The collective journey
towards a decent, happy life
Presentation at StudentsxCEOs Summit
Bandung, June 4, 2011
Koperasi KASIH Indonesia | 2
Our vision
SOURCE: KKI
‘KASIH’ (LOVE) is the foundation of what we do
To help as many people as possible to exit
financial difficulties and achieve a decent
and happy life. Financial difficulties include
having low income, lacking of financial
management capability and access to capital
Koperasi KASIH Indonesia |
We chose Cilincing – one of the poorest area in Jakarta – as our pilot project
North Jakarta
Poor household location splitPercent (100% = 67,104 households)
• Sub-district Cilincing contributes ~1/3 of poor
households (~19,000) in North Jakarta
• Kalibaru in Cilincing is one of the poorest
kelurahan in North Jakarta, with ~8,400 poor
households (83% from total)
Jakarta map
SOURCE: Republika.co.id (Nov 26, 2010), KKI
Cilincing
Koperasi KASIH Indonesia | 4
To date, we have been supporting 156 borrowers; They are typically a mother of ≥ 2 children, rent their house and earn monthly income of IDR 200-400k/person
SOURCE: KKI
To date, we have been supporting 140 borrowers …
… With following typical traits
• Woman aged 30-50
• Married with ≥ 2 children, mostly
still in school
• Husband has low income or
jobless
• Rent a house/room
• Family income of IDR 200-400k/
person/month
• Own a TV, but no motorcycle/
refrigerator/ washing machine
• Had borrowed from loan shark
• Do not have long-term
savings, only arisan* or
Ramadhan savings
Loan usage splitPercent (100% = 156)
% of client with income < 2 $/day : 96%
Total disbursed loan : IDR ~90 million
Average loan/client : IDR ~580,000
Clients’ savings collected : IDR ~7 million
Non performing loan : 0%
Portfolio at Risk (PAR>30) : 0.7%
Clients at Risk : 1 person
Borrowers’ gender splitPercent (100% = 156)
Other statistics
* Arisan is a group-based saving system, where one stored money regularly within a certain period and get the result in bulk, once within aperiod
97%
3%
Women
Men
Achieved without joint responsibility
Koperasi KASIH Indonesia |
Ibu Ndih is an example of our typical client
▪ Aged 50, married with 6 children*
▪ Sells cookies, cooking tools, collect plastic trash at free time
▪ Working 7 days/week, sleep 3 hours/day (from 23.00 – 01.00)
▪ Husband works as freelance construction worker
▪ Rent a house, 6 x 6 meters
• Family income of IDR 200 – 300k
/person/month
• Only own a TV, no motorcycle/
refrigerator/ washing machine
• Participating in small social lottery
(‘arisan’) and Ramadhan savings
* 4 married, 2 still lives with her; She also cover some costs of her grandchildren
5SOURCE: Jakarta Globe, KKI
Facts on Ibu Ndih
Koperasi KASIH Indonesia | 6
KKI holds a basic belief that giving loan is helpful but insufficient to really help someone to exit poverty. Education and other supports are also essential.
SOURCE: KKI
Financial
• Loan paid
weekly
(majority),
daily and
monthly
• Savings facility
Education
• Savings-
related
• Business-
related
• Lifestyle &
habit-related
Supports
• Bulk
purchasing of
basic needs
• Incidental
supports, e.g.,
after a fire
Current assets + income + capability + habit + beliefs
Decent & happy life for all ☺☺☺☺
Better income + capability + habits + beliefs = more assets & opportunities
1 2 3
Dream
Goals
Pillars and
foundation for
goals attainment
Starting point
Continuous motivation and beliefs internalization
Koperasi KASIH Indonesia |
We applied a multi-layered risk management system
Control applied
• Applicant’s character is checked during survey. Any doubt over a
person’s honesty will lead into application’s rejection
• Survey result is then checked with current borrowers. Concern from
most borrowers will also lead into application’s rejection
• KKI started to apply joint responsibility (tanggung renteng) from the
141st borrowers onwards. Dishonest people might not get a group
• It covers risk from (1) cash flow problem and (2) default loan, while
forcing members to collaborate and support each others
• Discipline applied in all interaction with KKI will help to control
subconscious part of borrowers to repay their loan
• Proximity with Field Officers and branch’s staffs also reduces
possibility of defaulting
Selection control
Individual control
Group control
Intangible control
• KKI provides many incentives (increase in loan amount, chance to get
housing and educational loan, various prizes and opportunities and
some sanctions (legal process, family ban and locking of access to
other microfinance institutions)
SOURCE: KKI
Koperasi KASIH Indonesia |
Some of KKI moments ☺☺☺☺
SOURCE: KKI
Pre-disbursement training Disbursement
Games in 1st weekly meeting Winners got prizes!!!
