29-07-09-RIM2009 Presentation

Graduation of Micro-Finance Clientto Micro and Small Entrepreneur : 

Graduation of Micro-Finance Clientto Micro and Small Entrepreneur Rapid Immersion into Micro finance 09 Centre for Micro Finance-IFMR Chennai, 29th July, 2009 By Hemantha Kumar Pamarthy

What is Micro Enterprise? : 

What is Micro Enterprise? Microenterprise is a type of small business that is often unregistered and run by a poor individual. The terms Micro-enterprise and Micro-business have the same meaning, though traditionally when referring to a small business financed by micro credit the term microenterprise is used.

Micro Credit / Finance : 

Micro Credit / Finance How can a small loan of US $ 100 Change an Economy? Or Can it?

Micro Credit / Finance : 

Micro Credit / Finance One small loan can change a family Several can strengthen a community Thousands can transform global economy

Micro Finance is not Panacea : 

Micro Finance is not Panacea Fatal Assumption – 1 Credit is the main financial service needed by the poor. In reality, they also need Savings, Insurance and Money Transfers

Micro Finance is not Panacea : 

Micro Finance is not Panacea Fatal Assumption – 2 Credit can automatically translate into successful Micro Enterprises / Livelihood Opportunities What also needed are Selection of & Motivation to Micro Entrepreneurs Business & Technical Training Market Linkages for Inputs & Outputs Infrastructure and Regulatory / Statutory approvals

Micro Finance is not Panacea : 

Micro Finance is not Panacea Fatal Assumption – 3 The poorest all wish to be self employed and can be helped by micro credit But in reality wage earning is still the primary attraction

Micro Finance is not Panacea : 

Micro Finance is not Panacea Fatal Assumption – 4 Those slightly above the poverty line do not need micro credit and giving it to them amounts to mis-targeting But the poor just out of the poverty line need handholding so that they do not slip back to BPL category

Micro Finance is not Panacea : 

Micro Finance is not Panacea Fatal Assumption – 5 All micro credit institutions can become financially self sustaining Actually only about 1% become so as per CGAP studies.

Micro Entrepreneurs fromMicro Finance Clients : 

Micro Entrepreneurs fromMicro Finance Clients In the absence of definite details it is assumed that normally micro finance is used by About 35% of Clients for Consumption and 65% of Clients for Enterprises A majority for Agro related and A slim minority for non-traditional Enterprises

Human Economical Tree : 

Human Economical Tree

Characteristics of BPL-MF Clients : 

Characteristics of BPL-MF Clients Uneducated / Marginally Educated Limited / No skills Almost no resources Mostly Women Marginal activities Limited Marketing Potential / Ability Poor Returns for Labour

Portfolio formula : 

Portfolio formula

And Today.. : 

And Today.. ….It goes beyond that. “Every Village needs six Men. To tell that to the villagers, It needs a Seventh Man” ….old Tamil Adage

The 7th Man.. : 

The 7th Man.. NGO or MFI or NGO-MFI

What Needs to be done?Micro Finance & Credit Plus : 

What Needs to be done?Micro Finance & Credit Plus Target Groups – Gender / Social / Cultural / Economical / Education Set Objectives Provide Access to Knowledge / Skills / Provide Access to Finance – Own savings / Credit (Size / Tenors / Rates) Fund Management / Banking Create Access to Micro Enterprises-Mfg. / Trading / Services? (Native wisdom / traditional skills / Demand-oriented Trades?) Business Management skills-Promoting / Marketing / Repeat ordering? Sustainability Impacts-Decision Making / Socio-Cultural elevation?

What Needs to be done?Micro Finance & Credit Plus : 

What Needs to be done?Micro Finance & Credit Plus Hand Holding + Mentoring Remove the “Fear of the Unknown” Complex Convince as an alternate source of Employment Raise confidence to take risk/s Support with appropriate skills / technology Provide Easy, Quick & Affordable Finance Enable a good location for Enterprise Create a strong Leadership Help in directing to easy Procurement of Resources Help with Products, Marketing Strategies, Business Plans, Promoting and Marketing Linkages Guide in Documenting & Book Keeping

Graduation & Stabilising Process : 

Graduation & Stabilising Process In the beginning the poorest need grants Time bound finite grants provide “breathing time” They also require financial services Savings help build “micro-funds” Credit helps build confidence and discipline Grant programme phases out Acquire Required Skills Participants pursue economic activities Graduate to Micro Enterprises

Graduation & Stabilising Stages : 

Graduation & Stabilising Stages

Some Micro Enterprises : 

Some Micro Enterprises Farming & Dairy, vegetable & Fish vending, Poultry, Pottery, Handloom & Tailoring, Handicrafts Soaps & cleaning products like Phenyl, Condiments like masalas, pickles & jams, Local Snacks, Paper bags & Envelopes and so on.

Benefits of Micro Enterprises : 

Benefits of Micro Enterprises Help Low Income earning poor to escape poverty Create Job opportunities as Micro enterprises encourage self, family and peer employment No division of labour as means are meagre and all roles have to be played by one or few Micro Enterprises, though in un-organised sector, can contribute significantly to output and employment

Outlook for Micro Enterprises : 

Outlook for Micro Enterprises Micro Enterprises can be encouraged, developed and sustained but at high costs incurred on Hand-holding and Mentoring which many of the smaller NGOs and MFIs may not be in a position to afford. If either Governments and / or Development Banks can provide such Hand-holding and Mentoring directly or subsidise such efforts by NGOs / MFIs, the Micro Enterprise Sector can sustain and add to the growth of the economy.

Thanks To you and to.. : 

Thanks To you and to.. Mr. Vijay Mahajan, BASIX Mrs. Roopa and Mr. Bernard Punnekal Mr. Ashuthosh, Hand in Hand Mr. Syed Hashemi, CGAP Australian Agency for International Development www.flipkart.com/micro-enterprises-perspectives-experiences-sridhar/8131412819-tu23f99ek4 en.wikipedia.org/wiki/Micro-enterprise www.grameen-info.org/grameen/gfund/micro.html base.d-p-h.info/en/fiches/dph/fiche-dph-7541.html www.yearofmicrocredit.org/docs/MicrocreditBrochure_eng.pdf