Reliances perspectives on Responsible Financing – What incentives are needed? Presentation by...
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Transcript of Reliances perspectives on Responsible Financing – What incentives are needed? Presentation by...
Reliance’s perspectives on Responsible Financing – What
incentives are needed?
Presentation by Baboucarr Khan
Agenda
Value proposition for the microfinance clients
Current & Recommended Microfinance practices – two schools of thought
Responsible Microfinance practices Lessons learnt Reflection
Value Proposition
Working capital loans Consumer credit Savings Retail foreign exchange Money transfer services
Current practices
Recommended approach
Responsible MicrofinancePractices – The Reliance Way Start relationship with Savings not Loans Establish a pattern of banking history to determine cash
flow generation capacity Conduct the personal character check and business
reference with key contacts and business partners Visit business to verify loan purpose, prepare proxy
financials as well as family to establish size and circumstances
Limit loan amounts to 50% of net worth of business venture
Gauge loan repayment between the range of 60% and 70% of net income after family expenses
Be transparent with loan covenants and terms Conduct site visits to ensure amount disbursed was used
in line with loan purpose Continuous monitoring is key to ensuring business
continuity or provide early warnings of any potential issues
Lessons Learnt – Reliance experience Low level of literacy on part of clients Information asymmetry Lack of trust of MFIs and Tax man Methodology suited for trading enterprises Monitoring and reminders are critical Diversion of funds is always a risk Absence of permanent addresses –
business & residential Risk of collusion between loan officers and
clients to access larger loan amounts
Lessons Learnt – Reliance experience Women higher risk of loan proceeds being
transferred to husband Majority of micro-entrepreneurs are
migrants with limited assets & proof on ownership
Burden of caring for an ill member of the family, ceremonies & burials
Planning for the education of children Islamic vs conventional banking – interest Need to maintain a diversified portfolio
Lesson learnt -Diversified Portfolio
Lesson learnt - Transparency & Reporting to stakeholders Set Social Performance Indicators and
measure and report accordingly i.e. GRI; CGAP standards
Establish clearly the vision and mission of company
Instil the mindset of responsible financing amongst employees, managers & directors
Product portfolio and service offerings to take into account interest of clients
Influence government and regulators to promulgate legislation that seeks to address unfair practices.
Reflection
"If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up."
Mr. C.J. Prahalad – Fortune at the bottom of the economic pyramid