APPENDICES Appendix A
Table A.1 Different features of five pioneering MFIs: Grameen Bank Bangladesh Bancosol Bolivia Bank Rykyat Indonesia Unit Desa Badan Kredit Desa(BKD) Indonesia Finca Village Bank -Membership 3.12 million 53,812 3 million
Borrowers; 28 million
depositors
765,586 171,000
-Average loan balance -Typical loan term
$ 134 1 year $ 1509 4-12 months $ 1007 3-24 months $ 71 3 months $ 191 4 months -Percent female members
-Mostly rural / urban
95% rural 60% urban 18% mostly rural 50% rural 95% mostly rural -Group lending contracts
-Collateral required Yes No Yes No No Yes No No No No -Voluntary savings emphasised -Progressive lending No Yes Yes Yes Yes Yes No Yes Yes Yes -Regular repayment schedules
weekly flexible flexible flexible weekly
-Target clients for lending poor largely non-poor
non-poor poor poor
-Currently financially sustainable
no yes yes yes no
-Nominal interest rates on loans (per year)
20%
47.5-50.5%
32-43% 55% 36-48%
Source: Khawari, 2004, p15
Appendix B
Table B.1 Key differences between traditional consumer loan and microcredit loans
Aspect Conventional Loan Microcredit
Origin of loan Based on salary Based on evaluation of business and surroundings
Purpose of loan Borrowing for expense - Consumption
Investment to create assets and income - Family business
Management From branch In field with visit to business-home
Profile of applicant Salaried Self-employed
Loan
administration
Standardized
Flexible, customized and quick
Interest rate Market rate Above market rate
Collateral Traditional Non-traditional
Term Medium and long Short and medium
Appendix C
Statements discussed in interview 1. Poverty Alleviation
Target group: the very poor
The very poor are excluded from microfinance Members in group loans exclude the poorest.
The poorest prematurely leave group loans more often than the less poor. The bonus/promotion structure for MFI staff increases the incentive for staff to
exclude the poorest.
The acceptance criteria1 of MFIs for clients lead to exclusion of the poorest. Microcredit instrument: individual loans
Microloans lead to an excessive debt burden among the poor.
Repeat loans become less interesting for successful borrowers on the long term. Motivation to repay decreases.
Compulsory savings as collateral bring along costs and frustration for lenders. Replicating identical programmes in different countries does not work. Microcredit instrument: group loans
Peer monitoring is not costless for group members, nor is all information shared with loan officers.
Group members choose safe and less productive projects due to the joint liability feature.
Group meetings bring along costs, especially for those who live far away. Social sanctions as a result of defaults make the poor even worse off than before. If one group member defaults, all members have the incentive to default as well. 2. Gender and Sector Developments
Gender
Microloans for women are actually controlled and invested by the men in the households.
Microloans lead to excessive workloads (household and microenterprise) for women. Women only invest in traditional activities, such as sewing and livestock rearing. Women employ family members as unpaid employees.
Children are kept home from school in order to work at the microbusiness. Microfinance sector
Increased competition between MFIs facilitates the ease to borrow multiple loans at different MFIs.
Multiple loans increase the number of defaults and the debt burden among the poor. Regulation for microfinance is very costly for MFIs.
Interest rate ceilings prevent MFIs of covering their costs and as a result MFIs target the less risky borrowers, the less poor.
Interest rate ceilings drive MFIs out of the market or prevent them from entering in the first place.
Subsidies make MFIs dependent on donors.
Subsidies increase inefficiency and bureaucracy, decrease innovation and creates unfair competition with unsubsidised MFIs.
Subsidies decrease the incentive for MFIs to become self-sustainable.
MFIs have the tendency to profile their balances through dubious financial reports. International commercial banks in microfinance prioritise profits above social
objectives.
International commercial banks are only interested in successful, already self-sustainable MFIs instead of the weaker ones.
