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Creating a Successful MFI in a Small Remote Low Income Nation
South Pacific Business Development Foundation (SPBD)
Samoa
Greg Casagrande
What is SPBD?
SPBD is a Samoan based NGO dedicated to eliminating poverty in the South Pacific.
SPBD provides micro credit to the poor for the purpose of starting a small business.
SPBD follows the Grameen Bank methodology to micro finance.
SPBD currently serves the island nation of Samoa. www.spbd.ws
The South Pacific
Total Population – about 7 million. Most people in the South Pacific live in
rural villages on small islands. Most live on a GDP of less than US$2,000 per year.
Major Countries– Papa New Guinea, Fiji, Samoa, Solomon
Islands, Tonga, Vanuatu, Micronesia, Marshall Islands, Kiribati
The South Pacific
Samoa
Samoa
Samoa has been an independent nation since 1962 and is governed by an elected parliament.
Samoa consists of two main islands, Upolu and Savaii, and covers 1,100 square miles.
Samoa has a population of 204,000 people. Samoa is very rural. Apia, the capital, is the only
town of any significance in Samoa. Samoa is considered the cultural heart of
Polynesia.
Samoan Economy
Economy– 75% of Samoans are involved in subsistence agriculture.– There are few major employers providing traditional waged
employment.– The economy is very dependant upon foreign aid. – There is mass migration of the brightest to New Zealand,
Australia and the USA to pursue better opportunities. – GDP - US$930 per year - similar to Pakistan.– Poverty – In 1999, the UNDP estimated that 48% of all
Samoans live beneath the poverty line.– WHO rates Samoa’s Health system as one of world’s worst –
similar to Yemen.
Typical Lives in Samoa and the South Pacific
Poverty of Opportunity– No jobs (75% of families not in waged sector)– No Credit available for the poor
Typical living condition– Grass roof– Pebble floor– Poor sanitation– Poor access to running piped water and electricity
Childhood education is not free Unsophisticated, little experience with banks
Samoan living conditions
Samoan Living Conditions
Samoan Living Conditions
History of Microfinance in the Pacific
The Pacific is littered with failures Samoa has had several failures
– UNDP, SPC, MoWA– Church run– Government run– Volunteer run
Continuing Failures– Fiji – Samoa – WIB
Bee keeping Handouts Forced solutions
Competition
SPBD has no direct competition in Samoa. The three commercial banks and the Development
Bank each require collateral or steady income for loans. They do not serve the poor.
SPBD Advantage: – SPBD is the only financial institution in Samoa able to
DELIVER credit throughout Samoa.– SPBD is the only financial institution in Samoa able to
provide on a large scale completely unsecured credit to the poor.
SPBD - Business Practices Target poor women. Provide unsecured credit for :
– micro entrepreneurial purposes, – home improvements and – childhood education.
Businesses are based on existing livelihood skills. Encourage and train self-formed groups of five. Organize groups into village based centers. Members guarantee one another within a group. Deliver credit directly to the villages. Charge market rates of interest. Collect small repayments at weekly center meetings in the villages. Strive to achieve financial self-sufficiency via strong financial
planning and effective use of technology.
SPBD Business Practices
Very structured program with clear rules Helps counter:
1. A very laid back culture2. Low levels of education3. No experience with financial institutions
Train staff and motivate them– Huge task because skill levels are low
Have strong local government support
SPBD in ActionPreliminary Meeting
SPBD in ActionPayment at Center Meeting
SPBD has a Business / Banking Mentality
Privately and commercially funded Started and maintained on commercial
enterprise principals Trustee, management and staff have
business and banking backgrounds. Funders – we speak your language
Cost Structure
Very low Lean organization CM’s to reach 500-800 clients each Yet very competitive and comprehensive
compensation and benefits structure
SPBD Methodology & Innovation
Created a Culture of Continuous Improvement
Client Identification– Formal invitation into the villages from local
matai (chiefs)– Poverty assessment tool
Identify the poor Measure impact
SPBD Methodology & Innovation
Product/Service Design– Variable loan sizes– Variable repayments– Flexible loans– Housing improvement loans– Childhood education loans
SPBD Methodology & Innovation
Delivery Methodology– CM’s support >400 clients each– In-house training program– In house loan utilization forms– Individualized weekly center reports– Center secretaries have professional
bookkeeping– Ongoing business education
SPBD Methodology & Innovation
In the pipeline– Process
Move from weekly to fortnightly meetings Group sizes to become flexible 4-7 members
– New Services Health Education series Improved Business Training Modules Savings Insurance Money Transfer
SPBD - The Leadership Team
The Trustees– Greg Casagrande – Founder and Managing Director
Education: – BA (Economics) - Colgate University – MS (Accounting) - Stern Graduate School of Business, New York University– MBA (Finance and Marketing) - JL Kellogg Graduate School of Management, Northwestern
University
Work Experience– CPA with Coopers and Lybrand in New York.– Several financial and general management positions with Ford Motor Company in Detroit,
Chicago and Japan. – Founder and Managing Director of SPBD.
