Capacity building

The ART of "upscaling"

Tissa Jayawardena, a programme officer with ECLOF Sri Lanka, has taken part in a three-week workshop on “The ART (Advanced Reflective Training) of upscaling microfinance”. New Horizons asked Tissa to tell us about the experience and what he had learnt.

The workshop began in Madurai, India, and then moved to Dhaka in Bangladesh in order for participants to consider microcredit in different contexts. The Development of Humane Action Foundation (DHAN), a professional Indian development agency, organized the ART course, during which we looked at:

•  the context of microfinance for the rural poor;

•  organizing the unorganised for microfinance;

•  organizational models for upscaling microfinance;

•  upscaling microfinance programmes;

•  microfinance and poverty reduction;

•  microfinance and livelihood promotion;

•  information technology for microfinance.

"Upscaling" in this context means reaching large numbers of people by providing more high quality products, and doing so over a wider geographical area more quickly, more equitably, and on a long lasting basis. There is a serious need for upscaling microfinance because huge numbers of poor people around the world who need microcredit have still to be reached.

Lending to the poor

We considered the fact that microfinance institutions (MFIs) have to realise that money lent to the poor is not always used for the purpose for which it is given; sometimes loans are diverted for other purposes. This is because the poor often have to convert their assets, including basic possessions, into cash in order to provide food or other basic daily needs. So, when cash comes into a household, it may well be spent on survival needs rather than business development. Therefore, a loan applicant's family circumstances must be assessed before microcredit is provided. Then, where appropriate, credit can be provided, and sometimes the terms of a loan can cover a combination of various expenditure items including consumption/income generation/entrepreneur loans/agriculture/general purpose loans (e.g. for housing).

Savings

The workshop examined the provision by MFIs of savings schemes. Savings can be especially helpful to the poor because it helps them deal with expenditure over a period of time, and to draw on past income or against future earnings, particularly if current income is low or non-existent.

Follow up

When I returned to ECLOF Sri Lanka, I made various suggestions to my colleagues for ways in which we could upscale our portfolio. This included diversifying the loan products we offer, and providing higher working capital loans to suitable micro-entrepreneurs, who could then be expected to provide employment for others in their communities. I also suggested that ECLOF Sri Lanka should provide seasonal loans to clients irrespective of any outstanding loans, but only if clients have a good record with ECLOF. I also recommended that we should organize regional workshops for rural clients.

Profile of the clients of an MFI/NGO

Used by permission from Microcredit: Sound Business or Development Instrument by Gert van Maanen (see Books and Publications, p. X).

Those at the top of the pyramid receive bigger loans, and those at the base benefit from smaller loans.

When focusing on the rural poor, microcredit needs to promote a progression from:

•  survival activity to enterprise activity;

•  poverty lending to enterprise lending;

•  consumption capital to working capital;

•  microfinance to development finance.

Learning in Ghana

Finance

An ECLOF financial training workshop for managers, finance officers and credit officers took place in Accra, Ghana, at the end of 2004. Ben R. N. Mbai from MNA Business Advisory Services in Nairobi, Kenya, led the workshop. This was the second time that Mr. Mbai has provided training for ECLOF staff.

Participants from seven African national ECLOF committees attended the workshop together with ECLOF staff from the Philippines and India, as well as ECLOF International's financial manager, Nejib Ababor.

Participants said they had found the one-week course very relevant to their work and that they would apply the skills learned immediately.

At the end of the workshop, Mr Mbai made a number of recommendations to ECLOF International to ensure that the results of the training had maximum effect:

Feedback

All ECLOF staff who took part in the financial workshop in Ghana completed a feedback questionnaire. In his answers, Lindsay Sathyanesan from ECLOF India said that as a result of what he had learnt during the workshop he believed ECLOF India could now better address the issue of "delinquent loans", though ECLOF India already had a plan in place for increasing overall income and decreasing expenditure.

Lindsay also believed that ECLOF India's loan processing and lending methodology, which is somewhat time consuming at the moment, could be simplified. He added that he had benefited from hearing from other ECLOF colleagues at the workshop about innovative and demand-based products that had been introduced in countries such as Kenya, The Philippines and Zimbabwe.

Board training

ECLOF Ghana board members attended a one-day training course on the role of the board and the responsibilities of members. This event took place after the financial training workshop.

There are 15 members on the ECLOF Ghana board; nine are women. Six church organisations are represented on the board. In addition, there are three representatives from the Christian Council of Ghana, and six members from non-governmental organizations linked to microfinance and women's development organizations. The outreach possible as a result of all the training that took place in Ghana was therefore multiplied because partners, as well as ECLOF staff, were able to benefit and will in turn be able to pass on their newly-acquired knowledge to their own organizations.

ECLOF Ghana board members include

1. Anna B. Nettey, 2. Jervis Djokoto, 3. Albert Essamuah, 4. Celeste Krahene Williams, 5. Florence Kyei-Kwakye, 6. Seth Appeadu Mensah (President), 7. Clara Fosu, 8. Beatrice Bernice Boateng, 9. Gladys A. Brobbey.

Also in photo : 10. Mbai Ben (consultant), 11. Nejib Ababor (ECLOF International).

Dealing with delinquency: the Zambian way

Jane Ogutu, head of ECLOF Kenya's (KECLOF) branch office in the town of Meru, has learnt how one microfinance institution (MFI) in Zambia is bringing down its level of arrears, a process known in the microfinance world as "delinquency management".

The African Rural and Agricultural Credit Association (AFRAC), of which KECLOF is a member, organized and part-financed Jane Ogutu's capacity building visit to Zambia, which was one of a number of exchange learning experiences that AFRAC facilitates each year. 

Jane visited the Micro Bankers Trust that was formed in 1996 to act as a channel through which the Zambian government could lend to MFIs. The trust has achieved some level of success in delinquency management, thanks to the positive partnerships it has formed with the solidarity groups and their members to whom loans are made. This relationship has made possible the high quality training and capacity building of group members and officials.

On her visit to the trust, Jane Ogutu heard how it has also tackled the problem of delinquency rates through the use of a participatory approach in the appraisal of loan applicants. The trust requires that savings be provided as collateral, and retains 20% of a group's savings to offset possible loan defaulting. Borrowers have to pledge items, and the trust takes possession of these if repayments are not made. The trust has found that thorough and regular monitoring of clients helps keep defaulting rates down.