8
Koperasi KASIH Indonesia | 9
We are building a solid foundation in the 1st year to enable future acceleration
SOURCE: KKI
Focus
Year 1
Year 2
Year 3Building a solid foundation
2nd pilot: Rural poor areaFull roll-out: Let’s go!
• Stress-test systems, products, policies and curriculum
• Identify and develop talents
• Establish legal entity
• Raise funding
• Develop 2nd office in 1 rural poor area
• Raise funding
• Identify and develop talents
• Improve systems further
• Open 3rd and 4th offices• Raise funding
• Develop strong talent pool
• Improve systems further
▪ 700 borrowers
▪ 99% performing loan
▪ 1% PAR at risk > 30 days
▪ IDR 50mn savings collected
▪ IDR 700mn funding raised
▪ 8 full-time field officers, 1 admin and treasurer hired, and independently working
▪ 5,000 borrowers in the end of year 3
▪ 98% performing loan
▪ Other targets will be defined in the end of year 1
Target
Koperasi KASIH Indonesia | 10
Several thoughts on MFI
Koperasi KASIH Indonesia |
3 words to summarize my opinion on Indonesia’s microfinance industry:BIG, FRAGMENTED and EXPLODING
BIG
• The pie size is just too big to
be served by one player; It is
available across Indonesia
• UKM Center FE UI reported on
2008 that there are ~50 million
customers that still need
microfinance support
FRAGMENTED
• There are various players with
massive quantity: credit union,
BMT, venture cap., foundation,
BPR, commercial bank
• Biggest today is MBK Ventura
with 250k clients
• Most of MFIs took form of credit union (Koperasi Simpan Pinjam) or BMT
• They mainly serve local needs, only some has national scale, making the market fragmented
Description Reason/source
EXPLODING
• Many new, strong local and
foreign players are entering
the market, e.g., Bakrie Group,
Bank Mandiri, Microinvest
• This is driven by the wide
“white space” available, and
potential for good profits
SOURCE: Personal opinion
Koperasi KASIH Indonesia |
Interested in this industry? There are multiple ways to get in. Your choice!
Description
• Options: World Bank, MICRA, Care International, others
• Why it makes sense: good to get the overview of microfinance industry and how NGOs on this area work
• Why other options might be better: Less direct learning on the business aspects
Join NGOs
• Options: Commercial banks (Danamon, BTPN, Mandiri), BPRs, Venture Capital (Mitra Bisnis Keluarga), Cooperatives (Koperasi Dian Mandiri, Koperasi Mitra Dhuafa), BMT (BMT Ventura, owned by Dompet Dhuafa), foundation (Yayasan Mitra Usaha)
• Why it makes sense: good direct learning on how to do the business; Joining commercial banks means better salary ☺
• Why other options might be better: Joining commercial MFIs might mean your activities are driven by profit-making mindset all the time
Join existing MFIs
• Options: YOURS ☺
• Why it makes sense: Good learning on how to start and manage your own business and about microfinance industry
• Why other options might be better: setting up own business means higher risk and commitment, while being able to shape things the way you want and potentially be more satisfied in many ways ☺
Create your own
SOURCE: Personal opinion
Koperasi KASIH Indonesia |
Wanting to start your own MFIs? Couple of tips from my 4-month experience
Description
• … that balances the opportunity (demand for microfinance services) and your resources (e.g., your knowledge and comfort with the area, who you know in the area, etc.)
Pick the right place …
• … including the following:
� Get to know the area, e.g. to find types of product that are needed, characteristic of the people in the area, people whose support you will need to start your business
� Get to know this business, e.g., what are possible product types, what are the risk management system, etc.
