HEED ANNUAL REPORT 2014

It is with great pleasure that I present the 1st annual report of HEED (Holistic Empowerment through Enterprise Development), the micro enterprise development program of YGRO. YGRO is a private Sri Lanka-based charity organization established with the mission of addressing the economic, social and developmental needs of the poor.

HEED was formed to empower the rural poor in Sri Lanka through “micro-lending” and technical assistance. Micro loans are targeted to very poor but motivated entrepreneurs who lack access to capital and technical resources. As Sri Lanka seeks to recover from a devastating 30-year civil war, HEED’s work is critical in restoring broken families and communities.

Since its inception in 2002, HEED has issued more than 8,000 loans in 4 districts across Sri Lanka. As an organization committed to economic sustainability, our staff work directly with prospective business owners for three to five years, providing training and resources needed to develop self-sustaining businesses.

We are blessed with a committed staff who are passionate about the welfare of those we work with. Despite difficult circumstances, HEED staff regularly go the extra mile to serve the poor. HEED also benefits from the guidance and support of the board and our funding partners. Their contributions, advice and understanding of the challenges we face have been a source of encouragement in difficult times.

As Sri Lanka emerges from war we see ample need for micro enterprise development, especially in newly resettled communities. Many Sri Lankan women, made widows by the war, are now forced to fend for themselves and their children economically. Seed money and business support is desperately needed to support these women – and many rural men as well – in their efforts to find a sustainable source of income. YGRO and HEED are committed to meeting this need for the long-term.

Much has been acheived through HEED by the grace of God and His enabling power – and there is much left to do. We pray that you would come alongside us as we continue in His service, working together in His never failing presence.

MESSAGE FROM THE DIRECTOR

Sathy Kulasingham

VisionThe rural poor in Sri Lanka are economically self-sustaining and equipped to be a transformative presence in their communities.

MissionTo support the development of sustainable small businesses in rural Sri Lanka.

YGRO and HEED work from a Christian basis and seeks to demonstrate the love of Christ through all of their activities. Therefore, we serve indiscriminately to alleviate poverty and do not distinguish by race, religion, creed or any other divide.

23% OFSRI LANKA’SPEOPLE LIVEON LESS THAN $2 A DAY.

Sri Lanka SnapshotSri Lanka is a tropical island country in the northern Indian Ocean off the coast of India. The country’s recent history has been marred by a thirty-year civil war, which ended in 2009.

Although Sri Lanka experienced significant economic growth between 2002 and 2009, poverty is still very widespread. In 2010, 23% of the population lived on less than $2 a day. Poverty is particullarly pervasive in the districts of Batticaloa (in the Eastern Province), Jaffna (in the Northern Province), Moneragala (in the Uva Province) and elsewhere. Many Sri Lankans who are no longer classified as poor still live within 20% of the poverty line, and are highly vulnerable to economic fluctuations.

Sri Lanka faces a number of issues as the country seeks to transition into an upper-middle income country, including inequitable economic growth, outdated public policy and public spending practices, and insufficient incentives for private sector development.

PER CAPITA GDP

$7,046GDP GROWTH (2011)

8.3%

• Sri Lankan culture dates back about 2,500 years

• At 25,000 sq miles, Sri Lanka is about the size of the U.S. state of West Virginia

• Sri Lanka’s civil war killed between 60,000 and 100,000 people.

• The 2004 Asian tsunami killed over 35,000 people in Sri Lanka.

• Sri Lanka has the highest biodiversity density in Asia and is home to 24 wildlife reserves

• Sri Lanka is the world’s 2nd largest exporter of tea

• Sri Lanka is the oldest democracy in South Asia

QUICK FACTS

RELIGION

SRI LANKA

HEED in BriefHISTORY

STAFF

HEED Staff, pictured below, continued to grow both professionally and quantitatively in 2013. As HEED’s service area expanded, two field staff were hired for the Batticaloa and Madampe offices. HEED continues to invest in regular training and education, both through all-staff training and through supporting more formalized education opportunities for individual staff members. The Jaffna Field Coordinator is pursuing a diploma program at the Jaffna University in micro finance, which is fully sponsored by the HEED program.

