Comparative analysis of two microfinance institutions targeting women : The NGO WAGES 1 in Togo and the NGO FDEA 2 in Senegal

Transcription

1 YF / IRAM Comparative analysis of two microfinance institutions targeting women : Te NGO WAGES 1 in Togo and te NGO FDEA 2 in Senegal 1 INTRODUCTION TO THE TWO INSTITUTIONS. 11 Commonalities of te two institutions. Te two microfinance institutions 3 studied in tis comparative analysis, sare a number of caracteristics: Tey address women in rural and urban areas (FDEA), or urban areas and city outskirts (WAGES), and are mostly directed at small businesses often linked to markets. Tey base teir concept of microfinance on small groups of women and on te application of mutual guarantee. Tey ave developed teir microfinance activities wit te support of non-governmental financial backers in te Nort (CARE for WAGES, NOVIB for FDEA). Tey cannot attain te status of microfinance institution according to te terms of te law of IMEC 4, wic only considers mutualist status (ence teir name: direct credit project ). Tey ave not completed teir institutional development, wic is still te object of lengty reflection. Teir NGO status is provisional. Tey are managed by native executives, wit no permanent tecnical assistance from abroad. Altoug bot institutions ave strengts tat will be analysed, particularly in terms of social ties, tey also ave teir weaknesses (management information systems, computerisation, institutional plans). 1 WAGES: Women and Associations for Gain Bot Economic and Social (Togo). 2 FDEA: Femme Développement Entreprise en Afrique (Senegal). 3 Institution is set in quotation marks, because of te fact tat neiter of te two as completed its institutionalisation, and NGO status is considered temporary. 4 IMEC: refers to te law common to te 9 member states of te WAEMU zone (West Africa Economic and Monetary Union), wic sets out te regulatory framework and conditions for carrying out microfinance activities for te Mutualist Saving and Credit Institutions (Institutions Mutualistes d Epargne et de Crédit). < LSN YF Note Page 1

2 12. WAGES was founded in Togo on te initiative of CARE, to set up a microfinance project for women, following a feasibility study conducted by CARE in Te first microfinance activities were launced in At te end of te tree-year project, WAGES was formed in 1999, olding NGO status. Tey signed a framework agreement under te rule of law on IMECs 5, giving tem legal permission to conduct microfinance operations. 13. FDEA was initially te initiative of a Senegalese woman, wo is te current director of te NGO. FDEA is an older organisation and started its activities in 1987, but its microfinance activities for women really took off in 1991 wit te backing of NOVIB. FDEA signed a framework agreement under te rule of law on IMECs giving it legal permission to conduct microfinance operations. 2 Caracteristics of te two institutions Concept of microfinance. Tis concept is described by way of a series of tables: Te client groups. Identification of target client groups Women wit income-generating, productive and diversified activities for urban and suburban markets. Underprivileged women Women wit microenterprises Women wit small enterprises Men (small number: 2 ) Size of te groups. 7 Size of te groups of targeted clients Associations wit 10 to 35 members. (on average : 17 women). Solidarity groups of 12 members (a reduced number). UNDERPRIVILEGED WOMEN (5 MEMBERS) Women wit microenterprises (10) Women wit small enterprises (10) Men (10). NB. Some women are also granted loans on an 5 Under te terms set out in te law on IMECs, WAGES & FDEA ave not been founded under legal mutualist status and are not autorised as suc. A special framework agreement system provided for by law and signed by te Minister of Finances sets out te specific conditions for conducting teir operations. However, tis framework agreement does not give tem legal status, unlike te mutualist microfinance institutions licensed by law. 6 WAGES 1999 data, FDEA: 1999 data. 7 Some women s associations ave cosen to structure temselves as internal solidarity groups. Page 2

3 individual level (long-term reliable clients in greater need of credit). Page 3

