The Use of Client Assessment Scorecard in Buusaa Gonofaa MFI, Ethiopia

1
The Use of Client Assessment Scorecard in Buusaa
Gonofaa MFI, Ethiopia

• European Microfinance Week 2009
• November 24 26, 2009, Luxembourg
• Presentation by Teshome Y. Dayesso,
• General Manager, bgmfi_at_ethionet.et

2
Outline of Presentation

• Expectations when developing BGs social ledger
  or poverty assessment tool
• How it works and experience so far
• Collection of data from clients
• Training and role of Loan Officers
• Data capture, data analysis and reporting
• Use of the information how the scorecard guide
  SP management, better segmentation of clients and
  better adaptation of products, loan size
  determination
• Interests and challenges operational and cost
  implications other issues triggered with the
  Award
• Perspectives and the way forward

3
Why Social Ledger or Scorecard?

• To answer a 5 Million Dollar question asked by
  Board Members what is happening with achieving
  our social mission, not only financial
  sustainability?.
• Whom do we reach? How poor are they?
• Is there a change (ve, -ve) in our clients
  livelihood?
• Where do we succeed in changing clients
  livelihood? Where do we fail? Why?
• Who benefits from BG most? Does our loan assist
  either survivalists or entrepreneurial poor? Or
  both?

4
Poverty Indicator Measurable Indicators   Year of Scoring Year of Scoring Year of Scoring Year of Scoring Year of Scoring
Poverty Indicator Measurable Indicators   1 2 3 4 5
  Date of scoring as Month/Year   m1/yy m2/yy m3/yy m4/yy m5/yy
  Household wealth          
Household Wealth   o      Oxen 18 0 1 3 3 2
Household Wealth   o      Cows 16 1 1 1 3 2
Household Wealth   o      Sheep/goats 2 0 1 4 1 1
Household Wealth   o      Bed type Metal/Wood 2/4 2 2 2 2 2
Household Wealth   o      Tape recorder 2 0 1 1 1 1
Household Wealth   o      TV 24 1 1 1 1 1
Household Wealth   Total Score of HH wealth   100 127 183 213 188
Growth in Business WC/Business Assets 30 30 60 100 150 160
Growth in Business Deduct Score for debt/credit   0 -24 -36 -48 -48
Growth in Business Score Net Business Assets   30 36 64 102 422
Growth in Business Total Score HH Bus. Wealth   130 163 247 315 610
Progress  Change of total wealth     25 52 27 94
4
5
Poverty category cut-off points
Approximate Income range Score range Poverty category
1/day 0 29 Very poor
1 2/day 30 54 Poor
2/day 54 Not so poor

• A person with total score of 15 is poorer than a
  person with score of 20, and vice versa

5
6
Experience so far how it works

• Collection of data from clients the scorecard
  is part of routine loan application process
• Intake a baseline data is gathered from all new
  clients upon entry to the program, at home with
  spouses (20 minutes)
• Poverty scoring LOs conduct assessment
  interview (scoring) on every new loan cycle (5
  minutes), at group meeting place at end of
  current loan before taking the next loan
• home visit of 5 clients per group (ave. group
  size 15)
• random checking by branch manager, internal
  auditors,
• Intensive training loan officer (LO) on the tool
  but gaps in interviewing skills, mapping of house
  location
• Data capture and analysis data is entered on
  Access data base, report generated by Crystal
  Reports (C Application)

7
Moving from SP Assessment to SP Management

• It provided key information for decision to
  resolve tension between social and financial
  goals.
• BGs average loan size is the lowest in Ethiopia,
  a source of constant pressure from staff to
  increase loan size
• Board insists on small loan size to maintain
  focus on the poor very poor as primary target
  group
• The scorecard helps to guide SP management
• better segmentation of clients by poverty status,
  gender, location (rural/urban), clients loan use
  pattern (IGA/MEs, agri/farming, consumption,
  housing improvement, etc.)

8
Should we increase loan size? For whom?
9
Rural-urban segmentation was made possible by the
scorecard
Loan Cycle Rural Loan Urban Loan
1st 63 83
2nd 125 125
3rd 146 167
4th 167 208
5th 188 250
6th 190 292
7th 250 333
8th 271 375
9th 292 417
9
10
The loan size was fine-tuned to fit business size
of clients segment
11
Benefits and Interests of the Scorecard System

• It encourages accountability it boosts MFIs
  awareness of poverty mission, not just ad social
  responsibility to clients as one important end
  akin to financial performance
• It can be used as a benchmark to set SP goals,
  track progress over time no of poor progressing
  to next level?
• It helps to segment clients into poverty levels,
  business nature or type, etc and offer tailored
  products
• Incentives - eventually to set performance
  targets and compare poverty outreach among
  branches, staff, etc
• BGs winning of European Microfinance Award 2008
  has helped BG to spearhead the agenda of client
  protection internally and in the Ethiopian MF
  sector.

11
8/24/2020
12
Challenges and the Way Forward

• Locating rural clients home address for data
  auditing is a great challenge. Dispersion of
  rural HHs poor infrastructure makes home visits
  very expensive.
• Limited local capacity to develop the data base
  the data base is rigid to generate various
  reports, thus limiting the advantages of existing
  data mining.
• The social ledger data processing is not
  integrated with the loan tracking system.
• At least 3 rounds of scoring (3 yrs) is needed
  to detect some pattern of change in clients
  livelihood.

12
8/24/2020
13
Poverty Indicator Measurable Indicators   Year of Scoring Year of Scoring Year of Scoring Year of Scoring Year of Scoring
Poverty Indicator Measurable Indicators   1 2 3 4 5
  Date of scoring as Month/Year   m1/yy m2/yy m3/yy m4/yy m5/yy
  Household wealth          
Household Wealth   o      Oxen 18 0 1 3 3 2
Household Wealth   o      Cows 16 1 1 1 3 2
Household Wealth   o      Sheep/goats 2 0 1 4 1 1
Household Wealth   o      Bed type Metal/Wood 2/4 2 2 2 2 2
Household Wealth   o      Tape recorder 2 0 1 1 1 1
Household Wealth   o      TV 24 1 1 1 1 1
Household Wealth   Total Score of HH wealth   100 127 183 213 188
Growth in Business WC/Business Assets 30 30 60 100 150 160
Growth in Business Deduct Score for debt/credit   0 -24 -36 -48 -48
Growth in Business Score Net Business Assets   30 36 64 102 422
Growth in Business Total Score HH Bus. Wealth   130 163 247 315 610
Progress  Change of total wealth     25 52 27 94
13
14
Thank You!