Presented by Alex Counts, President, Grameen Foundation USA

1
Grameen Foundation USA
Global Microfinance Development Demand and
Impact (Draft, w/out graphics)

• Presented by Alex Counts, President, Grameen
  Foundation USA
• To the Sustainable Development of Microfinance
  Services Seminar
• Taipei, October 2, 2003

2
Overview

• Supply and Demand Analysis
• Macro level, micro-level
• Strategies to Match Supply and Demand
• GF-USA Strategy
• Case Study Kashf Foundation (Pakistan)
• The Impact of Micro-finance
• The Power of information technology
• Case Study Village Phone Uganda

3
Supply and Demand

• Supply
• 27 million m/f clients under US1/day (poorest)
• 52 million m/f clients under US2/day (poor)
• Demand
• 250m families under US1/day
• 600m families under US2/day
• Only about 10 of demand being met

4
Bangladesh

• 70 of demand being met
• Success Factors
• Large Market Leaders (Grameen, BRAC, ASA)
• Smaller Niche Providers (IDF Hill Tracts)
• Relatively favorable regulatory environment
• Competition amongst MFIs
• Wholesale Fund (PKSF)
• Result Massive reduction of poverty
• 120,000 Grameen families cross poverty line each
  year

5

• Began in 1976 in Bangladesh
• 2.4 million borrowers
• 4.0 billion lent
• 500 types of micro-businesses
• average amount 160
• 3.7 billion repaid
• Innovative Grameen II
• 10,000 families cross
• poverty line each month

Professor Muhammad Yunus, Founder Grameen Bank
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Demand on the Micro-Level

• Motivation of poor to escape poverty
• Under-capitalized survival skills
• Inefficient corrupt government programs
• Exploitation by money-lenders
• The Case of Aduree Begum

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Matching Supply Demand

• Seedbed strategy
• Venture financing to establish new fast-track M/F
  market entrants
• High-growth strategy
• Creative financing for sustainable scaling up of
  existing MFIs
• Promotion of Enabling Environments
• Supportive Regulatory Frameworks
• Encouragement of savings mobilization
• Encouragement of transformation to specialized
  banks for poor

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GF-USA Strategy (I)

• Seedbed Approach
• Meso-America and Caribbean
• Arab World
• Best practice promotion, early stage automation,
  soft loans, capacity-building
• Examples
• Adelante (Honduras), ASAPROSAR (El Salvador), Las
  Melidas (El Salvador), ACJ (Nicaragua), AlSol
  (Mexico), Fonkoze (Haiti)

9
GF-USA Strategy (II)

• Fast-Growth
• Business Plan analysis, gap analysis
• SHARE (India) 200,000 to 1.8 million clients
• Using philanthropic resources to leverage
  commercial investments
• 101 leverage possible
• Assistance with transformation to banks
• ASA (India), CFTS (India), Kashf (Pakistan)

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Kashf Foundation

• First Grameen adapter on Pakistan
• Established in 1996 as pilot project to address
  poverty in slums of Lahore
• Institutionalized in 1998
• Led by Ms. Roshaneh Zafar

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Pakistan At A Glance

• Population 140 million (97 Muslim)
• 31 earn
• 85 earn
• Less than 1 have access to micro-finance
• Remainder dependent on loansharks
• They Charge Interest of 10-20 per month
• Recent increase in violence against women and
  minorities

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Kashf miracle or revelation

• Women 100 of senior management 90 overall
• Cutting edge micro-savings, micro-insurance,
  enterprise development, micro-credit card, social
  development program
• Highly efficient branches break even in 2 years
  repayment is 98 so is scale-able

13
Incoming Client Profile

• 86 barely survived on
• 50 had lost a child under 2 y.o.
• 55 lived in one room houses (7 members per
  family)
• 76 were illiterate

14
Impact

• 76 have experienced increase in income averaging
  Rs. 800 (14) per month
• 82 report increased self-esteem
• 54 report increased respect from husband
• 76 have increased savings substantially

