Church microfinance scheme is ‘Good News’ to poor

Workers keeping track of savings at the Church-run credit union

May 17, 2010
UCAN

A Church-run microfinance program introduced more than three years ago is helping to improve the livelihoods of many poor people in a parish in Cambodia’s capital.

“Last year, when my motorbike broke down, I thought I would have to take my children out of school, but luckily I was able to borrow 500,000 riel (US$118) from the credit union to repair my motorbike enabling my children to continue their studies,” said Meas Putry, a motorcycle taxi driver.

Putry is a signed-up member of the credit union of St. Joseph Church in Phnom Penh.

The program provides loans to poor people at the cheapest rate, said Saing Yuth, a former teacher and credit union administrator. She said loans are fixed at 1 per cent interest per month and without the need to provide collateral. Other credit institutions usually demand interest repayments of 4-5 per cent a month, she noted.

As well as the loan service, the Church credit union also has a savings account program, which gives savers an interest rate of 3 per cent per annum.

Parish priest Father Paul Roeung Chatchai introduced the credit and savings program in early 2007. “The Church’s main mission is to proclaim the Good News to the people. Our credit union is one way of doing this by providing a lifeline to poor people when they face difficult situations,” said the priest from the Thai Missionary Society.

Another objective, Father Roeung added, is to encourage and teach the local community to support each other and be less financially dependent on their families.

Initially starting with 30 members with savings totaling 170,000 riel, the program now has 170 members and 16 million riel’s worth of savings. A large amount of this is deposited in a commercial bank to earn interest.

“Our members can deposit as little as 1,000 riel per week into their savings account,” said Father Chatchai, adding that the Church has a 12-member committee that manages the program.

Putry says he now has 2 million riel in his account. “I thank God that this program has been introduced in our community,” he said.

In Cambodia there are 27 commercial banks, six specialist banks and 21 licensed micro credit institutions, according to a National Bank of Cambodia report.

ADB provides $30.7M to Cambodia’s livelihoods, microfinance program

Microfinance Focus, Dec. 10, 2009: The ABD will assist Cambodia develop microfinance institutions and rural livelihood service providers in Cambodia’s Tonle Sap Basin region by providing $30.7 million in loans and grants program to aid a new Cambodia new initiative to boost income and food security in the region.

Two of ADB’s development partners in Cambodia, the International Fund for Agricultural Development (IFAD), and the Government of Finland will also contribute a further $19.1 million. The project will spur agricultural productivity and increase incomes for up to 2.5 million people in 630,000 households in the poor Tonle Sap Basin provinces of Banteay Meanchey, Kampong Cham, Kampong Thom and Siem Reap.

It will fund new or upgraded infrastructure, which is likely to include small-scale waterworks for irrigation and flood control systems, and improved farm-to-market roads. In addition the project will help to establish commune-based livelihood improvement groups that will provide revolving funds to members to buy agricultural supplies such as seeds and fertilizers. Support will be given to build up the capabilities of microfinance institutions and rural service agencies, to train farmers in modern agriculture technologies, and to boost access to information through internet centers or e-kiosks that can be utilized by commune members.

“The project will deliver a broad range of benefits including increased crop productivity and output, improved post-harvest management, market access and prices, greater access to rural financial services, and increased knowledge of agriculture technologies, all of which will help raise living standards, boost incomes, and provide livelihood opportunities for poor households,” said Ian Makin, Senior Water Resources Management Specialist with ADB’s Southeast Asia Department.

It is also part of a broader ADB-led initiative to develop the Tonle Sap Basin, and complements the work of other development partners in the agriculture sector, including IFAD. The project is strongly focused on providing grass roots support for individual communities, who will be fully involved in identifying priority investments that reflect their specific needs, the ABD said in a statement.

It also includes a gender action plan to ensure women are able to participate fully and to benefit equitably from the project. Cambodia’s economy has grown between 6%-10% in recent years, driven by the construction, garment and tourism industries. However, growth in the agriculture sector, which provides livelihoods for up to 85% of the population, has been uneven because of weak infrastructure, low productivity, a lack of access to markets and poorly developed rural financial services.

The result is persistently high levels of rural poverty and food insecurity, with almost a third of rural households lacking sufficient food during each year. The Ministry of Agriculture, Forestry and Fisheries is the executing agency for the project, which is due for completion around August 2017.

Breaking out of poverty with $50

29 Oct 2007
Concern Worldwide U.S.A.
Website: http://www.concernusa.org

NEW YORK (October 29, 2007) - In what started as a small savings and loan program for the rural poor in Cambodia just fourteen years ago, today has grown into an independent microfinance bank reaching nearly 68,000 people. In villages where people were living from day to day, access to credit was virtually non-existent for millions caught in the poverty trap because they had no way to improve their economic productivity. Now, with a loan portfolio of more than $5 million, one bank dedicated to the poor is helping families throughout Cambodia change their lives.

In a country like Cambodia, still recovering from a difficult history, the poorest people are the ones struggling to turn their lives around.

