Posted by admin on 2 August, 2010
The BWTP Network is proud to announce the signing of an MOU with Hatton National Bank (HNB) for the Asia Microfinance Forum 2010 as official ‘Local Host’. The MOU, signed in Colombo on the 14th of July compliments the considerable in-kind contributions of HNB, as a BWTP Network member, over the past 12 months in preparation for the Asia Microfinance Forum 2010.
The signing ceremony was attended by FDC Executive Director, Craig Wilson, representing the BWTP Network, HNB Senior Deputy General Manager Nihal Kekulawala and BWTP Chairman and HNB Marketing and Retail banking Deputy General Manager Chandula Abeywickrema. Read More
The BWTP Network looks forward to a fruitful working relationship between Lead Sponsor the Citi Foundation, HNB and the BWTP Network in the lead up to Asia’s foremost microfinance conference.
Posted by admin on 29 July, 2010
ASKI as a microfinance institution plus plus
As a microfinance institution, Alalay sa Kaunlaran Inc. has been an active player currently serving over 60,000 members. Its microfinance operations have achieved outstanding performance in terms of outreach, portfolio quality, operational and financial self sufficiency using the standards of the Microfinance Council of the Philippines (MCPI). ASKI aims to establish a total of 37 branches in three (3) regions of the Philippines namely Regions 1, 2 and 3 by end of 2010. The organization, its staff and its clients have consistently been receiving recognition and awards from both government and private institutions for its contribution to both community and national development. ASKI has been introducing innovations in microfinance by harnessing new technologies- an example of which is the mobile banking in partnership with Nationlink Network. ASKI has also adopted MCPI’s social performance management (SPM) technology which will effectively translate the institution’s mission into practice. As a result of this, ASKI was invited to participate and present a paper on SPM in a conference in Switzerland in June 2010. Currently, ASKI is actively participating into the implementation of a Market-Led Product Development for more client-focused microfinance which employs a systematic approach to product development to better meet the needs of poor micro-entrepreneurs in the Philippines. This is an endeavor of Opportunity International Australia through the Australian-NGO Cooperative Project (ANCP). The program brings in experts to work with ASKI in building its capacity on market research, process mapping, pilot testing, individual lending and includes a component on governance. The other business units of ASKI like the Mutual Benefit Association, Community Development, Business Development, ASKI Foundation ASKI Skills and Knowledge Institute are all geared up to create economic and social impacts for the clients it serve.
ASKI in Singapore
Last July 22, 2010, ASKI Philippines officially launched its international operations through the ASKI Global Ltd. This is another milestone not only for ASKI but for the microfinance industry, in general. While Philippine MFIs are transforming into banks, training/educational institutions, mutual benefit associations (micro insurance companies), foundations, social development organizations and the like, ASKI is creating a new transformation model. ASKI has long before recognized the underserved sector of the economy. These are Overseas Filipino Workers who have been regarded as a sector which does not belong to the MFIs target market – the vulnerable, marginalized, poor, needy etc. While many MFIs are lending to OFW families, the OFWs are excluded from many non-financial activities such as training on value formation, business development, social leadership etc. because of the main fact that the OFWs are not in the Philippines. Their remittances become a source of payment for OFW families’ loans, especially for businesses which cannot be sustained over a long-term period. This conceptual framework led ASKI to take one big, bold step to serve the underserved.
ASKI as GDO
ASKI Global Ltd. is a global development organization committed to help Overseas Filipino Workers Communities in Asia make their work experience become more meaningful and productive that could pave the way towards building a happy, wealthy and healthy families.
