Global Microfinance Case Competition - Slide Deck

Five-Year Master Plan Amartha GAE OPO? Gae Indonesia maju! (What is Amartha working on? Indonesia’s better future!)

The Loan Wolf

University of Melbourne

Aditya Darma Saputra Elvira Hakim

Katherene Reji Maggie Singorahardjo

Industry Context The industry aims to alleviate high levels of poverty among the Indonesian population.

MICROFINANCE INDUSTRY 50 million borrowers (est. 2013)

60,000 Microfinance

Institutions (MFIs) (est. 2013)

Local commercial

banks

The number of banks in the industry are set to increase with Bank Indonesia proposing a rule stating at least 20% of loans to be micro loans by 2018

Assuming compounding annual growth rate (CAGR) of 4.46% per year

Industry Context Firm Context Objective Proposed Programs Implementation Risk and

Mitigation Conclusion Appendix

Firm Context (Amartha)

Amartha’s vision is to allow more accessible financial services to a low income demographic in Indonesia’s rural areas. Amarthans are socially driven with main focus revolves around meeting the needs of people. Amartha sees the importance in empowering women with affordable financial services as it will positively impact on the welfare of the household.



What do we want to achieve?

Indonesian workers rank highest in the world in terms of willingness to give up higher pay for a greater work/life balance. In reality, people in the rural area do not have the choice to have a greater work/life balance. They have to generate income for their families and often they need to migrate to other city/country. Their mindset is that the only opportunity to work in their hometown (rural area) is to work in paddy field. While in reality, being a farmer is not the only thing that they can do. We aim to give them opportunity to generate income without having to leave their home and family by disbursing a target of approximately 62,000 loans and extending our product offerings through our flagship program, GAE OPO.



How do we achieve our goal?

Consultation Extending on education prior to loans being issued, we also seek to implement the provision of consultation for startups and new entrepreneurs in terms of marketing, business and financial advice, also provided through volunteers

With consultation, startups and small businesses are exposed to new sources of skills and knowledge which they can use to leverage their businesses. Thereby increasing income, decreasing the probability of default rates and increasing level of confidence to borrow

Implementation In order to achieve the desired benefits of the proposed solutions, we put forth two main programs that we abbreviate into:

GAE OPO GAE OPO is a Javanese dialect language which roughly translates into “What are you working on?” in english.

GAE OPO is an abbreviation, consisting of the first letter of every word from the name of the initiative that we are proposing:

“Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on.” - Mohammad Yunus

Open

Partnership

Opportunity

Guilt Marketing

Attractive Promotion

Effective Socialisation

Education and Socialisation Study in Indonesia found that those who were not financially literate were less likely to use financial services.

Our recommendation aims to alleviate this problem by instilling financial literacy education to mature individuals through liaising with the government and other education institutions.

Also, we will aim to partner up with institutions and organisations such as Melbourne Microfinance Initiative to assist current employee with the field works. With having volunteers at our disposal, we will be able to expand the range of rural people that we can touch without having to incur significant cost.



Guilt Marketing Attractive Promotions Effective Socialisation

Attractive Promotions Tying staples to the seminars - providing staples to low income families provided they attend the seminars. The aim of this promotion is to increase awareness of the program that is available to the rural people of Indonesia.

Effective Socialisation Indonesian, especially those in rural area, put their trust into public figures such as the Mayor of the area. Inviting village head/mayor of the province to talk and participate in the program enables them to gain a sense of security and increases credibility of the program. Educate people on the benefit of productive loan, and the opportunity to earn income without having to leave their home

Guilt Marketing Consumptive behaviour is very apparent during the Lebaran period. And more often than not, the feeling of guilt comes right after the act of spending money itself. During this period, we will use “guilt” as our primary marketing tool. Guilt will be an effective emotion to use to get into people’s head and to make them realise that they need to work again/earn some money. By creating a subtle but effective marketing campaign, we want to instil the feeling of guilt to people, and at the same time we will promote the benefits of having a m i c r o f i n a n c e l o a n , w i t h generating more income as one of them.



GAE’s Strategy Rationale

During the festive period of Lebaran in

which most people return to their

homes and families, we want to focus

our efforts on marketing, socialising

and giving promotion to people during

this period.