78% OF HEED CLIENTSARE WOMEN.

4. Batticaloa Staff: 5Clients: 1,061 Clients in the Batticaloa district are primarily farmers.

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Geographic Coverage

1. JaffnaStaff: 4Clients: 2,671 Jaffna was brutally affected by Sri Lanka’s 30-year old conflict. Clients are motivated and eager to rebuild their lives.

2. MannarStaff: 2Clients: 1,601 As in the case of Jafffna and Batticaloa, Manner was deeply affected by the civil war. Fishing is the main trade of this area.

3. Madampe (Kurunagala district)Staff: 3Clients: 1,978The main sources of income in the Madampe area are trade and small industries.

LoansLOAN PORTFOLIO BY USELOAN PRODUCTS

LOAN APPROVAL PROCESS

Conduct field visits.

• Verify the residential address of the client.• Investigate any outstanding loans the client may have and

any default record.• Assess client’s integrity and business acumen.• Verify the purpose of the loan application.• Verify the investment of personal finances in the business.• Assess the potential for business growth.• Meet other team members of the business venture, if any.

Meet the potential client and obtain endorsements from the District Secretary and Grama Nilathari (two local authorities who verify the residency of the client).

Receive completed application forms and business plan from the prospective client.

Field Officer recommends for approval / rejection of the loan.

Field coordinator cross checks and recommends for approval to center coordinator.

Approval granted by center coordinator.

HEED loans can be taken by an individual, or by a group of 6 to 8 members. Individual clients make monthly payments, whereas group clients make bi-monthly debt payments. As with more conventional lending, HEED follows a careful due-diligence process to ensure wise investment of resources.

2013 at a Glance

BRANCHES

LOAN OFFICERS

CLIENTS

REPAYMENT RATE

OPERATIONAL SUSTAINABILITY

AVERAGELOAN SIZE

TOTAL LOANSDISBURSED

CLIENT GROWTHIN 2012

OF CLIENTS IN2013 WERE NEW 7

VILLAGES ADDED TO GEOGRAPHIC COVERAGE

ADDITIONAL FIELD STAFF HIRED FOR BATTICALOA &MADAMPE OFFICES

FINANCIAL INDICATORS

CLIENT GROWTH

HEED STAFF & COVERAGE

2009$116,179

2013$205,090

2009845

20131,324

ACTIVE CLIENTS NET PORTFOLIO(Outstanding, USD)

Pushpalogini AmirtharubanLoan LKR 30,000 (USD $231)

Pushpalogini’s story is one of triumph over many struggles. She was born in the late 70s in a village in northern Sri Lanka, to a family of six. Her father, the sole bread-winner of the family, worked as a mason. Because of the family’s financial struggles, Pushpalogini was forced to drop out of school at the age 16. Her family was constantly on the move during Sri Lanka’s civil war, particularly in the 1990s and early 2000s when her area was subject to heavy fighting.

In the midst of Sri Lanka’s conflict, Pushpalogini married and had three daughters. Early in her marriage, Pushpalogini’s husband began to suffer from mental illness and was only able to find work as a low-wage laborer. Their difficult financial situation prompted Pushpalojini to start a small business selling consumable goods out of her sister’s house. Her initial daily income of about 40 to 80 cents gradually grew to around $4.

In 2013, with the support of YGRO and a partner organization called ZOA, Pushpalogini was able to attend a business development training program. With a HEED loan, she built a small shop made of zinc sheets along her village’s main road. When her shop relocated to higher-visibility road, Pushpalogini’s business began to thrive. Her income grew five-fold to about $20 a day, enabling her to support the education of her children. Today Pushpalogini says she hopes to add more items to her shop and expand her business, which she knows will be instrumental in continuing to support her family, providing a better education to her children, and supporting others with similar struggles.