1
Appendix D
Table D.1 Summary of replies per organization on each statement
ABN DOEN FMO Hivo I/CC ING Intp Oik OxNo Rabo SNV Trio
Target group: the very poor
Microcredit excludes the poorest x2 x +/- +/- +/- +/- +/- +/- +/- +/- x x In groups, strong members exclude poorest - x +/- +/- + +/- +/- x - - x x Poorest leave group loans prematurely - x - N.O. +/- N.O N.O +/- - N.O. N.O. N.O. Staff incentive structures exclude poorest - x - +/- +/- +/- +/- +/- +/- +/- +/- x Admittance criteria exclude poorest x x + +/- +/- +/- +/- +/- +/- + +/- x
Individual loans
Debt Burden +/- + +/- +/- + +/- +/- + + +/- +/- +
Repeat loans become less attractive - +/- + - + +/- +/- - - +/- Frustration and costs compulsory savings N.O. +/- +/- +/- +/- +/- +/- + +/- x +/- +
No replication of programs + + + + + + + + + + + +
Group loans
Peer monitoring is costly - +/- + + + +/- N.O. + - + +/- +
Information from monitoring not told +/- + - + +/- +/- N.O. + + + N.O. - Choose less risky / productive projects - - + N.O. N.O. N.O. +/- - - x + -
Group meetings entail costs - + + + + +/- +/- + +/- +/- +/- +
Sanctions make the poor worse off - + x - +/- N.O. +/- +/- +/- N.O. +/- - One default leads to group defaults - - - - +/- N.O. N.O. +/- - +/- +/- -
Gender
Female loans invested / controlled by men - +/- - + + +/- + +/- + +/- + +
Excessive workload for women x x x x x x x x x x +/- x
Women invest in traditional activities - +/- - N.O. - +/- +/- x +/- x +/- +/- Family members as unpaid employees +/- N.O. x x +/- x N.O. x N.O. N.O. x x Less education at school N.O. +/- + - - +/- N.O. - +/- N.O. - -
The microfinance sector
Competition leads to loan overlap +/- +/- + + + + + + +/- +/- + +/- Multiple loans increase debt burden +/- + +/- +/- +/- +/- +/- +/- - +/- +/- +/- New regulation entails high costs +/- +/- +/- +/- +/- +/- +/- +/- +/- +/- +/- +/- Interest rate ceilings: target the less poor + +/- + + +/- + +/- +/- +/- +/- + + Interest rate ceilings increase entry barriers + + + +/- + + +/- +/- + N.O. + + Subsidies create dependency on donors +/- + +/- +/- +/- +/- + +/- +/- +/- +/- +/- Subsidies have negative effects on MFI +/- +/- + +/- +/- + + + + +/- +/- +/- Subsidies: less motivation to become viable +/- +/- +/- - +/- +/- + +/- +/- - +/- +/- MFIs profile through dubious fin. reports + x +/- +/- + x N.O. +/- x + + +/- Commercial banks prioritise profits +/- + + +/- + +/- +/- + +/- +/- +/- +/- Commercial banks target successful MFIs +/- x +/- +/- +/- +/- + +/- +/- +/- + +/-
2
N.O.= No opinion + = Agree: the statement is a common problem
Table D.2 Frequency of replies per category
Summary - +/- x + N.O.
