Table of Contents. The Kiva Microfinance Website: Where Kiva Fits. Connecting Microfinance Networks with Kiva Social Investors

Transcription

1 Cnecting Microfinance Networks with s Aldi Haryopratomo October 24, 2007 "Revolutiizing how dors and lenders in the US are cnecting with small entrepreneurs in developing countries Where Fits The Microfinance Website: Large Companies Medium Enterprises Small Enterprises Finance needs >10 milli 200, milli 5, ,000 Sources of capital Foreign bank debt, internatial bds, Development Finance Institutis (e.g. IFC) Commercial Banking Sector SME Venture Funds, e.g. MekgEnterprise Fund, Grofin BRI (Indesia s People s Bank) Village Owned Banks / Cooperatives The Quartet: 1. The Borrower 2. The MFI 3. The Lenders 4. The Website Micro Enterprises < 5,000 Microfinance programs run by government, NGOs, internatial dors Microfunds Introducti s Innovati: Linking the Internet to Microfinance Introducti Problems Faced by Microfinance Instituti s Internet Lender Online Marketplace Partner Microfinance Instituti Small or Micro Entrepreneur Low-income households No access to financing and interest rates are high Microfinance Institutis Unable to access commercial banking sector Lack ctinuous sustainability as most MFI s were formed based a e-time bulk grant/loan Mrs. Sri Lenders from Developed Countries Difficult to see impact from charity or loans Low interest loans High repayment rates Transparent impact 6

2 from from MFI Client Applicati Data Digital Photo MFI approves client and disburses loan with no change to MFI s processes MFI charges same interest rate as usual. translati & editing team allows postings to be de in the client s local language provides MFIs with digital cameras and laptops up request 7 8 Lender funds profile from from Average time to 100% funding = 1.5 days aggregates 0% interest USD loan capital and wires it mthly to MFI 9 10 from from 1. During the loan term MFI reports ly delinquencies On time collecti auto-reported to lenders On time collecti auto-reported to lenders Delinquent manual report required s raised Repayments owed = Net payment 2. At the end of loan term MFI must provide a loan impact summary automatically deducts repayments owed from each mth 11 12

3 13 Introducti What are s benefits? s Transparency ( I know where my mey is going ) Sustainability ( When repaid, I can re-lend to somee else ) Affordability ( With ly 25 I can help change somee s life ) Uniqueness ( Microfinance is a great tool and I can help ) Microfinance Institutis Low interest USD debt capital Low liability: losses can be passed to Internet Lender Strg partnerships = lg term access to capital Significant internatial exposure State of the art fund raising and reporting systems MFI Benefit Summary Increase profitability No cost funds: 0% interest mthly bulk loans wired to your bank account No liability: Client loan losses borne by (like a securitizati) Flexible currency risk policy: MFI respsible for managing F/X risk; however s will likely forgive default if massive devaluati occurs Low reporting costs: reduces you staff and IT costs by providing: Excepti based reporting system and automatic mthly net billing Free full time -site interns to help train staff and post client data Free digital cameras and laptops Free translati, text editing Improve transparency / global reputati Exposure:.org is the world s most trafficked microfinance website Transparency: Show client level impact/operatial excellence to other funders Be a part of the fastest growing MFI network: Over 65 MFIs in 36 countries raise mey via growing at 5 MFIs a mth Partners Wide range of local MFI partners 67 microfinance institutis from 40 countries have joined in first 24 mths Mexico Nicaragua Hduras Ecuador Haiti Dominican Republic Bolivia Moldova Ukraine Bulgaria Azerbaijan Tajikistan Iraq Afghanistan Gaza Senegal Ghana Cgo Uganda Togo Nigeria Camero Kenya Tanzania Mozambique Vietnam Cambodia Indesia Samoa 16 Partners Partial List of Partners AFRICAFRICA Microfund - Togo Eby Foundati - Kenya Hluvuku-Adsema- Mozambique Lift Above Poverty Foundati- Nigeria Kraban Support Foundati- Ghana Women Initiative to Eradicate Poverty- Uganda Youth Self Employment Foundati- Tanzania Life in Africa Foundati- Uganda Women s Ecomic Empowerment Csort- Kenya Senegal Ecovillage Network- Senegal Village Enterprise Fund- Uganda Rural Agency for Development- Kenya People s Microcredit Investment Bureau- Kenya SEED Development Group- Kenya Acti Now: Kenya- Kenya Kisumu Medical and Educati Trust- Kenya Share an Opportunity Microfinance Ltd.- Uganda HELP Africa- Togo HOPE RDC- Democratic Republic of Cgo GHAPE- Camero Urban Ministry- Nigeria 17 EASTERN EUROPEUROPE & CENTRALC ASIASIA Mikrofd EAD- Bulgaria Microinvest LLC- Moldova Regial Ecomic Development Center- Bulgaria Nadiya- Ukraine Norwegian Microcredit LLC- Azerbaijan Komak Credit Uni- Azerbaijan MLF MicroInvest- Tajikistan LATINATIN AMERICA Fundación para la Vivienda Progresiva- Mexico Admic Nacial- Mexico Mifex Microfinance Exchange- Ecuador Prisma Microfinance- Hduras / Nicaragua Esperanza Internatial- Dominican Republic and Haiti IMPRO- Bolivia ASIA South Pacific Business Development- Samoa CREDIT MFI- Cambodia Ariana Financial Services Group- Afghanistan Al Aman- Iraq MBK Ventura- Indesia Mekg Plus- Vietnam in Numbers Ramping up fast: 11.1 milli raised from 133,000 lenders in 24 mths Total Capital Raised from Internet Lenders (m) 12m 10m 8m 6m 4m 2m 0m Jan '06 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan ' year projectis 130M 280M USD On track to be e of the largest microfinance funds (Citibank = 100M) Feb Mar Apr May Jun Jul Aug Sept