4 Nature of te loans. Nature of te loans 8 NATURE OF THE LOANS : PROGRESSIVE: COMMON LOAN: THE MOST WIDESPREAD (6 TO 12 MONTH TERM). Special loan: for associations tat ave repaid several rounds of credit witout fail. Can be granted on top of a common loan (maximum 3 mont term). Repayment: montly (6 mont term initially, up to 12 monts on te 8 t round of credit) Nature of te loans: progressive : Underprivileged women: 2 to 5 monts Women wit businesses. 6 to 28 monts Individual women. 6 to 28 monts Possibility to move from first to second category (cf. Appendix 3). Repayment : montly (for an initial 6 mont term up to 28 monts on te 13 t round of credit) Size of loans. 9 SIZE OF LOANS: Size of loans Average sum per loan: 258,597 cfa. Minimum loan: 100,000 cfa (1 st loam). Maximum loan: 1,000,000 cfa (8 t loan). Size of loans : Average sum per loan: 420,560 cfa. Underprivileged women: from 5000 cfa 1 st loan to 25,000 4 t loan. Women wit businesses: from less tan 300,000 cfa up to 5 million cfa depending on lengt of client istory and evolution of te activity. Links between loans and savings. Links between loans and savings First loan: save for 4 monts before accessing loan. All loans: ave savings equal to 1/3 of te loan. Sum of saving to keep untouced: 2,000 cfa. Obligatory saving: 2 products: - Savings prior to loan access: 10 of te sum of te loan - Unregulated saving as loan is paid off. 8 Te associations / groups affiliated to WAGES also grant certain members an internal loan from teir own resources; often emergency loans. Oter associations create solidarity and mutual aid funds wit similar objectives. 9 Cfa: Franc of te African Financial Community: 100 cfa = 1 Frenc franc. Page 4

5 Voluntary saving: - Solidarity-based saving (social problems, study visits and excanges). - Provident savings on sigt (reconstitute te working capital). Page 5

6 Links between loans and savings (continued). Links between loans and savings (continued) Voluntary saving (continued): - Pilgrimage savings (to go to Mecca or Lourdes) - Saving to set up te financial institution (to create te women s bank ). - ealt savings (to create mutual ealt insurance companies). Interest rate policy. Interest rate policy Loans:. Te association / group: pays WAGES 1.5 per mont. Women wit businesses: pay te association / group 2 per mont. Te difference in interest rates: 0.5 is set aside to cover association running costs. SAVINGS: Interest accrued: 3 per year. Loans: Te group: pays 27 a year to te FDEA. Savings: Obligatory saving: 4 a year. Voluntary saving: no interest accrued. Oter savings: interest accrued. no Governance style. Governance style WAGES Management: Co-ordinator: long-standing member of WAGES staff and former project leader wit CARE in Togo. Management team: some managers from previous CARE projects and some later ires. Managers and beneficiaries: Managers strongly committed to teamwork. Beneficiaries are committed and given responsibility witin te associations and groups. FDEA Management: Cairman: founder and Managing Director of te FDEA: a woman wit considerable carisma. Management team: come from te world of NGOs and te recruitment business. Managers and beneficiaries: Managers ave motivation and commitment to action and do not wis to leave Page 6

7 te organisation in spite of salaries below market rates. Beneficiaries: committed to women s groups. Governance style (continued). Governance style (continued) Dialogue women/institution: Variety of activities: - Regular meetings for discussion and consultation. - Training: Credit metods (members). Administration committee (montly). Managers (montly). IGA Management (members). Marketing (members) - Studies on te impact of te financial services on women Dialogue women/institution: Numerous activities: - Seminars for reflection and consultation (regional and national) on directions to take (products, institutionalisation, etc.) - Study trips at ome (Senegal) and abroad on topics relating to markets and micro-enterprise management. - Training for women in te groups. 22 Results obtained. Te operating figures can be found in te tables in te appendix. Loan recovery rates wen payment becomes due are good in bot cases: FEDEA Senegal: 98 on time (1999). : 97 on time (1999). Tere are, owever, considerable variations in te loan recovery rates of certain credit representatives portfolios, but tese are few in number and of least volume for te moment. Bot institutions aim to become permanent. In terms of balance of payments, te FDEA in Senegal covers 40 of its expenses troug its products (1999) and will begin to make a profit in 3 years time. WAGES in Togo covers 90 of its expenses troug its products and predicts a ealty balance of payments by te year Analysis of social ties. 31 Categories of social ties identified Te typology tat emerges from our observations is te following: Pre-existing social ties witin te associations and groups. Practice of solidarity, social ties between te women and te limitations. Page 7