ASKI’s Research Overview
Most Asians, Filipinos in particular, migrate to other countries to find employment to support their families in the Philippines. As a result of this migration, many countries, like Singapore, have a big Filipino community. Statistics of 2009 showed that there are 8.7 to 11 million overseas Filipinos worldwide, about 240,000 are in Singapore. About 70% of the latter are household service workers. And every year, more than a million Filipinos leave to work abroad, and the exodus includes an increasing number of skilled workers taking unskilled work overseas, resulting to “brain drain”. While the Philippine government recognizes the economic impact created by the increasing remittances (US$17B in 2009 from US$15B in 2008) sent by the OFWs to the country, there are social effects that need to be addressed especially among the household service workers abroad. A Filipino mother leaving the Philippines to work abroad as a domestic helper and earn few hundred dollars means leaving behind an average of 3 children. About 51% of OFWs are women.
A Focused Group Discussion (FGD) which was conducted in November 2009 revealed that of the 20 OFWs interviewed, 18 of them have been working in Singapore between 10-20 years. Most of them keep on coming back to Singapore after a 3-year contract because they need to continuously sustain their families. Remittances sent to families were used for non-productive purposes such as buying or improvement of houses, buying residential lots, vehicles (usually motorcycles) and appliances, pay tuition fees and educational plans for children, support a seriously ill family member or relative or extend loans to friends and relatives. About 8 of the 20 OFWs interviewed have been separated from their husbands due to family problems, most serious of which is child abuse committed by a family member. This confirms the findings of ABSCBN’s Bantay Bata that 90% of the child abuse are happening in poor families especially in homes where the mothers are working abroad. These findings established the fact that remittances sent to the Philippines are not used productively and have only covered the basic needs of the family, and in some cases, used to buy little luxuries in life. Meanwhile, cases of family break ups persist and more children are affected.
ASKI Global’s Mission/Objectives
The ultimate outcome that ASKI Global Ltd. would want to achieve is to fast track reunification of the OFWs with their families. This could only happen if the OFWs will have a regular and sufficient source of local income that would sustain the family. Entrepreneurship and enterprise development have been proven in many countries to alleviate poverty, generate employment and increase the purchasing power of people. The East Asian miracle was brought about by the building of small and medium enterprises in these countries. ASKI Global Ltd. saw the importance of helping the OFWs change their mindset and bring in (or activate) the entrepreneurial spirit among them through education and training. Work, family and personal values are integrated in the course to create a value-laden OFWs in Singapore thus; she/he would become an asset for every Singaporean employer. The families of OFWs who will be ready to start a small business will be linked to government and nongovernment organizations by ASKI Philippines for financial and non-financial assistance. While the OFWs are funding the business in the Philippines, their families will run and manage it with regular coaching and monitoring from ASKI Philippines to ensure that when the OFWs return home, there is a new and sustainable source of income.
The resulting outcomes of triple bottom-line that ASKI Global Ltd. expects include:
1. Productive use of remittances for setting up family enterprises resulting in the development of SMEs in the country;
2. Generation of local jobs as a result of the building up of small and medium enterprises;
3. Strengthening of families by fast tracking OFW’s return to the Philippines.
Visit ASKI Philippines website: http://www.aski.com.ph/
The ASKI Philippines BWTP Network Member Page: http://www.bwtp.org/aski.html
Posted by admin on 27 July, 2010
We are pleased to announce the winners of the BWTP Research Competition. The research competition is funded as a part of the Citi Network Strengthening Project. The aims of the competition are to:
Provide the opportunity for researchers, consultants, skilled practitioners or the research departments of stakeholders institutions (such as MFIs) to contribute to the discussion on financial inclusion in Asia;
Provide contributions on the issue of financial inclusion for the inaugural BWTP Network Bulletin;
Contribute to the discussion on financial inclusion at the Asia Microfinance Forum 2010;
Provide opportunities for local researchers/consultants to contribute to BWTP Network activities.
