Microfinance as Social Business_JURGEN HAMMER

Microcredit Summit Campaign
Merida, Mexico – Sept 4th, 2014
WORKSHOP Group 3
Microfinance as Social Business
Jurgen HAMMER
CIO and Head of Social Performance Management

MICROFINANCE AND SOCIAL BUSINESS
1 Grameen Credit Agricole Foundation - GCAMF
Who are we ?
2 Social Business - Concept and Application
3 Case Study Chamroeun (Cambodia)
4 Case Study ACAD (Palestine)
9/25/2014 2

1. Grameen Credit Agricole - Mission
Mission Contribute to poverty alleviation
Investment
approach
Objectives
Financial
Instruments
Complementary
services
Microfinance
Access to financial
services
Mainly loans and
guarantees
Technical Assistance
Social Business
Access to essential
goods and services
Equity and debt
Support and
Coaching
9/25/2014 3

1. GCAMF – Activities and Portfolio ( 30 June 14)
9/25/2014 4
4
 Total outstanding microfinance
portfolio: € 26,5 million (1)
 35 partner MFIs (1) in 19
countries, mainly sub-Saharan
Africa and South and South-East
Asia
 Partner MFIs have 2,2 million
active customers of which:
o 84% are women
o 84% live in rural areas
o 25% live in sub-Saharan
Africa
o Average loan amount € 372
 The Foundation is a shareholder
in 11 Social Businesses located in
8 countries with a portfolio of € 4
million.
(1) Chamroen and ACAD are accounted for in the SB portfolio

1. GCAMF Social Business Portfolio( Q1 – 2014 )
5%
9/25/2014 5
5 Grameen Crédit Agricole Microfinance Foundation – April, 8 2014
42%
3%
50%
5%
Financial
services
Health
Agri-food
Other
41%
45%
9% Sub-saharian
Africa
South & South-
East Asia
Europe
MENA

1. Investment Policy Social Business
FINANCIAL INSTRUMENTS
EQUITY
50%
DEBT
50%
SECTORS
ESSENTIAL GOODS
and SERVICES
- Focus on agriculture and
agro industries
- Other sectors: energy,
waste management,
housing, healthcare,
culture, communication
FINANCIAL
INFRASTRUCTURES
- Microfinance institutions
- Financial services: micro
insurance, mobile banking,
remittances
GEOGRAPHY
DEVELOPPING
COUNTRIES
- Sub-Saharan Africa,
- MENA
- South and South East Asia
> 75%
DEVELOPED
COUNTRIES
< 25%
9/25/2014 6

2. Concept and Application
At the crossroad of entrepreneurship and philanthropy
Social Business is based on business and
market mindset to develop projects,
innovate and create products and services
Social Business initiatives are aimed at
providing affordable solutions to nutrition,
drinkable water, health, sanitation, housing,
finance (…) for the poor
Social Business requires long term vision,
patient capital and a spirit of partnership
In Social Business, traditional financial
instruments are used to serve social causes
Objective
Financial Profit
maximisation
Instruments
Debt / Equity
Objective
Financial sustainability
+
Social Return
Instruments
Debt / Equity
Objective
Social Return
only
Instruments
Grants
Social Business is an infinite source of systemic innovation
9/25/2014 7

3. Case Study Cambodia – Chamroeun
Financial Sector in Cambodia
NATIONAL BANK OF CAMBODIA
MFIs 19 NBC Branches
32 Commercial Banks 7 Specialized Banks
09 Foreign
Branch Banks
1 State owned
6 Privately owned
13 Locally
incorporated
37 Licensed
Money Changer
Licensed 65
Registered 1,377
7 Deposits
33 Registered (NGOs)
4 Representative
Offices
10 Subsidiary
Banks
Source: NBC - Q1 Report 2013
9/25/2014 8

3. Case Study Cambodia - Chamroeun
Chamroeun Background
 Started 2006 by Entrepreneurs du Monde as NGO program
 Focus on serving the very poor in Phnom Penh, by providing
adapted loans, savings, and microinsurance services.
 2009, as regulation requirement, transformed to a private
liability company and obtained certificate of registration as
Credit Operator from National Bank of Cambodia.
 2011, achieved all the requirements to become a Licensed
Microfinance Institution granted by the National Bank of
Cambodia in August 2011.
9/25/2014 9

