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United Prosperity
 

United Prosperity

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United Prosperity will allow the general public to combat poverty and multiply the impact of their money.

United Prosperity will allow the general public to combat poverty and multiply the impact of their money.

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    United Prosperity United Prosperity Presentation Transcript

    • http://www.unitedprosperity.org 1
    • The poor have limited access to capital Total working poor without access to capital ~ 3 billion1 100 million entrepreneurs served by micro-finance institutions1 1. Gonzalez and Rosenberg (2006), “The state of Microfinance” and Estimated 1.5 CGAP occasional paper #8 (2004) billion working poor in demand of microfinance1 2
    • Lack of guarantees limits lending to small entrepreneurs1 “The biggest problem we face in trying to expand the reach of microcredit is not the lack of capacity. Instead, it is the lack of availability of money to help microcredit programs get through their initial years until they reach break-even level. Local banks cannot lend to MFIs because MFIs cannot provide collateral. However, if an international or domestic organization steps forward to act as a guarantor, local banks are happy to provide the money.” The Microcredit Revolution in ‘Creating A World Without Poverty: Social business and the future of capitalism ’, NewYork, PublicAffairs, page 70). By Mohammad Yunus with Karl Weber 3 1. Refer slide in Appendix for CGAP’s note on guarantees
    • Your guarantee will enable entrepreneurs to get loans You guarantee loan to entrepreneur on United Prosperity’s website $20 Lends1 Lends $20 Repays loan Repays loan Bank Microfinance Entrepreneur Guarantee: $60 Institution (MFI)/Partner Loan : $200 Loan : $200 $20 Guarantee: $60 Social Guarantors On loan repayment (You) your funds are returned to you 1 - Banks also lend directly to entrepreneurs in some cases 4
    • How does it work ? Originate Guarantee Issue Repay Loans Loans Loans Loans (slide 1 of 4)  Microfinance institution (MFI) uploads list of entrepreneurs or groups seeking loans onto United Prosperity website Loan No. Group No. Client Id. First Name Last Name Term Sex Amount Age Loan Purpose 10001 891 34454 Malati Ahir 9 F 7500 25 To buy a cow 10002 891 35656 Vasanti Tamhane 6 F 5400 32 To open a flower shop 10004 891 35666 Sujata Kumbhar 8 F 8000 28 To put up a tea shop 10005 891 35667 Aseema Sheikh 8 F 7850 23 To start an embroidery business 10006 891 35682 Farha Ismail 8 F 7540 23 To start an embroidery business  MFI also uploads photograph and profile of entrepreneur or a group of entrepreneurs for whom it seeks funds or + + Entrepreneur 5
    • How does it work ? Originate Guarantee Issue Repay (slide 2 of 4) Loans Loans Loans Loans  Using United Prosperity’s website, social guarantors like you select an entrepreneur whose loan they would like to guarantee. Loan amount: $200 Guarantee: $60 $20 The guaranteed amount is always Social Guarantor less than the loan amount ,with the Social Guarantor initial loss in case of a default $20 borne by the MFI. $50 In this example, the guarantee is Entrepreneur focused on an entrepreneur, but it could also be focused on a group of entrepreneurs $20 Social Guarantor 6
    • How does it work ? Originate Guarantee Issue Repay Loans Loans Loans Loans (slide 3 of 4)  The Bank and MFI issue loans Microfinance Bank Entrepreneur Institution (MFI)  The MFI uploads the loan disbursal date on the United Prosperity website Loan No. Date Month Year Amount 10001 23 6 2008 7500 10002 30 6 2008 5400 10004 23 6 2008 8000 10005 30 6 2008 7850 10006 23 6 2008 7540 7
    • How does it work ? Originate Guarantee Issue Repay Loans Loans Loans Loans (slide 4 of 4)  Loans are repaid Weekly or Fortnightly or Monthly Monthly Microfinance Entrepreneur Bank Institution (MFI)  The guarantee amount is returned to you (social guarantor) 8
