Communitymanaged microfinance

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Community-managed micro-finance
Rationale and performance
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Target Group Analysis - Most Vulnerable
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Appropriate Response - Most Vulnerable
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Target Group Analysis - Vulnerable
DTL
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Target Group Analysis - Least Vulnerable
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Products - Purpose and user preference

• Emergencies/basic needs
• Asset protection
• Predictable costs (education/rent etc)
• Planned investment (business/agriculture)

• Emergencies (catastrophes, death, ill-health)
• Asset protection

• Emergencies/basic needs
• Predictable costs
• Debt repayment
• Planned investment

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Preference - Where Ugandans save money
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Why Ugandans save
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Preference - Where Ugandans borrow money
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Why Ugandans borrow
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What is a community-managed micro-finance
institution?

• A CMMFI is self-managed and independent
• A CMMFI is a small-scale community-based
  institution that mobilises and manages its own
  savings, providing interest-bearing loans to
  members and offering a limited form of financial
  insurance
• Unlike ROSCAs, members can save in variable
  amounts and borrow, when needed, for varying
  periods of time
• A CMMFI is usually time-bound it shares out
  member equity once a year in proportion to savings

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Heres one.
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And heres another.
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What does a CMMFI allow you to do?

• Save all the time (in varying amounts)
• Borrow when you need it (in amounts that are
  useful and for varying periods of time)
• Pay when you can (within a given period)

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Background Where do CMMFIs work best?

• CMMFIs work everywhere, but they work, at a
  modest scale, in remote rural areas and amongst
  the very poor, where MFIs find it hard to operate
  profitably, or at all.
• CMMFIs work where credit demand is weak and
  debt-service capacity extremely limited and there
  are no institutional savings options.

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Here.
.And here
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Background What do CMMFIs do?

• CMMFIs create local pools of capital, providing
  access to useful lump sums
• to meet predictable expenses
• to facilitate household cash-flow management
• to make short-term investments in IGAs
• To mitigate shocks to livelihoods

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Background What dont CMMFIs do?

• CMMFIs do not provide large amounts of investment
  capital for permanently established enterprises
  that seek substantial growth and need long-term
  loans.

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CMMFIs worldwide CARE, Oxfam, CRS, World Vision
01/08

• India 1,250,000
• Niger 196,000
• Uganda 125,000
• Mali 110,000
• Ethiopia 100,000
• Zimbabwe 90,000
• Tanzania 93,000
• Mozambique 30,000
• Cambodia 29,000
• Kenya 25,000
• Rwanda 25,000

• Bangladesh 22,000
• Ecuador 20,000
• Malawi 17,000
• Afghanistan 10,000
• SA/Lesotho 10,000
• Swaziland 10,000
• Sierra Leone 6,000
• Angola 6,000
• Eritrea 6,000
• Senegal 3,500
• Zambia 1,000

Total participants worldwide 2,184,500
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Long-term performance and survival Zanzibar,
Mali Niger

• Zanzibar (CARE)
• 254 growth in 4 years (44 gt157 groups) 37
  compounded annual increase.
• 12 total dropout over 4 years
• 53 return on average savings of 89 (135)
• Average ending Association net worth 4,000
• Mali (Oxfam)
• Self-financing, managed replication. 33
  compounded annual increase
• Niger (CARE)
• Average 8-year survival rate 96
• Average 15-year survival rate 94

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Why We Do it - Livelihood Impact

• Large increase in assets, mainly controlled by
  women
• Improved nutrition, access to medical services
  and education
• Increased stability of household enterprises
• Increase in number of IGAs
• Improved social status/social capital
• Improved intra-family relationships

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Costs

• Cost per CMMF client
• 15-50 in Africa,
• 5-25 in Asia
• Cost per MFI client
• 100-400 in Africa
• 80-200 in Asia

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CMMF Issues Challenges and opportunities

• External pressure to capitalise and link to
  banks/MFIs
• External pressure to federate
• Polyvalent training approach
• Tendency to be used as a beast of burden

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Upside of CMMFIs

• Safe
• Flexible
• Simple and transparent
• Accessible
• Frequent opportunities to save
• Save in variable amounts
• Regular opportunities to borrow
• Repay in variable amounts
• Incremental debt, proportionate to capacity
• Savings (asset) based, not credit (debt)

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Downside of CMMFIs

• Limited pool of capital
• Limited range of savings, insurance and lending
  products
• Requires annual distribution to maintain
  transparency and safety (causes disruptions in
  loan access and size)