InFiNe.lu Grantees Blog, Boulder Microfinance Training 2015, Week 3

InFiNe.lu Grantees Blog, Boulder Microfinance Training 2015, Week 3

After a selection process, InFiNe.lu has awarded 2 scholarships to its members to attend the Boulder Microfinance Training 2015 in Turin from July 20th to August 7th. During the 3 weeks of training, our grantees, Chiara Baldassare and Caroline Morilhat will share with us what they are learning.

Week 3: 07/08/2015 – Ending Thoughts

The Boulder experience is coming to an end. Today, we had the last session of the Masterclass on new financial inclusion paradigms.

The sessions in the last week have been animated by Robert Christen and Natasa Goronja.

Few thoughts on Micro-insurance were introduced by Michael McCord president and founder of the Microinsurance Centre. First, Michael has set the common definition of micro-insurance be it the sub-segment of insurance designed to be appropriate for the low income market in relation to cost, terms, coverage and delivery mechanisms. The intervention has started by asking to the audience how many institutes currently offer Microinsurance services. The statistic has been quite astonishing given that only around 10 institutions amongst the 300 participants declared offering these services. Therefore, it seems like that there is lack of offer for these products, but, the viability of the business case strictly depends on the context, country and type of clients. In fact, according to market studies, in some cases the micro-insurance companies have been found profitable and the system has delivered value; in some other cases no positive externalities were found. Therefore, the speaker strengthened further the importance to have a customer centric focus thereby deeply understanding customers needs in order to design the right product for the target market.

Furthermore, we covered the topic of over-indebtedness presented via conference call by Richard Rosenberg, senior advisor of CGAP. Richard has begun the discussion showing that over-indebtedness often has a stronger impact on poor people rather than wealthy clients. In fact, over-indebtedness often triggers negative consequences which go beyond the economic impact as it concerns for instance change in social status, loss of self-confidence and moral support by local communities. These effects are difficult to measure, however, Richard presented some ways to estimate the burden of excessive indebtedness on clients and MFIs. As the MFIs have a double mission, financial and social, the question remains how to find the right compromise between protection of self-financial interest and guarantee clients access to financial services.

The last session covered the level of interest rates and profits charged by MFIs. The industry underwent difficult times between 2008 and 2010 thereby having an effect on interest rates charged and profits. The breakdown of interest rates analysed displayed a relevant increase in financial cost mainly due to lowering of donors’ funds and a consequent erosion of the profit per loan granted. The main take away derived from the discussion is that the effective interest rates charged to clients depends on the context and country of the MFIs and has changed relevantly in the past years.

Finally, Robert Christen concluded the Masterclass session with the most recurring topic of the 3 weeks program be it customer centrism. This gave the occasion to show the evolution of the challenges in the Microfinance industry from 1.0 solving basic problems of asymmetry of information and transaction costs to access clients, 2.0 scale and sustainability to the 3.0 mission of improving value proposition to clients.

The Masterclass has been concluded with the graduation ceremony where all participants received their graduation certificate.

During the past three weeks we managed to learn a lot and have a great exchange of ideas amongst participants of different profile and horizons.

We have really much benefitted from this experience and are looking forward to leverage our knowledge in Luxembourg!

Thank you to InFiNe.lu for allowing us to enjoy this great learning opportunity.

Authors: Chiara Baldassare and Caroline Morilhat

Week 3: 03/08/2015 – Elective courses in English (author: Chiara Baldassare)

During the third week I have chosen to attend the following classes:

  1. Product Costing: Making Products Viable through Increased Efficiency” taught by Indrajith Wijesiriwardana Principal Consultant of Uvades Consulting;
  2. Valuation, Acquisition, and Negotiation for Your Financial Institution” run by Max Errazuriz independent consultant for EYS.

Product Costing: Making Products Viable through Increased Efficiency” sheds the light on the needs MFIs have to improve efficiency. In an environment challenged by increased competition and new market entrants, existing MFIs are forced to react and propose an efficient business model to survive to market threats. This class taught survival techniques, how to analyze MFIs’ costing and enhance their operational efficiency.

The course started with a discussion on commonly used cost-allocation methods and introduced Activity Based Costing (ABC) with a step by step approach. Benefits and challenges of each step and ways to overcome such challenges have been discussed in class, based on a wide range of field experiences. The results from case studies have been carefully assessed in order to strengthen the learning process and support management decisions based on different case-scenarios. The course methodology allowed participants to share their field experiences and therefore bring an added value to the class’ discussions. Participants had the opportunity to train on the CGAP sponsored software model – an Excel-based ABC learning tool.

