|
|
| Mobile Banking | Partnership |
VBARD
is innovative in reaching people at communes or grassroots level, where it has
minimal representation. Lack of access roads and high transaction costs
prevented it from serving the poorest, often the most isolated. In 1998, mobile
banking units have been introduced to increase the outreach of its credit and
deposit services, through the use of 159 vehicles equipped to travel on dirt
road and hilly pathways. The World Bank’s Rural Finance project has supported
the acquisition of another 172 vehicles by VBARD, used to carry loan officers to
process loan applications, disburse money, collect repayments and mobilise
savings. The visits to remote areas followed a fixed calendar and were announced
in advance, to coincide with weekly market days. The World Bank’s program
support was also the opportunity to integrate some microfinance methods into
VBARD banking approach, using the mobile banking program as ‘vehicle’ for
change:
Offering
appropriate loan products (wider range of products, some loans
collateral-free)
Linking
lending and saving (disburse loans and collect savings during visits)
Combining
credit and training (to enhance borrowers capacity to identify and pursue
economic activities)
Group-based
lending (peer pressure, incentives, empowerment)
Reasonable
interest rates (using cost-recovery rates, and keeping costs down)
At
the end of 2003, the mobile banking program has provided financial services to
315,000 poor households, about 6% of VBARD clients. On average each mobile bank
has disbursed 1,921 loans and mobilised 1,983 savings accounts every month. Each
vehicle recorded a profit of US$1,000 per month.
The
major constraints and weaknesses of the model for replication are related to:
Security
concerns, despite that no robberies have happened so far, it could be an
issue in other contexts
Accessibility
of funds, as clients need to wait for the next visit of the mobile bank to
access funds
Monitoring,
should be reinforced in places where audit and accounting are not commonly
practiced
Group formation and training, are costly and time-consuming.
In
1996, TYM launched the Mutual Assistance Fund, where each member contributed a
fixed amount every week in return for a specified benefit in case of death or
illness. The primary objective for the MAF was to help TYM members with a small
level of protection in the case of premature death or sickness. With a weekly
contribution of VND 200 ($1 cent), upon the client’s death, her outstanding
loan balance would be written off and her family would receive a small sum to
cover funeral expenses. Likewise, a member would receive a payout upon the death
of her spouse or child less than 18 years of age.
The
MAF was introduced to TYM members as an additional benefit or service provided
by the institution at a minimal cost. Premiums are collected at weekly meetings
along with loan repayments and savings collection so there was no additional
work involved either on the part of the members or the technical officers. The
target market for the MAF is the same as that for TYM’s loan products, but the
potential impact on the household is far greater since the MAF enables the
client’s family to better cope with additional expenses incurred from the
member’s death and also relieves the family from the burden of repaying her
outstanding debt. At the institutional level, the MAF enables TYM to have an
additional level of reserve for its loan portfolio without having to increase
its provision expenses and reduce its net profit.
Customer
satisfaction and impact on community.
TYM
members consider the MAF as good value for money. The MAF also helps to support
group and community solidarity since members can rely on the Fund to help defray
costs related to death and illness rather than use their loan capital.
Participation in the MAF seems to have sensitised members as to the importance
of “saving for a rainy day.” This is evidenced by the fact that several TYM
members expressed their willingness to continue to save and contribute to the
MAF even when they have stopped taking out loans.
Customer
service.
The
MAF is highly appreciated by TYM members primarily because of the personalised
service by TYM staff. Members do not have to travel far to make their
contribution, the technical officers come to them. Likewise, the delivery of
claims by the branch head and technical officer adds a personal touch and
generates good word-of-mouth publicity and awareness. The staff also make
frequent house visits to members, which strengthen client relations and help to
prevent fraudulent claims.
SC/US
decided to explore potential partnership with a commercial bank in the
implementation of a urban microfinance project for the following reasons:
The
microfinance sector is becoming more business-like and cost-efficient due to
higher competition and fewer donor resources;
Microfinance
needs commercial funds to achieve scale and financial sustainability;
SC/US needed a program arrangement that will facilitate its transformation into an MFI once the legal framework was in place
SC/US
decided to use a service delivery partnership model, where roles are shared
between a commercial bank, a service company, and an NGO (SC/US):
SC/US,
provides technical assistance and institutional development support, in
setting up and subsidizing the first phase of development of a service
company, negotiating with a commercial bank, and advocating for a supporting
environment
The
commercial bank, performing the lending function on a legal basis, has
available lending funds, and an entrustment role
The
service company, provides consulting services to the bank in implementing a
microfinance model (promotion of loan products, clients assessment and
training, facilitation of loan processing, financial reporting)
Advantages
of the model
No
need for a banking license;
The
company holds the technology and therefore can spin off when possible;
The
company is not a financial entity and does not require a large equity base;
The
company has its own structure, governance, staffing, that can be similar to
an MFI;
The
company can develop more appropriate corporate culture for the poor;
Potential
access to plentiful and low-cost funds
Weaknesses
of the model:
Microfinance
is new to a majority of commercial banks;
Difficulty
in identifying a commercial bank as partner
Entrustment
and consulting fees may be high and difficult to calculate;
Products
are limited to loans only;
The
commercial bank might be reluctant to record high volume of transactions;
No
previous experience of such multi-stakeholder partnership in Vietnam,
involving a bank, an NGO and a service company, to provide microfinance
services.
Recent
developments
Service
Company was registered as a LLC and functions as an independent entity, with
a social mission, an independent board and a managing director seconded by
SC/US
Service
Company operates through 2 branches and 1 regional office, reaching 1,300
active clients after one year of operation;
Repayment
rate 100%; 35% of operating costs covered by interest income;
Trainings
in lending methodology, book-keeping, product development, market surveys,
& financial ratios were offered to Company staff
The
negotiation with a commercial bank is in final stage;
Program
operations are still underway under a temporary memorandum of understanding
with the local Women’s Union;
Future
development
Transform
the Company into an MFI when the Microfinance Decree is passed;
SC/US
will becomes an investor in the MFI
The
Commercial Bank would be offered to become an investor or a wholesale-loan
provider for the MFI;
Lessons
learned
Service
company model can be an excellent approach in countries where there is no
legal framework;
Roles
and responsibilities of parties need to be clearly defined;
Agreement issues may be complicated and negotiation is time-consuming;