Target group: the very poor
Microcredit excludes the poorest 0 4 8 0 0
In groups, strong members exclude poorest 3 4 4 1 0 Poorest leave group loans prematurely 3 1 2 0 6 Staff incentive structures exclude poorest 2 2 8 0 0 Admittance criteria exclude poorest 0 3 7 2 0
Individual loans
Debt Burden 0 0 7 5 0
Repeat loans become less attractive 6 0 4 2 0 Frustration and costs compulsory savings 0 1 8 2 1
No replication of programs 0 0 0 12 0
Group loans
Peer monitoring is costly 2 0 3 6 1
Information from monitoring not told 2 0 3 5 2 Choose less risky / productive projects 5 1 1 2 3
Group meetings entail costs 1 0 5 6 0
Sanctions make the poor worse off 3 1 5 1 2 One default leads to group defaults 6 0 4 0 2
Gender
Female loans invested / controlled by men 2 0 4 6 0
Excessive workload for women 0 11 1 0 0
Women invest in traditional activities 3 2 6 0 1 Family members as unpaid employees 0 6 2 0 4
Less education at school 5 0 3 1 3
The microfinance sector
Appendix E
Table E.1 Participated organizations and contact persons
Focus Banks
Contact Persons
ABN AMRO Onno Mulder Senior Vice President
DOEN Foundation Jasper Snoek Programme Manager Financial Sector Development FMO Els Boerhof Manager Micro & Small Enterprise Fund (MASSIF)
Hivos Tom Baur
Anita Jurgens
Programme Manager Financial Services and Enterprise Development
Junior Programme Officer
I/C Consult Ellie Bosch Senior Consultant
ING Group Gera Voorrips Programme Manager
Interpolis Toon Bullens Cooperative Insurance and Innovation Oikocredit Guillermo Salcedo Manager Microfinance
Oxfam Novib Bruno Molijn
Veronica Berezowsky
Senior Investment Officer
Programme Officer for Latin America Rabobank Foundation Charles Ruys Manager
SNV Lukas Wellen Portfolio Coordinator North Central Vietnam
Appendix F
Summary of each interviewed organisation ABN AMRO3
ABN AMRO is a Netherlands-based, leading international bank established in 1824. As at 31 March 2006, ABN AMRO has over 3,500 branches in more than 60 countries and territories, a staff of over 105,000 full-time equivalents and total assets of EUR 975.1 billion.
Microfinance is an important part of ABN AMRO’s sustainability strategy. The microfinance activities are particularly focused where the bank has local presence, mainly India, Brazil and the United States of America. In Brazil, the bank has established a joint venture with NGO Acción, Real Microcrédito, in which ABN AMRO invested 80 percent of the capital. In India, the bank is working with 18 local MFIs and is gradually establishing new MFIs and partnerships with smaller, not yet successful, MFIs. In the USA, especially in Chicago, the focus is on helping the community as a whole. Furthermore, together with likeminded partners, ABN AMRO has invested USD 2.5 million in ShoreCap, a global microfinance company. ABN AMRO has also become the leading private
shareholder of FMO with 22 percent. Through entities such as FMO and ShoreCap can ABN AMRO provide microfinance to countries where the bank has no local presence.
ABN AMRO provides equity and debt, directly and indirectly, to local MFIs. Loans are preferred to be provided in local currency to avoid foreign exchange risk for local MFIs, but are available in any currency. The bank also offers MFIs technical assistance to help them strengthen their managerial capabilities, such as information technology, governance and credit discipline. Staff of ABN AMRO is actively involved in the management of MFIs where the bank has substantial equity participation. Moreover, the bank is represented in the (supervisory) boards of FMO and ShoreCap. ABN AMRO has reached profits in India and break-even in Brazil.
Target Group: India: Very poor rural women
Brazil: Microentrepreneurs, special focus in Sap Paolo (50 percent is women) USA: Community, special focus on Chicago
Product Focus: Credit, equity, and technical assistance
Geographic Focus: Africa, Asia, Latin America and Eastern Europe
Number of Projects: Reaching 8,000 clients in Brazil and 160.000 clients in India in 2005 Microfinance Portfolio: USD 18 million for Brazil and India in 2005
Head Office: Amsterdam, the Netherlands
3
DOEN Foundation 4
DOEN Foundation was established by the Dutch Postcode Lottery and its’ proceeds come from the Postcode Lottery, the Bankgiro Lottery and the Sponsor Lottery. Financing is provided to
organisations and projects in the field of Sustainable Development, Culture and Welfare. DOEN offers grants, loans, guarantees and investment capital. DOEN has invested EUR 80 million in microfinance.