Vision, Mission & Core Values
VISION
“A leading Cambodian social microfinance institution working to
achieve positive and lasting changes in the livelihoods of
economically active poor families in a socially responsible manner”
MISSION
“To improve the livelihoods, skills, and self-confidence of poor
families in Cambodia by providing them a wide range of
responsible microfinance and complementary socio-economic
services”
CORE VALUES
Integrity, quality of services, transparency, fair practices,
confidentiality, and non-discrimination
9/25/2014 10

Targeted Population
 Primary objective = a strong positive impact on the living
conditions of the poor households in Cambodia, particularly micro
entrepreneurs.
 Over 85% of clients/beneficiaries are women such as small market
stallholders, ambulant vendors and other small scale activities.
9/25/2014 11

Chamroeun = A Social Business MFI
Chamroeun is a social business which seeks to maximize social impact for
its clients rather than financial return for its shareholders:
 Bylaws of the institution specifically state there is no
dividend distribution
 Profits are fully re-invested in the organization to the
benefits of the micro entrepreneurs
 Interest rates charged to clients have progressively been
decreased each year since 2010 to reduce the cost of
services
9/25/2014 12

Social-driven governance:
 All of Chamroeun’s shareholders and Board of Directors members are social-oriented;
 Social Performance Management Committee set up at Board of Directors level
to protect the institution’s social mission while ensuring its financial sustainability.
 Committee tasks and responsibilities :
 Supervision of effective translation of the institution’s social mission
into practices
 Assure strong focus on promoting best practices and monitoring social
performance by using recognized tools, clear targets, and metrics
 Full review on Chamroeun using the drafted Universal Standards for
Social Performance Management developed by the SPTF
 Active involvement in revision of the vision and mission and the social
performance tools used within Chamroeun.
9/25/2014 13

Enable environment for vulnerable and poorest of the poor to access to
financial services:
 Very small and flexible loan terms and conditions
 Average loan size 125 USD (about 14% of GNI per capita), for business
start-up or expansion
 40 offices nationwide to serve partners (transportation costs and timing)
 Products are tailored to fit with business needs and characteristics
 Latest: pilot the micro insurance services
9/25/2014 14

 Wide range of non-financial services:
 Trainings to partners/clients and non-partners, free of charge
o financial literacy and business training
o social training
o skill training
o social and business counseling with free of charge;
 Using unified approach: socio-economic officers are in each branch to
offer such non-financial services;
 Environmental protection:
 In process to initiating financing initiatives toward renewable and clean
energy
 Awareness on usefulness on renewable and clean energies is in
development process
9/25/2014 15

Profit sharing back to the partner through Chamroeun Foundation:
 Board of Directors and management established the Chamroeun
Foundation Association (CFA)
 CFA implements charity activities - scholarship to partner’s children,
supporting other NGOs who are working with the same population
and responding to disasters.
 Clear policy to share back the profit from microfinance activities
through the Foundation.
9/25/2014 16

 Active involvement with with social-driven initiatives:
o Endorsement SmartCampaign;
o Reporting to MIX Market;
o Updating of pricing structure with MFTransparency;
o Member of Cambodia Microfinance Association and of Banking with the
Poor Network (BWTP);
 Social performance measurement:
o Annual assessment using Cerise’s SPI since 2007;
o Perform the Poverty Assessment Tools (PAT);
o Both financial and social rating in 2011 + mandatory updates every 2 years;
o Started self evaluation against Universal Standards for Social Performance
Management (USSPM) initiated by Social Performance Task Force (SPTF)
and put in follow-up agenda of Board SPM Committee;
o In process of certification on client protection.
9/25/2014 17

Competitive benefits with stimulating and respectful working
environment:
 Equal job opportunities with competitive benefit package
 People with disability and women strongly encouraged
 Profit sharing to staffs
 Sound capacity building and career development programs
 Regular reflection on satisfaction through staff satisfaction surveys,
client satisfaction surveys and annual workshop
 The code of conduct + code of ethics
9/25/2014 18

Comparison to peers*
* data obtained from Cerise July 15th, 2013
SPI Benchmark
9/25/2014 19

4. Case Study Palestine - ACAD
Key features
• 1988: ACAD NGO started its lending activities.
• 2013: transformation into a for-profit Limited Liability Company (ACAD
for Finance & Development)
• Shareholding structure:
Entity USD (1,000) % of capital
ACAD (NGO) 3,000 56,5%
EIB 1,000 18,8%
SIDI 535 10%
GCAMF 500 9,4%
Triple Jump 300 5,6%
• Gross Loan Portfolio (as of June, 2014): USD 4,7 mln.
• Over 3,000 active borrowers, 70% women, 60% located in rural areas.
• 40% of portfolio finances agriculture.
9/25/2014 20