8 Women s ties to te microfinance institution. Relationsip between social ties and te need to re-access credit. Relationsip between social ties and services provided by te institutions. Size of groups / associations and creation of social ties. Ownersip, institutionalisation: indicators of social ties. Te features of eac type are outlined below. Page 8

9 32 Nature of te social ties Pre-existing social ties witin te associations and groups. In bot cases (WAGES in Togo & FDEA in Senegal) tere are two types of groups and associations, depending on weter ties already existed before financial services were acquired. In te case of WAGES in Togo, we must also add te cit funds arising from te associations. We ave observed no differences in te nature of te social ties between te two types, as tere as been no specific analysis on tis topic (lack of impact assessments by te FDEA in Senegal, no analysis in te impact model used by WAGES in Togo). Wat does emerge in terms of social ties is te following: - Wen te groups / associations of women precede te access to credit, internal coesion is generally quite strong and includes social ties tat te members ave forged over a long period of time. - But te groups and associations of women tat were set up by te two credit institutions to provide access to credit also demonstrate good internal coesion. - Te rare opportunities to gain access to formal credit often ignore te women s real social beaviour patterns: te need to access long-term credit is a precondition for repeated economic activity and sustained income and tus also for te link wit te microfinance institutions. Practice of solidarity, social ties between te women and te limitations. Te practice of solidarity and surety always raises te issue of te gap between teory and practice, and tis is difficult to analyse. Te perception of te influence of social ties is terefore difficult to establis. Wat as been observed is tat: - Repayment can be made by te group / association if a woman finds erself in difficulties, in order not to endanger teir access to new credit. But te woman acknowledges er debt to te group or association of women and must discarge it according to te terms tat are negotiated. - But inability to repay, if it is an issue for several members and if te sum of te debt is ig, can become more and more problematic. Tis creates a cul-de-sac in wic te institution is not repaid te loan because te ratio of ealty borrowers to delinquent borrowers is unfavourable. - Older groups or associations tat ave long-term sared experience can more easily find solutions to teir internal problems. Teir solidarity and social ties are more developed. Page 9

10 Te women s links to te microfinance institution. Te factors tat give rise to ties between te beneficiaries and te institutions appear to be influenced by te fact tat te women identify strongly wit te two institutions. Several factors come into play ere: - Te metods used by te institution: Te women are generally well versed in te institutions metods. Te metodological approaces taken by te two institutions leave considerable room for te women to take part in defining metods and procedures and accessing information and training. Knowledge and mastery of tese metods and procedures are gradually acquired as teir credit istory develops. - Adaptation of financial products to women s needs : Te definition of financial products is also closely correlated to teir needs by te women temselves. Te number of savings products offered by FDEA is evidence of tis 10. In te case of WAGES, te significance of saving is well understood and researc is conducted into wat makes up te associations internal resources (in order to grant emergency loans, create a solidarity fund, etc). Te women s constantly repeated request to raise te credit limit is still resisted by te two institutions. - Te perception of belonging to te institution: Bot institutions secure te loyalty of teir female clients by way of participatory management, but it sould be pointed out tat tese two institutions are te only ones tat provide women wit long-term access to credit in a fairly noncompetitive market (tere are few microfinance institutions competing in te same places). One important factor for bot institutions is te credit ceiling, wic in general is ig in comparison to oter institutions offering loans, and tis is very important for securing client loyalty and creating strong links wit te women. - Perception of te idea of ownersip of te institution: One can observe a perception of ownersip developing among te women in bot microfinance institutions (see below). 10 Wit its counter-effect of increasing management carges, tis may present a risk tat can potentially lead to a reduction in products at a later stage. Page 10