DOEN focuses amongst others on development of the financial sector, which comprises microfinance, SME financing and sector development as a whole. DOEN supports start-up MFIs with subsidies towards self-sustainability and investment capital and invests in more established MFIs. DOEN is mostly known for its equity investments (90 percent of its portfolio). DOEN shies away from group loans or consumer finance as it is not an advocate of the instruments. DOEN also stresses not to focus on the poorest who rather need subsidies as opposed to credit. Partnerships of DOEN:
Triodos-DOEN Foundation (TDF). In 1994, DOEN Foundation and Triodos Bank initiated TDF. TDF provides finance and know-how to microfinance institutions and trade finance for Fair Trade/ certified organic producers. DOEN has capitalised the fund of EUR 34 million and contributes additional funds annually. Currently, TDF has a portfolio of EUR 28 million in microfinance. ProCredit Holding. DOEN participates from the beginning in 1998. DOEN is a major shareholder
in Procredit Holding with a participation of over EUR 28 million. Procredit Holding has set-up 19 MFIs worldwide. DOEN is a direct shareholder (EUR 6 million) in 8 MFIs and has provided grants for technical assistance (EUR 7 million) and loans.
AfriCap. DOEN is a USD 0.3 million shareholder in AfriCap, an MFI investment company. DOEN also finances individual MFIs, such as Fonkoze and MCN in Haiti, Came in Mexico,
AMSA in Argentina and WWF in India. DOEN supported these MFIs with EUR 2 million. Triple Jump, Access Alliance and Symbiotics. DOEN finances new initiatives targeting small
MFIs in poorly covered regions or increasing available finance to MFIs with EUR 0.6 million. Business Partners Madagascar, ProCredito Bolivia and Agora Nicaragua. In addition to
microfinance DOEN invests in SME financing initiatives. Investments total EUR 1 million.
Target Group: People without proper access to financial services. Product Focus: Equity investments, credit, guarantees and subsidies. Geographic Focus: Africa, Asia, Latin America and Eastern Europe
Number of (indirect) Projects: 48 MFIs, which reach 1.7 million entrepreneurs
Microfinance Portfolio: EUR 35 million and funding of TDF of EUR 33 million in 2005 Head Office: Amsterdam, the Netherlands
4
FMO5
Finance for Development
The Netherlands Development Finance Company (FMO) invests risk capital and know-how in companies and financial institutions in developing countries. The aim is to create promising
enterprises which can serve as engine of sustainable growth and poverty reduction in their countries. FMO was established in 1970 by the Netherlands government and by the business community. Currently the government holds 51 percent of shares, major Dutch banks hold 42 percent and the remaining shares are held by employers’ associations, trade unions and Dutch private enterprises. FMO’s portfolio is EUR 2.4 billion and staff is around 220 persons.
The Micro and Small Enterprise Fund (MASSIF) of FMO focuses on strengthening the financial sector in the lower side of the market. In the Fund’s portfolio, 22 percent is targeted to microfinance and to Small and Medium Enterprises. The products FMO provides are financing existing MFIs with additional funding to expand their services, contributing to the creation of new MFIs, offering technical assistance, funding training courses for local financial institutions, and equity stakes in combination with a seat on the supervisory board. Finance is typically long term and in local
currencies. In addition, FMO supports regular banks to open a specialized desk which serves the lower end of the market. FMO leaves the stage as soon as commercial markets can take over.
Target Group: All MFIs (including the SME sector) Product Focus: Credit, equity and technical assistance
Geographic Focus: 43 countries in Africa, Asia, Latin America and Eastern Europe Number of Projects: 125 projects for 122 institutions
Microfinance Portfolio: EUR 60 million in 22 currencies (60 percent in local currencies) Head Office: The Hague, the Netherlands
5
Hivos6
People unlimited
The Human Institute for Development Cooperation (Hivos) is a Netherlands-based, non-governmental organization since 1971 that strives for civil society building and sustainable economic development. Their main activity is providing financial and political support to local private organizations. Hivos provides support in 31 countries, with regional offices located in Costa Rica, India, Indonesia and Zimbabwe. In 2005 Hivos received 80 million euros from the Dutch government, the European Union, donors, depositors and private organizations, of which 20 percent was spent for microfinance projects. In 1994, Hivos and Triodos Bank established the Hivos-Triodos Fund, which combines the banking expertise of the Triodos Bank and the development knowledge of Hivos. Products offered are: 1. Loan and equity investments. Provided by the Hivos-Triodos Fund. Trade finance is also offered
to certified ‘Fair Trade’ and organic producers.
