Contents
Introductory movieIntroductory movie
BackgroundBackground
Business ModelBusiness Model
MethodologyMethodology
Key lessons learntKey lessons learnt
ConclusionConclusion
Coenraad Jonker
Why are we doing this?
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Cost effective lending to informal small and micro enterprisesCost effective lending to informal small and micro enterprises
Institutional development in communitiesInstitutional development in communities
Capital formationCapital formation
Results as at end November 2008
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The amount of money that has been lentThe amount of money that has been lent
The number of loansThe number of loans
The average size of the loansThe average size of the loans
The beneficiary gender split (female)The beneficiary gender split (female)
The default rateThe default rate
R7.1mR7.1m
630630
R11 037.61R11 037.61
79%79%
7.13%7.13%
Contents
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Introductory movieIntroductory movie
BackgroundBackground
Business ModelBusiness Model
MethodologyMethodology
Key lessons learntKey lessons learnt
ConclusionConclusion
Coenraad Jonker
CIF 2CIF 2 CIF 3CIF 3CIF 1CIF 1
Business Model - A CIF is capitalised from a central trust and thereafter becomes a revolving source of funds
Standard Bank Community Investment Trust
Standard Bank Community Investment Trust
Donor 1Donor 1 Donor 2Donor 2 Donor 3Donor 3
Loan
The CIF uses donor funding for the purpose of
on-lending to informal micro enterprises
Community peer pressure and moral persuasion are used to ensure repayment.
No collateral required
Repayment
Donors do not accrue any profit – all returns are
reinvested into the fund
etc
All donor funds accrue to an umbrella fund which disburses
monies to the various CIF’s
Loan terms
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Repayments are made over a maximum period of 24 months, and the repayment schedule is linked to the nature and requirements of the business
Repayments are made over a maximum period of 24 months, and the repayment schedule is linked to the nature and requirements of the business
Interest is charged at 3% pm on outstanding balancesInterest is charged at 3% pm on outstanding balances
Loan size ranges from R1 000 - R50 000Loan size ranges from R1 000 - R50 000
There is an initiation fee of R100 and a monthly charge of R15There is an initiation fee of R100 and a monthly charge of R15
Contents
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Introductory movieIntroductory movie
BackgroundBackground
Business ModelBusiness Model
MethodologyMethodology
Key lessons learntKey lessons learnt
ConclusionConclusion
Mike Shongwe
The lending process
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Community Investment Fund
Process Flow
Launch fund
Receive Loan
application
Site visitsThe fund manager and panel
physically verify screened applications and further assess the required loan amount and ability to
repay
Panel screen applicantApplicants are judged based on
their ability to repay the loan as a function of their character, as
judged by the CIF panel which is representative of the broader
community
Receive repaymentBeneficiaries are given up to 24 months to repay the loan in full
Reinvest funds in CIFLoan repayments are reinvested in the CIF – donors do not take any
profit out of the fund
Disburse loanSuccessful applicants receive a loan up to
the value of R50 000
Contents
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Introductory movieIntroductory movie
BackgroundBackground
Business ModelBusiness Model
MethodologyMethodology
Key lessons learntKey lessons learnt
ConclusionConclusion
Mike Shongwe
Lessons learnt
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Community Investment Fund
Process Flow
Launch fund
Receive Loan
application
Site visits1.Decisions are taken on your feet – you do it while you are physically there2.Have to be passionate. Have to get to the level of the people 3.It is a community process, not an efficiency process (the time to listen)4.Try to avoid giving loans that will not repaid
Panel screen applicant1.Initially 50% of applications are deferred, but approvals increase as experience grows2.Experience is important in assessment
Receive repayment
Reinvest funds in CIF
Disburse loan1.Entrepreneur hand-holding by other service providers
1. The community partners must “see the opportunity”.2. Partners can take various forms and are community specific 3. Panel independence must be understood upfront and reinforced all the
time
Contents
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Introductory movieIntroductory movie
BackgroundBackground
Business ModelBusiness Model
MethodologyMethodology
Key lessons learntKey lessons learnt
ConclusionConclusion Coenraad Jonker
Conclusions
What we don’t yet know:
– Optimal scale of funds
– Optimal operation once the funds are independent
– How to replicate lending skills and maintain performance at scale
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Foundation Maturation Growth
What we have learnt
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Disbursed over 630 loans to those considered uncreditworthy by conventional standards
Disbursed over 630 loans to those considered uncreditworthy by conventional standards
The structure is low cost (a single professional per fund / per two funds)
Performance of the funds is good (7.13% default rate)
The structure is low cost (a single professional per fund / per two funds)
Performance of the funds is good (7.13% default rate)
Trained 60 community members as fund panel members, providing them with skills in the areas of
character introduction and making lending recommendations
Trained 3 community members as resident CIF Managers
Trained 60 community members as fund panel members, providing them with skills in the areas of
character introduction and making lending recommendations
Trained 3 community members as resident CIF Managers
Standard Bank has become known in the CIF communities as “the bank that cares”
Standard Bank has become known in the CIF communities as “the bank that cares”
Informal businesses constitute a worthy market
Informal businesses constitute a worthy market
Institutional capacity at community level adds value and reduces risk
Institutional capacity at community level adds value and reduces risk
Building a skills base in micro-lending is an intense people orientated development
process
Building a skills base in micro-lending is an intense people orientated development
process
The involvement of communities in the lending process reconnects people and
institutions
The involvement of communities in the lending process reconnects people and
institutions
Background on presenters
Coenraad Jonker
Coenraad is a cum laude MBA graduate from the Gordon Institute of Business Science and currently lectures the MBA course on doing business in informal markets. He also holds B Luris and LLB degrees, both cum laude.
Coenraad is currently the Director of Community Banking at Standard Bank and has served Edward Nathan Corporate Law Advisors for 9 years of which 5 years were as Chief Executive Officer.
Mike Shongwe
Mike Shongwe is a career banker. He left conventional banking when he was the Head of National Sales and Marketing at Standard Bank Swaziland in July’ 99 following his appointment to spearhead a vision by the bank and other corporate partners, to set up the Inhlanyelo “Seed Capital” Fund; a private enterprise initiative, established to promote socio-economic development targeted at the under privileged and unbanked population across Swaziland. The Fund has since established itself as an unrivalled informal micro enterprises financier in Swaziland.
In September 2007 he joined Standard Bank of SA [SBSA] to design an implementation model for the bank’s new Community Investment Fund – a job creation and poverty reduction intervention in SA’s informal business sector.
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