11 - Te impact of loans. Te loans ave a strong impact on te revenue generated from economic activities and direct social and economic effects on livelioods (food, ealt, male/female social and domestic relations, informal debt relief and te self-reliance and freedom of women). But te institutions do not value tese aspects (no impact studies at FDEA and no promotion or development at WAGES). Relationsip between social ties and te need to re-access credit. Te need to re-access credit is a strong motivating factor for te women and fosters quite a strict mindset. Tey are more likely tan men to abide by te administrative rules, in order to guarantee follow-up loans. Te women do not want to return to teir previous circumstances (using moneylenders, itinerant bankers, supplier credit from traders, uncertain recourse to parents and friends, etc.) Because of tis, te women often develop: - Teir own strict requirements for internal management (respect for te credit rules, repayment arrangements, creation of internal solidarity funds to mitigate blows, and so on). - Tis translates into te association or group aving social control over te members, requiring tat any outstanding payment of a loan by a woman in difficulties be covered (up to a certain limit if several members ave outstanding debts). It can be said tat social ties are created between te associations or groups and te credit institutions. Relationsip between social ties and services provided by te institutions. In bot cases, and, te services provided and te variety of activities aimed at te women are te factors tat integrate and create social ties: - : FDEA is organised around two poles of complementary strategic actions - financial and non-financial services - eac one wit separate accounting. Te women s demands are for bot poles and tey do not differentiate between te two. Teir motivation for non-financial services is generally to receive advice on financial products and on te creation of te women s bank (regional and national seminars) or training and saring of experiences in running a micro-enterprise (market researc, marketing tecniques, etc). Page 11

12 - : Because te women wit WAGES are more urban and teir economic activities take priority, tey are less available to attend meetings organised by WAGES. But tey are in constant searc of new economic opportunities and always delegate an association member to go to te training sessions and meetings tat WAGES organises. One can see, ten, tat if te microfinance model integrates nonfinancial services as a support to te financial services, social ties are forged between te women and institution, tereby ensuring tat te financial services are well managed. Size of te groups / associations and creation of social ties. One caracteristic sared by and is te small size of te groups / associations (an average of 17 women per association and 12 women per solidarity group for WAGES and an average of 5 in a group of impoverised women and 10 in oter groups for FDEA). Te small size is an important factor for te emergence of values: social coesion, solidarity, social ties, and so on. Tese values are expressed in a variety of ways tat differ from one group to anoter. Ownersip and institutionalisation: indicators of social ties. Bot institutional models emerge as calling upon women to take part in management and ave not cosen te mutualist model tat involves ownersip of te institutions by te beneficiaries. However, te women can be seen to be developing a perception of ownersip of te institution. : In te case of, te women want to set up te Women s Bank and ave created a specific saving capitalisation product (1,000 cfa on opening te account, ten 1,000 cfa a mont for 24 monts). : Wit, te women clearly express teir sense of belonging to WAGES and sow willingness to capitalise on a future management structure, even if tis means contributing 20,000 cfa eac. Some associations require a dividend on tese sares. Te determining factor in te women s view of teir ownersip is te permanent nature of access to financial services, in particular loans. Page 12

13 4 Te limitations of te social ties. However, te presence of social ties among te women is not te panacea tat can resolve every difficulty. Certain limitations do appear: Number and volume of outstanding debts in te group. Altoug solidarity witin te associations or group works wen it is a matter of a single member in difficulties, it quickly comes up against its own limitations if te number and volume of outstanding debts increase, leading to an end in access to credit. Absence of cas revenue made available by loans. A minority of loan beneficiaries do not manage to free up additional resources for a variety of reasons (economic activity as not been good, teft of stock, lengty illness tat leads women to use te loan to cover ealtcare). Te institutions do not analyse or look for solutions to tese circumstances tat are not insured for by te groups or associations. Te demands of economic activity limits participation in te microfinance institution s management activities. Tis is particularly true in te case of WAGES, were women say tat tey do not ave a lot of time for meetings, and prefer to maximise te amount of time tey spend on teir commercial activities. Unequal distribution of credit witin a group or association. Te poor distribution of credit around te individual members of te association or group can sometimes be a source of internal tension and can even cause it to break up. Possible solutions tat are being tried out are te solidarity groups in te case of WAGES Togo, or individual loans for certain women in te case of FDEA Senegal. Long distances, journey times and costs of getting to te institution s offices. Affiliation to an institution and te functioning of te groups and associations are bot influenced by te distances and costs of getting to te offices (to witdraw or repay loans). In te case of FDEA, te distances generally range from 30 to 40 km, wit one group at a distance of 150 km. Tese distances also ave te effect of reducing te frequency wit wic te credit representatives provide follow-up and tis leads to a relaxing of te internal management rules in groups and associations. Page 13

