Unni Beate Sekkes æ ter Mikrofinans Norge/soon PhD student at RUC 1 Presentation of the Norwegian...

Unni Beate Sekkesæter Mikrofinans Norge/soon PhD student at RUC

1

Presentation of the Norwegian and US model of microfinance

Organisation

Bank

Programme

Loan Fund

Centre / Network

Loans

Centre / Network

Peer Peer groups groups

Peer Peer groups groups

Mic

ro e

ntr

ep

ren

eu

rs

Lender1

2

3

4

The lender may be:

1) The programme with an integrated loan fund

2) An external loan fund

3) A bank

4) The network group (Norway)

Unni Beate Sekkesæter 22/11-2011

First groups were formed in 1997 in Oslo for mainly immigrant entrepreneurs – still 90% immigrants

Based on the peer group lending methodology Average loan € 4000 Interest: 6%

◦ 200 persons have been part of network groups and started saving

◦ 3 loan products1. Peer group loans for start up and businesses with less

than 6 months experience + Group loans for existing businesses

2. Individual loans for existing businesses 3. Linkage loans from banks – with or without partial

guarantee from the project


Peer groups are self managed and responsible for ◦ Reviewing loan proposals ◦ Giving loans from the group’s loan fund◦ Keep up the saving scheme◦ Ensuring that members repay on time◦ Function as bank and collection agency

Share experience of running business Mutual support & training

◦ Select topics for training◦ Join courses financed by the project/interest

earnings of the group

Network Credit: Self managed groups


Persons who want to start their own business Persons who have already started their own business – but need

more financial capital Persons with minority background who came to Norway with a

lot of resources and knowledge ◦ Often highly educated, but without possibilities of getting their

education recognised ◦ Often employed in temporary positions or part time jobs ◦ Often overqualified for the jobs they are doing

Persons who have been dependent on some sort of public assistance for a while ◦ Those who have a willingness to get out of dependency

on public assistance and make their own livelihood


A Local .Women’s Microfinance Programme in Hordaland County,Norway – was part of the Equal Credit EU project

Evaluation looked into these issues:The member/business profileThe programme outcome and access to business finance Stakeholder relations

Survey questionnaire (29 responses) = 50% of programme participants

5 focus groups

7 in depth interviews with employees6 months process – cost: £8000External consultant (student – less expensive)


Evaluated by Student Pauline Chancellee, France

Evaluation looked into these issues:The MFN member/business profile/characteristics

measures the economics and social effects of the microfinance programme services on its customers.The programme outcome and access to business finance

Survey questionnaire (17 responses)

2 focus groups

in depth interviews with management/othersExternal consultant (student)


Non-business sources of credit were used:◦ home equity loans: HNC -21% MFN – 18%◦ personal loans HNC -7% MFN - 59%◦ loans from friends and family HNC - 21% MFN

18%◦ In HNC 18% are now using bank credit for their

businesses whereas 29% did before◦ In MFN 18% are now using bank credit for their

businesses whereas 12% did before 24% of HNCs and 6% of MFNs customers received

loans from other business development programs (Innovation Norway)


50% of HNC and 41% of MFN businesses are home-based

44% have income from a job in addition to their business

37% for HNC and 70% for MFN are single head of households

The HNC entrepreneurs with established businesses worked 32 hours per week on average

Legally registered businesses increased from 52% to 65% for HNC reflecting the increasing “formalization” of their enterprises

MFN members now prefer to keep their businesses as separate as possible from their private economy. 82.4% are now using a separate bank account for their businesses whereas 30% did before,

46% reported substantially improved” record keeping

A total of 78% of the respondents had started their business at the time of the survey, an increase from 52% at the time of joining