The winners of the competition and their respective research are:
1. Mr. Aloysius Gunadi Brata, Dept. of Economics, Atma Jaya Yogyakarta University, Indonesia:
- Financial Inclusion for Youth Entrepreneurs in Creative Industry: a case of youth entrepreneurs in clothing industry in Yogyakarta, Indonesia
2. Mr. Arjun Kashyap, Intellecap, India:
- How Microfinance Institutions Can Harness MIS for Financial Inclusion
3. Mr. Imran Nafer and Ms. Ranabahu R.M.N.U, IDEAs Consultancy (pvt) Limited, Sri Lanka:
- Case studies: Analysis of Community Based Organization model in achieving the double bottom line
4. Mr. Md. Wakilur Rahman, College of Economics & Management, NWSUAF, Yangling, Shaanxi, China; Bangladesh Agricultural University, Mymensingh, Bangladesh:
- Sustainability of NGO Type Microfinance Service Providers in China: Outreach and Regulatory Environment
5. Dr.M.Anjugam, Centre for Agricultural and Rural Development Studies, India:
- Impact of SHG – Bank Linkage programme on Financial Inclusion – Rural Household Study in Tamil Nadu
6. Irma L. Cosico, ASKI Global Ltd., Singapore:
- A New Model of Transformation: Harnessing on the Potentials of OFWs Through Entrepreneurship.
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Nirdhan Utthan Bank Limited, “the bank for upliftment of the poor” is a microfinance bank established in November 1998 under Company Act of Nepal 1997 (now Company Act 2006). Nepal Rastra Bank, the central bank of Nepal granted a license in April 1999 to undertake banking activities under the Development Bank Act 1996. It started its formal operation from July 1999. Now, operated under Bank and Financial Institution Act 2006, Nirdhan Utthan Bank (NUBL) provides microfinance services such as Loans, Deposits, Microinsurence and Remittance services to poor families of Nepal. The lending methodologies are individual lending based on Grameen Bank, Bangladesh model and group lending based on Self-help Group model through few specified branch offices.
Though, legally established as a company in 1998, the operation of NUBL is a continuation of microfinance services provided by an NGO called “NIRDHAN” which was providing microfinance services since March 1993. The story behind the establishment of “NIRDHAN” starts from 1986 when Dr. Harihar Dev Pant, the Chief Executive Officer of NUBL/Executive Chairman of “NIRDHAN” (then senior officer with central bank of Nepal) visits Grameen Bank in Bangladesh. The visit inspired him to launch microfinance program in Nepal resulting the birth of “NIRDHAN” or “people without money” in 1991. NIRDHAN began its microfinance operation in March 1993.
NIRDHAN, as an NGO has a limited recourses and capacity to satisfy unmet demand of poor people in different part of the country. This results the establishment of Nirdhan Utthan Bank Limited, NIRDHAN being a lead promoter. In July 1999, NIRDHAN transferred all microfinance operations to Nirdhan Utthan Bank. NIRDHAN created Nirdhan Utthan Bank Limited for the following strategic reasons:
Development banks are supervised and regulated by the Central Bank, which will enforce banking standards;
A development bank can have access to different source of funding enabling it to satisfy financial need of poor people;
The bank can lend to a wider range of clients, including micro entrepreneurs graduated out of the bank’s regular clientele. Further, a bank can accept collateral for potentially larger and diverse loan products.
Visit Nirdhan Utthan Bank Limited website: http://www.nirdhan.com/index.php
The Nirdhan Utthan Bank Limited BWTP Member page: http://www.bwtp.org/nirdhan.html
Posted by admin on
Berendina Microfinance Institute (GTE) Ltd
The Berendina Microfinance Institute (GTE) Ltd, known by its acronym “BMI” commenced its operations in May 2007 as a successor to the microfinance program that was under Berendina Foundation. BMI follows a credit plus approach providing both credit and business development services in both the rural and estate sectors. While Berendina Foundation conducted its microfinance activities within a charitable approach, BMI follows best practice in Micro Finance services as advocated by CGAP and the industry.
It is the aim of BMI to build a sustainable micro finance organization by providing financial and business development services to the poor and the poorest entrepreneurial communities, in a productive and efficient manner. Through these means, it aims at reducing dependency on external funders and other donors.