14 5 Conclusions. Te lessons tat can be drawn can be classified as follows: 51 Size of te groups: a decisive factor. Te small size of te groups seems to be a decisive factor wen encouraging te women s relationsips wit eac oter and a certain level of solidarity, bot founded on existing social ties forged troug daily management practices. 52 Sared activities bringing women togeter. In bot cases ( and ), te formation of groups / associations on te basis of te nature of teir activities (small businesses trading agricultural products, fis-sellers, arts and crafts sales, etc) creates / reinforces te social tie by means of conversation and dialogue on te sared activities. 53 Non-financial services: supporting financial services. Te women appreciate te non-financial services, in spite of te fact tat tey are sometimes not readily available (), wen tese services meet teir needs (marketing training, economic activity management, researc into new markets). Te women are generally in constant searc of new economic opportunities to use loans and sometimes rapidly restructure teir activities. Tey need tougts from wic to develop new ideas. 54 Ownersip of te institution: te women s wis to ensure permanent access to financial services. Te women are interested in becoming owners of te institutions in order to guarantee permanent access to credit, wic will in turn determine te permanence of teir economic activities and terefore teir income. It is, ten, te impact of loans on income and te improvement of te women s livelioods tat determine teir loyalty and ties to te microfinance institution. In te case of, te women go so far as to aim to distribute te dividends from teir subscribed sares. 55 Te pysical and social proximity between te institution and te women. Te issue of distance and journey costs (see te case of FDEA Senegal), clearly demonstrates te importance of a relationsip of geograpical closeness between te women and te institution, a fundamental complement to te relationsip of social proximity. Page 14

15 Appendix 1 Evolution of microfinance activity indicators Indicators Loans Clients Volume (cfa) Sum (cfa) Years N Growt N Growt Amount Growt Average loan Growt Year Year Year Year Year Year Year Year Year Year Year May Total/average Source: IRAM Setting up a microfinance institution. Mission statement. July Productivity of credit representatives Regional office Target as per Year 1 business plan 70 credit files per Kaolack regional office credit Actual productivity in Year Page 15

16 (3 credit representatives). representative files / 1 rep 88 Tiès-Louga regional office (3 credit representatives). Dakar-Mbour regional office (2 credit representatives). Average 70 credit files per credit representative 70 credit files per credit representative file s / 1re p 187 files / 1 rep 70 file s / 1 rep 75 files / 1 rep 150 files / 1 rep 122 files / 1 rep 180 files / 1 rep 982 files total, an average of 123 / representative Source: IRAM Setting up a microfinance institution. Mission statement. July Page 16

17 Appendix 2 Institutional development ACTIVITIES December 1998 December 1999 Progress made ASSOCIATIONS GROUPS MEMBERS etc Number of associations Number of solidarity groups Number of members Number of statutes Number of internal regulations Number of cooperation agreements signed Number of general assemblies eld Number of impact surveys filled Number of women trained , , , , SAVINGS (cfa) - Total amount of savings - Amount witdrawn from savings - Net savings 468,458, ,388, ,069, ,395, ,488, ,906, ,936, ,099,690 70,837,291 CREDIT Total number of beneficiaries Number of loans granted Sum of loans granted (cfa) Capital repayment (cfa) Outstanding portfolio (cfa) Source: WAGES Annual report of operations Productivity of credit representatives in 1999 Number of associations & members Number of active credit representatives Associations Members 7, Page 17

18 Average : 744 members / credit representative Average : 40 associations / credit representative Source: WAGES Reported data Page 18

