microfinance in practice workshop
DESCRIPTION
A presentation for those interested in becoming microfinance practicionners.TRANSCRIPT
Microfinance in Practice Workshop
Welcome =)
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Workshop Outline
1. Introduction2. Microfinance process : interview to analysis3. Support to small entreprise4. Intro to hard skills:
1. Finance2. Accounting3. Monitoring and evaluation (M&E)
5. Toolkit6. Lessons learnt7. Tips8. Resources
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
My backgroundIDS Coop Placement : -Support to Income Generating Activities (IGA) for members with HIV/AIDS in Burkina Faso, through WUSC-Uniterra. 10 months
-Different partners-Different types of work-Different types of IGA
- Mandate- A typical day on placement - What made coworkers and other volunteers special and inspirational
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
My background
Access Riverdale-Roles-Microfinance in Canada
- AR, Calmeadow/Alterna, Momentum, Developpement International Desjardins
- The need is definitely here- Not only business loans
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Introduction - Microfinance in Practice: 4 principles 1. Appropriate services
Often: short term loans, repetitive, small amounts, friendly approach
2. Simplify operationsLiteracy constraints + printing expensive + computer challenges
3. Motivate people to reimburseYou have to be a presence, call them, see them, visit themIncentives
4. Charge interests that cover all fees
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Introduction
Why microfinance? Is it for me?
Framework : Community Economic Development
Q & A - -- μf μf μf --
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Microfinance Process, from interview to analysis
Goals of process:
Get to know the entrepreneur and the business
– Understand on what levels you can help –Assess integrity, character, reputation, etc. – Evaluate the risk of the business– Importance of having local staff on board
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
5 Steps of Process
1. Receive microcredit application
2. Gather and validate information
3. Detailed analysis of application
4. Make decision
5. Monitoring and Reimbursement
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
1. Receive microcredit application
needs, match with product, eligibility
can be during an interview most of the time, try to minimize paperwork
interview preparation: get familiar with sector of activity (research!!) and come up with a series of questions : hand-out info to gather
hand-out: documents to ask for
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
2. Gather and validate information
Canada = Beacon scores, call references
Visits to residence and business of critical importance
Goal : understand the financial need and see what you can do.
Financing needs come can be of different natures : hand-out
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
3. Detailed analysis of application
Huge diversity in institutional cultures and how people think about this
Think in terms of risk; is it increased or decreased by what you find, and how can you help?
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Intro to Risk Assessment
When making decisions, always evaluate if it raises or lowers the risk to the MFI/NGO and what are the ways to mitigate that risk.
Refer to financing needs hand-out.
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
4. Make Decision
Explain clearly, always give feed-backSometimes credit is not what is needed and you can be able to provide other types of support (see next section)
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
5. Monitoring and Reimbursement
Different arrangements
Q & A : -- μf μf μf --
Support to Small Business
Most common things I did :- Develop or adapt management and M&E tools- Training: broad/specific- Financial analysis of IGA project- IGA project development & Proposal/business plan writing
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Exploitation of IGA, starting & working capital
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Management 101
What is management?1. Entrepreneurship2. Organization and strategy3. Marketing4. Accounting and controls5. Human resources mgt6. Production mgt7. Information systems8. Quantitative methods
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Management 101
-Innovation
- How to choose an IGA?-Supply/demand-Value added-Vertical integration-Product diversification
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Management 101
Market study
- really important research
- Know the clients and what they want
- Implement like any other type of reseach
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Management 101-Promotion and publicity-Tips:
-Professionalization-Compare with other products- use testimonies-Have a prepared sales pitch-Ensure you preserve a good reputation-Do not get discouraged!
- Networking
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Financial Analysis – what to remember from 1st year econ
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
-Simple: income and expenditure
- Capital and depreciation
- Cost versus sales price (margin/benefit/profit)
- Cash flow and income projections
Support to Small Business
Things to keep in mind: - Very culture-specific so talk to friends about their conceptions of economics, competition, etc. -Integrate planning everywhere- Field research and talking to people involved in these IGA crucial-Work in teams, try to get people from different sectors on board- Network right away!
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Support to Small Business
Often the credit is not the major need of the client:-CRUCIAL role of training-My major role = advising, like a consultant – how ironic!!-Always be constructive, help the clients improve
Technical Assistance – typology of IGA
3 sectors: agriculture, industry and services
Match people with resource people
Q & A -- μf μf μf -- . BREAK
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Intro to hard skills
Finance-Not the stock market!- How much you need to know really depend on the kind of work you’ll do- We’ll cover :
-Principles of credit- Break-Even Analysis-Basic Financial Ratios
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Principles of credit
-Loan term and repayment frequency possibly most significant variables-Cash patterns : regular vs irregular cash flow-Loan term : match with business cycle-Loan Utilization: consumption vs production, or use for other IGA (risk)-Loan purpose: fixed assets vs working capital-Interest rate : declining balance vs flat method-Fees and charges: have a proportionally higher impact than interest rate because not calculate on declining balance
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Break-even analysis
-Fixed costs (FC) : rent, depreciation, salaries, etc.- Variable costs (VC): supplies, raw materials, stationary. Calculate on average (AVC)-Contribution Margin (CM) = average revenue – AVC-Break-even point (BEP)= FC / CM (in intems/time)-Break-even revenue = BEP X AVC + FC
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
.
Basic Financial Ratios
Forthcoming online. Sorry =(
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
.