There are three programs under BMI.
• Core Microfinance Program;
• Business Development Services
• Rebuilding Livelihoods through Sustainable Employment Project
Visit Berendina Microfinance Institute (GTE) Ltd website: http://www.berendina.org/index.html
The Berendina Microfinance Institute (GTE) Ltd BWTP Member page: http://www.bwtp.org/berendina.html
Lao PDR Microfinance Working Group (MFWG)
The Lao PDR Microfinance Working Group (MFWG) was established in May 2007 by a group of microfinance practitioners committed to sharing experiences and working together to promote a coordinated approach to sustainable microfinance that works towards international good practice principles in the Lao PDR.
The MFWG supports the poverty alleviation efforts of the Government of the Lao PDR, in particular those outlined in the National Growth and Poverty Eradication Strategy (NGPES) which include movement towards a market-oriented economy, financial sector reform specifically of microfinance providers, client-driven microfinance service development, MFI autonomy including that of interest rate setting, the creation of a microfinance forum and legal space for sustainable microfinance institutions.
Through the MFWG, members will learn from one another about successful and unsuccessful approaches to microfinance in the Lao PDR, consolidate sector information on the microfinance website for the Lao PDR, raise awareness about microfinance, maintain an email discussion and announcement list and facilitate dialogue with government agencies and banks for development of the microfinance sector.
Visit Lao PDR Microfinance Working Group website: http://www.mfwglaopdr.org/
LOLC Micro Credit Ltd (LOMC)
Since 2003 the LOLC Group has been carrying out microfinancing activities in Sri lanka and LOLC Micro credit Ltd (LOMC) was established in 2009 to accelerate & expand the business. LOMC is a subsidiary of LOLC PLC with FMO (The Netherlands Development Finance Company) owning a 20% stake of LOMC as its shareholder. Operating under the brand name LOLC Isuru Diriya, LOMC already has a far reaching network of branches in Sri lanka. The company is among the largest microcredit providers in Sri Lanka and works in agriculture centric districts, providing individual as well as group loans for micro entrepreneurs. LOMC is currently the largest agriculture implements financier in the country and the only microfinance provider with strategic partnership with SL Post to deliver microloans through Post Offices.
Visit LOLC Micro Credit Ltd (LOMC) website: http://www.lolc.com/
The LOLC Micro Credit Ltd (LOMC)BWTP Member page: http://www.bwtp.org/lolc.html
Nerude Laghubitta Bikas Bank Ltd.
Nerude Laghubitta Bikas Bank Ltd. is registered under the “Company Act 2063″ with the Company Registrar’s office of Nepal as a micro-finance development bank in Biratnagar, Morang district. The registered code number of this organization is 989/063/64 dated March 4, 2007 (2063.11.10 Bikram Era). Nerude came into existence in May 23, 2007 (2064.02.09) with the establishment of its central office at Biratnagar in Eastern Region of Nepal. The Nepal Rastra Bank (NRB) has given the license for operating the transactions. The license number is “D” 12/063/64.
Nerude Laghubitta Bikas Bank Ltd., established in 2007 with the objective of uplifting the socio-economic status of rural poor, has initiated micro-financial services and community development activities to female group members by replicating the basic approach of Grameen Bank Financial System of Bangladesh (GBFS).
Visit LOLC Micro Credit Ltd (LOMC) website: http://www.lolc.com/
The Nerude Laghubitta Bikas Bank Ltd. BWTP Member page: http://www.bwtp.org/nerude.html
VisionFund (Cambodia) Co. Ltd.
VisionFund Cambodia (VFC) seeks to help these entrepreneurial poor get a start in business through the provision of small loans, with the goal of breaking the cycle of poverty. Their work extends and complements World Vision’s ministry by focusing on poor families to establish secure, healthy and dignified lives.