19 Appendix 3 Target Groups 11 Category Percentage Occupations 3 Hairdressers Services 3 Seamstresses 10 Restaurant owners 16 Total services 3 Raising and sale of livestock Agriculture 19 Production & sale of fruits and vegetables 22 Total Agriculture 11 Coal vendors 8 Sale of cosmetics 18 Sale of cloting Trade 2 Sale of medicinal plants 1 Sale of aberdasery 9 Manufactured products 1 Ironmongery 3,5 Houseold items 8,5 Various 62 Total Trade Source: WAGES Annual report of operations Activity financed Category Percentage Trade Crafts Agriculture 8 Services 7 11 WAGES: Social categories: 84 of women from urban areas, 16 from rural areas (1999). Page 19

20 Fising 5 Source: IRAM Setting up a microfinance institution. Mission statement. July Page 20

21 Appendix 4 Summary of impact results Average age 38 Etnicity 46 Ewé 4.5 Kabye 1.5 Peda 31 Mina 3 Kotokoli 1 Oter 10 Ouatci 3 Fon Average number of people in carge 5 Women s sare in ouseold expenses (percentage) 67 Division of ouseold expenses by women Number of scool-age cildren 2.96 Number of cildren in scool 2.56 Percentage of scool-age cildren attending scool 86.5 Income-generating activities Services: 42 Food 16 Pocket money 7 Healt 11 Transport 7 Coal/firewood 3 Domestic elp wages On average, tey spend 40,940 F CFA 2 Rent 3 Water 2 Electricity/Gas 1 Petrol 3 Education 3 Cildren s ealt 3 Hairdressers 3 Seamstresses 10 Restaurant owners 16 Agriculture : 3 Raising & sale of livestock 19Production/sale fruits - vegetables 32 Average montly profit Trade: Percentage of women wo keep te books 27 Use of loans 48,200 F CFA Occupations 1 Payment of debts 0.25 Investment 11 Coal vendors 8 Cosmetics 18 Cloting 2 Medicinal plants 1 Haberdasery 9 Manufactured products 1 Ironmongery 3.5 Houseold items 8.5 Various 62 Frequency of saving 1 Daily 4 Bimontly 41 Weekly 54 Montly Use of profit 84 Food 2.5 Scool fees 3.5 Cloting 1.5 Social expenses 2.5 Healt 1 Transport 1 Care of te cildren 4 Oter Percentage wit access to tap water 48 Percentage wit access to electricity 57 Page 21

22 Literacy rate 59 Source: WAGES Annual report of operations Page 22

23 Appendix 5 Loan cycles and savings/loan ratio 12 Sum of loan Term of loan (monts) 300,000 6 mont s 600,000 8 mont s Savings required prior to loan Sum saved per mont 30,00 10, , , , , ,00 0 Montly saving Payment deferral Savings mont/total Total savings Ratio Savings / loan 1 50,000 70, mont 1 105,00 165,00 mont ,00 210,00 mont , , , ,00 290,00 mont ,000, ,0 20, ,00 320,00 mont ,200, ,0 25, ,00 420,00 mont ,800, ,0 25, ,00 530,00 mont ,000, ,0 25, ,00 575,00 mont ,500, ,0 25, ,00 675,00 mont ,000, ,0 25, ,00 775,00 mont ,500, ,0 25, mont 525, , Indicates te progression of 13 loan cycles. Page 23

24 4,000, ,0 25, ,000, ,0 25, ,00 975,00 mont ,00 1,175,0 mont Source: FDEA data & calculations (2000). Page 24

25 Appendix 6 Progression of loan cycles Loan cycle Maximum sum per individual Actual loan term Maximum deferral 1 100,000 cfa 6 monts 1 mont 2 150,000 cfa 7 monts ,000 cfa 8 monts monts ,000 cfa 9 monts monts ,000 cfa 10 monts monts ,000 cfa 11 monts monts ,000 cfa 12 monts 2 8 1,000,000 cfa 12 monts monts 2 monts Source: WAGES Annual report of operations Brackets of loans granted by WAGES In 1999 Bracket / amount Number of women Percentage <180,000 cfa From 180,001 to 300,000 cfa From 300,001 to 600,000 cfa >600,000 cfa Total Source: WAGES Annual report of operations Page 25