Through the understanding of product costing, the attendees were taught how to assess different products’ viability for increased profitability. The class has been extremely useful as it adopted the perspective of MFIs in product costing.

Valuation, Acquisition, and Negotiation for Your Financial Institution” is meant to answer strategic questions on how to create, value, and avoid value destruction in a competitive environment. During the course we looked at the reasons why Financial Institutions (FIs) are bought and sold.

Furthermore, we covered topics such as understanding the importance of capitalization, opting for mergers and acquisitions as an answer to strategic challenges, analyzing the financial structure and its consequences. Different MFIs and FIs valuation methodologies were introduced during the class conjointly with their advantages and pitfalls, as well as the negotiation process in buying or selling financial institutions.

The class used exercises and role playing to reinforce concepts whereby participants were asked to put themselves in the position of MFIs buyers or sellers and conclude successful deals with the counterparty in both scenarios of mergers and acquisitions.

Week 3: 03/08/2015 – Elective courses in French (author: Caroline Morilhat)

Cours « Financement des chaînes de valeur agricoles par la microfinance »

Intervenant : Isso-Takou Soulémane DJOBO, directeur du bureau régional Afrique centrale et coordonnateur thématique régional (Microfinance, Entreprise et Création d’Emplois) au Centre International du Développement et de la Recherche (CIDR). Depuis 5 ans, Soulémane I.T. DJOBO accompagne les IMF dans la finance rurale et le financement des chaines de valeur agricoles en Afrique Centrale, de l’Est et de l’Ouest.

La notion de filière agricole décrit l’activité agricole d’une spéculation donnée, de la production jusqu’à la commercialisation. Il s’agit d’une approche descriptive, alors que la notion de chaîne de valeur est une approche opérationnelle qui étudie une gamme complète des activités pour apporter un produit ou un service de la conception jusqu’à la livraison au consommateur, faisant appel à toutes les parties prenantes qui contribuent à ajouter de la valeur aux différentes étapes. “De la fourche à la fourchette”.

Dans le cadre des politiques de développement, l’agriculture est retenue comme un secteur prioritaire avec une volonté marquée de retenir les populations dans leur milieu naturel et d’insérer les petits producteurs dans le circuit marchand par la promotion des chaînes de valeur agricole. Les IMF ont donc un rôle à jouer pour faciliter l’accès aux financements, tout en calculant leur risque.

Durant la semaine, nous avons analysé la structure des chaînes de valeur, les acteurs, les enjeux associés et les cycles financiers. Les concepts ont été illustrés par des exemples de chaînes de valeur comme pour l’ananas et le manioc.

Après avoir pris en compte les différentes caractéristiques des chaînes de valeur, l’intervenant nous a fait part des principes de financement des chaînes et des moyens pour développer de nouveaux produits financiers, tourné vers le client et fondé sur l’étude et orienté sur les résultats.

Cours « Evaluation intégrale de la performance : financière et sociale »

Intervenant : Evrim Kirimkan est actuellement responsable régional pour l’Amérique Latine pour MicroFinanza Rating après s’être consacré à divers projets de consultance en gestion des risques et gestion de performance sociale en Amérique Latine et en Afrique, notamment au sein du ‘Risk Management Initiative in Microfinance’.

“Nous sommes une institution financière… nous laissons l’aspect social aux ONG”. “Nous sommes une IMF sociale… nous ne pouvons pas être rentables”.

Une IMF peut-elle équilibrer sa performance financière avec sa performance sociale ?

Evrim, de par son expérience chez Microfinanza rating a répondu à ses questions en expliquant les possibilités pour trouver le bon équilibre. Il a, en un temps limité, passé en revue différentes activités et les principaux indicateurs permettant une évaluation « intégrale » de la performance d’une institution de microfinance, c’est à dire financière et sociale.

Chaque jour, nous avons pu mettre en parallèle des indicateurs et des ratios financiers, avec les activités sociales comme par exemple la qualité du portefeuille et la responsabilité sociale.

La théorie était toujours complétée par des statistiques comparatives des moyennes et des pratiques dans différents pays et sur les différents continents, et par des applications en comparant différentes institutions. La dernière session était réservée à un exercice de notation financière et sociale permettant un récapitulatif de tous les concepts étudiés durant le cours.