4 19 in Numbers Ramping up fast: High Volume of Website Traffic Average new users each day = 9,200 Average loans funded each day (Jan-Aug 07) = 36,500 (Sept-Oct 07) = 61,500 Average # of lenders each day (Jan-Aug 07) = 444 (Sept-Oct 07) = 1,300 Highest number or user in 1 day = 94,000 Highest loans funded in 1 day = 258,000 (>10,000/hr) in Numbers Borrower Statistics Total Borrowers : Male : 28% Female : 72% Average size : US Average Term : 10.1 mths Asia is still less than 30% of portfolio Highest # lender in 1 day = 3,100 <10% of lenders withdraw funds after repayment Revenue from datis = 7.5% of loan volume 20 Early Results Strg base of early supporters Free payment processing and employee support 120 Milli free banner impressis Free Google Adwords 25% of traffic Free Yahoo Search Marketing and employee support Free promoti (Community Impact Award) Funding for Field Research and Development Free phes for cell based data upload pilot Free promoti of widget to bloggers Featured Organizati Early Funder Early Funder Free computers and early funder 22 Early Results Strg accolades in the press and +10,000 blogs Innovati of the week:.org uses smart design to make a little cash go a lg way. "Revolutiizing how dors and lenders in the US are cnecting with small entrepreneurs in developing countries 2006 Year in Ideas Issue: At.org, a schoolteacher in Kansas can partner with a seamstress in Kenya to jump-start a tailor shop. You too can have a big impact with a small amount of mey." Partners Typical Partners The Average MFI in has Been a partner for 7.5 mths Raised 180,000 in capital Paid back 69,000 in capital 215 business posted s Risk Ranking System Avoids Creating a Glass Ceiling 7 = star partners 7 = star partners 13 = star partners 20 = star partners 18 = star partners "If you've got 25 bucks, a PC and a PayPal account, you've now got the wherewithal to be an internatial financier." 23 24

