Microfinance as Social Business_JURGEN HAMMER
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Transcript of Microfinance as Social Business_JURGEN HAMMER
Microcredit Summit CampaignMerida, Mexico – Sept 4th, 2014
WORKSHOP Group 3
Microfinance as Social Business
Jurgen HAMMER CIO and Head of Social Performance Management
2204/08/2023
MICROFINANCE AND SOCIAL BUSINESS
1 Grameen Credit Agricole Foundation - GCAMF Who are we ?
2 Social Business - Concept and Application
3 Case Study Chamroeun (Cambodia)
4 Case Study ACAD (Palestine)
3304/08/2023
1. Grameen Credit Agricole - Mission
Complementary services
Financial Instruments
Objectives
Investment approach
Mission Contribute to poverty alleviation
Microfinance
Access to financial services
Mainly loans and guarantees
Technical Assistance
Social Business
Access to essential goods and services
Equity and debt
Support and Coaching
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1. GCAMF – Activities and Portfolio ( 30 June 14)
4
Total outstanding microfinance portfolio: € 26,5 million (1)
35 partner MFIs (1) in 19 countries, mainly sub-Saharan Africa and South and South-East Asia
Partner MFIs have 2,2 million active customers of which: o 84% are women o 84% live in rural areaso 25% live in sub-Saharan
Africao Average loan amount € 372
The Foundation is a shareholder in 11 Social Businesses located in 8 countries with a portfolio of € 4 million.
(1) Chamroen and ACAD are accounted for in the SB portfolio
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1. GCAMF Social Business Portfolio ( Q1 – 2014 )
5 Grameen Crédit Agricole Microfinance Foundation – April, 8 2014
42%
3%
50%
5% Financial services
Health
Agri-food
Other
41%
45%
5%9%
Sub-saharian Africa
South & South-East Asia
Europe
MENA
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1. Investment Policy Social Business
FINANCIAL INSTRUMENTS
EQUITY50%
DEBT50%
SECTORS
ESSENTIAL GOODS and SERVICES
- Focus on agriculture and agro industries
- Other sectors: energy, waste management, housing, healthcare,
culture, communication
FINANCIAL INFRASTRUCTURES- Microfinance institutions- Financial services: micro insurance, mobile banking,
remittances
GEOGRAPHY
DEVELOPPING COUNTRIES
- Sub-Saharan Africa, - MENA
- South and South East Asia
> 75%
DEVELOPED COUNTRIES
< 25%
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2. Concept and Application
At the crossroad of entrepreneurship and philanthropy
Social Business is based on business and market mindset to develop projects, innovate and create products and services
Social Business initiatives are aimed at providing affordable solutions to nutrition, drinkable water, health, sanitation, housing, finance (…) for the poor
Social Business requires long term vision, patient capital and a spirit of partnership
In Social Business, traditional financial instruments are used to serve social causes
Objective
Financial Profit maximisation
InstrumentsDebt / Equity
Objective
Financial sustainability+
Social Return
InstrumentsDebt / Equity
Objective
Social Return only
InstrumentsGrants
Social Business is an infinite source of systemic innovation
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NATIONAL BANK OF CAMBODIA
19 NBC BranchesMFIs
09 Foreign Branch Banks
6 Privately owned
13 Locally incorporated 37 Licensed
Money ChangerLicensed 65
Registered 1,377
33 Registered (NGOs) 4 Representative Offices
1 State owned
32 Commercial Banks 7 Specialized Banks
7 Deposits
10 Subsidiary
Banks
Financial Sector in Cambodia
Source: NBC - Q1 Report 2013
3. Case Study Cambodia – Chamroeun
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Started 2006 by Entrepreneurs du Monde as NGO program
Focus on serving the very poor in Phnom Penh, by providing adapted loans, savings, and microinsurance services.
2009, as regulation requirement, transformed to a private liability company and obtained certificate of registration as Credit Operator from National Bank of Cambodia.
2011, achieved all the requirements to become a Licensed Microfinance Institution granted by the National Bank of Cambodia in August 2011.
3. Case Study Cambodia - Chamroeun
Chamroeun Background
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“A leading Cambodian social microfinance institution working to achieve positive and lasting changes in the livelihoods of economically active poor families in a socially responsible manner”
“To improve the livelihoods, skills, and self-confidence of poor families in Cambodia by providing them a wide range of responsible microfinance and complementary socio-economic services”
VISION
MISSION
Integrity, quality of services, transparency, fair practices, confidentiality, and non-discrimination
CORE VALUES
3. Case Study Cambodia - Chamroeun
Vision, Mission & Core Values
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Primary objective = a strong positive impact on the living conditions of the poor households in Cambodia, particularly micro entrepreneurs.
