Introduction to Financing

MICROFINANCE 101: WEEK ONE

Robert Gailey, Point Loma Nazarene University

WELCOME!

2

Brief Outline for Tonight

Introduction of Mr. Ali – learning about his business

Introduction of participants

Exploring how household financing works – group activity

What are some different approaches to financing and how

does microfinance fit in?

Inspiration from Grameen Bank and Dr. Yunus

Outline of remaining weeks of class

Question Time

3

Introductions

State your name

Your institutional affiliation if you have

one

Your first exposure to microfinance

What you hope to get out of the course

4

Opening Questions

1. Why do people need

financing?

2. What things/events do people

finance?

3. What mechanisms exist for

people to access financing?

5

Rutherford (2000 + Summer 2009)The Poor and Their Money

6

Old Chinese Proverb: A Fishing Analogy

Give a man a fish(Traditional relief)

or

Teach a man to fish?(more progressive development)

but

He still needs the TOOLS to fish and ACCESS to the water

Difference between MED and MFWhat is the economic objective of an

MED/MF Intervention?To build a business/enterprise: For start-up,

expansion, or transformation.To provide lump sums of money: For people to

use for a variety of needs/wantsWhich tools are available to meet the

economic objective of the MED/MF interventionFinancial Tools: Involve some form of cash

transactionNon-financial Tools: Do not primarily involve a

cash transaction 7

8

MF and MED Tool Matrix

Economic Objective Non-Financial Tools Financial Tools

Helping a Business/Enterprise start, expand, or be transformed (from micro to small-scale or small-scale to medium-scale).

Helping an individual or family meet their needs/wants for Lump Sums of Money for use in emergencies, life-cycle needs, opportunities, and cultural obligations.

Emergency, cultural, and life-cycle ROSCAs and ASCAs, Post Office Savings accounts, Deposit Collectors, Money Lenders

Health education, literacy education, and other non-financial forms of information dissemination.

Microfinance Institutions (MFIs), Business ROSCAs and ASCAs, Business Insurance, Pre-Entrepreneurial Business Grants (such as Trickle Up Program), moneylenders.

Business Development Services (BDS), Livelihood and Vocational Training, Networking/Mentoring.

Typology of Financial Services

Group Lending

Village Banking(e.g FINCA)

ASCAsROSCAs

Loan fund provided from outside source

Loan fund generated within group

Grameen Model

Non-time-bound ASCA

Time-bound ASCA

Latin America Model

Solidarity Group Lending

Individual Lending

Financial ServicesMethodologies

Grouping

Source of funding

Size of groups

Accumulation

Time

Ownership

Major Distinction

9

Primary Goals of Microfinance Institutions (MFI)

Breadth of Outreach (how many people served)

Depth of Outreach (how poor are people served)

Length of Outreach (serving people for many years)

Positive Impact (long-lasting and substantive)

10

11

Vision of many MFIs

Providing many poor families with access to affordable financial services.

Creating indigenous sustainable institutions that can meet the long-term financial needs of their communities.

Improving social conditions—better health, sanitation, nutrition, education.

12

Outline for Rest of Course

Week 2: Focus will be on Microfinance Institutions, interest rates, key debates,

Week 3: Focus on local microfinance institutions – International Rescue Committee, Accion, CDC Finance – introduction and information

Week 4: Hearing from the clients, clubs, and investors – meet staff and clients from La Maestra, college clubs, and San Diego Microfinance Alliance, and local individuals who are invested in microfinance

13

Concluding Remarks

Questions/Remarks

Please turn in your tags

Come hungry next week – Client of Accion

– Happy Joe Luck Kape