STORIES OF HOPE

George StanislasRunner-up, Lydia Award (2012)Four Loans / Average LKR 200,000 (USD $1,538)

At the time George began his poultry business, his full-time job was clearing mines in post-conflict areas of Sri Lanka. A former fisherman, George started the business in 2005 with the help of a relative. The two initially invested $385 to raise 50 birds. Three years later, George gave up his full-time job to concentrate on the poultry business. During this time he enrolled in the HEED program, and successfully applied for his first loan of $154. George later used four more HEED loans to purchase a piece of land, pen, chicks and a refrigerator. With the help of these loans, George and his family have been able to grow the business, expanding from a client base of 50 to 100, and improving his production volume from 50 birds to 400. The business also generates revenue by selling bird droppings as fertilizer, and today employs five people.

In recognition of his achievements, George was selected by an agriculture company in his area to participate in a training program in Matara (an area in South of Sri Lanka) to teach others how to effectively raise poultry. A persevering person by nature, George triumphed over considerable challenges. His “never-give-up” attitude kept him going after suffering immense damages and loss of property in the cyclone that hit his home town in 2008. He is also a firm believer in passing on his experience and knowledge to others. To date, George has trained at least 15 people from his village in starting small-scale businesses. He is also an active member of his church community and is the secretary of the church committee.

The “Lydia Awards”Named after a Biblical woman described in the book of Acts as a successful businesswoman and wise financial steward, the Lydia Award is given annually to exemplery micro-financed businesses within PEER Servant’s network. Awards are based on a number of criteria, including growth in capital and employees, innovation, and level of impact on the community. Micro-finance organizations from around the world send two Lydia nominees annually to PEER Servants, who choose a winner through their selection committee. In 2010, a HEED client from the Jaffna district won the Lydia Award, and in 2012 George Stanislas was a runner-up.

STORIES OF HOPE

Fernandopulle Chandima GeethaniFour Loans /Average LKR 18,750 (USD $144)

Chandima, from southern Sri-Lanka, is a wife and mother of an 11-year old daughter. Due to the instability of her husband’s job, Chandima started a small-scale sewing business in 2009 to help support the family.

Chandima obtained a HEED loan to purchase a sewing machine, and soon attracted a significant number of clients. Her hard work earned her a spot in a training program organized in collaboration with YGRO, where she learned to make cloth dolls. The dolls turned out to be her breakthrough product, and are today sold at various village festivals and shops in the Kurunegala district. In addition to her sewing business, Chandima conducts training sessions on sewing cloth dolls for other young aspiring woman entrepreneurs. She is currently in her fourth round of financing through HEED, seeking $577 to purchase a small three wheeled vehicle in order to expand her sales coverage. She says her dream is to have her own sales outlet and to provide job opportunities to women in the region.

STORIES OF HOPE

K.L. Sisira KumaraFive Loans / Average LKR 20,000 (USD $154) A father of two, Kumara is skilled at electrical and mechanical work and owns a workshop in his village of Megapalassa. The first round of financing from HEED was used to purchase electrical spare parts and accessories for his workshop. Kumara used additional rounds of HEED financing to take advantage of an abundant local resource: coconut trees. Kumara invested in a production facility to create ropes from coir, the fibers on the outer husk of the coconut.

Kumara’s coir business today employs five people and provides coir products to three companies, which in turn export his product to Korea. He plans to double his production capacity by expanding the machine count from 7 to 15 by end of 2014.

STORIES OF HOPE

Suvaganesh SumathyLoan LKR 30,000 (USD $231)

Sumathy’s story, like many in Sri Lanka, is one of both tragedy and inspiration. Born in 1978 in a village in north Sri Lanka, Sumathy dropped out of school at age 16 because of financial hardships. She married at the age of 19 in the midst of Sri Lanka’s civil war. Just three days after her wedding ceremony, Sumathy’s husband, Sivaganesh, was abducted by militants. A few months later Sumathy found out she was pregnant and gave birth to a girl. Sumathy was forced to care for her infant daughter alone until finally, after two years, the militants released her husband.