Over 85% of clients/beneficiaries are women such as small market stallholders, ambulant vendors and other small scale activities.
3. Case Study Cambodia - Chamroeun
Targeted Population
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Chamroeun is a social business which seeks to maximize social impact for its clients rather than financial return for its shareholders:
Bylaws of the institution specifically state there is no dividend distribution
Profits are fully re-invested in the organization to the benefits of the micro entrepreneurs
Interest rates charged to clients have progressively been decreased each year since 2010 to reduce the cost of services
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Social-driven governance: All of Chamroeun’s shareholders and Board of Directors members are social-
oriented; Social Performance Management Committee set up at Board of Directors level to
protect the institution’s social mission while ensuring its financial sustainability. Committee tasks and responsibilities :
Supervision of effective translation of the institution’s social mission into practices
Assure strong focus on promoting best practices and monitoring social performance by using recognized tools, clear targets, and metrics
Full review on Chamroeun using the drafted Universal Standards for Social Performance Management developed by the SPTF
Active involvement in revision of the vision and mission and the social performance tools used within Chamroeun.
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Enable environment for vulnerable and poorest of the poor to access to financial services:
Very small and flexible loan terms and conditions
Average loan size 125 USD (about 14% of GNI per capita), for business start-up or expansion
40 offices nationwide to serve partners (transportation costs and timing)
Products are tailored to fit with business needs and characteristics
Latest: pilot the micro insurance services
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Wide range of non-financial services: Trainings to partners/clients and non-partners, free of charge
o financial literacy and business trainingo social trainingo skill trainingo social and business counseling with free of charge;
Using unified approach: socio-economic officers are in each branch to offer such non-financial services;
Environmental protection: In process to initiating financing initiatives toward renewable and clean
energy Awareness on usefulness on renewable and clean energies is in
development process
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Profit sharing back to the partner through Chamroeun Foundation:
Board of Directors and management established the Chamroeun Foundation Association (CFA)
CFA implements charity activities - scholarship to partner’s children, supporting other NGOs who are working with the same population and responding to disasters.
Clear policy to share back the profit from microfinance activities through the Foundation.
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
171704/08/2023
Active involvement with with social-driven initiatives:
o Endorsement SmartCampaign;o Reporting to MIX Market;o Updating of pricing structure with MFTransparency;o Member of Cambodia Microfinance Association and of Banking
with the Poor Network (BWTP);
Social performance measurement:o Annual assessment using Cerise’s SPI since 2007;o Perform the Poverty Assessment Tools (PAT);o Both financial and social rating in 2011 + mandatory updates
every 2 years;o Started self evaluation against Universal Standards for Social
Performance Management (USSPM) initiated by Social Performance Task Force (SPTF) and put in follow-up agenda of Board SPM Committee;
o In process of certification on client protection.
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Competitive benefits with stimulating and respectful working environment:
Equal job opportunities with competitive benefit package
People with disability and women strongly encouraged
Profit sharing to staffs
Sound capacity building and career development programs
Regular reflection on satisfaction through staff satisfaction surveys, client satisfaction surveys and annual workshop
The code of conduct + code of ethics
3. Case Study Cambodia - Chamroeun
Chamroeun = A Social Business MFI
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Comparison to peers*
* data obtained from Cerise July 15th, 2013
SPI Benchmark
3. Case Study Cambodia - Chamroeun
202004/08/2023
Key features
• 1988: ACAD NGO started its lending activities. • 2013: transformation into a for-profit Limited Liability Company (ACAD
for Finance & Development)• Shareholding structure:
• Gross Loan Portfolio (as of June, 2014): USD 4,7 mln.• Over 3,000 active borrowers, 70% women, 60% located in rural areas.• 40% of portfolio finances agriculture.
Entity USD (1,000) % of capital
ACAD (NGO) 3,000 56,5%
EIB 1,000 18,8%
SIDI 535 10%
GCAMF 500 9,4%
Triple Jump 300 5,6%
4. Case Study Palestine - ACAD
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Social Business Charter: Structure & Methodology
Principles (between 5 to 7) Based on Prof. Yunus‘ Seven Principles of Social Businesses Defining fundamental Social Business characteristics of the Microfinance
Institution
Commitments (1 to 3 per Principle) Translation of the principles into concrete, measurable engagements Consensual definition between GCAMF and the partner MFI
Indicators Precise indicators to be measured and analyzed on a regular basis Indicators from a standardized and widely used datasets (USSPM & Mix
Market, IRIS etc) to allow for benchmarking.
