1. Practical Microfinance CourseSession 1 Review Questions Dr. Phyllis SantaMaria Gabriel Flores

2. After tonights session, you will be able to... Speak to the high-level concepts of Microfinance andits evolution Articulate the overall benefits and key limitations ofMicrofinance Select a Microenterprise to study and prepare aninterview with its owner Share what inspires you to be on this course and whatyou plan to accomplish 3. Consider in pairs... What is the value of people reaching their fullpotential? Some questions you can engage as you explore: Is it even important? Why/why not? What does it mean for people to reach their full potential? What does that entail? Who is included in people? Whats the impact on the person/peoples community? What, if any, are the external drivers? How is value identified and measured? 4. Microfinance in Action Course: Timeline1: Microfinance Overview18/02/135: Sustainable Community18/03/133: Sustainable SolutionsMicroenterprise Presentation04/03/13 6: Sustainable Organisations 25/03/13 2: Sustainable Finances 4: Sustainable Teams 25/02/1311/03/13 7: Sharing Sustainability 08/04/13 UKMF Club: 5 Talents Savings in Kenya27/02/13 UKMF Club : MF & poverty alleviation 18/04/13 FebMar-Apr 2013 2013 KEY ACTIVITY TodayInterviewing A Microenterprise 25/02/13Talent Profiling &Debriefing25/02/13Presenting a Microenterprise 04/03/13 25/02/13Five Talents Case Study Project 11/03/13 25/03/13Prepare Final Presentation 25/03/1308/04/13 5. Microfinance in Action Course: Structure2013 1. Microfinance 2. SustainableSavings Groups in3. Sustainable OverviewFinancesKenyaSolutions Mon 18 FebMon 25 FebWed , 27 Feb Mon 4 Mar UK MF Club, Allen & OveryKey Topics MicrofinanceBalance SheetMicroenterprise presentations OverviewProfit & Loss StatementsUK MF Club featuring Key Lessons of Microenterprise for Basics of Insightful Ratios inLillian Mwikali, Microfinance (and Social Enterprise) Microenterprise MicrofinanceThika CommunityIdentifying sustainable solutions Template for ME Development Trust, Kenya presentationPracticalSelecting a Five Talents Kenya,Five Talents ProjectsActivity Microenterprise Interview with Lillian Mwikali, Overview of FiveMicrofinance Practitioner Talents Course ProjectsHome playMicro-enterpriseProject SelectionMeet your Project Team interview Microenterprise interviews Identify Challenges, Issues and Talent Dynamics Prepare presentation potential solutions profile & debrief sessionsFacilitators Dr PhyllisPSLillian Mwikali and Five PS SantaMaria (PS) GFTalents UK GF Gabriel Flores (GF) 6. Microfinance in Action Course: Structure 4. Sustainable 5. Sustainable 6. Sustainable 7. Sharing TeamsCommunityOrganisationsSustainability Mon 11 Mar Mon 18 Mar Mon 25 Mar Mon 8 AprKey Topics Microinsurance Key Performance Indicators The role & impact of governance andProject Presentations Team DynamicsSocial Impact Measurementregulation Magnifying YourMIX Market Making it happen in real life East UK Microfinance Club Solutions Tajikistan case studymembers, friends andcolleagues are warmlyinvitedPracticalMasterminding Activity Evaluating an MFI forReview progress on projects, get Presenting your solutionsActivity Leveraging talents sustainability supportto Five Talents challengesIs your project sustainable?Home playPlan your projectIdentify the impact of yourComplete core actionsYour plan for your Take Action on yourprojectPrepare presentation for last sessionMicrofinance in Action projectTake ActionFacilitators PS PS PS Panel of Experts GF GF GF UK Microfinance ClubYour invited guests 7. How do I get the most out of MFIA? Each classroom starts promptly at 18:00 and the formal partwill complete by 21:00 be here at 17:45 Please let us know today which sessions you plan to miss Let us know which sessions you will attend via webinar For the sessions you miss, watch the replay and connect with your teammates Use the Rural Finance on-line lessons Practice doing what you do best and enjoy most andcollaborate to accomplish everything else Complete assigned home play activities between sessions Find a workout partner and workout with them Apply what you learn here to accomplish your personal goals Have fun