5 Costing out s debt capital s Risk Model creates an incentive to improve transparency Interest Rate Charges Cost of staff time to post client data Write Off Rate F/X Hedging Cost Total Cost of Capital 0% 0.2% - 2% 1.3% Varies ~0-1% + F/X risk Comments: passes 100% of the funds lent via social investors line. supports its low cost internet operatis by charging social investors optial fees. has been a financially self sufficient 501c3 U.S. n-profit organizati since November Based time study data of MFIs using, the cost of staff time to post and maintain each client profile.org ranges from < 1 USD to 10 USD. The average loan raised per client profile is 500USD putting the average cost as a factor of the debt capital raised to around 0.2% - 2%. According to the MIcroBanking Bulletin, the average write off ratio for all MFIs listed the MIX is 1.3% in This number is subtracted from the cost equati since social investors bear default risk / all MFI write offs. s loans are in U.S. dollars and s policy is for MFIs to manage the currency risk. The cost of hedging short term loans varies by ctext and many MFIs simply do not hedge given the large savings spread by using. For most MFIs, represents the cheapest U.S. dollar debt capital source available. Inputs 1) Self-reported MFI Data Organizatial age Gross Portfolio (GLP) Overall Portfolio At Risk (PAR) Organizatial Self Sufficiency (OSS) Regulatory Status 2) 3 rd Party MFI Data Financial Audit Results Credit Rating Score Audit Results Independent Evaluatis Outside funder Quality Network Affiliati 3) MFI Performance Total Outstanding s PAR s Fellows Journaling Coverage Durati of Partnership Performance during Partnership Risk Model Outputs 1. MFI Reputati s site 2. Mthly Fundraising Limit 26 Case Study: (Togo) Microfund Togo - Total 0% Interest Capital Raised.org 700, , , , , , , Number of mths Performance the Platform Partner Since: Nov 6, 2006 Total s Raised: 705 Total Capital Raised: 670,000 Average Size: 850 Average Time to Fund a 1 day Testimial from Managing Director The partnership of KIVA with MICROFUND is very excellent and today KIVA is our best partner The support of KIVA has been and is very helpful to our survival and allows us to increase csiderably our portfolio Due to our partnership with KIVA, MICROFUND respds more easily to the needs in credit of its members at the great satisfacti of its beneficiaries - Joseph Kossi (MICROFUND Manager) Case Study: (Mexico) Part of Network Case Study: AFSG (Afghanistan) 600, , , , , ,000 0 Admic (ACCION network) - Total Capital Raised.org Mths.org Performance the Platform Testimial from Managing Director Partner Since: Aug 31, 2006 has been an incredibly successful partner in Total s Raised: 994 providing us low cost funding to expand our Total Capital Raised: 557,000 operatis Highly recommended. Average Size: 510 Average Time to Fund a 1.3 days MFI Missi Statement: To provide high quality and fair priced savings and loan products to our clients, which will increase their incomes, expand their businesses and improve their quality of life. Performance the Platform Partner Since: Jan 18, 2007 Total s Raised: 305 Total Capital Raised: 117,000 Average Size: 385 Average Time to Fund a : 8 hours Testimials from MFI 's loan fund has brought a significant change over AFSG's growth and productivities and huge change to clients living standard KIVA has been proved to be a powerful instrument for poverty reducti build assets, increase incomes and reduce their vulnerability to ecomic stress in Afghanistan AFSG and its clients are really thankful of 's fund and we hope that supports AFSG ctinuously - Storai Sadat (Executive Director)

6 Does make financial sense for my MFI? Checklist Somee my staff can: Digitally photograph clients Communicate via / access the Internet regularly Speak English or Spanish My MFI can: Legally accept US Dollar debt from a foreign lender Managing foreign exchange risk Next Steps for Partnering with MFI Partner Next Steps Role 1. Complete and submit partnership applicati 2. Receive respse from regarding applicati status 3. If approved, work with 's Partnerships team to setup a pilot program 4. Launch 1-2 mth pilot program 5. Assess pilot program outcomes and scale program based needs Provide guidance and feedback all applicati documents and requirements Review applicati materials and respd to MFIs within 1-2 weeks Provide all additial documents and going, comprehensive assistance with pilot setup Mitor pilot and provide -going support Provide comprehensive assistance for pilot scaling and work with MFI to determine mthly funding limit If your MFI is qualified and you re interested in starting a pilot program or want more informati ctact: partnerships@kiva.org