Last three

monthsBefore

Completed a course/training module provide by MFN

1[1] 13

Received help from a NC sponsored advisor 4 12

Referred a customer to a NC member 6 10

Provided business advice/other help to a NC member

11 14

Spoke with NC staff 15 16

Sold my product together with a NC member

5 5


Education

24,0%

48,0%

16,0%

12,0%

University/college

Vocational education

10-12 years

1-9 years

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Série1 12% 6% 35% 41% 6%

7 - 11 years in school

Vocational Education

High SchoolCollege or

University up to Cand Mag

Master's degree or above

Hordaland MFN


Type of business

Var types production

Not started yet

Sewing-workshop

Flowers/greenery

Hair/cosmetic treatm

Course/teaching

Shop/sales

Art/crafts

Health/body care

Food production

Per

cent

30

20

10

0

77

21

3333

2121

10

Mikrofinans NorgeDistribution of the Financed Activities

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

Série1 17,60% 30% 6% 11,00% 17,60% 11,80% 6%

Import/Export Art/CraftTravel

agenciesMusicians

Média, Communicati

on and Internet

Cleaning Services

Course/Teaching

Hordaland


Very

importantSomewhat important

Little/Not important

The Microinvest/MFN loan 82% 6% 12%

The MFN business education training 59% 23% 17%

The business training I received through participation in group meetings

65% 35% 0%

The consultants/advisors MFN provides me 74% 17% 6%

The friendship and support from others members 65% 35% 0%

The customer referral from others members 47% 30% 23%

The business advice from others members 65% 23% 12%

The chance to make our own decisions 100% 0% 0%

Helping my business to grow/improve 100% 0% 0%

Increasing my self-confidence 74% 17% 6%

Helping improve my relations with family 75% 17% 12%

Increasing my involvment in the community 94% 0% 6%


Last three

monthsBefore

Completed a course/training module provide by MFN

1 13

Received help from a MFN sponsored advisor

4 12

Referred a customer to a MFN member 6 10

Provided business advice/other help to a MFN member

11 14

Spoke with MFN staff 15 16

Sold my product together with a MFN member

5 5


The typical Hordaland Network Credit business owner is 30-50 years and female.

Among informants answering the questionnaire in this study, 18% were immigrants

96% of those participating in the focus groups were born in Norway 37% are single heads of households. 50% were 30-39 years and 39% 40-49 years. 82,4% have improved their quality of life since joining the

programme The income of Hordaland Network Credit’s customers has so far not

changed in any measurable way since they joined, it must be said that even those with considerable profit from their business, choose to reinvest this in the business rather than take it out as salary.

The entrepreneurs with established businesses worked 32 hours per week on average. In addition, 46% reported “substantially improved” record keeping, and the percentage of legally registered businesses increased from 52% to 65%, reflecting the increasing “formalization” of their enterprises.


The “Hordaland Network Credit Survey 2001” (Sekkesæter, 2002) was filled out by a random sample of 50% of the 60 members in Hordaland County, Norway.

29 respondents participated in the questionnaire survey 24 of them also participated in focus group discussions with the author. The informants were all members of peer groups of 4-5 people who are planning

their start-up (15%) or are currently in business (77%) or had been in business (8%).

THE SURVEY WAS DESIGNED TO EXPLORE THESE THEMES: The characteristics of Hordaland Network Credit’s members; Their level of participation in the program; The characteristics and evolution of their businesses; The changes in the sources of business credit they use; The member’s assessment of the quality of Hordaland Network Credit services and

the usefulness of the services offered; The level of joint marketing and joint venturing among members; The changes in self-confidence, community involvement and family relations

encouraged through the group process.


Business advice from other members

16,0%

40,0%

44,0%

Little/not important

Important

Very important

The friendship and support

from other members

4,0%

20,0%

76,0%


Important

Very important

48% say Hordaland Network Credit has been very important

in helping the business grow;


Increase in self confidence

4,0%

32,0%

64,0%


Important

Very important

What I learnt from participating

in group meetings


Important

Very important

Per

cent

70

60

50

40

30

20

10

0

12

27

62


From LA to New York and Boston to Miami, low- to moderate-income entrepreneurs are unable to access the credit needed to build sustainable businesses and attain economic self-sufficiency.

40 million households (106 million people) have limited access to mainstream financial institutions in the U.S. and 28 million people are completely

unbanked. Microenterprises (<5 employees) account for approximately 18 percent of

employment in the U.S., and create 900,000 jobs a year. Predatory lenders charge average annual interest rates over 300 percent— and accounted for over $42 billion in loan volume in 2008. CDFIs Invested $3.5 billion in 2004 to create economic opportunity in the

form of new high-quality jobs, affordable housing units, community facilities and financial services to low-income families and small businesses. 70% of customers are low income.

Grameen America started in 2008 and grow fast: 7000 loans


Accion who took over WC have served over 23 000 micro-businesses and distributed nearly 19 000 loans, making Accion who merged with WC one of the largest micro-enterprise initiatives in the country.

