Micro & Small Enterprise Lending Products: Credit Union Innovations

Transcription

1 Micro & Small Enterprise Lending Products: Credit Union Innovations Lucy Ito World Council of Credit Unions, Inc. (WOCCU) Emerging Products for Micro & Small Enterprise Finance World Bank & World Bank Institute March 20, 2001

2 CU Lending Innovations WOCCU/CUES/Philippines (December 2000) Member-Savers: 147,669 Savings & Shares: $10.5 million Loans Outstanding: $8.1 million WOCCU/Ecuador (September 2000) Member-Savers: 792,255 Savings & Shares: $79.3 million Loans Outstanding: $68.3 million

3 WOCCU/CUES/Philippines: A Coupling of Methodologies Model Credit Union (MCUB) Asset-Accumulation Savings-Based Mixed Outreach Financial Disciplines Individual Loans Strategic Needs: New Product Dev t New Members Credibility/Brand Village-Banking (SCWE) Income Generation Loan-Driven Target: Poor Women Product Discipline Group Loans Strategic Needs: Source of Loan Funds Graduation Options Strong Host MFI

4 MCUB & SCWE Model Credit Union Building (MCUB) Financial Disciplines: Quality Products & Services (Savings & Credit) Efficiency of Operations Usage of PEARLS Monitoring System (See: WOCCU International CU Prudential Standards) Savings & Credit with Education (SCWE) Introduces a village-banking group loan product to CUES credit unions

5 Basic Village Banking Model 5-6 women form a Solidarity Group. 5 Solidarity Groups form a Credit Association. Credit Association representing women behaves as a single client to host or sponsoring institution. Transactions and funds within Credit Association are handled internally by Management Committee. Source of credit funds = external donor funds.

6 FFH Innovation on Village Banking Product: Credit with Education (CWE) 5-6 women form a Solidarity Group. 5 Solidarity Groups form a Credit Association. Credit Association representing women behaves as a single client to host institution. Transactions and funds within Credit Association are handled internally by Management Committee. Integrated financial and educational service delivery system. Non-formal education on high impact topics (health, nutrition, other) Source of credit funds = CU member savings & external donor funds.

7 WOCCU/CUES Innovation on Village Banking/CWE: Savings & Credit with Education (SCWE) 5-6 women form a Solidarity Group. 5 Solidarity Groups form Savings & Credit Association (SCA). Members may save only and skip loan cycle(s). SCA joins CU as an Associate Member. SCA Management Committee handles internal transactions; but, no internal fund. Rather, SCA deposits funds into CU.

8 WOCCU/CUES Innovation on Village Banking/CWE: Savings & Credit with Education (SCWE) Source of funds = CU member savings only. Members may graduate to become individual members in their own right. Coupled with Model Credit Union Building Methodology. Automation of manual record-keeping to increase efficiency and reduce cost.

9 Key SCWE Implementation Elements Weekly Meetings: Loan repayment installments made Voluntary savings made (withdrawable, interestbearing, convenient) Money is counted and books are balanced Other: Education seminar Meeting chaired by Management Committee, not the credit union field agent Management Committee Responsibilities:: Collects loan repayments. Collects savings. Balances the books. Deposits to the credit union.

10 Credit Design Loan Amount: P 1,500 ($37.50) maximum initial loan 50% increase per cycle Up to maximum P 9,000 ($225~$180) Duration: 16-week cycle Payment Mode: Weekly at meetings; lump sum to credit union. Loan Purpose: Income generating projects with weekly income.

11 CUES/SCWE Results (01/31/01) 733 active SCAs (11 CUs) 22,045 SCWE members Of 147,669 members (15% of CU membership) 20,480 are borrowers (90%) (10% save only) Cumulative loans granted: P195.2 M (US$3.9 M) Loans outstanding: P51.5 M (US$ 1.03 M) Portfolio at risk (30 days): 0% (7 th cycle) Pure voluntary savings: P7.0 M (US$140,000) Coop graduation to zero-subsidy: 4 CUs (4/11)

12 SCWE Demands on Credit Union Resources Full Capacity: 60 SCAs x 5 x 5 = 1,500 Staffing: (5) SCWE Supervisor + 4 Field Agents Infrastructure: Liquidity Product Methodology Training Information Systems Fixed Assets (motor bikes)

13 Overall CU Operations vs. SCWE Bansalan CU 12/31/97 12/31/98 12/31/99 12/31/00 Net Loan Income 24.73% 23.94% 30.06% 31.52% SCWE NA 4.58% 33.88% 37.94% Cost of Savings 5.42% 5.99% 3.77% 4.11% SCWE NA 1.09% 4.17% 7.17% Oper. Expenses % 14.41% 11.47% SCWE NA 26.52% 23.90% 12.29% Net Income 8.09% 7.51% 6.64% 8.82% SCWE NA % -6.48% 12.68%

14 Graduation Opportunity for SCWE Members Member can simultaneously participate in SCWE and access individual savings and loan services. Maximum P 9,000 SCWE loan size complements individual CU loan amounts: SCWE Group Loans: 20,889 Individual Loans P1-10,000 ($1-200): 26,748 Individual Loans P10,001-20,000 ($ ): 8,262 Individual Loans P20,001-30,000 ($ ): 6,828 Individual Loans >P30,000 (>$600): 7,816 Total No. of Outstanding Loans: 70,543 (of which 67.53% <$200) Liquidity = 32.43% (Small loan size is not due to queuing.) See Dec 2000 Summary of Micro-Loans for Batch 1 & 2 Coops.

15 Graduation Opportunity for SCWE Members 73% of SCWE members indicate desire to become regular members. But, graduation to date: <100 Eliminating Barriers to Entry: Perceived Minimum Initial Share Capital Requirement: P100 ($2) vs. P2,500 ($50) Cf. average savings after 7 cycles P434 (~$9)

16 Other MFI Innovations Being Used by WOCCU Credit Scoring & Automatic Loans (from Calpia) Approval in <5 minutes and lower interest rate. Removal of Key Barrier For Good Borrower Entry: The Pre-Membership Education Seminar (FENACOAC- Guatemala): minutes vs. 3 days. Effect: attract good borrowers rather than desperado borrowers. SME Loans Based on Cash Flow (WOCCU/Ecuador) Open-End Lines of Credit Interest Free Supplier Advances IRnet (WOCCU s International Remittance Network) Credit unions can remit funds across 40 different countries for <$10 per US$1,000.

17 Summary of CUES MCUB Batch 1 Performance Batch1 CUs (12) 12/31/98 12/31/00 Membership 43,417 92,407 Delinquency (PAR >30days) 63.52% 14.24% LLP (>12 months) 9.99% 100% External Credit 6.34% 1.37% Net Income/Average Assets 2.04% 4.68% Growth of Assets vs. Inflation 5.68% < 9% 22.52% > 6.6% Savings/Assets 35.53% 51.59% Annual Loan Growth 1.55% 22.52%

18 For More Information on WOCCU/CUES/Philippines Lucy Ito Vice President World Council of Credit Unions, Inc. (WOCCU) 5710 Mineral Point Road Madison, WI USA Phone: (608) Fax: (608)