and play full out! 8. What is the purpose of Microfinance? What do you think Microfinance is for? We believe Microfinance is an access for all people toreach their full potential...and this is the basis of our work. 9. What is poverty? How is poverty defined? the poorpeople who, compared to their fellow citizens, dont have much money.Stuart Rutherford, The Poor and Their Money, 2009 How does somebody born into poverty rise out of it? What, if any, assistance is needed and from whom? Poverty is lack of capabilities.Prof Amartya Sen, Nobel Prize for Economics, 1998 10. Economic Pyramid & Market Purchasing power parity (USD) Population in millions > $20,000 Tier 1 95 - 120 $1,500 - 20,000Tiers 2 & 3 1,800 2,100< $1,500 Tier 4* 5,000*Tier 4 = Bottom of the PyramidNearly three billion poor people in Not-so-poorPoor Ultra Poor Marginaliseddeveloping countries lack access to the>$2.30>$1.15 < $1.15 $2.30them manage their precarious lives.(World Bank, CGAP) 2.5B People Source: UN World Development Report*PPP: Purchasing Power Parity per day 11. What other services are needed? How do you manage your money? What categoriesare there? What financial services do you use? Are theyimportant? Why? What, if any, risks are there of using these services? 12. Muhammad Yunus had a vision...Muhammad Yunus with MWB team of Enterprise Trainers fromNairobi slums at Microcredit Summit for Africa and Middle East,Nairobi, 8 Apr 2010 13. Microfinance 1.0: I receive MicrocreditSlow & expensiveBangladeshs BigPushThreeInvestors &Solidarity Group todonors Lending groups, Offer wholesalecredit, subsidies andOne size fits all mainlyPhoto, P SantaMaria at CASHPORadviceInnovatetrial and error women Microfinance, Varanasi, IndiaCreate jobsUsers = Consumers of loansPROBLEM: slow, inflexible group model, could not satisfy demandLloyds of London 13 14. Lessons from poor people in Dhaka:saving for lump sums Saving up: savings firstthen taking a lump sum(savings) Saving down: lump sumfirst then paying off inregular savings (loans) Saving through: lumpsum when needed inexchange for regularinstalments (merry gorounds or insurance) Savings and creditStuart Rutherford w S Arora, The Poor and TheirMoney: Microfinance from a twenty-first centuryconsumers perspective (2009) are two sides of the same coin 14 15. Lessons from history MicroCREDIT MicroSAVINGS1720s in Dublin: Jonathon Swift 1798 London Benefit Club, first savings bank,lent small sums, no collateral, two with children, later adults: Priscillaco-signers, weekly payments, no Wakefield, philanthropist, Quaker, writer,interestfeminist and granddaughter of Barclay ofBarclays BankLloyds of London 15 16. Lessons from history MicroINSURANCE 1799 Society of Assurancefor Widows and OrphansONE SIZE FITS ALLAGES 1846 FIRST GROUP LIFEPOLICY Combined weeklypayments with premiumsbased on death 1769 FIRE INSURANCE SIGN probabilities 16 17. Lessons from history 1850s: F W RaiffeisensCredit co-operatives co-operatives on self- help principles to help starving farmers in Germany 1880s: 600 in Germanyand Austria Today Austrias mostpowerful bankinggroup 17 18. Lessons from history1. DESIRE: rich andpoor want good waysto save, borrow andinsure2. DEMANDS of the poormet on a large scale withlimited and low-qualityservicesPhoto: P SantaMaria, CashPor MFImeeting, Varanasi, India 201018 19. Lessons from history3. DANGER OFIDEOLOGY: cautionabout storylines whenunderstanding howpeople use services4. DUPLICATE: Mostmicrofinance ideas havebeenduplicated, refined, borrowed and publicised 19 20. Lessons from history5. DILIGENCE: most 7. DIMINISHING:microfinance is fromprivate initiatives, not financial services for thefrom governments.poor diminish as countries grow richer.6.DEVELOPMENT: 8. DOUBTFUL:Developing countries are delivering financialcopying the economic services to the poor onhistory of todays richnations, making thetheir own rarely reducesfinancial revolution was povertyinevitable. 