Article based on member survey(2000) describing characteristics of Working Capital’s customers, and measures the impact of the programme’s services on its customers in Massachusetts and Rhode Island with a sample of 110 respondents (ibid, 2000).

It must be noted that since then, Working Capital in Massachusetts (now ACCION) has downscaled its peer lending activities and merged with ACCION which now have only individual loans of up to $50 000

First State Community Loan Fund (partner with YWCA, my case study org): The Micro Loan Fund (MLF) provides loans for individuals and microenterprises from

$300 to $15,000. Loans are repaid over a four-month to three-year period. Most business purposes are eligible, including working capital, equipment and inventory.


LEVEL OF INTERACTION WITH OTHER MEMBERS and POTENTIAL MEMBERS

HORDALAND NETWORK CREDIT WORKING CAPITAL

Spoke to another WC member in the last two weeks.

89,7% 80.7%

Referred a customer to a WC member during the last three months.

70,4% 65.9%

Talked to another business owner about joining WC.

60,7% 65.9%

Provided business advice/help to a WC member in last three months.

55,6% 60.0%

Recruited someone who joined WC.

28,6% 50.0%

Sold products with another WC member.

42,9% 44.0%

Have a joint venture with another WC member.

44,8% 44.0%


IMPORTANCE OF THE HELP OF OTHER GROUP MEMBERS


Friendship and support from other members are very important.

76% 79.0%

Customer referrals from other members are very important.

41,7% 57.4%

Business advice from other members is very important.

44% 66.8%

IMPORTANCE OF THESE SERVICES FOR YOUR BUSINESS


The advisors the programme provides me are very important

29,2% 74.4%

The business training sessions at the association meetings are very important

30,4% 69.7%

The advice/help from a programme representative is very important

36% 67.5%

The programme business education curriculum is very important

30,4% 65.1%

The loan is very important 50% 60.1%


OUTCOMES OF THE PROGRAMME AND THE GROUP PROCESS

HORDALAND NETWORK CREDIT

WORKING CAPITAL

The chance to make our own decisions is very important.

60% 84.2%

Increasing my self-confidence is very important.

64% 73.8%

Increasing my involvement in the community is very important.

20,8% 64.2%

Helping improve my relations with my family is very important.

30% 42.7%


◦ “The social capital of a society includes the institutions, the relationships, the attitudes and values that govern interactions among people and contribute to economic and social development. Social capital, however, is not simply the sum of the institutions that underpin society, it is also the glue that holds them together. It includes the shared values and rules for social conduct expressed in personal relationships, trust, and a common sense of “civic” responsibility that makes society more than a collection of individuals” (The World Bank 1998, p. 1)

◦ Social intermeditation is financial intermediation with a capacity-building component, aimed at those sectors of society that lack access to credit and savings facilities.” (Edgcomb and Barton, 1998, p vii).

◦ Social intermediation involves the building of social capital in the form of groups that can generate an “information asset” and social collateral for future borrowing.


Contextual Variables: Ch 5 Moderating Variables: Ch 6 Outcome Variables: Ch7

Programme characteristics: Strategy/policy: Peer lending/individual Target group Training/Technical

Assistance

Original model - e.g. Grameen/ACCION

Duration: Age of programme

Funding source: Banks Local/national government Small Business Administration

Financial/social exclusion

Stakeholder rationality

Country: Norway, US and UK

Level of adaptation to local context Management qualities Funding strategy

Shared values/vision of various stakeholders?

-Level of participation in programme & group decision making process: -Degree of self-management

Effectiveness & impact 1. Programme 2. Peer group 3. Clients (micro-entrepreneurs) · Economic · Social 4. Local community

Group dynamics/activity/loan process

Stakeholders: Donors: Govt./Banks/Foundations Board member Staff/management Members (Focus groups and survey)

Local context (community) Level of financial exclusion Socio-economic indicators Minority/majority issues, culture

Learning & Dissemination 1. Related to Programme Policy 2. Related to Peer Group

Lending & social capital 3. Local /national micro-

enterprise support/funding strategy

4. Further research needs

Conclusions: Ch 8

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Unni Beate Sekkes æ ter Mikrofinans Norge/soon PhD student at RUC 1 Presentation of the Norwegian...

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