The bank was started by Concern Worldwide, an international humanitarian relief and development organization, and it is called Angkor Mikroheranhvatho Kampuchea (AMK) bank. It was a bold step for Concern and widely seen as risky, but now it is an independent banking institution helping poor villagers realize their potential.

With 85 percent of loans going to women, AMK endeavours to issue loans to mothers who are often in charge of finances for the home and maximize the benefit. AMK says the figures speak for themselves - women borrowers generally put the money to the best use for the household.

"We target these loans to women, usually about $50 on average," Chetan said.

AMK is unique because it engages communities from the bottom up. Communities fully understand that the repayment process is crucial and that one default impacts everyone. Credit is often issued to groups who are collectively responsible for paying back the loan, known as "solidarity lending." AMK's success is largely due to the remarkable level of responsibility of borrowers who make their loan payments on-time - an impressive record for any lender.

"The scale up of the microfinance program is enormous and the level of growth and success of programs both in spread and depth was not expected a decade ago," Tanmay Chetan, Board member of AMK, said. Chetan is in the United States this week attending a Conference in Washington, D.C.

Loan sizes are smaller than they would be in the United States, but the concept is fundamentally the same. Businesses borrow money for overhead until they achieve net income. Large banking institutions like DEPFA Bank see the effective, if not crucial, role AMK plays in Cambodia. DEPFA's CEO, Gerhard Bruckermann, has deployed personnel from his bank to assist in the growth and development of AMK.

"When you see what they are doing and what kind of change it makes on peoples lives, it's probably the best money spent by DEPFA - ever," Bruckermann said. "We couldn't do any better with our money."

Once poverty-stricken, families are able to pay for school and access health resources if a medical emergency arises, rather than sell off animals or other collateral.

Loans carry an interest rate of one percent, which further legitimizes the credit for what it is - not a handout. Moreover, that interest is immediately used to finance more loans so the economic stimulus is direct and fast.

And the success of Concern's AMK Bank has not gone unnoticed. Earning recognition from the World Bank subsidiary, the Consultative Group to Assist the Poor (CGAP), Concern received their prestigious award for the past two years for financial transparency and progress, ranking above more than 200 other microfinance institutions.

"AMK has demonstrated that when you give people the tools and resources to help themselves, they are able and eager to do so," Chetan said.

Chetan is in New York October 29 - 31 meeting with Concern's microfinance personnel from 10 countries around Africa, Asia and the Caribbean.

"It's part of Concern's way - to share the learning so that successful models that help us to tackle poverty are shared with others," Tanmay added. "We still have a long way to go to help the poorest break out of poverty but, with innovations like AMK, we can help transform a family's life with $50. We've reached 68,000 so far - we still have a long way to go."

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Tanmay Chetan is on the Board of Directors of AMK and is available for interview. Please contact Justin Schair at (212) 557-8000 or justin.schair @ concern.net for more information or to setup an interview.

About Concern Worldwide Concern Worldwide is a non-denominational, not-for-profit humanitarian organization that has more than 3,000 personnel working in 28 of the poorest countries throughout the world. Concern Worldwide focuses on health, education, microfinance, HIV&AIDS and emergency response programs, directly reaching more than five million people each year.

Financing a poor Cambodian through eBay?

New eBay site lets people finance the world's poor

By Jonathan Stempel

NEW YORK (Reuters) - EBay Inc, the world's largest online auctioneer and payments company, launched on Wednesday a Web site allowing ordinary investors to buy securities aimed at improving conditions in the world's poorest countries.

MicroPlace, located at http://www.microplace.com, will allow people to invest as little as $100 to support development in impoverished areas.

So-called microfinance is the supply of loans, savings, insurance and other basic financial services to low-income households and businesses, typically without collateral. It is often conducted in emerging economies, where people cannot typically obtain bank loans.

Microfinance is at work in more than 100 countries, and is generally provided by financial institutions or wealthier investors. It gained wider renown last October when Bangladeshi economist Muhammad Yunus, who pioneered it in 1976, and the Grameen Bank he founded won the Nobel Peace Prize.

"Capital markets are just waking up to this asset class," Tracey Pettengill Turner, the founder and general manager of MicroPlace, said in an interview. "This is different because it is the first Web-based service for the everyday investor to invest in microfinance, and earn an investment return while addressing global poverty."

Turner said she has worked in Bangladesh, and worked at Grameen in 1998 after graduating from Stanford Business School. She said she sold MicroPlace to eBay in June 2006.

Another microfinance site, Kiva.org, said last week it has built a $13 million loan portfolio in its first two years to help about 20,000 entrepreneurs. Other sites include Finca International's http://www.villagebanking.org and Accion International's http://www.accion.org.

TRACK RECORDS

MicroPlace chose the Calvert Social Investment Foundation to offer its first 10 securities, where funds are designated for such countries as Cambodia, Ecuador, Ghana and Tajikistan.

The securities mature in two to four years and, despite lacking credit ratings, yield just 1.5 percent to 3 percent a year. That's below the 3.8 percent yield on similar maturity U.S. Treasuries, which have essentially no credit risk.