VisionFund provides the poor with financial choices at reasonable interest rates using three loan methodologies, namely: Community bank, Solidarity group and Individual lending.
VFC measures its success in moving its clients to the next economic tier. These tiers are categorized as the poorest of the poor, poor, and the not-so-poor. In a 2004 study by World Vision Australia it clearly showed VFC’s level of success with an 80% to 83% reduction in the poorest of the poor at the client level for Village Banks operating for 2-3 years and a 70% increase in not-so-poor at community level. With over 79% of VFC’s clients being women the success of this model also has led to positive social changes with:
• a reduction of domestic violence;
• an increase in women’s rights, and
• improvements in food supply and quality.
Visit VisionFund (Cambodia) Co. Ltd. Website: http://www.visionfund.com.kh/site/
The VisionFund (Cambodia) Co. Ltd. BWTP Member page: http://www.bwtp.org/visionfund.html
Posted by admin on 28 June, 2010
BWTP Network Program Manager Jamie Bedson was invited to a meeting of the Lao Microfinance Working Group (MFWG) to launch ‘Lao PDR Microfinance Industry Report’ in Vientiane, 18th June 2010. The MFWG (profiled in last month’s newsletter), is an informal association of microfinance stakeholders in Lao, but is growing in response to the various challenges facing the industry. The country is in a unique position as the market and supportive policy/regulatory environments exist (including deposit-taking), but there is a large short-fall in capacity and human resources. The BWTP Network looks forward to a long collaboration with the MFWG on the issue of network strengthening and working to increase financial inclusion in the region. The Lao PPDR industry assessment, as well as recently published reports for Thailand and Myanmar, is available here.
Posted by admin on 27 June, 2010
In recent years, authorities in the Thai Nguyen have worked to overcome difficulties of a challenging landscape to bring the clean water through forests and over mountains to many rural areas, particularly to the communes of ethnic minorities. Bringing clean water to villages has been significantly contributed to by the Vietnam Bank for Social Policy’s (VBSP) loan from preferential credit sources, which not only promotes local economic development but also clean water awareness in mountainous communes.
According to the Rural Water Supply and Sanitation (RWSS) Center of Thai Nguyen, the highlights in providing safe water for living in the province recent times is the priority of the People Committee to the construction of some projects to provide safe water in the locality of the isolated, remote, mountainous areas – where ethnic minorities live densely. Since the safe water supplying station were built, the living habits of many families has improved, including the reduced use of low hygiene water from wells or spring.
At Binh Long commune, Vo Nhai district, where Tay, Nung, Dao, Cao Lan ethnic groups of Tay, Nung, Dao, Cao Lan reside, water problems have been overcome by water supply works in the province which have operated since mid-2009. Over 200 households have received preferential credit loans to install water pipes in their homes. “ We are using safe water sourced from the commune water supply works. Since it started operating, we have been consuming about 10m3/month at the price of 3.500đ/m3, which is a reasonable price” said Ms. Nguyen Thi Trinh – resident of Cho hamlet in Binh Long. It is reported that the water quality is sufficient for families to consume daily without having to use filtering devices.
Mr. Luong Hong Vinh, an Agribank and VBSP client, has accessed a loan to improve access to clean water. For Mr Vinh and his family, the dry season resulted in lack of clean water for the standard living and drilling a well required reaching 30 – 40m to ensure clean water. Prior to accessing the loan, Mr Vinh’s family had to travel a long distance through mountains to obtain water for use. Now however, safe tap water is available to the family.
The Director of Thai Nguyen VBSP Branch, Mr. Nguyen Van Hao said: “This results achieved by the foundation of the RWSS program for the local rural and mountainous area, are the result of close cooperation between the local community, VBSP and various governmental levels and sectors. Also, it is the result of the effective communication of RWSS credit policies to the farmers and rural areas, for all people to understand and comply with, along with that is the allocation loans to each district, from district to each commune”.