Over the next eight years, waves of tragedy struck Sumathy. She lost her sister in a natural disaster, lost her father when he was struck by lightning, and her husband Sivaganesh died in an accident. She was left alone and destitute, with two children to take care of, one of whom suffers from a disability. Her only income was from the sale of string hoppers and milk from a cow.

Sumathy first encountered HEED in 2013, when she obtained a $231 loan to purchase additional cows. Today she owns 6 cows and is able to sell more milk than ever before. Her dream, she says, is to be self-sufficient and to support her family without depending on others. She also wants to expand her business by purchasing more animals – particularly goats – to increase milk sales.

STORIES OF HOPE

Peer Servants, United States based group of volunteers who partner with indigenous, autonomous microfinance institutions in Africa, Asia, Eastern Europe, Latin America, and the Caribbean.

Rice MinistrySingapore based ministry involved in developmental work with a concern for the poor in Asia.

ZOANetherlands-based NGO with operations also in Sri Lanka.

Hope OutreachUK based charity.

Individual supportersThere are many individuals who partner with us for the development of the poor. They play a significant part in serving the poor.

PARTNER INSTITUTIONS

ORGANIZATIONAL STRUCTURE

The YGRO Board oversees and directs all matters pertaining to HEED through a sub-committee called the Finance and Administrative Committee (FACOM). Formed in 2010, FACOM implements its decisions through the HEED Board Committee, which consists of two executives and three non-executive members.

The primary responsibility of the HEED board is (1) to ensure the vision and mission of HEED is achieved; (2) provide the policies and framework to guide operations; and (3) review the work of the Operations Director. The HEED Board meets four times a year to decide on the broader goals for HEED and to monitor its progress.

The decisions of the HEED Board Committee are implemented by the Operations Director, who is responsible for the day-to-day operations of all the HEED centers in the country. There are four regional heads reporting to the Operations Director, with daily, weekly, and monthly status updates being provided from each geographical location. The Operations Director is assisted by the Central Service Unit (CSU) Program Coordinator in Colombo who coordinates with all the centers in the districts. The Program coordinator monitors the programs and prepares the monthly management reports for the HEED program.

HEED GOVERNANCE

FACOM BOARD

Chandran Williams, FCCAYGRO Director, FACOM Secretary

Sathy Kulasingham, ACMAHEED Operations Director

Innappan Michael Naveendran, ACAHEED Board Committee Member

Ruwanthi Elwalagedara, BA EconHEED Board Committee Member

Niyanthini Kadirgamar, BAHEED Board Committee Member

Lokendra AbhayaratneChairman, Console Electronics Past Chairman of World Vision Lanka

Tony SeneviratneChairman, National Peace CouncilFormer National Director, Habitat for Humanity Sri Lanka

Anbahan Ariyadurai, Ph.DDean of EngineeringOpen University of Sri Lanka

ASSETS $ (USD)Non-Current Assets Fixed Assets Net of Depreciation 8,549

Current Assets Cash at Bank and In hand - Loan Capital 83,202 Cash at Bank and In hand - Other 11,776 Net Loan Portfolio – Client / Debtors Total Loan Portfolio – Client / Debtors 218,834 Less Loan Loss Reserve 13,216

TOTAL ASSETS 309,145

EQUITY AND LIABILITIES Donated Equity 290,695 Excess of Donation / Income over Expenses 18,450 Liabilities 0

SUPPORT & REVENUE

DONATIONS 23,254

OPERATING INCOME Interest Income on Loans 40,055 Income – Client Services 1,065Total Operating Income 64,374 LESS OPERATING EXPENSES Salaries and Benefits 24,270 Administrative Expenses 2,578 Occupancy Expenses 4,300 Travel 2,929 Communications 608 Bank Fees 15 Depreciation 1,563 Maintenance and Repairs 3,391 Audit and Legal Fees 206 Client Training Expenses 347 Other Operating Expenses 852 Loan Loss Provision 4,865Total Operating Expenses 45,924

NET OPERATING INCOME 18,450

Balance SheetDECEMBER 31, 2013

HEED 2014 ANNUAL REPORTCONTACT INFORMATIONADDRESS, CITY, COUNTRY