Overseas labour workers/Migrant

workers would be presented with the

opportunity to start a business in their

hometown. This could be attractive to

them provided that they have the

capability to access loans offered by

Microfinance institutions such as

Amartha. GAE Marketing Framework



Partnership W e a i m t o a c h i e v e a sustainable partnership within the community of Amartha. Following our first point, Open, we want to open the door to women who want to work with other people. Encouraging women to start their own businesses with people who they trust will have a positive impact on the sustainability of their business, income, and happiness.

Open Partnership Opportunity Opportunity By having an open partnership structure in our community, opportunity will arise through an effective discussion and community that fosters growth. We prov ide consu l ta t ion services as a platform to cater to and support the growing number of business ventures.

Open W e l c o m e m e n i n t o t h e A m a r t h a ’ s c o m m u n i t y , provided that women remains the so le focus, i .e . the propor t ion of women as members of Amartha is greater than the men. T h e I n d o n e s i a n c u l t u r e continues to place a greater i m p o r t a n c e o n m a l e dominance as men are often perceived as the community leaders, decision makers and mediators while women are seen as backbone of the home and family values.



OPO’s Strategy Rationale

Partnerships would give women confidence to engage in entrepreneurial activity to a point where they are sensitised with the practice. This will also motivate other women to join, thereby increasing the number of borrowers for Amartha Partnerships would be accounted as one entity, which will help reduce the number of defaults as the partner/s would be able to share responsibility of the whole syndicate. As the graph shows, partnerships enterprise enjoy higher survival rate than a sole proprietor. Catering for groups of people, rather than individuals will also help reduce Amartha’s administration costs.



Implementation Five-Year Time Frame

GAE

Year 1 Socialise the program to the target market.

OPO

Year 2 Once there is sufficient familiarity and knowledge of the programs, initiate the OPO scheme.

Open new branches

Year 3 Once reaching capacity limit, open new branches to cater for the growing market

Open new branches

Year 4 Continue progress of Year 3 Continually focus risk mitigation to avoid the loss of identity.

Open new branches

Year 5 Continue to fulfill the growth capacity Revise the five-year plan



Risk and Mitigation

RISK 1: Risk of Default

RISK 2: The proposed programs

offered might not be attractive

RISK 3: Being too focused on

profitability growth and straying away from core vision

Mitigation 1:

Incorporated in our GAE OPO program. educating people, encouraging them to

partner up, create consulting service and volunteers will help mitigate the risk

of default. implement Quality Service Control periodically

MITIGATION 2: We would introduce the benefits from

opening up a business to people in rural areas, highlight the benefit to the

Indonesian economy in terms of a higher standard of living and provide

encouragement by provide testimonials from successful borrowers

MITIGATION 3: Create sense of belonging to the

employee by providing them perks and benefits. Incentivise them. Creating the

slogan (GAE OPO) that act as the reminder to the employees and volunteers to work accordingly.



Conclusion

Goal

Assumption: Constant rate of growth and dropout over the course of 5 years

---------------------------------- With the successful implementation of the GAE OPO programs, the forecast indicates t h a t A m a r t h a w i l l achieve its objective of o v e r 5 0 , 0 0 0 l o a n disbursement by 2021. ----------------------------------



Appendix A ●  Compounded Annual Growth Rate: est. 2009 - 2013

50 = 42 (1 + x)4 x = 4.46%



Appendix B

●  Growth Rate: est. 2012-2013 [Number of New Members (2013) - Number of New Members (2012)] / [Number of New Members (2012)]

●  Dropout Rate: est. 2013

Retention Rate: [Active Members End of Year (2013)] / [Active Members Beginning of Year (2013) + New Members (2013)]

Dropout Rate:

[1 - Retention Rate]



Appendix C Translation : Lebaran (Eid Mubarak) does not only purify your heart, it will also purify your wallet, making it holy, and clean and empty again.



Appendix D http://www.gbgindonesia.com/en/finance/article/2013/an_outlook_on_indonesia_s_microfinance_sector.php http://www.bwtp.org/MF_Industry_Report_Indonesia_ELECTRONIC.pdf http://www.gbgindonesia.com/en/finance/article/2013/an_outlook_on_indonesia_s_microfinance_sector.php http://www.gbgindonesia.com/en/finance/article/2013/the_outlook_for_indonesia_s_islamic_banking_sector.php http://vuir.vu.edu.au/22309/1/Iwan%20R%20Prawiranata.pdf



Global Microfinance Case Competition - Slide Deck

Economy & Finance

Transcript of Global Microfinance Case Competition - Slide Deck