15
Current status

• 10 branches in January 2002
• 34 branches in June 2003
• 45,331 women borrowers (60,000 at full expansion
  of these branches)
• Added 7,119 in Q1 (24 growth in quarter)
• 189 growth from July 2002 to June 2003
• First GF-USA investment July 2002
• Target of 40 branches by December 2003

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The Financial Picture

• Loans 830K disbursed in Q1 (530K in Q4)
• Portfolio 3.3m (2.9m as of 12/02)
• Recovery Above 99 (PAR 0.20)
• Savings 112,234 (was 17,126 in 6/02)
• Self-sufficiency 97 (was 75 in 6/02)

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Branch Costs

• To serve 2,000 borrowers
• 98,000 per branch
• 70,000 for loan capital
• 28,000 is net, cumulative subsidy until
  break-even
• 49 per client

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Expansion Costs

• Key Goal Expand from 10 to 40 branches (2002-3)
• Financing Required 3.2 million
• Funding Gap 1.2 million (as of October 2002)
• Funding Gap 0 (as of September 2003)
• Secured by GF-USA 412,000
• Goal for 2008 500,000 borrowers 250 branches
• Immediate Need 4 million in equity to convert
  to a bank in 2004

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GF-USA Strategy (III)

• Promotion of Enabling Environments
• Advocacy for pro-m/f regulatory regime
• Establishment of wholesale funds to tap
  commercial financing for growth
• Collaboration with banks through solving
  technology interface issues
• Promotion of open-source architecture
• Promotion of savings through deposit insurance

20
Impact

• Research from Bangladesh, India, Philippines and
  Pakistan
• Four Types of Impact
• Income (Economic Poverty)
• Social health, education, nutrition
• Communal Amenas Case
• Political 1996 elections in Bangladesh

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Accelerating Impact

• Integrate ICT into micro-finance
• Poor as vendors of ICT
• Mobile Phones
• Correcting Market Failure and Exploitation
• Internet Kiosks
• E-Health (tele-medicine)
• E-Governance (ensuring accountability)
• E-Learning
• E-Jobs (out-sourcing work to rural poor)

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Grameen Tech Center

• Help MFIs automate for efficiency
• Bring technology to the poor
• Model Grameen Telecom
• 30,000 Village Phone Ladies in Bangladesh
• Earning double average
• per capita income
• Lifting overall village economy

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Village Phone Uganda Partners and Roles

• Each own 50 of MTN villagePhone Uganda
• 2 board seats each plus one independent
• Buy-out clause by MTN after 3 yrs

Knowledge transfer and project management
Telecommunications Infrastructure, Marketing
Phone packageTraining District
Operations, District allocation, monitoring,
train the trainer and reporting
Village Phone Operator
Microfinance Partners
Loan capital, basic training , Phone package
Repayments
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Financial Picture

• Loan, repaid _at_ 13 (cash 100K, in-kind
  66K)
• Buyout clause based on airtime volume potential
  for addl 100K or more

72 of revenue per call

• 28 of revenue per call to pay for Operations
• 333K in start up capital (cash in-kind)
• Est. cash flow positive in year 3

Village Phone Operator (VPO)
Microfinance Partners

• Minutes at 37 discount
• Addl 10 discount w\ bulk purchase
• Est. 6 min per day to repay loan

• Interest income from loan
• 8 commission of phone card sales to VPOs

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GF-USAs David Keogh and the first Ugandan
phone lady first of 5,000
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Margaret Bagonza in business 18 minutes/day
during first week
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Progress of Replication in Uganda

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Conclusion

• Demand is strong and largely unmet
• Supply is growing, but growth must be
  accelerated
• MFIs with unfunded business plans must be helped
  to grow
• New MFIs should be seeded in underserved regions
• Enabling environments must be created
• Power of Information and Communications
  Technology must be harnessed for micro-finance
  sector