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Creating a Successful MFI in a Small Remote Low Income Nation

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Creating a Successful MFI in a Small Remote Low Income Nation ... Samoa, Solomon Islands, Tonga, Vanuatu, Micronesia, Marshall Islands, Kiribati ... – PowerPoint PPT presentation

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Title: Creating a Successful MFI in a Small Remote Low Income Nation


1
Creating a Successful MFI in a Small Remote Low
Income Nation
  • South Pacific Business Development Foundation
    (SPBD)
  • Samoa
  • Greg Casagrande

2
What is SPBD?
  • SPBD is a Samoan based NGO dedicated to
    eliminating poverty in the South Pacific.
  • SPBD provides micro credit to the poor for the
    purpose of starting a small business.
  • SPBD follows the Grameen Bank methodology to
    micro finance.
  • SPBD currently serves the island nation of Samoa.
  • www.spbd.ws

3
The South Pacific
  • Total Population about 7 million.
  • Most people in the South Pacific live in rural
    villages on small islands. Most live on a GDP of
    less than US2,000 per year.
  • Major Countries
  • Papa New Guinea, Fiji, Samoa, Solomon Islands,
    Tonga, Vanuatu, Micronesia, Marshall Islands,
    Kiribati

4
The South Pacific
5
Samoa
6
Samoa
  • Samoa has been an independent nation since 1962
    and is governed by an elected parliament.
  • Samoa consists of two main islands, Upolu and
    Savaii, and covers 1,100 square miles.
  • Samoa has a population of 204,000 people.
  • Samoa is very rural. Apia, the capital, is the
    only town of any significance in Samoa.
  • Samoa is considered the cultural heart of
    Polynesia.

7
Samoan Economy
  • Economy
  • 75 of Samoans are involved in subsistence
    agriculture.
  • There are few major employers providing
    traditional waged employment.
  • The economy is very dependant upon foreign aid.
  • There is mass migration of the brightest to New
    Zealand, Australia and the USA to pursue better
    opportunities.
  • GDP - US930 per year - similar to Pakistan.
  • Poverty In 1999, the UNDP estimated that 48 of
    all Samoans live beneath the poverty line.
  • WHO rates Samoas Health system as one of worlds
    worst similar to Yemen.

8
Typical Lives in Samoa and the South Pacific
  • Poverty of Opportunity
  • No jobs (75 of families not in waged sector)
  • No Credit available for the poor
  • Typical living condition
  • Grass roof
  • Pebble floor
  • Poor sanitation
  • Poor access to running piped water and
    electricity
  • Childhood education is not free
  • Unsophisticated, little experience with banks

9
Samoan living conditions
10
Samoan Living Conditions
11
Samoan Living Conditions
12
History of Microfinance in the Pacific
  • The Pacific is littered with failures
  • Samoa has had several failures
  • UNDP, SPC, MoWA
  • Church run
  • Government run
  • Volunteer run
  • Continuing Failures
  • Fiji
  • Samoa WIB
  • Bee keeping
  • Handouts
  • Forced solutions

13
Competition
  • SPBD has no direct competition in Samoa.
  • The three commercial banks and the Development
    Bank each require collateral or steady income for
    loans. They do not serve the poor.
  • SPBD Advantage
  • SPBD is the only financial institution in Samoa
    able to DELIVER credit throughout Samoa.
  • SPBD is the only financial institution in Samoa
    able to provide on a large scale completely
    unsecured credit to the poor.

14
SPBD - Business Practices
  • Target poor women.
  • Provide unsecured credit for
  • micro entrepreneurial purposes,
  • home improvements and
  • childhood education.
  • Businesses are based on existing livelihood
    skills.
  • Encourage and train self-formed groups of five.
  • Organize groups into village based centers.
  • Members guarantee one another within a group.
  • Deliver credit directly to the villages.
  • Charge market rates of interest.
  • Collect small repayments at weekly center
    meetings in the villages.
  • Strive to achieve financial self-sufficiency via
    strong financial planning and effective use of
    technology.