4. Case Study Palestine - ACAD
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Principle 1: The Social Business aims at contributing to the overcoming of poverty and vulnerability through a business based approach.
Principle 2: The Social Business’ objective is to provide solutions to one or more problems that threaten people and society.
Principle 3: The Social Business protects its clients.
4. Case Study Palestine - ACADSocial Business Charter - Principles
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Principle 4: The Social Business aims at being profitable, to ensure its economic and financial sustainability. Its objective is not profit maximization. The intention is that profits shall be re-invested by the business in ACAD-Finance in order to maximize the social impact.
Principle 5: The Social Business contributes to a better environment.
Principle 6: The Social Business works for employee empowerment, pays market wages and offers above standard working conditions.
Principle 7: The Social Business sets up relevant indicators to monitor these commitments and the social impact on stakeholders.
4. Case Study Palestine - ACADSocial Business Charter - Principles
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• Principle 1: The Social Business aims at contributing to the overcoming of poverty and vulnerability through a business based approach.
• Commitment 1: ACAD-Finance has a clear focus on serving vulnerable clients in Palestine.
• Commitment 2: ACAD-Finance allocates a significant part of its resources to serve rural clients and small-holder farmers by facilitating their access to finance and – through ACAD NGO or other partner organizations - capacity building services.
• Commitment 3: ACAD-Finance is committed to the promotion of Palestinian women’s empowerment through special financial services designed to meet their needs.
4. Case Study Palestine - ACADSocial Business Charter - Commitments
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• Principle 4: The Social Business aims at being profitable, to ensure its economic and financial sustainability. Its objective is not profit maximization. The intention is that, provided this is consistent with ACAD Finance’s dividend policy, profits shall be re-invested by the business in ACAD-Finance in order to maximize the social impact.
• Commitment 9: The balance between distribution and retention of profits is subject to ACAD-Finance’s dividend policy which is agreed with the Shareholders further to the mechanism set out in the Shareholders’ Agreement. Whilst ACAD-Finance will wish to retain profits in the company in order to ensure its development and sustainability and to grow the company and thus to foster its social mission, it is also accepted that Shareholders have expectations of a return on their capital.
• Commitment 10: It is noted that in order to reflect the spirit of Principle 4, investors have voluntarily committed to reinvesting the amount of any distributions that they receive from ACAD-Finance into social business projects with the purpose of maximizing social impact.
• Commitment 11: Bonuses and any profit-sharing schemes for the executive directors and managers of ACAD-Finance are granted equitably based on financial and social performances.
4. Case Study Palestine - ACADSocial Business Charter - Commitments
262604/08/2023
Jurgen HAMMER
CIO and Head of Social Performance Management
Tel: + 33 1 57 72 02 47
www.grameen-credit-agricole.org
CONTACT
272704/08/2023
APPENDICES
282804/08/2023
Principle 1: The Social Business aims at contributing to the overcoming of poverty and vulnerability through a business based approach.
ACAD-Finance Company is a regulated social finance company based in Palestine that provides sustainable and efficient financial services to women and poor families, mainly in rural areas, to contribute to poverty alleviation and economic development in Palestine.
Principle 2: The Social Business’ objective is to provide solutions to one or more problems that threaten people and society.
ACAD-Finance provides support to agriculture development. By supporting the increase of better quality agricultural production and market outlet (through business development support from ACAD) it contributes to improved food security for Palestinian communities.
Principle 3: The Social Business protects its clients.
ACAD-Finance adheres to the sector’s standards on client protection: it endorses the SMART Campaign’s Client Protection Principles (“CPPs”) and puts in place key procedures to ensure its compliance with them. CPPs will be an integral part of a set of social performance indicators that ACAD-Finance designs and defines, together with its shareholders, to monitor its action.
App1. Case Study Palestine - ACADSocial Business Charter - Principles
292904/08/2023
Principle 4: The Social Business aims at being profitable, to ensure its economic and financial sustainability. Its objective is not profit maximization. The intention is that profits shall be re-invested by the business in ACAD-Finance in order to maximize the social impact.
