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Microfinance in Practice Workshop
 

Microfinance in Practice Workshop

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A presentation for those interested in becoming microfinance practicionners.

A presentation for those interested in becoming microfinance practicionners.

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  • About me Expectations – one thing you want to learn Sessions objectives = get something to hook you up that you will research on your own Discuss hard/soft skills for microfinance work Session format = Topic, questions, break halfway Some print materials, others to be emailed/put on google group depending on people’s preferences

Microfinance in Practice Workshop Microfinance in Practice Workshop Presentation Transcript

  • Microfinance in Practice Workshop Welcome =) Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Workshop Outline
    • Introduction
    • Microfinance process : interview to analysis
    • Support to small entreprise
    • Intro to hard skills:
      • Finance
      • Accounting
      • Monitoring and evaluation (M&E)
    • Toolkit
    • Lessons learnt
    • Tips
    • Resources
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • My background
    • IDS 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Introduction - Microfinance in Practice:
    • 4 principles
    • Appropriate services
      • Often: short term loans, repetitive, small amounts, friendly approach
    • Simplify operations
      • Literacy constraints + printing expensive + computer challenges
    • Motivate people to reimburse
      • You have to be a presence, call them, see them, visit them
      • Incentives
    • Charge interests that cover all fees
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Introduction Why microfinance? Is it for me? Framework : Community Economic Development Q & A - -- μ f μ f μ f -- Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 5 Steps of Process
    • Receive microcredit application
    • Gather and validate information
    • Detailed analysis of application
    • Make decision
    • Monitoring and Reimbursement
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 4. Make Decision Explain clearly, always give feed-back Sometimes 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 5. Monitoring and Reimbursement Different arrangements Q & A : -- μ f μ f μ f --
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Exploitation of IGA, starting & working capital Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Management 101
    • What is management?
    • Entrepreneurship
    • Organization and strategy
    • Marketing
    • Accounting and controls
    • Human resources mgt
    • Production mgt
    • Information systems
    • Quantitative methods
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Management 101
    • Innovation
    • How to choose an IGA?
      • Supply/demand
      • Value added
      • Vertical integration
      • Product diversification
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Financial Analysis – what to remember from 1 st year econ Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
    • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- . BREAK
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com .
  • Basic Financial Ratios Forthcoming online. Sorry =( Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com .
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Monitoring and Evaluation
    • Impact of microfinance – hand-outs
    • 5 principles to strive for :
      • Offer financial services in the long run : permanence
      • Reach a high number of clients : size
      • Reach the poorest (or specific population): outreach
      • Cover operational and financial costs : sustainability
      • Reach high productivity and lower costs : efficiency
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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-financing
    • Q & A - -- μ f μ f μ f --
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Printed tools
    • Microcredit application
    • SWOT analysis
    • microcredit contract
    • microcredit file
    • monitoring file
    • impact assessment questionnaire
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Unprinted tools
    • IGA and market study guides and powerpoints
    • general ledger
    • typology of IGA
    • other M&E tools in Excel
    • management proceedures
    • Q &A -- μ f μ f μ f --
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Lessons Learnt Importance of group work, but also challenges e.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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Lessons Learnt Credit TEAM – need to do capacity building Listening and Empathy the most important skills ever Rethink your role as the “expert” – so much to learn from others Try to have people familiar with the different trades on the IGA committee Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Where I screwed up :
    • Worked too independently
      • More 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 - -- μ f μ f μ f --
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Tips Get the people high up in the hierarchy on your side Show commitment and instigate meeting habits with resource person Try to mobilize resources to do on-site follow up and inspections Network 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Tips
    • Use slow times to:
        • Do Community Economic Analysis
        • Enjoy learning about the informal/formal economy and the financial sector
        • Create 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 needed
        • Learning about informal economy and cultural economics a REALLY good use of your time!
    Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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 -- μ f μ f μ f -- Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • 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_address] , 416 595 0761 What’s next? Workshop Evaluation Thanks =) Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com
  • Workshop Evaluation Thanks =) Microfinance in Practice Workshop – UTSC, 27/03/08 -- μ f μ f μ f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com