15
SPBD Business Practices
  • Very structured program with clear rules
  • Helps counter1.  A very laid back
    culture2.  Low levels of education3.  No
    experience with financial institutions
  • Train staff and motivate them
  • Huge task because skill levels are low
  • Have strong local government support

16
SPBD in ActionPreliminary Meeting
17
SPBD in ActionPayment at Center Meeting
18
SPBD has a Business / Banking Mentality
  • Privately and commercially funded
  • Started and maintained on commercial enterprise
    principals
  • Trustee, management and staff have business and
    banking backgrounds.
  • Funders we speak your language

19
Cost Structure
  • Very low
  • Lean organization
  • CMs to reach 500-800 clients each
  • Yet very competitive and comprehensive
    compensation and benefits structure

20
SPBD Methodology Innovation
  • Created a Culture of Continuous Improvement
  • Client Identification
  • Formal invitation into the villages from local
    matai (chiefs)
  • Poverty assessment tool
  • Identify the poor
  • Measure impact

21
SPBD Methodology Innovation
  • Product/Service Design
  • Variable loan sizes
  • Variable repayments
  • Flexible loans
  • Housing improvement loans
  • Childhood education loans

22
SPBD Methodology Innovation
  • Delivery Methodology
  • CMs support gt400 clients each
  • In-house training program
  • In house loan utilization forms
  • Individualized weekly center reports
  • Center secretaries have professional bookkeeping
  • Ongoing business education

23
SPBD Methodology Innovation
  • In the pipeline
  • Process
  • Move from weekly to fortnightly meetings
  • Group sizes to become flexible 4-7 members
  • New Services
  • Health Education series
  • Improved Business Training Modules
  • Savings
  • Insurance
  • Money Transfer

24
SPBD - The Leadership Team
  • The Trustees
  • Greg Casagrande Founder and Managing Director
  • Education
  • BA (Economics) - Colgate University
  • MS (Accounting) - Stern Graduate School of
    Business, New York University
  • MBA (Finance and Marketing) - JL Kellogg
    Graduate School of Management, Northwestern
    University
  • Work Experience
  • CPA with Coopers and Lybrand in New York.
  • Several financial and general management
    positions with Ford Motor Company in Detroit,
    Chicago and Japan.
  • Founder and Managing Director of SPBD.
  • Jerry Casagrande Trustee
  • Education
  • BA (Political Science) Dartmouth College
  • MBA, MA (Latin American Development) - Stanford
    University
  • Work Experience
  • UNHCR, World Bank, Ashoka Various management
    positions
  • 3D Life Adventures Founder and Executive
    Director

25
SPBD The Leadership Team (contd)
  • Jim Young Trustee
  • Education
  • BA (Economics) Princeton University
  • Work Experience
  • Goldman Sachs Vice President Institutional
    Equity Sales
  • Minh-Huy Lai General Manager
  • Educated with MBA from Thunderbird School.
  • 7 years of investment banking experience with
    JPMorgan in NY, Hong Kong and Singapore.
  • MF experience in Kosovo.
  • Lived in worked in many developing nations.

26
SPBD The Local Team
  • All of our professional staff have strong prior
    work experiences (several with local commercial
    banks).
  • All are proficient in both Samoan and English.
  • All staff are proficient on the PC and have been
    trained in micro finance best practices.
  • All staff are eligible for performance bonuses
    based on individual and team performance.

27
SPBD - Achievements to Date
  • Building an Organization
  • We have a team of 10 full-time, well trained and
    dedicated professionals.
  • Infrastructure and Processes in Place.
  • Our loan officers have vehicles to access rural
    villages.
  • We have a strong set of documented operating and
    administrative processes and procedures.
  • Villages Served
  • We serve over 60 villages throughout Upolu,
    Samoa.
  • The Poor Trained and Funded
  • We have trained and funded over 2,100 businesses.
  • Distributed over US800,000 of unsecured credit.