So far, Thai Nguyen provincial branch of VBSP has disbursed over VND 31 billion for RWSS programs, including investment priorities for the mountainous areas where ethnic people live.
From now until the end of 2010, Thai Nguyen province aims to provide a further 6% of rural population with safe water, to raise the rate of households using safe water from 84% to 90%. VBSP continues to play an important role to implement preferential loan program to help improve the quality of life of ethnic minorities in mountainous provinces of Thai Nguyen.
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Source: Article from the Daily Mirror, Sri Lanka, Saturday 5th June 2010.
LFSUS Bankers forum on Financial Inclusion: Focusing on Low Income Housing Finance was a unique event organized to bring together local and foreign banks in Sri Lanka to introduce financing affordable housing as a growth opportunity, through their corporate commercial responsibility to the society.
In addressing the forum Mr. Chandula Abeywickrama, Chairman of LFSUS, shared “Today the Growth opportunities for commercial banks are from outside their comfort zones, as the traditional markets shrink. Affordable Housing for the low income groups is much more than providing shelter. It provides them an opportunity to Enhance Literacy, Healthy living and Income generation.”
Though there is a significant progress made in the development of sustainable micro entrepreneur creation, through greater financial inclusion, financing affordable housing yet remains a non-commercial interest to banks. Financing affordable housing for low income groups by and large remains the responsibility of states, governments and international bodies like UN HABITAT as it fails to get the necessary attention of financial institutions.
At the bankers Forum organized by LFSUS, a company limited by guarantee established to Mobilize resources for financing country wide MFIs in affordable housing initiatives, operates independently as a Credit Enhancement facility encouraging both Public and Private sector investments to finance MFIs in Sri Lanka.
New Market opportunity to commercial bank through a risk sharing Credit Enhancement mechanism (guarantee) will be offered to commercial banks to step in to this challenging corporate commercial responsibility. Further Mr. Abeywickrama stressed Commercial Banks to look at financing affordable housing for low income groups as an investment. If the banks can set in motion, a program to progressively graduate low income groups through financing affordable housing, they create future value customers. Initiating a financial education concurrently can build a group of customers who would be more responsible and accountable in their dealings with the banks.
The Chief of Urban Finance Division at UN Habitat from Head Quarters was also present at this forum. Ms. Barbara Hewson shared her long withstanding experience in commercial banking assured commitment to the LFSUS project supported by UN Habitat. In addressing the forum she added Loan Products based on Low-Income Market Needs can be an effective tool to leverage public and private investment and community savings. Mr. Karunaratne from Central Bank and Mrs. Padma Ratnayake also addressed the forum and enlightened the audience.
Finally Mrs. Ayanthi Gurusinghe, the CEO of LFSUS, said that she looks forward in following up on the keen interest shown by the commercial banks and would ensure that the MFIs introduced by LFSUS will have proven track records creating an opportunity to share risk with all stakeholders. Many successful microfinance institutions by their many initiatives and models have demonstrated to the world the potential held by the poor if presented with an opportunity to upscale will make them Bankable.
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SANASA Development Bank is a unique bank committed to uplifting the standards of living for low income Sri Lankan families with its range of micro finance activities. The ownership of the bank is confined to the SANASA Movement. The clientele of the bank, among others, consists of farmers, fisherman, vendors and laborers and small business owners, making us truly a people’s development bank. Feel welcome to explore the links below and in order to learn more about our institution.
SANASA Development Bank, Ltd. (SDBL) has for a second consecutive year remained one of the most high-performing microfinance institutions in the world as rated by the 2009 Mix Global 100. SDBL has experienced 91.7% growth in borrowers, with a total number of 179,806 borrowers in year 2009. SDBL has proven to be successful in helping to reduce poverty in Sri Lanka with its outreach percentile of 91.5% and a market penetration of 3.4%.