2. Seed Capital. Provided by Hivos. These are grants delivered in series of instalments based on conditional targets. Purpose of the grants are start-up losses, investments, larger loan portfolio, capacity building or activities that improve the quality and relevance of financial services. It is available for new or small MFIs with growth potential and MFIs in difficult circumstances. 3. Subsidies for financial institutions. Hivos provides subsidies for one-off expenditures such as
market-studies, product development, investments in Management Information Systems and training courses. Only available for MFIs who cannot finance investments from their own profits. 4. Other. Networking, lobbying and exchange of knowledge. Hivos also supports the promotion of
quality of financial services, performance standards and a favourable policy environment. MFIs at the early stages of development receive seed capital in order to develop themselves and expand further. At a later stage the MFIs become of interest for loan and equity investments of Hivos-Triodos Fund. Hivos-Triodos Fair Share Fund invests in more established MFIs. Commercial banks enter the picture at the end of the chain where Hivos leaves the stage.
Target Group: Low-income groups, and people without or with limited financial access. Special attention is paid to women (about 65 percent of clients reached is female).
Product Focus: Credit, equity, grants, subsidies and advisory services Geographic Focus: Africa, Asia, Latin America and South East Europe
Number of Projects: In 2005, Hivos-Triodos Fund reached 35 organizations, who reached 2.2 million clients. Hivos supported 30 MFIs, accounting for 1 million clients.
Microfinance Portfolio: Hivos-Triodos Fund EUR 24.4 million; Hivos had a turnover of EUR 15 million in 2005.
Head Office: The Hague, the Netherlands
6
I/C Consult7
I/C Consult is the only interviewed organization that is not a direct member of the Netherlands Platform for Microfinance. However, I/C Consult is the joint advisory unit of the Dutch development agencies Cordaid and Icco, both of which are members of the platform. I/C Consult, established in 1994, aims at strengthening the capacity of ICCO and Cordaid partner organizations by providing tailored consultancy services on programmatic and organizational issues. ICCO and Cordaid enable NGOs and Community-Based Organisations to support underprivileged segments of society in their development process. Although working exclusively for Cordaid and ICCO-partners, I/C Consult is an independent and autonomous organisation. The views and approaches of I/C Consult do not
necessarily reflect the policy of ICCO or Cordaid. Costs of consultancies by advisers of I/C Consult are part of the services of ICCO and Cordaid.
I/C Consults supports microfinance activities either through a provider approach, where the organisation provides direct services, or through a promotor approach, where sustainable member-based financial organisations are supported. If possible, I/C Consult joins forces with local consultants and experts. I/C Consult assists institutions with:
• Assessment of the MFI’s financial landscape and position taking of the MFI;
• Assessing strengths and limitations with regard to client profile, outreach, sustainability and cost-effectiveness;
• Formulating possible scenarios and options for the future and making strategic choices;
• Business planning, growth strategy, Management Information Systems development, methods
for client selection and for impact assessment;
• Advice on financial and institutional issues;
• Finding links to (inter) national knowledge institutions and to relevant 'best practices' of
microfinance practitioners;
• Check and mirror underlying paradigms and assumptions of microfinance approaches.
Target Group: Rural focus, with special attention to young or specialized MFIs
Product Focus: I/C Consult: Advisory services and technical assistance for Icco and Cordaid (Icco: Grants, credit, guarantees and equity participations.
Cordaid: Credit, guarantees and matchmaking in attracting equity from investors) Geographic Focus: Africa, Asia, Latin America and Central and Eastern Europe.
Head Office: Utrecht, the Netherlands
7
ING Group8
ING Group is a global financial institution of Dutch origin, active in over 50 countries with a staff of 114.000 employees. ING offers a broad spectrum of banking, insurance and asset management to more than 60 million clients, which comprise individuals, families, small businesses, large corporations, institutions and governments. In stock value, ING is among the 20 largest financial institutions in the world and among the 10 largest in Europe. In the Benelux, ING’s home market, ING is the largest financial institution.