ACAD-Finance’s financial and economic sustainability are key drivers, allowing ACAD-Finance to implement and maintain its social mission over time, therefore having a
sustainable impact on the areas where it operates. Driven by a business-based approach and operating in a competitive framework,
ACAD- Finance ensures its viability and development through relentless review and improvements of its products and services. ACAD-Finance’ strategy to achieve these social
and financial returns is aligned with its social mission.
Principle 5: The Social Business contributes to a better environment.
ACAD-Finance is committed to contributing in efforts that help ensure a healthy environment for current and future generations.
App1. Case Study Palestine - ACADSocial Business Charter - Principles
303004/08/2023
Principle 6: The Social Business works for employee empowerment, pays market wages and offers above standard working conditions.
ACAD-Finance’s human resources policy reflects fair and non-discriminatory treatment of employees, with a particular focus on training, personnel and career development.
Principle 7: The Social Business sets up relevant indicators to monitor these commitments and the social impact on stakeholders.
ACAD-Finance contributes to the development of tools and indicators used for monitoring the achievement of its social commitments.
App1. Case Study Palestine - ACADSocial Business Charter - Principles
313104/08/2023
• Principle 1: The Social Business aims at contributing to the overcoming of poverty and vulnerability through a business based approach.
• Principle 2: The Social Business’ objective is to provide solutions to one or more problems that threaten people and society.
• Commitment 1: ACAD-Finance has a clear focus on serving vulnerable clients in Palestine.
• Commitment 2: ACAD-Finance allocates a significant part of its resources to serve rural clients and small-holder farmers by facilitating their access to finance and – through ACAD NGO or other partner organizations - capacity building services.
• Commitment 3: ACAD-Finance is committed to the promotion of Palestinian women’s empowerment through special financial services designed to meet their needs.
• Commitment 4: In order to encourage the establishment of credit and savings schemes ACAD-Finance provides loans to agriculture cooperatives and farmers, and contributes to strengthening the value chain of agricultural products.
• Commitment 5: ACAD-Finance’s funding support to cooperatives is closely linked to the technical assistance and training provided by ACAD NGO to cooperatives and their members.
• Commitment 6: Subject to availability in the market, ACAD-Finance, as a microfinance institution, will actively commit to promote, micro insurance services adapted to the agricultural sector in Palestine and to engage with public and private stakeholders in order to improve their awareness of this product.
App2. Case Study Palestine - ACADSocial Business Charter - Commitments
323204/08/2023
• Principle 4: The Social Business aims at being profitable, to ensure its economic and financial sustainability. Its objective is not profit maximization. The intention is that, provided this is consistent with ACAD Finance’s dividend policy, profits shall be re-invested by the business in ACAD-Finance in order to maximize the social impact.
• Commitment 9: The balance between distribution and retention of profits is subject to ACAD-Finance’s dividend policy which is agreed with the Shareholders further to the mechanism set out in the Shareholders’ Agreement. Whilst ACAD-Finance will wish to retain profits in the company in order to ensure its development and sustainability and to grow the company and thus to foster its social mission, it is also accepted that Shareholders have expectations of a return on their capital.
• Commitment 10: It is noted that in order to reflect the spirit of Principle 4, investors have voluntarily committed to reinvesting the amount of any distributions that they receive from ACAD-Finance into social business projects with the purpose of maximizing social impact.
• Commitment 11: Bonuses and any profit-sharing schemes for the executive directors and managers of ACAD-Finance are granted equitably based on financial and social performances.
App2. Case Study Palestine - ACADSocial Business Charter - Commitments
333304/08/2023
• Principle 7: The Social Business sets up relevant indicators to monitor these commitments and the social impact on stakeholders.
• Commitment 16: The Board of Directors of ACAD-Finance determines relevant indicators for each of the above commitments. To do so, ACAD-Finance, operating as a microfinance institution, may be supported by external specialists and development actors in the field of microfinance.
• Commitment 17: ACAD-Finance’s social impact will be assessed, at the latest, three years after the agreement on this Charter. This assessment shall be undertaken on a transparent and independent basis by a dedicated research professional or organization. Among the tools used by ACAD-Finance to monitor its social commitments, it may use a poverty measurement score card, such as the Progress out of Poverty Index (PPI) tool, in order to measure the poverty level of its clients.
• Commitment 18: ACAD-Finance commits to report relevant social performance indicators to the MIX market on an annual basis.
App2. Case Study Palestine - ACADSocial Business Charter - Commitments