Serving the poor may commonly be viewed to be risky and expensive but Sanasa Development Bank has been efficient in minimizing costs to its clients as indicated by an efficiency percentile of 63% in 2009 Mix Global 100. With regards to its profitability, SANASA Development Bank has continued to perform well and stable with its financial condition as measured by its Operating Self Sufficiency rate of 118%.
SANASA Development Bank, Ltd. has 60 branches and extension centers strategically located nation-wide in Sri Lanka and renders financial services that mostly cater to the needs of farmers, fisherman, vendors, laborers and small business owners. These financial services are designed for family and business banking such as: savings, credit, investments, pawning and microfinance. It also has several programs and projects for community development, namely: institutional strengthening and social programs, capacity building, housing and environmental projects.
To learn more of SANASA Development Bank’s profile and operation, please see SDBL’s Annual Report 2009 or visit http://www.sdb.lk/.
Please click here for the 2009 Mix Global 100 publication.
The SANASA Development Bank at the BWTP Network (http://www.bwtp.org/sanasa.html) and Mix Market. (http://www.mixmarket.org/mfi/sdbl)
Posted by admin on 18 May, 2010
Mounting cases of multiple loans and teetering non-performing loan (NPL) ratios have put the buoyancy of Cambodia’s microfinance sector into question: which mechanisms will ensure the sector’s recuperation from the global financial crisis and, for the long haul, its sustainability? Microfinance stakeholders have responded by highlighting savings deposits as a tool to strengthen the sector as it provides clients with an alternative savings channel while generating a domestic source of loan financing. The benefits of a savings account of any size and type are sizeable, but one of the major challenges lies in encouraging clients to open an account and even more so, to keep it active.
As of December 31st, 2009, the sector in Cambodia recorded 878,559 borrowers with a loan outstanding balance of 1,247,774 million KHR (300 million USD) vis-à-vis 126,099 depositors with a deposit balance of 40,457 million KHR (9.71 million USD) . These figures alone posit that the sector has not yet managed to capture deposits from the public as effectively and efficiently as it should: the result of inconsistent and isolated savings mobilization efforts. However, the conditions for a sector-wide savings mobilization campaign in Cambodia are favourable, including a latent demand for a formal savings mechanism, an enabling legal framework, and government support. As the sector’s coordinating body, Cambodia Microfinance Association (CMA) is set to take advantage of the enabling environment to launch a savings mobilization campaign in function of its greater objective to promote financial literacy amongst Cambodians.
High Saving Propensity: TA4755-CAM: Developing Deposit Services in Rural Cambodia
In 2005, the Asian Development Bank (ADB) launched a technical assistance, TA4755-CAM: Developing Deposit Services in Rural Cambodia, for the Royal Government of Cambodia (RGC) to address the narrow selection of sophisticated savings products. As a component of the TA, the ADB partnered with the Cambodia Institute of Development Study (CIDS) to conduct a national study on the saving habits of poor people in rural and urban Cambodia. The study drew two significant findings on saving habits in Cambodia . First, most rural Cambodians store their savings in kind, i.e. gold, land, livestock, or simply under their pillows, all of which stand the risk of theft or devaluation. Second, many of the study’s participants expressed interest in securing their disposable income in formal savings accounts, however most lack access to or are uninformed of the savings options available and their respective benefits. In relation to the second finding, the ADB partnered with CMA to produce It’s Our Money We’re Talking About, a 30-minute video spot on savings mobilization wherein the hostess presents profiles of local Cambodians and their informal savings habits . She brings all of the featured subjects together to inform them about the opportunity for opening a savings account with a MFI. Finally, she concludes with an interview with a NBC representative who asserts that public deposits are protected under the NBC’s regulation and supervision. Although lack of funding and coordination stopped the video short in its tracks from having airtime, CMA accredits it as a stepping stone in mobilizing savings.