In 2004, ING initiated the ING Microfinance Support Programme with the objective to offer Dutch ING employees the opportunity to be actively involved in microfinance efforts. Employees provide local MFIs with expertise, increase awareness of microfinance in the Netherlands and provide funding to a special microfinance investment fund.
ING established an alliance with Oikocredit in 2004, through which ING provides technical assistance to MFIs. ING is also partners with the United Nations Capital Development Fund (UNCDF). It sponsored the 2005 United Nations Year of Microcredit and provides technical assistance to partners of UNCDF. Furthermore, ING has set up an Indian subsidiary, ING Vysya Bank Ltd, which provides microfinance services directly to over 60,000 self-help groups in villages and indirectly through local MFIs.
Target Group: The poor in general. Previously, ING Vysya focused on women in particular, but currently more men have entered the scene.
Product Focus: Credit and technical assistance
Geographic Focus: Africa, Asia, Latin America and Eastern Europe Number of Projects: 22 (reaching, among others, 60,000 self-help groups) Microfinance Portfolio: USD 23 million in 2005
Head Office: Amsterdam, the Netherlands
8
Interpolis9
Interpolis Crystal Clear
Interpolis is among the prominent insurance companies in the Netherlands, while also being active in Ireland and Luxemburg. In 2005 Interpolis merged with Achmea through which Interpolis has become part of Eureko, a European bank-insurance-group. Interpolis currently has a staff of around 6,000 employees.
Regarding corporate social responsibility, Interpolis promotes the development of mutual insurance companies in developing countries and plans to continue these efforts by creating even more
opportunities for establishing and supervising mutual insurance companies in the future. Since 2004, Interpolis provides know-how, insurance software and financial resources in close co-operation with MIAN (Micro Insurance Association Netherlands). MIAN, established by (ex-) employees of Interpolis, is a cooperation of volunteers from the cooperative insurance sector in the Netherlands. MIAN does not search for projects, but is engaged by NGOs. In cooperation with other MFIs, MIAN provides voluntary consultants for projects. Interpolis is an important donor of MIAN.
Target Group: Rural areas. Currently, most partner MFIs are working primarily with women, but this is not a special focus of Interpolis.
Product Focus: Expertise, insurance software and financial resources
Geographic Focus and Number of Projects: 10 projects in India, Bangladesh, Nepal, Sri Lanka, Philippines, Cambodia, Uganda and Kenya. Around 350.000 families make use of the micro insurances covering the risk of the death of their breadwinner.
Reinsurance Exposure Portfolio for Micro-insurance risks: EUR 8 to 10 million in 2005 Head Office: Tilburg, the Netherlands
9
Oikocredit10 Investing in People
A truly international organisation, Oikocredit started as a pioneer in the field of development financing in 1975 and is today one of the largest private financiers of microfinance worldwide. Oikocredit is one of the two largest private funding organizations in the world in terms of outreach and volume. The organisation is among the few global ethical investment funds.
Oikocredit has experienced an exponential growth in the past 5 years, especially for microfinance activities which now account for over 65 percent of Oikocredit’s outstanding capital. Oikocredit’s loans are channelled through a network of offices worldwide and managed by local professionals, which ensures an appropriate understanding of local needs and circumstances. MFIs are assessed on their ability to provide economic and social benefits to their clients and can range from small to large, urban to rural and start-ups to well-established MFIs. Lately, Oikocredit has also been investing in the SME sector involved with agriculture, trade, serviced and manufacturing. The organization has joined forces with institutions such as ING, ICCO and ASN/NOVIB in the Netherlands.
Oikocredit offers only loans instead of donations as it is viewed that loans are more effective in achieving economic productivity and self-reliance. Products offered by Oikocredit are:
1. Long term loans. These are provided in hard or local currency, for 3 to 10 years and at fixed or flexible interest rates;
2. Credit lines. A fixed amount of money that an MFI can draw from Oikocredit, when the MFI experiences fluctuating working capital needs over the year;
3. Syndicated loans. These are offered where Oikocredit joins forces with other financiers;
4. Guarantees. These are extended when an MFI needs a guarantee in order to receive local loans; 5. Equity investments. Where loans and guarantees are not feasible, equity investments is possible.
