1 what is microfinance? nabard definition “provision of thrift, credit and other financial...
TRANSCRIPT
1
What is Microfinance?
NABARD definition
“Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas for enabling them to raise income levels and improve living standards”
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Microfinance Approaches
Individual lending
Grameen Bank solidarity lending– 5 member groups incorporated to form centers upto 18
groups– Loans disbursed to individuals on group credibility
Latin America Solidarity lending group– 4-7 members cross guarantee each others loan– Loan disbursed to group leader
Village Banking– 30-50 people are members– MFIs fund and internal mobilization of member funds
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Microfinance Approaches
Self-reliant village banks– Cater to the whole village– Sponsor does not provide credit, bank relies on savings
mobilization
Self Help Groups – Banks Linkage – 20 member groups facilitate savings and loan
disbursements – After a display of financial maturity banks lend to SHGs
in multiples of group savings– Loan disbursed to the group with on lends to its
members
Mixed Model– SHG and Grameen Model is adopted catering to
individual market segments
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Current Scenario
Population=6000 million
Population below poverty line=2000 million
Equal to 400 million households for microfinance
Access to microfinance=30 million
10000 MFIs reach 4% of potential market
$21.6billion demand for microfinance
$2.5billion supplied by microfinance
growth in no. of clients reached in last 5 years = 350%
*http://www.uncdf.org/english/microfinance/facts.php
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Statistics
Whats good about Micro-banks? excellent track-record over past 10 years for leading MFI
– solid profitability (ROE in the 20s is usual)– fast growth– low portfolio at risk (average default rates of 3%),
excellent diversification– products and services range adapted to client needs– high solvency– good MIS systems and reporting capabilities– solid governance and high professionalism of boards
and management– access to many commercial sources, no subsidies at all
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Does Technology fit in here?
Benefits
– Reduction of transaction costs
– Improves data integrity
– Increases transparency
– Improves organizational efficiency
– Greater outreach
– Greater impact
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Does Technology fit in here?
Challenges– High costs of technology entry and technology failure– Discreet geographical and operational diversity– Bottlenecks like lack of awareness of technology and
vendors, education– High gestation periods– Customized solutions are most viable for MFIs ,
however customization increases costs for the technology provider
– Limited sharing of knowledge and resources within the sector
Out of the box thinking, Pushing Limits and coming up with Innovations
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Technology forays in Microfinance
Automatic teller machines
Benefits
•Flexible account access
•Eliminates need for MFI personnel presence
•Increased hours of operations fit client profile
•Increased client outreach, beyond branch network
•Easier deposit process
Specifics
Cost of 1 machine=$20,000-$35000
Magnetic cards== $0.25 – $0.5
Smart cards=$ 6- $ 10
Finger print readers
Examples
PRODEM FFP , Bolivia –20 ATMs serving 43,000 clients
MEB, Kosovo –17 ATMs serving 110,000 clients
Banco Ademi,Dominican Republic- with and EFT provider serves 28000 clients
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Technology forays in Microfinance
Interactive Voice response
Benefits
• serve large number of clients simultaneously
•Anytime access to account information
•Frees staff time for other usesSpecifics
Cost of 1 machine=$10,000-$50000
Analog and digital telephone sys.
Call flow application
Text to speech application
Examples
EDYPME Edyficar, Peru-used to explore client demographics and profile
Received 1500 calls per month, but not to access client information, and areas outside MFI outreach
Only 15% of clients successful in following instruction
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Technology forays in Microfinance
Smart Cards
Benefits
• automated transactions
•Secure client information
•Built in limit on credit and other accounts
•With stored data on cards no need to access central server
•Quicker and improved transaction accuracy
•Reduce human error
Specifics
Cost of card= $6-$10
Card reader= $100-$300
Card with finger print templates
Examples
PRODEM FFP, Bolvia-competitive advantage attracted greater number of clients
SKS, India-used PDA combination. Loan officers found manual transactions faster
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Technology forays in Microfinance
Biometrics
Benefits
• greater security and client convenience
•Local verification
•Staffless and swift verification
•User id is tamper free
Specifics
Fingerprint readers-$60-$240
smart card= $6-$10
MIS-reader interface software= $1000-$1900
Card with finger print templates
Examples
PRODEM FFP, Bolvia-implemented in all of 54 offices, greater client satisfaction
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Technology forays in Microfinance
Equity Mobile Banks, Kenya
Benefits
•Increased outreach where commercial banks refused to venture inspite of volumes
•hilly tea growing zones on the slopes of Mt Kenya
•effectively provided an appropriate institutional framework and setting for the provision of demand-oriented deposit facilities
•Average transaction time reduced by 70% to 3 mins
•computerized financial services closer to rural households
Specifics
•Laptop, cash
•mobile van with mobile antenna
•146-174 MHz VHF radios
•Branch acts a hub for 5-6 mobile units
•Future plans to link mobile units to branch office with VSATs
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Technology forays in Microfinance
Rickshaw Bank, CRD, Assam
Benefits
•75000 rickshaw pullers in Guwahit and none owns a rickshaw. Collaborated with IIT guwahati to develop superior rickshaws
•Aerodynamic and safer
•Rickshaw puller own the rickshaw by paying Rs 25/day instead of a lease of Rs 30 a day
•Comprehensive insurance for puller, passenger and the rickshaw
•Earning per day increase from Rs 60 to Rs 250
•Peer pressure established to ensure repayments
Specifics
•Cost of rickshaw= Rs. 8200
•40% lighter than normal ricks
•Higher comfort for passenger and rickshaw puller
•Rickshaw garages couple up as daily savings and installment collection centers
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Technology forays in Microfinance
Computer Munsi, Pradhan
Benefits
•Community based and financed computer entrepreneur provides accounting services to SHGs
•Self sustenance of SHGs
•Accurate and timely information
•MFI personnel free to concentrate on core activities
•Increases outreach
•Creates a computerized base for future IT interventions
Specifics
•Munshi covers 100 to 200 SHGs
•Computer placed in developed locality with power supply
•Munshis earn remuneration for their services
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Why are intervention needed?
Technology providers understanding of the microfinance landscape is limited
MFIs face challenges in accessing the “right” technology providers
Intellecap’s competency in the sector places it at the forefront of the sector evolution and the emerging needs/challenges
Intellecap’s vision is to increase technological outreach to encompass all tiers of MFIs and hence contributing to the development of the sector
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Intellecap Venture
Work with the MFI to identify infrastructure and bandwidth to absorb technology pilot
Assist Philips in the needs analysis of the MFI to prepare the Technology Design
Develop an optimal operations plan Develop Control and Pilot project parameters Assist in capacity building sessions for the MFI Monitor and steer the pilot Organizing interactive sessions between MFI and
technology provider for brainstorming and trouble shooting during the course of the pilot
Develop an operations plan for Stage II Execute stage II following the stage I operational
framework Develop a financial model for impact
measurement and return on investment