Legal Framework: PRAKAS on Licensing of Microfinance Deposit Taking Institutions
On December 13th, 2007, recognizing the value of voluntary deposit services for the Cambodian microfinance sector, the NBC issued the PRAKAS on Licensing of Microfinance Deposit Taking Institutions to authorize eligible MFIs to collect deposits from the public. Although the strict prerequisites stipulated in the edict have made applying for a deposit-taking license a tedious process, including a minimum length of sound operation for at least 2 years and a minimum paid up capital equal to 10,000 million KHR (2.5 million USD), they ensure depositor protection. To date, the NBC has issued deposit-taking licenses to four MFIs, two of which have experienced a marked increase in their deposit balances compared to their counterparts unequipped with a savings license (the other two MFIs have just recently received their licenses, effectively making it difficult to measure any change). In early 2008, just prior to being granted a deposit-taking license, Amret and SATHAPANA held 3,522 million KHR (845,618 USD) and 5,609 million KHR (1.35 million USD), respectively. As of December 31st, 2009, their deposit balances grew to 12,209 million KHR (2.93 million USD) and 12,738 million KHR (3.06 million USD), respectively. The surge in domestic capital was timely as foreign investment, which financed 80% of the sector’s loan portfolios prior to the global financial crisis , has significantly curtailed. In addition, domestic deposits provide MFIs with a greater shield from foreign exchange rate risks, thereby making the cost of borrowing more affordable.
Government Support: Financial Sector Development Strategy 2006-2015
The Financial Sector Development Strategy for 2006-2015 (FSDP 2006-2015) delineates the goals and objectives for the development of the financial sector in Cambodia based on the recommendations of a government working group comprising representatives from the NBC, the Ministry of Economy and Finance (MEF), the Ministry of Commerce (MoC), and development partners. One of the priorities in the document appropriated to the microfinance sector is to establish a funding strategy for MFIs which is independent from international donors or the NBC. It further suggests that microfinance operators consider local deposits as a source of loan financing and accordingly, assigns the supervision and regulation responsibilities to the NBC . The development of the FSDP 2006-2015 provides a valuable template for other industries in the region, as the strategy’s recommendations were produced as a result of the synergy of the diverse stakeholders of Cambodia’s financial environment within which MFIs operate.
CMA’s Objective: Raise Public Awareness
A public awareness campaign on savings is a recommended tool to increase MFI deposit balances, which will in turn provide a stronger shield from the impacts of inevitable financial shocks. Therefore, CMA is currently searching for funding opportunities to launch a savings mobilization campaign. CMA members have recommended using the ADB video spot as a model for future savings mobilization materials but steering towards more popular communication mediums, such as newspaper advertisements or radio shows. CMA will also emphasize the current legal framework to inform the public that measures to protect deposits have been put in place. In addition, CMA will draw from the established government support to execute the savings mobilization initiative.
In summary, the Cambodian poor have a high propensity to save and will do so soundly with increasing opportunities to make deposits, and with legal backing and government support, increasing MFI capacity to collect more savings will ultimately promote the sustainability of Cambodia’s microfinance sector.
Thanks to Jacqueline Tevy Foelster, Cambodia Microfinance Association Volunteer, for this summary.
________________________________
i Cambodia Microfinance Association. Cambodia Microfinance Operation (December 31, 2007 & 2009). Raw data. Phnom Penh. 23 Feb. 2010.
ii Chandararot, Kang Ph.D. and Liv Dannet. National Survey on Saving Needs and Opportunities for Poor Households in Cambodia. Asian Development Bank and Cambodia Institute of Development Study. March 2007.
iii Khmer Mekong Films (Producer), CMA (Commissioner), & ADB (Financial Support). It’s Our Money We’re Talking About. 2007.
iv Chou Vannak, Deputy Director of the Financial Industry Department, Ministry of Economy and Finance. Personal interview. 17 December 2009.
v Royal Government of Cambodia. Financial Sector Development Strategy 2006-2015. 26 March 2007.
