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Community-managed micro-finance

Community-managed micro-finance. Rationale and performance. Most Vulnerable. DTL. Income. Target Group Analysis - Most Vulnerable. Most Vulnerable: Provisioning Response. DTL. Provisioning. Appropriate Response - Most Vulnerable. Vulnerable: Savings Response. Low Risk Strategy.

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Community-managed micro-finance

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  1. Community-managed micro-finance Rationale and performance

  2. Most Vulnerable DTL Income Target Group Analysis - Most Vulnerable

  3. Most Vulnerable: Provisioning Response DTL Provisioning Appropriate Response - Most Vulnerable

  4. Vulnerable: Savings Response. Low Risk Strategy Savings Consumption Target Group Analysis - Vulnerable DTL

  5. Less/Least Vulnerable (typical MFI client) DTL Target Group Analysis - Least Vulnerable

  6. Savings Least vulnerable. Multiple sources of income. Fewer, larger transactions Most vulnerable. Unreliable and intermittent sources of income. Many small transactions Low-risk product preference Managed risk product preference Insurance Credit Products - Purpose and user preference Emergencies/basic needs Asset protection Predictable costs (education/rent etc) Planned investment (business/agriculture) Emergencies (catastrophes, death, ill-health) Asset protection Emergencies/basic needs Predictable costs Debt repayment Planned investment

  7. Preference - Where Ugandans save money

  8. Why Ugandans save

  9. Preference - Where Ugandans borrow money

  10. Why Ugandans borrow

  11. What is a community-managed micro-finance institution? • A CMMFI is self-managed and independent • A CMMFI is a small-scale community-based institution that mobilises and manages its own savings, providing interest-bearing loans to members and offering a limited form of financial insurance • Unlike ROSCAs, members can save in variable amounts and borrow, when needed, for varying periods of time • A CMMFI is usually time-bound – it shares out member equity once a year in proportion to savings

  12. Here’s one….

  13. And here’s another….

  14. What does a CMMFI allow you to do? • Save all the time (in varying amounts) • Borrow when you need it (in amounts that are useful and for varying periods of time) • Pay when you can (within a given period)

  15. Background – Where do CMMFIs work best? • CMMFIs work everywhere, but they work, at a modest scale, in remote rural areas and amongst the very poor, where MFIs find it hard to operate profitably, or at all. • CMMFIs work where credit demand is weak and debt-service capacity extremely limited and there are no institutional savings options.

  16. Here…. ….And here…

  17. Background – What do CMMFIs do? • CMMFIs create local pools of capital, providing access to useful lump sums: • to meet predictable expenses • to facilitate household cash-flow management • to make short-term investments in IGAs • To mitigate shocks to livelihoods

  18. Background – What don’t CMMFIs do? • CMMFIs do not provide large amounts of investment capital for permanently established enterprises that seek substantial growth and need long-term loans.

  19. CMMFIs worldwide – CARE, Oxfam, CRS, World Vision 01/08 India 1,250,000 ± Niger 196,000 ± Uganda 125,000 Mali 110,000 Ethiopia 100,000 Zimbabwe 90,000 Tanzania 93,000 Mozambique 30,000 Cambodia 29,000 Kenya 25,000 Rwanda 25,000 Bangladesh 22,000 Ecuador 20,000 Malawi 17,000 Afghanistan 10,000 SA/Lesotho 10,000 Swaziland 10,000 Sierra Leone 6,000 Angola 6,000 Eritrea 6,000 Senegal 3,500 Zambia 1,000 Total : participants worldwide 2,184,500

  20. Long-term performance and survival – Zanzibar, Mali & Niger • Zanzibar (CARE) • 254% growth in 4 years (44 >157 groups) 37% compounded annual increase. • 12% total dropout over 4 years • 53% return on average savings of $89 ($135) • Average ending Association net worth $4,000 • Mali (Oxfam) • Self-financing, managed replication. 33% compounded annual increase • Niger (CARE) • Average 8-year survival rate 96% • Average 15-year survival rate 94%+

  21. Why We Do it - Livelihood Impact • Large increase in assets, mainly controlled by women • Improved nutrition, access to medical services and education • Increased stability of household enterprises • Increase in number of IGAs • Improved social status/social capital • Improved intra-family relationships

  22. Costs • Cost per CMMF client • €15-50 in Africa, • €5-25 in Asia • Cost per MFI client • €100-400 in Africa • €80-200 in Asia

  23. CMMF Issues –Challenges and opportunities • External pressure to capitalise and link to banks/MFIs • External pressure to federate • ‘Polyvalent’ training approach • Tendency to be used as a ‘beast of burden’

  24. Upside of CMMFIs • Safe • Flexible • Simple and transparent • Accessible • Frequent opportunities to save • Save in variable amounts • Regular opportunities to borrow • Repay in variable amounts • Incremental debt, proportionate to capacity • Savings (asset) based, not credit (debt)

  25. Downside of CMMFIs • Limited pool of capital • Limited range of savings, insurance and lending products • Requires annual distribution to maintain transparency and safety (causes disruptions in loan access and size)

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