Accounting
-Essential:Tool of analysis, control and M&E- Your to-do list :
- learn to use the accounting equations : assets = liabilities + equity- learn to read and UNDERSTAND the 3 main financial statements: balance sheet, income statement and statement of cash flow- learn double-entry, ledgers, credit-debits
-In practice : simpler (books, records)
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Accounting in Practice
Tips to microentrepreneurs (based on my experience in Burkina Faso) :- Write down EVERY single transaction- Keep and file every transaction record- Get organized - supplies-Do not mix IGA money with familial/personal /NGO money (separate bank accounts)- Be lucid and conservative in management of gifts to friends/family and in the customer credit policies
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Accounting in Practice
Tips to small entrepreneurs (based on my experience in Burkina Faso) :
- set the salary for the boss
- have written procedures for cash flow
- get familiar with computer software like Excel or Ciel Associations
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Monitoring and Evaluation
- Impact of microfinance – hand-outs- 5 principles to strive for :
1. Offer financial services in the long run : permanence2. Reach a high number of clients : size3. Reach the poorest (or specific population): outreach4. Cover operational and financial costs : sustainability5. Reach high productivity and lower costs : efficiency
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
M & E Keep in mind : •Need to constantly re-evaluate the project•Microfinance is a tool for an end, not a goal in and of itself Integrate PLANNING everywhere•Be creative in making the work happen! Hard to understand for many people – what is the impact you want? Through which kind of activities?•Donors want to see “sustainability”, e.g. self-financingQ & A - -- μf μf μf --
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Tool-kit
ABC of tools
•Make sure they’re adapted to literacy/numeracy levels
• Always develop them participatorily
•Complicated not necessarily always better
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Printed tools
-Microcredit application-SWOT analysis- microcredit contract- microcredit file- monitoring file- impact assessment questionnaire
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Unprinted tools
-IGA and market study guides and powerpoints- general ledger- typology of IGA- other M&E tools in Excel- management proceedures
Q &A -- μf μf μf --
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Lessons Learnt
Importance of group work, but also challengese.g. people don’t speak when the leader is not there, etc. Need to ensure people understand their role (very CLEAR) and how the group is
supposed to function
Group projects versus individual projects
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Lessons Learnt
Credit TEAM – need to do capacity buildingListening and Empathy the most important skills everRethink your role as the “expert” – so much to learn from othersTry to have people familiar with the different trades on the IGA committee
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Lessons Learnt
Group projects versus individual projects
Technical assistance – typology of IGA
3 sectors : agriculture, industry and services
Match people with resource people
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Lessons Learnt
People have diverse agendas and they may mistake you for someone who has funding (some people are just opportunist)
Be really open minded and realistic as to people’s levels and needs
Synergize
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Where I screwed up :
Worked too independentlyMore impact if take more time to develop tools together rather than doing them all and
Time management – Spreading myself too thin
Not action-oriented enough (did lots on paper but not that much in reality. REVS+ example)
Denied the imperative of learning accounting
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Where I screwed up :
My own attitude towards “placement as learning”Attitude towards expectations
Taking lots of time reading audit reports and trying to make a sleek manual
Too much time trying to understand things
May have overemphasized savings They have an opportunity cost
But good Local Economic Development strategy because mobilizes the funds locally
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Where I screwed up :
Tried to make things too complicated
Classism/Positionality made it hard to relate to people
Talked more to middle-class, professional people
Compare with Ella, Kate and Denise
Q&A - -- μf μf μf --
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Tips
Get the people high up in the hierarchy on your sideShow commitment and instigate meeting habits with resource person Try to mobilize resources to do on-site follow up and inspectionsNetwork right away! Business development centre, other agencies
They have training materials, tools and research instruments already designed
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Tips
Build partnerships! (sustainability)
Do not reinvent the wheel
Always test your trainings before hands, especially the examples
Follow up on trainings whenever you can – try to get participants to organize local trainings
Don’t get too caught up in academic ways
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Tips
Match product to need (big investment – longer loan)
Know the institutional culture of your NGO
Research tips: SPSS, Delicious
Don’t freak out – lots of time for self-briefing on placement!
Keep a work diary and to-do list, write a lot about life and work
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Tips
Be patient! Learn communication styles (who calls who? Setting up meetings?)
Remember you’re leaving after 8-12 months
Think of what your baseline is and ensure you’ll get all the data – START WITH THAT if there’s no baseline, ensure you create it
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
TipsUse slow times to:
Do Community Economic Analysis Enjoy learning about the informal/formal economy and the financial sectorCreate information briefs on major IGAs (with investment, exploitation cycles, equipment costs, financial flux) Help identify the gaps, opportunities (market research) and see where the microfinance services are neededLearning about informal economy and cultural economics a REALLY good use of your time!
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Resources
Skills/Training
Calmeadow documents : Accounting and Finance
QuickMBA: Accounting and Business: www.quickmba.com
Accounting Coach: www.accountingcoach.com
UNCDF: Accounting applied to microfinance COURSE: www.uncdf.org/mfdl/index.php?_mode=students.home
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Resources
General
Mohammed Yunus, Banker of the Poor
Consultative Group to Assist the Poorest (CGAP): www.cgap.com
Check me out on delicious.com (username: onomatopee)
Q &A -- μf μf μf --
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Conclusion
Microfinance rocks! It’s okay to be a keener!
Hard/Soft Skills – a process
All experiences are diverse – no one size fits all solution.
Be humble and realistic : You’ll screw up too, don’t worry!
Go out and learn about something microfinance/CED-related
Contact info: [email protected], 416 595 0761
What’s next? Workshop Evaluation
Thanks =)
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]
Workshop Evaluation
Thanks =)
Microfinance in Practice Workshop – UTSC, 27/03/08 -- μf μf μf --
Facilitated by Emanuele Lapierre-Fortin, [email protected]