Scaling Microcredit

1
Scaling Microcredit

• Initial Presentation to RDVPSteven
  KetchpelSeptember 17, 2004

2
A Microcredit Success Story

• Borrower Profile Male, 5th grade education, no
  income, no collateral
• Loan 55 USD, repayable 5/mo over 1 year term
• Proceeds Used to buy bicycle, and start
  delivery service (milk and household goods) for
  11-14/delivery

3
Result

• Loan re-paid in 6 months
• Borrower continued education
• Started additional businesses employing gt200
  people
• Sought to pay back by making microcredit
  available to others

4
More about our case study

• Grew up in Simsbury, CT
• Soccer, Scouting, Computers
• College at Harvard
• Computers, Theater, TA-ing
• Grad School at Stanford
• Computers, startups, IEEM
• Started Vividence
• Raised money (65M)
• Hired people (up to 180)
• Fired people (down to 55)
• Sold company (20M)

5
Agenda

• Microcredit works for borrowers
• Microcredit works for lenders
• 300M families could benefit
• Microcredit can scale up
• Im ready to dive in!

6
What is Microcredit?

• Loans, not grants or charity
• Use Social Capital instead of collateral
• Larger, future loans depend on current repayment
• Weekly repayment schedule
• Used for income-generating businesses

7
Microcredit works for borrowers

• Bangladesh 86 increase in school enrollment
• Bangladesh 48 of poorest households with
  microcredit cross poverty line, only 4 without
  do
• Bolivia Access to Microcredit allows people to
  double income in 2 years

8
Microcredit works for lenders

• FINCA Repayment rate of 97, interest rate of
  3-4 per month
• Grameen Philippines 98 repayment rate (after
  fixing management problems)
• Times of India 20-40 interest rates, repayment
  rates 90 (better than commercial loans)

9
300M families could benefit
(Unitus website)
10
MFI scaling by organizations

• Unitus Microfinance 2.0
• Find small, successful MFIs
• Grow through access to donors, debt, and capacity
  building consulting
• Help MFI operate profitably and change from
  nonprofit to bank
• Protect mission to serve poorest

11
MFI scaling by software

• Grameen Foundation USA
• Grameen Replication program
• Moap Microfinance Open Architecture Project
• Tino Tran, RDVF 2003-2004
• PDAs, OCR/OMR, Web Architecture, Wireless

12
MFI scaling by securitization

• Bundle small loans and re-sell them, getting more
  money to make new loans

Loan
SeniorDebt
PensionFund
Loan
Special Purpose Entity
JuniorDebt
Bank
Loan
Equity
Found-ation
Loan
(Adapted from The Isabela Project)
13
Im ready to dive in!

• http//www.rdvp.org/sketchpel/todo.html
• Includes list of next steps and contacts

14
Yes, microcredit works. And it needs to reach 10
times as many people.