20 21. MF 1.0: I receiveMF 1.0 MFIs Credit-led create what they product Managers usethink people wantMicrocreditgroups for economy give training for& outreachaccessing credit Find a readydemand PUSH Slow & expensiveUsers = consumers I RECEIVE21 22. Your Web 1.0 to 2.0 Journey I participate Web 1.0:Web 2.0: join LinkedInI receiveJOIN! Microfinance in Action Group 22 23. MF 2.0: I participate Sources of funds UsersUsers Users saving generate generatethrough Wholesale savings & savings and Micro fundingborrow on-lend insurancefrom donorsSaving up & saving up &Credit life & investorsdown downSavings life Bangladeshi 3Village Banks insurance MFIs as BanksSelf-Help Health BRI IndonesiaGroups Crop Pro Credit VSLAsDisaster FuneralMicrocredit Saving downDanger: I participate Users = Savers & Borrowers & Insuredoverheating PROBLEM: too much credit in some places, still many excluded, a lotLloyds of London 23 of untapped savings potential, client protection needed 24. MF 2.0: I participate MFIs variety of Consumers get mobiles MF 2.0products Grameen II Peer-to-Peer Village Banks Lending Platforms develop SHGs-Bank links platforms VSLAs-bank NeedSavings, credit, i links Client Individualised nsurance, mone protection microbanking y transfers Microinsurance MF & investor standards Mobile money Well-designedSHAREOverheating of regulationmicrocredit Yes we Users = savers, borrowers, lenders,can!insured, mobile payment users I PARTICIPATE24 25. MF 3.0: We collaborate &co-create M-PESA E. Africa Masai in Tanzania using mobile phones for funds transfer, Dec 2007 Photos Liz Hingley 15 millions users in Kenya Dec 2012 26. MF 3.0: We collaborate, co-create & connect Collaboration by organisations to create platforms for co-creationUser generated savingsUser generated business Agents for finance, information, and greater transparencye-commerce PlatformsBusiness platformsEveryone can save, be Everyone can manageinsured & interactUsers = EntrepreneursMF 3.0 pioneers!We CO-CREATE SOLUTION: One platform, one community, one team Lloyds of London 26 27. MF 3.0: We collaborate, co-create &connect (BASIX Sub-K: < 1k rupees & 1 km)VijayMahajanhttp://blip.tv/cgap/episode-5544040 27 28. MF 3.0: collaborate, co-create & connect(BASIX Sub-K: < 1k rupees & 1 km)http://blip.tv/cgap/episode-5544040Insert video clip Mahajan 28 29. MF 3.0: We collaborate,co-create & connect29 30. MF 3.0: We collaborate,co-create & connectPaper receiptRecordsent viamobile30 31. MF 3.0: What opportunities! Pakistan 110 million mobile phone users 15 million bank account users 400,000 telco agents 12,700 bank branches Photo REUTERS, Aktar Soomrohttp://www.cgap.org/news/taking-pulse-branchless-banking31 32. MF 3.0: We redirect investmentFrom outsidecreditTo infrastructureCARE-PLAN-BARCLAYS Banking on Change toreach 400k people in 11 countries throughVILLAGE SAVINGS & LOAN ASSOCIATIONS 32 33. MF 3.0: Savings mobilisationCARE-PLAN-Barclays Do what you do bestCARE-PLAN-BARCLAYS Banking on Change to Partnershipsreach 400k people in 11 countries throughVILLAGE SAVINGS & LOAN ASSOCIATIONS 33 34. MF 3.0: MICROINSURANCE SEWA (Self EmployedWomens Association) Gujerat, 1972: TradeUnion for SEW SEWA Vimo insurance:120,000 with packageof package of death,sickness and loss ofassets www.sewa.org/ 34 35. Yumis Story ACTION: Took our Microfinance in Action Course 2009 Clinic and micro-health insurance in Kibera 2009-13Vostrum Clinic, Kibera sustainable in 2012, Microinsurance research with Mosleh Ahmed, 2012-13MWB developedYumi participated in ourPractical EnterpriseMicrofinance in Actioncourse in Kiberacourse, 20092008-2010 MWB Training of Trainers MWBs & Yumis fieldwork, Kibera, Nairobi (featured in The Constant Gardener) Focus Groups withMWB mentored MWB Enterprise courseYumi in developing graduates, Kiberaher project35 36. MF 3.0: collaborate, co-create & connectPro-Poor Seal of Excellence J D Bergeron, Danielle Hawkins & Dr Phyllis SantaMaria, UK MF Club, 22 Jan 2013 36 37. What insights have you gained? What are the benefits of Microfinance? What are its limitations? What are the risks and who is exposed? 38. Background 39. 41 40. 