

Moving beyond loans

» Many of the problems facing the poor can be solved with small loans, but some cannot

» Poor need a wide range of services to address their various financial needs

» Savings– A safe place to keep

money, income protection» Insurance

– Protection in times of crisis: death, drought, disability

» Money transfers– Sending and receiving

money to/from other family members

Income protection

Income generation

But for the Grace of God – I could have been born here!!

“You must be the change you wish to see in the world” - Mahatma Gandhi