Target group: MFIs that focus on people with limited access to financial services or other resources necessary to start economic activities and improve their lives. All segments of the poor.
Product Focus: Credit, guarantees and equity investments.
Geographic Focus: 32 focus countries in Africa, Asia, Latin America and Central and Eastern Europe Greatest presence is in Latin America.
Number of Projects: Over 467 project partners, as per 31 December 2005 Microfinance Portfolio: Outstanding capital of EUR 163 million in 2005. Head Office: Amersfoort, the Netherlands
10
Oxfam Novib11
Oxfam Novib is part of Oxfam International, a leading alliance of 12 likeminded donor agencies. These members work together with over 3,000 local development agencies in more than 100 countries to find solutions to poverty, suffering and injustice.
Oxfam Novib supports over 800 partners and has an annual budget of around EUR 150 million. In 1997, Novib established the Financial Services Unit (FSU), which manages the Novib Fund, and the ASN-Novib Fund, the first private investment fund in microfinance in the Netherlands. In June 2006, the ASN-Novib fund has been temporarily closed, because too many funds were flooding in (over EUR 40 million), while too few projects were available. The microfinance department of Oxfam Novib demands commercial interest rates on loans to MFIs in order to stimulate them to remain efficient and to eventually attract loans on the commercial market.
Oxfam Novib has 3 financial products available:
1. Loans. Non-standardized loans and with very flexible conditions;
2. Guarantees. Provided when an MFI cannot attract foreign loans due to legal reasons and when a guarantee can help the MFI attract local loans;
3. Grants. Offered for capacity training, product innovation, pilots, impact studies, operation costs (only in first year of operation) and loan fund (only in start-up phase).
Target Group: The poor in general, with a preference to rural MFIs. However, since most MFIs target women, Oxfam Novib reaches in particular women, which account for around 75 percent.
Product Focus: Credit, guarantees and grants.
Geographic Focus: Africa, Asia, Latin America and Eastern Europe Number of Projects: 74 projects, supporting 64 organizations. Microfinance Portfolio: EUR 18.3 million in 2005
Head Office: The Hague, the Netherlands
11
Rabobank Foundation12
The Rabobank was established at the end of the nineteenth century as a collection of small rural co-operative banks. Currently, it has grown into an extensive financial group, owned by approximately 328 local banks and is among the largest banks in the world. Rabobank offers financial services and products to the Dutch and international retail and business markets.
In 1973, Rabobank established a charitable foundation for the improvement of social prosperity, the Rabobank Foundation. This Foundation channels social and civil commitment by globally supporting groups in society that do not have access to financial services through projects such as microfinance. Rabobank Foundation supports cooperatives or member-based organisations which offer an
opportunity to save, borrow or insure. Before support is granted, MFIs must have demonstrated that they are able to receive deposits from their clients. Rabobank Foundation's funds are obtained partly from the local Rabobanks, who allocate a percentage of their net profits to the Foundation, and partly from Rabobank Nederland, the central bank of the Rabobank Group, which doubles the contributions from the banks. Goal of the Foundation is to project the friendly face of the Rabobank.
The Foundation has 5 instruments in executing its policies:
1. Grants and subsidies. Grants are in particular for small and medium-sized MFIs. Subsidies are regularly granted in start-up phases of institutions or programmes;
2. Hard and local currency loans on non-commercial conditions;
3. Guarantees. Offered when direct credit facilities are not feasible or practical; 4. Participations. Reserved for co-operative financial institutions;
5. Technical Assistance. Expertise of colleagues in the Rabobank Group in various fields of banking organisation is offered to partners.
Target Group: Poor rural women. Taking all microclients into account, 75 percent is women, 75 percent is rural, 50 percent is around or beneath the poverty line and 50 percent is illiterate. Product Focus: Credit, subsidies, grants, guarantees, participations and technical assistance Geographic Focus: Africa, Asia, Latin America and Eastern Europe
Number of Projects: In the past 5 years 595 projects to 315 organizations. Accumulated number of 3.2 million microclients, with a growth rate of 15 percent per year.