Social Business Charter: Structure & Methodology
Principles (between 5 to 7)
 Based on Prof. Yunus‘ Seven Principles of Social Businesses
 Defining fundamental Social Business characteristics of the Microfinance
Institution
Commitments (1 to 3 per Principle)
 Translation of the principles into concrete, measurable engagements
 Consensual definition between GCAMF and the partner MFI
Indicators
 Precise indicators to be measured and analyzed on a regular basis
 Indicators from a standardized and widely used datasets (USSPM & Mix
Market, IRIS etc) to allow for benchmarking.
9/25/2014 21

Social Business Charter - Principles
Principle 1:
The Social Business aims at contributing to the overcoming of poverty and
vulnerability through a business based approach.
Principle 2:
The Social Business’ objective is to provide solutions to one or more problems
that threaten people and society.
Principle 3:
The Social Business protects its clients.
9/25/2014 22

Principle 4:
The Social Business aims at being profitable, to ensure its economic and
financial sustainability. Its objective is not profit maximization. The intention
is that profits shall be re-invested by the business in ACAD-Finance in order to
maximize the social impact.
Principle 5:
The Social Business contributes to a better environment.
Principle 6:
The Social Business works for employee empowerment, pays market wages
and offers above standard working conditions.
Principle 7:
The Social Business sets up relevant indicators to monitor these
commitments and the social impact on stakeholders.
9/25/2014 23

Social Business Charter - Commitments
• Principle 1: The
Social Business
aims at
contributing to
the overcoming of
poverty and
vulnerability
through a
business based
approach.
• Commitment 1: ACAD-Finance has a clear focus on
serving vulnerable clients in Palestine.
• Commitment 2: ACAD-Finance allocates a significant part
of its resources to serve rural clients and small-holder
farmers by facilitating their access to finance and –
through ACAD NGO or other partner organizations -
capacity building services.
• Commitment 3: ACAD-Finance is committed to the
promotion of Palestinian women’s empowerment
through special financial services designed to meet their
needs.
9/25/2014 24

• Principle 4: The Social
Business aims at being
profitable, to ensure its
economic and financial
sustainability. Its objective
is not profit maximization.
The intention is that,
provided this is consistent
with ACAD Finance’s
dividend policy, profits
shall be re-invested by the
business in ACAD-Finance
in order to maximize the
social impact.
• Commitment 9: The balance between distribution and
retention of profits is subject to ACAD-Finance’s dividend
policy which is agreed with the Shareholders further to
the mechanism set out in the Shareholders’ Agreement.
Whilst ACAD-Finance will wish to retain profits in the
company in order to ensure its development and
sustainability and to grow the company and thus to foster
its social mission, it is also accepted that Shareholders
have expectations of a return on their capital.
• Commitment 10: It is noted that in order to reflect the
spirit of Principle 4, investors have voluntarily committed
to reinvesting the amount of any distributions that they
receive from ACAD-Finance into social business projects
with the purpose of maximizing social impact.
• Commitment 11: Bonuses and any profit-sharing schemes
for the executive directors and managers of ACAD-Finance
are granted equitably based on financial and social
performances.
9/25/2014 25

CONTACT
 Jurgen HAMMER
CIO and Head of Social Performance Management
jurgen.hammer@credit-agricole-sa.fr
Tel: + 33 1 57 72 02 47
www.grameen-credit-agricole.org
9/25/2014 26

App1. Case Study Palestine - ACAD
Principle 1: The Social Business aims at contributing to the overcoming of poverty
and vulnerability through a business based approach.
 ACAD-Finance Company is a regulated social finance company based in Palestine that provides
sustainable and efficient financial services to women and poor families, mainly in rural areas, to
contribute to poverty alleviation and economic development in Palestine.
Principle 2: The Social Business’ objective is to provide solutions to one or more
problems that threaten people and society.
 ACAD-Finance provides support to agriculture development. By supporting the increase of better
quality agricultural production and market outlet (through business development support from
ACAD) it contributes to improved food security for Palestinian communities.
Principle 3: The Social Business protects its clients.
 ACAD-Finance adheres to the sector’s standards on client protection: it endorses the SMART
Campaign’s Client Protection Principles (“CPPs”) and puts in place key procedures to ensure its
compliance with them. CPPs will be an integral part of a set of social performance indicators that
ACAD-Finance designs and defines, together with its shareholders, to monitor its action.
9/25/2014 28