    • Your guarantee makes a difference to poor entrepreneurs’ families  Availability – Because of the guarantee, the entrepreneur gets a loan  Timely – The entrepreneur can start her business immediately and improve her family’s life.  Credibility - By repaying this loan the entrepreneur can establish her credit worthiness in the community  Lower Interest Rate – Because of the Entrepreneur guarantee the entrepreneur gets the loan at a lower interest rate 9
    • Strengthens institutions that serve the poor  Access - Can borrow from local and international banks and reach out to more entrepreneurs  Relationships - Can establish relationships with larger banks  Lower Cost - Reduce the cost of borrowing Microfinance from banks Institution (MFI)  Better Cash Flow – Reduce working capital requirement and leverage existing capital effectively  Credibility – Association with an international organization like United Prosperity increases their market credibility 10
    • Makes bank lending more inclusive  Credit Quality - Powerful cash-secured guarantee significantly reduces the risk of lending to the poor  Better Capital Utilization - With lower credit risk, capital can be leveraged to increase lending  Greater Revenues - Enhanced conduit to emerging MFIs and micro-enterprises to sell loans and cross sell related products like savings Bank accounts, health and life insurance  Lower Risk – Continuous visibility and monitoring of the MFI performance when the guarantee is in force  Financial Inclusiveness - Increase financial inclusiveness with minimal risk 11
    • Maximizes your impact  Maximum Impact – Because of the risk sharing between the bank and United Prosperity a $1 in guarantee translates to $2 to $5 in loan to the entrepreneur  Transparent –You can see who’s life is getting transformed by your guarantee  Multiplied – On loan repayment you can You support a new entrepreneur (Social Guarantor)  Affordable – With as little as $25, you can transform the life of a family 12
    • Appendix 13
    • Guarantees help emerging microfinance institutions gain bank financing and reach more entrepreneurs Guarantors and MFIs managers report that loan guarantees help MFIs to get loans—often the MFI’s first local loan—from banks that otherwise would not lend to them. -Consultative Group to Assist the Poor (CGAP) (Focus Note No. 40, January 2007) 14
    • Guarantees will accelerate the growth of smaller MFIs There are estimated to be 10,000 MFIs worldwide Banks lend to larger well-established MFIs ( Tier 1 and some Tier 2) Banks are reluctant to lend to emerging (Tier 2-4) Source: Jennifer Meehan(2004) “ Tapping Financial Markets for Microfinance” and Grameen Foundation USA 15
    • Guarantees help the entrepreneurial poor access capital End loans intended for Entrepreneur objective Guarantee on behalf of Traditional microfinance •Additional family income MFI •Income generating activity •Mostly part-time labor •Often temporary, and sometimes seasonal activities Technology innovation financing •Improved livelihood Portfolio of loans • Finance new technological •Exponential productivity gains of bank intended innovations which help the poor •Potential to grow for financing improve their livelihood innovations Microenterprises •Some orientation to growth and Portfolio of •1-10 employees capital accumulation microenterprise •Fixed business premises •Stabilization of income loans of bank •Typically family labor Self Help groups •Additional family income Portfolio of SHG •Groups of poor entrepreneurs who loans of bank borrow jointly •Income generating activity 16
    • Early Supporters Cognizant  Leading provider of information technology, consulting and business process outsourcing services  NASDAQ-100 Index and S&P 500 Index  Pro-bono software development for United Prosperity Netsuite  Leader in on-demand software  Netsuite software license and implementation grant Hanson Bridgett  One of San Francisco's oldest and most respected law firms  Pro-bono legal services for United Prosperity School of Law – Boalt Hall, University of California, Berkeley  Pro-bono legal services for United Prosperity by the Practicum group O’Melveny and Myers  Ranked 16th on The American Lawyer’s 2008 A-List  Pro-bono legal services for United Prosperity Tempus Law  Pro-bono legal services for United Prosperity 17
    • Thank you bhalchander@unitedprosperity.org