Microfinance Portfolio: EUR 3,981,000 per year Head Office: Utrecht, the Netherlands
12
SNV13
Connecting People’s Capacities
SNV is a Netherlands-based, international development organisation that offers services to nearly 1800 local organisations worldwide with more than 800 advisors, of which over 50 percent are local employees. SNV has established permanent field offices in over 30 countries in order to support countries with their fight against poverty. The organisation works with institutions that operate at district, provincial and local level and include private, governmental and civil society organisations. SNV gives advice and support to institutions that lack the expertise and know-how to improve their existing situation. Since 2002, SNV is recipient of subsidies from the Ministry of Foreign Affairs of the Netherlands. The organization is active in the field of sustainable management of natural resources, improvement of local governance and private sector development.
Within the private sector development, providing employment and income generating opportunities such as microfinance, has gained importance within SNV over the past decade. In the microfinance sector SNV advisors are involved in credits, savings, guarantees, insurance products and training and technical assistance, to national MFIs and local potential borrowers. For national MFIs, these services have as purpose to strengthen their ability in providing microfinance programmes. These MFIs often do not target the poorest, but those one step less poor, since, as SNV explains, the poorest do not have any investment possibilities. In addition, SNV trains potential borrowers how to start microenterprises. SNV does not provide training courses themselves, but helps local communities organize and provide such sessions. Furthermore, SNV has established a special niche in providing capacity building services that focuses on (remote) rural areas. SNV does not charge any interest rates since their investments are mainly grants. The use of financial instruments is explicitly left for other donor organisations.
Target Group: The poor with investment opportunities. SNV has a special niche that focuses on rural areas.
Product Focus: Advisory services and support
Geographical Focus: 31 countries in Africa, Asia, Latin America and Eastern Europe Microfinance Portfolio: EUR 3.2 million in 2003
Head Office: The Hague, the Netherlands
13
Triodos Bank14
Triodos Bank is an independent Dutch bank, established in 1980, with branch offices in the Netherlands, Belgium, United Kingdom and Spain. Since 1994, Triodos Bank has contributed its expertise in sustainable banking to the microfinance sector. The bank is renowned for its innovative and transparent approach and pioneering force to sustainable banking. Triodos manages 3 commercial investment funds through its daughter Triodos International Fund Management B.V. that provide finance and equity for MFIs and short-term trade finance to certified ‘Fair Trade’ or organic
producers. The funds have different risk profiles and cover different geographical areas. This enables Triodos to finance partners in different stages of development.
Hivos-Triodos Fund (HTF). Established in 1994, the fund is a joint venture of Hivos and Triodos Bank. Hivos guarantees 90 percent of the loans and the remaining 10 percent is guaranteed by private Dutch investors. HTF targets smaller, rural MFIs targeting the lowest segments of the market. Total portfolio in 2005 was EUR 24 million.
Triodos-DOEN (TD). Founded in 1994 at the initiative of the DOEN Foundation and the Triodos Bank. In 2006, the Fund has changed its strategy and now focuses more on new underserved markets in new countries, more equity investments and by offering more local currency loans. Total portfolio in 2005 was EUR 32.5 million.
Triodos Fair Share Fund (TFSF). Launched in 2002 and one of the first and truly private investment funds in the microfinance sector worldwide. TFSF is one of the three Social
Responsible Investment Funds in the Netherlands. The fund aims at providing the investors a fair return of around 2-4% excluding tax advantages. Total portfolio in 2005 was EUR 16 million. Loans are offered in euros, US dollars or in local currencies and up to a maximum of 5 years.
Loan conditions can be adapted to the needs of the borrower. Through its equity investments Triodos is currently a minority shareholder in 12 MFIs, in which it is actively involved and represented on the Board of Directors.
Target Group: People without access to financial services. Product Focus: Credit and equity investments.
Geographic Focus: Latin America (50 percent of total investments), Africa, Asia, and Eastern Europe. Number of Projects: 50 MFIs and 111 loans outstanding, as at March 2006.
Microfinance Portfolio: EUR 64.7 million, as at March 2006. Head Office: Zeist, the Netherlands.
14