Principle 4: The Social Business aims at being profitable, to ensure its
economic and financial sustainability. Its objective is not profit
maximization. The intention is that profits shall be re-invested by the
business in ACAD-Finance in order to maximize the social impact.
 ACAD-Finance’s financial and economic sustainability are key drivers, allowing ACAD-Finance
to implement and maintain its social mission over time, therefore having a sustainable
impact on the areas where it operates.
Driven by a business-based approach and operating in a competitive framework, ACAD-Finance
ensures its viability and development through relentless review and
improvements of its products and services. ACAD-Finance’ strategy to achieve these social
and financial returns is aligned with its social mission.
Principle 5: The Social Business contributes to a better environment.
 ACAD-Finance is committed to contributing in efforts that help ensure a healthy
environment for current and future generations.
9/25/2014 29

Principle 6: The Social Business works for employee empowerment, pays
market wages and offers above standard working conditions.
 ACAD-Finance’s human resources policy reflects fair and non-discriminatory treatment of
employees, with a particular focus on training, personnel and career development.
Principle 7: The Social Business sets up relevant indicators to monitor these
commitments and the social impact on stakeholders.
 ACAD-Finance contributes to the development of tools and indicators used for monitoring the
achievement of its social commitments.
9/25/2014 30

Social Business
aims at contributing
to the overcoming of
poverty and
vulnerability through
a business based
approach.
Social Business’
objective is to
provide solutions to
one or more
problems that
threaten people and
society.
• Commitment 1: ACAD-Finance has a clear focus on serving vulnerable clients
in Palestine.
• Commitment 2: ACAD-Finance allocates a significant part of its resources to
serve rural clients and small-holder farmers by facilitating their access to finance
and – through ACAD NGO or other partner organizations - capacity building
services.
• Commitment 3: ACAD-Finance is committed to the promotion of Palestinian
women’s empowerment through special financial services designed to meet their
needs.
• Commitment 4: In order to encourage the establishment of credit and savings
schemes ACAD-Finance provides loans to agriculture cooperatives and farmers,
and contributes to strengthening the value chain of agricultural products.
• Commitment 5: ACAD-Finance’s funding support to cooperatives is closely
linked to the technical assistance and training provided by ACAD NGO to
cooperatives and their members.
• Commitment 6: Subject to availability in the market, ACAD-Finance, as a
microfinance institution, will actively commit to promote, micro insurance
services adapted to the agricultural sector in Palestine and to engage with public
and private stakeholders in order to improve their awareness of this product.
9/25/2014 31

Business aims at being
profitable, to ensure its
economic and financial
sustainability. Its
objective is not profit
maximization. The
intention is that,
provided this is
consistent with ACAD
Finance’s dividend
policy, profits shall be
re-invested by the
business in ACAD-Finance
in order to
maximize the social
impact.
• Commitment 9: The balance between distribution and retention
of profits is subject to ACAD-Finance’s dividend policy which is
agreed with the Shareholders further to the mechanism set out in
the Shareholders’ Agreement. Whilst ACAD-Finance will wish to
retain profits in the company in order to ensure its development
and sustainability and to grow the company and thus to foster its
social mission, it is also accepted that Shareholders have
expectations of a return on their capital.
• Commitment 10: It is noted that in order to reflect the spirit of
Principle 4, investors have voluntarily committed to reinvesting
the amount of any distributions that they receive from ACAD-Finance
into social business projects with the purpose of
maximizing social impact.
• Commitment 11: Bonuses and any profit-sharing schemes for
the executive directors and managers of ACAD-Finance are
granted equitably based on financial and social performances.
9/25/2014 32

Business sets up
relevant indicators to
monitor these
commitments and the
social impact on
stakeholders.
• Commitment 16: The Board of Directors of ACAD-Finance
determines relevant indicators for each of the above
commitments. To do so, ACAD-Finance, operating as a
microfinance institution, may be supported by external
specialists and development actors in the field of
microfinance.
• Commitment 17: ACAD-Finance’s social impact will be
assessed, at the latest, three years after the agreement on
this Charter. This assessment shall be undertaken on a
transparent and independent basis by a dedicated research
professional or organization. Among the tools used by ACAD-Finance
to monitor its social commitments, it may use a
poverty measurement score card, such as the Progress out of
Poverty Index (PPI) tool, in order to measure the poverty level
of its clients.
• Commitment 18: ACAD-Finance commits to report relevant
social performance indicators to the MIX market on an annual
basis.
9/25/2014 33

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