Turner said issuers "generally have very good track records, often with 10 years in investing in microfinance with no history of defaults." She added that the issuers often set aside reserves to limit potential credit risk.

Investments may be made through eBay's PayPal service, or a regular bank checking account, and investors are assessed no fees, commissions or expenses. Prospectuses are available online, and MicroPlace is regulated as a brokerage by the Financial Industry Regulatory Authority.

Turner said MicroPlace makes money from charging issuers to list. "We aspire to break-even, and if and when we reach profitability, eBay intends to reinvest any profits back into its own social initiatives," she said.

Catherine England, a spokeswoman for San Jose, California-based eBay, said the program will be "not material" to results at the online auctioneer and payments company.

(Additional reporting by Eric Auchard in San Francisco)

Micro-finance gives developing world a chance to ease poverty

Wednesday, 5th September 2007
Graeme Brown
The Business (UK)

An email has just arrived in my inbox from an organisation called Kiva, telling me that a Cambodian woman I recently lent money to, Pork Saru, has made a repayment of $28 (£13.88, e20.54). Twelve other people from all over the world received the same email. In June, the 13 of us lent Saru a total of $500. She used the loan to buy a motorcycle to transport goods more easily to the grocery store she owns, and to improve her product range.

None of the lenders knew each other, and none of us knew Saru. Until recently, it would have been almost impossible for her to access the funds she needed to improve her business, and almost impossible for 13 people living in the West to help her.

Kiva (which means agreement in Swahili) is a US-based, non-profit organisation. It acts as a kind of retail micro-financier. Micro-finance gives access to capital to poor people in the developing world who otherwise would be unable to borrow; it doesn’t require collateral. According to the World Bank, of the 3bn people of working age in the developing world who could make use of micro-finance, less than 1bn have access to it. Kiva is attempting to make a start at bridging that gap.

Where it differs from traditional micro-finance institutions is that it allows an individual in the West to choose who they will help in the developing world via its website. It personalises aid. Unlike a donation to a large charity, or the tax you pay that is spent on international development, you can see exactly where your money goes. Kiva connects people who need to borrow money with people who want to lend money; it does not interfere with who lends what to whom, it just provides the platform for thousands of transactions to happen.

There are thousands of entrepreneurs like Saru featured on Kiva’s website asking for the loan they need to invest in their businesses, and there are thousands of people willing to lend. Since the website was launched just over two years ago, it has enabled 90,000 people to lend almost $10m to 15,000 entrepreneurs across the developing world. From a brick manufacturer in Kenya, who used his $150 loan to rent a brick press, doubling his production overnight and enabling him to hire five new staff, to a female mechanic in Honduras, who took over her husband’s business after his death and used her $300 loan to buy new equipment and now employs four staff, it is providing help to entrepreneurs and acting as a catalyst for wealth and job creation in countries that are in much need of both.

Reading the stories of people who have borrowed through Kiva is awe-inspiring. Crucially, it seems hugely important to the borrowers that what they are being offered is a loan rather than a handout. Simply giving aid assumes people in the developing world are helpless and robs them of their self-respect. A loan is a business arrangement – borrowers are trusted to pay it back. It helps people to help themselves.

Anyone familiar with the great Peruvian economist Hernando De Soto’s groundbreaking work on the essential role of private property in economic development will recognise the benefits of giving people in the developing world the same rights and responsibilities we enjoy in the West.

Kiva’s borrowers almost always meet their responsibilities. It has a miniscule default rate of 0.17%, comparing very favourably with any bank in the City of London. Remarkably, it appears more successful at assessing risk than almost every financial institution in the West. Kiva uses local micro-finance institutions (it has 59 partners worldwide) who assess whether applicants are suitable for loans. The local partners are incentivised to be cautious because their repayment rates are published on Kiva’s website. If a local partner were to begin showing high rates of default, Kiva’s army of individual lenders would immediately become less likely to lend money to its clients.

The whole enterprise is based on market principles: there is no central direction and no vast bureaucracy. The power of the internet has brought together thousands of entrepreneurs, who want the chance to improve the lives of themselves and their families, and thousands of people who want to help them.

The Western public have rightly become sceptical of aid handed to governments with poor records on corruption and human rights. They are frustrated that huge multi-national non-governmental organisations (NGOs) seem to spend as much on mail shots as they do tackling poverty. At a time when Western politicians – pressurised by a celebrity elite interested above else on assuaging their own consciences – are cancelling debt, Kiva’s 15,000 entrepreneurs are happy to borrow more, and perfectly capable of paying it back.

The biggest change sweeping the developing world is being caused not by government aid, or action by huge NGOs. It is being caused by the market. Mobile phones in Africa are revolutionising communication. Buyers and sellers can exchange information more quickly than ever before, boosting trade and growth.

The Asian Tigers revolutionised their living standards over the last 50 years through trade, not aid; the same entrepreneurial spirit is latent in millions of people in Africa and other parts of the developing world. By lending them money through innovative new personalised and ultra-accountable micro-finance organisations, we can give them the chance to pull themselves out of their heart-breaking poverty and change the world for the better.