43 41. Credit-led Microfinance:Savings-LedMicrofinance: Indonesia India Bolivia Peru KenyaPhilippinesSudan & South Sudan TanzaniaBurundiUgandaMyanmar 42. Headline figures 100% of clientsSavings portfolio 404,476received business training37,658 clients8,124 new clients in 2011Average loan 12Countries 93%56Loans in repaymentcirculation1,461,208 rate 43. Current challenges Social impact measurement Mobile money Sustainable funding 44. Social impact measurementUgandaChallenge Results Recommendations 2 Months internshipsponsored by Vodafone todesign programme (MWBgraduate) Funding to partiallyimplement social impactmeasurement in Uganda 45. Mobile money TanzaniaChallenge Results 46. Current challenge: sustainablefundingCARE-PLAN-BARCLAYS Banking on Change toreach 400k people in 11 countries throughVILLAGE SAVINGS & LOAN ASSOCIATIONS 47. This courses challengesCARE-PLAN-BARCLAYS Banking on Change toreach 400k people in 11 countries throughVILLAGE SAVINGS & LOAN ASSOCIATIONS 48. READY TO START? 49. Homeplay: Your Microenterprise Study1. Why study a Microenterprise in the MFIA?2. What is a Microenterprise? A small business with fewer than 5 employees Registered as a sole trader, partnership or limited company (by guarantee or shares)3. Who is involved in a Microenterprise? Who is the owner? Who are the employees/team? Who are the customers and other stakeholders?4. Where are they found? When do they operate? Are they seasonal? Do they rely on repeat business? Do they work alone or collaborate with other businesses?5. How do they sustain themselves? What are their challenges? How do they know theyre profitable (or not)? 50. What resources should I check?http://www.microfinancelessons.com/Lessons 4, 5, (6 optional) 51. How to do your Microenterprise Study Choose a buddy Go through the online lessons in Rural Finance:http://www.microfinancelessons.com/ Lesson 4: Financial Reality of Business Enterprise Lesson 5: Collecting and Analysing Financial Information from Microenterprises For extra credit ;-) : Lesson 6: Can they afford to borrow? Rates of return and the cost of money Interview a Microenterprise owner Interview top tips: Introduce yourselves and stress that youve come to learn from the business not to give advice or teach anything. Convince them that youre not the tax [wo]men. Praise the business and its products/services. Collect the following information: Brief description of the business and its owner Reason why they started it, its history, the number of jobs it is creating and the owners opinion about its main strengths/problems Financial information as discussed in Lessons 4 & 5 in Rural Finance Reference the five questions we just used to explore Microenterprise 52. Now what are your goals? What most inspires you about this course? What would you like to accomplish over the next 6weeks? In the course Personally Professionally In your projects How will you get connected with others here? (Get atleast one persons contact details) 53. ACTION: Register for the UK MF Club event What happens when Savings Groups grow? Featuring Lillian Mwikali, Thika Community Development Trust, Kenya and Five Talents (UK) At Allen & Overy, 1 Bishops Gate Drinks and canaps provided! 54. Microfinance in Action Course Graduates Maria, a banker passionate about philanthropy, was helped to get a job as a fundraiser with a major MF umbrella organisation, worked with a MF fund and is now theMicrofinance Advisor for Commonwealth Development Corporation. Mary, a lawyer specialising in energy projects, set up a consultancy as an environmental lawyer to work with grassroots organisations in the UK. Melissa did field work with MWB in Tanzania and now leads a MF and Social Investing Interest Group at a major law firm plus being a lawyer and mother. Jessica, a financial lawyer, did MWBs first field work project in Kibera, worked in Moscow, did an MA in international development part-time and is now workingwith the Grameen Foundation in the UK and Africa. Sam, did fieldwork for our Practical Enterprise Course, got introduced to a development project in Kenya, is now the DFID-Citi Fellow for Microfinance for 2012-13and has authored three annual Microfinance Banana Skins reports. Nora, a credit manager with Charity Bank, went on fieldwork twice with MWB in Nairobi to help design and deliver our Practical Enterprise Course. Nora has sincedone a social impact assessment with a MFI in rural India. Yumi used her banking skills and passion for