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

• South Pacific Business Development Foundation
  (SPBD)
• Samoa
• Greg Casagrande

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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

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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

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The South Pacific
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Samoa
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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.

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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.

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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

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Samoan living conditions
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Samoan Living Conditions
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Samoan Living Conditions
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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

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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.

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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.

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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

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SPBD in ActionPreliminary Meeting
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SPBD in ActionPayment at Center Meeting
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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

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Cost Structure

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

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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

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SPBD Methodology Innovation

• Product/Service Design
• Variable loan sizes
• Variable repayments
• Flexible loans
• Housing improvement loans
• Childhood education loans

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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

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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

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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

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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.

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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.

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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.

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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.

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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

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Successful SPBD Micro-Businesswoman Bakery
Business
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SPBD Successful Micro-Businesswoman Village Store
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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

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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

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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.

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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.

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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.

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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.

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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

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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

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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

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Thank you

• South Pacific Business Development Foundation
• PO Box 1614
• Saleufi, Apia, Samoa
• Phone [phone]
• Email greg_at_spbd.ws
• Web www.spbd.ws