Do the homework …
• … focusing on what you must have, not everything, starting from long-term objectives, to 1st year objective, combine it with your SWOT to define your strategy. Then translate your strategy into a product design and operational system and its corresponding tools. Last, prepare basic financial system to capture what happens
Prepare pragmatically …
SOURCE: Personal opinion
• Execution capability is what truly sets one MFI from the others, as systems are widely known and tools are widely available
• So, set your heart for the journey (including all the challenges and excitements), and do it!
Set your heart, and EXECUTE!
Koperasi KASIH Indonesia |
Last 3 cents to be remembered
SOURCE: Personal opinion
• In microfinance industry, you can make money while
helping people. Decide wisely between the two
• Indonesia’s microfinance industry will grow rapidly in
upcoming years. It needs Indonesia’s best talents.
Considering it as a career option might makes sense
• Going back to the 1st point, remember that microfinance
industry dealt with poor people – fellow Indonesians
that are much less-fortunate. They need your help to
achieve a better life. NEVER FORGET this when you
are in the industry. Help yourself and help them, too.
Koperasi KASIH Indonesia |
THANK YOU
SOURCE: Personal opinion
Koperasi KASIH Indonesia | 16SOURCE: KKI
APPENDIX
Koperasi KASIH Indonesia | 17
Our team combines people with diverse backgrounds, expertise and resources, which has enabled us to effectively tapped into the market
SOURCE: KKI
Petrus Partono*
▪ Role: Commissioner
▪ 38 years old
▪ Catholic church’s brother
▪ ~13 years on people empowerment in Cilincing, in areas of education, health, elderly support, employment creation, housing support
Leonardo Kamilius
▪ Role: Managing Director
▪ 25 years old
▪ Bsc. in Accounting, University of Indonesia, class of 2004
▪ 2.5 years with McKinsey & Company, Jakarta, focusing on operation transformation and strategy
Lucyana Siregar
▪ Role: Director
▪ 25 years old
▪ Bsc. in Accounting, University of Indonesia, class of 2004
▪ 0.5 year in accounting division, Sinar Mas Land
▪ Involve in various social activities in university
Full-time Part-time
Yuswati
▪ Role: Field Officer
▪ 39 years old
▪ High school graduate
▪ Previously worked in institution run by Sisters, making bags from plastic trashes
Denni Pasaribu
▪ Role: Field Officer
▪ 20 years old
▪ High school graduate
▪ Previously worked in clothing manufacturer
Rosmida
▪ Role: Public Relation
▪ 57 years old
▪ Health cadre for the last 15 years
▪ Has extensive network in Cilincing
Koperasi KASIH Indonesia |
Yel – Yel Koperasi KASIH Indonesia
Kami pasti bisa
Mencapai KESEJAHTERAAN
Dengan jujur, disiplin, usaha keras dan doa
Kami akan berjuang
Bekerja dan menabung
Demi keluarga tercinta
Kami PASTI, PASTI, PASTI BISA!!!
18SOURCE: KKI
We BELIEVE that our vision is there to be achieved
Koperasi KASIH Indonesia | 19
Most of KKI’s systems were adopted from Grameen Bank, added with some new ideas and necessary modifications
SOURCE: KKI; Grameen Bank guideline
Description Difference with GB model
Selection
• KKI uses Poverty Index assessment to determine whether someone can get a loan or not
• KKI uses its own version of assessment, built from different types used in other institutions
Education
• KKI gives continuous training on different topics and leverages various methods stressing on practice to form the good habits
• Not enough information
Risk management
• KKI provides many incentives for good members and applies legal action to defaulters
• Collective responsibility will be applied in in upcoming batches*
• Early version Grameen Bank applies collective responsibility; Current version does not
• Some incentives used are taken from Grameen model
Impact measurement
• KKI measures 2 lead and 2 lag indicators: Increase in income and savings (lead) and house ownership and ability to send children to university (lag)
• Not enough information
* Thorough assessment shows benefits exceeds cost by far; Method picked will be the one thatts least harmful to members
Koperasi KASIH Indonesia |
Let us know if you have inquiries or want to join our effort ☺☺☺☺
20SOURCE: KKI