– Jerry Casagrande – Trustee Education
– BA (Political Science) – Dartmouth College – MBA, MA (Latin American Development) - Stanford University
Work Experience– UNHCR, World Bank, Ashoka – Various management positions– 3D Life Adventures – Founder and Executive Director
SPBD – The Leadership Team (cont’d)
Jim Young – Trustee– Education
BA (Economics) – Princeton University
– Work Experience Goldman Sachs – Vice President – Institutional Equity Sales
Minh-Huy Lai – General Manager– Educated with MBA from Thunderbird School.
– 7 years of investment banking experience with JPMorgan in NY, Hong Kong and Singapore.
– MF experience in Kosovo.
– Lived in worked in many developing nations.
SPBD – The Local Team
All of our professional staff have strong prior work experiences (several with local commercial banks).
All are proficient in both Samoan and English. All staff are proficient on the PC and have been
trained in micro finance best practices. All staff are eligible for performance bonuses
based on individual and team performance.
SPBD - Achievements to Date
Building an Organization – We have a team of 10 full-time, well trained and dedicated
professionals. Infrastructure and Processes in Place.
– Our loan officers have vehicles to access rural villages. – We have a strong set of documented operating and administrative
processes and procedures. Villages Served
– We serve over 60 villages throughout Upolu, Samoa. The Poor Trained and Funded
– We have trained and funded over 2,100 businesses.– Distributed over US$800,000 of unsecured credit.
Achievements
SPBD has demonstrated that:– Poor Samoans are creditworthy– They are receptive to financial products– Capable of starting and sustaining small
businesses Leading academic opinion in the region
said contrary.
Measurements of Success.
Successful businesses for all of our micro entrepreneurs.– Food preparation – Clothing production – Copra (coconut oil) production– Vegetable farms, Plantations– Chicken and pig farms– General Stores, Roadside stands, market place trading– Weaving– Traditional arts and crafts– Tourist operators
Successful SPBD Micro-Businesswoman Bakery Business
SPBD Successful Micro-Businesswoman
Village Store
Measurements of Success
Quality of life indicators– High quality roof on the home– Proper flooring – Electricity in the home– Easy access to clean water– Easy access to good sanitation– Children in school
SPBD Ensures quality of life improvements by also providing: – Housing improvement loans– Childhood Education loans
SPBD has staying power
Where other regional MFI’s have failed, SPBD has persevered, learned, improved and grown.
We’re still here after 3 years We have handled internal corruption and theft.
– Cleaned out and strengthened controls and processes We have continually refined our process to reflect
the local realities. Aggressively pursuing Institutional Financial
Sustainability
SPBD Complaints
The South Pacific is not on the world’s radar screen– Too small– Too remote– Obscure cultures– Difficult to administer
The voice of the poor is not heard – Region is misunderstood
No Funds for MFI in regions– UNDP, USAID, IFC, SPPF, Major MFI corporate and
other donors are not interested in MF in the region.
Current State of Development in the South Pacific
Most development agencies have abandoned the region. (e.g. USAID has left the region due to difficulties in serving a remote population).
The need for economic development remains. Most of the population lives in rural poverty.
South Pacific nations are small and remote. None are currently served by a world class micro finance organization.
SPBD is now the largest micro finance organization in the region, despite the fact that it only serves Samoa.
Opportunities
There is now an excellent opportunity to create a:– well-managed, – large – efficient,– region-wide micro finance organization in the South
Pacific A region-wide, micro finance organization could
leverage a larger base of talent and financial resources and could thus help more people than could several struggling small organizations.
Major Constraints
Ongoing violence and instability in Papua New Guinea and the Solomon Islands is a major constraint in those nations. SPBD will initiate efforts first in stable nations.
Due to the small populations on each island, a successful organization must be exceptionally well managed and efficiently run. This is a key item for SPBD.
Funding is also a major constraint since most international funding organizations do not operate in the region.
Plans for the Future
Growth in Samoa– Expand to the island of Savaii
Growth in the region– Tonga – Vanuatu – Micronesia
Outreach– Could grow to 50,000+ long term
Capital is the key constraint
Concerns of Funders
SPBD is too small – We can breakeven with less than 5000 active clients
and an average loan size <US$300 Area is too small
– Samoa is small but the region is big– Many LDC’s in the region, totally neglected by world
class MFI’s– We have developed a replicable model that can be
replicated throughout the region and reach out to over 50,000 people
Wants
Look for opportunity to affiliate with large networks– Financial assistance– Share procedures/ processes– Share technology– Staff development
Looking for Capital Looking for Technical partners
Thank you
South Pacific Business Development Foundation– PO Box 1614 – Saleufi, Apia, Samoa– Phone: 011-(685)-20189– Email: [email protected]– Web: www.spbd.ws