providing low-cost, quality primary health care to people at the Bottom of the Pyramid to set up a sustainable clinic inKibera, the largest slum in Africa. She is working with Mosleh Ahmed, an MWB Director Helen, a GP in Essex and Public Health Doctor with international experience, is setting up a primary health care facility in an Indian Ashram that has a MFI with 80kmembers and doing research with Mosleh Ahmed for setting up a micro health insurance scheme. Helen and Mosleh have just done field work in Sri Lanka and India. Chris used his financial law and Microfinance in Action skills to do research for securitisation of funds for a fund and a large MFI Rosy, an Anglican priest and management consultant, added her Microfinance in Action skills to her expertise for working on a project on sustainable housing inSouth Africa 55. Are you now able to... Speak to the high-level concepts of Microfinance? Articulate the overall benefits and key limitations ofMicrofinance? Select a Microenterprise to study and prepare aninterview with its owner? Share what inspires you to be on this course and whatyou plan to accomplish? not sure? Collaborate with others! 56. Also Remember... Complete your Talent profiling, if not already done Schedule your profile debrief with Gabriel today sothat it takes place in the next two weeks 57. Contact Information Dr. Phyllis SantaMaria: Mobile: +44 7715 004 303 Landline: +44 207 839 0844 Email: phyllis@microfinancewithoutborders.com Gabriel Flores Mobile: +44 7834 528 966 Email: gabriel@microfinancewithoutborders.com 58. APPENDICES 59. A lot of people are impactedHigh Income10% Ultra Poor 13%MiddleIncomePoor 24%26%LowIncome26% Global Poverty ProfileSource: Figures compiled by Sadrudin Akbarali 60. Poverty more prominent in developing countriesHigh Income Middle 2%Ultra Poor Income18% 20%LowIncomePoor 34%26%Developing Countries Poverty ProfileSource: Figures compiled by Sadrudin Akbarali 61. Africa is even more impacted Middle High Income Ultra Income3% Poor Low 10%32% Income 20% Poor 35% Africa Poverty ProfileSource: Figures compiled by Sadrudin Akbarali 62. Microfinance starts with the end in mind...1976: Funding 1983: Grameen 2006: Nobel from Janata Bank (Village Peace PrizeBankBank) Est.1976: Lent $271982: 28,000 2012: Grameen to 42 women BorrowersScotland Est.Fully repaid!Each woman made a profit of $0.02!Group Lending Methodology 5 counter-guaranteeSustainable: Poor people pay back their loans (2% default) moreso than clients of Commercial Banks (6% estimated repaymentrates in USA, UK)Group payingloans, CASHPOR, Varanasi, India, Feb 2010 63. Grameens huge impactKey Accomplishments Cumulative amount disbursed since inception $12 billion Number of members 8.4 million Deposits $1.39 billionExtra Programmes Beggar members85,236 Cumulative no. of village phones 471,423 Cumulative no. of houses built with housing loans 692,247 Group of profitable and non-profit ventures: Grameen TrustGrameen Fund, which runs equity projects like Grameen Software Ltd, Grameen CyberNet Limited, Grameen Knitwear Ltd, Grameen Telecom, Grameenphone (GP), biggest private sector phone company in Bangladesh. The Village Phone project of GP brought cell-phone ownership to 471,423 rural poor in over 50,000 villages since the beginning of the project in March 1997. 64. We now know there are pitfalls to Microcredit... 65. Microfinance has diversified from loans...Life cycle needs for Bottom of the PyramidHousehold Categories formation: Credit (C)C,S Savings (S) Insurance (I) Death: C, I ONGOING NEEDS Birth: C, S, I Remittances (R) Working Capital: C, S Productive Assets: C, S Investments: S, C Asset protection: I Health: C, S, I, R Old Age: I, S Shocks: C, S, I, REducation: C, SMarriageCeremony: C, S 66. Microfinance via multiple channels Place a * by any channel youve used. 67. Register!www.microfinancewithoutborders.comfor a FREE copy of Microfinance 3.0phyllis@microfinancewithoutborders.comJoin the Microinsurance Networking Group 76 68. Your Web 1.0, 2.0 & 3.0 JourneyMF 1.0: I Web 2.0: receive join LinkedIn MF 2.0: I PARTICIPATEMicrofinance 3.0SIGN UP FOR We collaborate,co-create and connect Microfinance in Action Group77