28
Achievements
  • SPBD has demonstrated that
  • Poor Samoans are creditworthy
  • They are receptive to financial products
  • Capable of starting and sustaining small
    businesses
  • Leading academic opinion in the region said
    contrary.

29
Measurements of Success.
  • Successful businesses for all of our micro
    entrepreneurs.
  • Food preparation
  • Clothing production
  • Copra (coconut oil) production
  • Vegetable farms, Plantations
  • Chicken and pig farms
  • General Stores, Roadside stands, market place
    trading
  • Weaving
  • Traditional arts and crafts
  • Tourist operators

30
Successful SPBD Micro-Businesswoman Bakery
Business
31
SPBD Successful Micro-Businesswoman Village Store
32
Measurements of Success
  • Quality of life indicators
  • High quality roof on the home
  • Proper flooring
  • Electricity in the home
  • Easy access to clean water
  • Easy access to good sanitation
  • Children in school
  • SPBD Ensures quality of life improvements by also
    providing
  • Housing improvement loans
  • Childhood Education loans

33
SPBD has staying power
  • Where other regional MFIs have failed, SPBD has
    persevered, learned, improved and grown.
  • Were still here after 3 years
  • We have handled internal corruption and theft.
  • Cleaned out and strengthened controls and
    processes
  • We have continually refined our process to
    reflect the local realities.
  • Aggressively pursuing Institutional Financial
    Sustainability

34
SPBD Complaints
  • The South Pacific is not on the worlds radar
    screen
  • Too small
  • Too remote
  • Obscure cultures
  • Difficult to administer
  • The voice of the poor is not heard
  • Region is misunderstood
  • No Funds for MFI in regions
  • UNDP, USAID, IFC, SPPF, Major MFI corporate and
    other donors are not interested in MF in the
    region.

35
Current State of Development in the South Pacific
  • Most development agencies have abandoned the
    region. (e.g. USAID has left the region due to
    difficulties in serving a remote population).
  • The need for economic development remains. Most
    of the population lives in rural poverty.
  • South Pacific nations are small and remote. None
    are currently served by a world class micro
    finance organization.
  • SPBD is now the largest micro finance
    organization in the region, despite the fact that
    it only serves Samoa.

36
Opportunities
  • There is now an excellent opportunity to create
    a
  • well-managed,
  • large
  • efficient,
  • region-wide micro finance organization in the
    South Pacific
  • A region-wide, micro finance organization could
    leverage a larger base of talent and financial
    resources and could thus help more people than
    could several struggling small organizations.

37
Major Constraints
  • Ongoing violence and instability in Papua New
    Guinea and the Solomon Islands is a major
    constraint in those nations. SPBD will initiate
    efforts first in stable nations.
  • Due to the small populations on each island, a
    successful organization must be exceptionally
    well managed and efficiently run. This is a key
    item for SPBD.
  • Funding is also a major constraint since most
    international funding organizations do not
    operate in the region.

38
Plans for the Future
  • Growth in Samoa
  • Expand to the island of Savaii
  • Growth in the region
  • Tonga
  • Vanuatu
  • Micronesia
  • Outreach
  • Could grow to 50,000 long term
  • Capital is the key constraint

39
Concerns of Funders
  • SPBD is too small
  • We can breakeven with less than 5000 active
    clients and an average loan size ltUS300
  • Area is too small
  • Samoa is small but the region is big
  • Many LDCs in the region, totally neglected by
    world class MFIs
  • We have developed a replicable model that can be
    replicated throughout the region and reach out to
    over 50,000 people

40
Wants
  • Look for opportunity to affiliate with large
    networks
  • Financial assistance
  • Share procedures/ processes
  • Share technology
  • Staff development
  • Looking for Capital
  • Looking for Technical partners

41
Thank you
  • South Pacific Business Development Foundation
  • PO Box 1614
  • Saleufi, Apia, Samoa
  • Phone 011-(685)-20189
  • Email greg_at_spbd.ws
  • Web www.spbd.ws
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