angels of microfinance

ANGELS OF MICROFINANCE – HOW TO ENGAGE THE GLOBAL CITIZENS TO FINANCE MSEs – PROJECT MAIN CONCEPTS – SÃO PAULO, BRASIL - DECEMBER, 2015

Microfinance currently plays a small role into the financial sector.There are limited number of MFIs operating in Brazil, serving 3 MM borrowers* – data is an issue and misconceptions apply.Larger MFIs have avg 2,000 active clients – the vast majority is considerably smaller.

Potential demand for microfinance in Brazil is expansive.There are around 10 million microenterprises eligible for microfinance.Overall microfinance penetration in Brazil is around 2.0% of potential demand.

There has had a expressive growth of financial services in Brazil, but the MSEs segment has a unique demand profile:- Growth in access to banking networks- Increased portfolio availability – credit, loans, savings and insurance

The question remains – are them able to meet the lower-income microentrepreneurs financial needs?

THE BRAZILIAN LANDSCAPE IN A NUTSHELL

THERE IS ROOM FOR IMPROVEMENT

The banking sector is increasingly viewing lower-income markets as a growth opportunity.

Yet the omnipresence of banks in the Brazilian economy add pressure and restrict access.

Stringent requirements from the perspective of low-income clients: typically require proof of minimum income (R$ 500-1,000 per month) and several forms of identification (Identification Card, CPF, and Proof of Residency) for opening current accounts.

Higher loans sizes, with conservative approval processes.

Limited lifecycle and high interest rates – 1,2% per month* + 3% of the total transaction amount as administrative fee.

*some researched institutions are practicing na avg 4% monthly interest rate as of Dec’2015


BUT ALSO HURDLES TO BE WORKED ON

Average micro entrepreneur borrower is almost illiterate

Average monthly income – up to RS 600 (US 175)

Female – 67% of the micro entrepreneurs

Loan amount – 60% ranging from USD 750 – USD 1000 up to 12 months


AND VOICES THAT SHOULD BE HEARD

Improve focus on lower-income microentrepreneurs - tailored products addressing client needsLocal institutions – local outreach – field knowledgePromoting understanding of products through effective training, collaterals and marketing materialsFostering a long-term strategy and adopting supporting business practicesProduction/ revenue oriented credit lines


BUILDING A FRIENDLIER ENVIRONMENT FOR MSEs

Giving Index

World position – 9012% have taken part in voluntary/ charitable projects22% have given aid to charity40% would help a stranger

Yet...

... would be willing to take part in a cause where peers were also involved

... Don’t actually know how to help

... Do not trust NGOs

... Fear Money won’t actually reach the need


A NATION OF BYSTANDERS?

What the lower income MSEs really need?- Investment Capital- Mentoring- A long term commitment plan

How to get involved?- Provision of “angel” capital – small amounts of investment (limited to USD 1000 per

year), full risk with Market average return tied to production returns- Administrative fee designed to provide mentoring and training – volunteer based

network- Losses can be mitigated with bundled credit life and/or crop insurance where

applicable

BRINGING THE AVERAGE CITIZEN TO THE GAME

BLENDING MICROFINANCE AND CHARITABLE DONATIONS AS AN INVESTING PRODUCT

Escalate the available amount of available funding to MSEsInvolve new segments of the population – build a giving cultureBuild up field knowledge to maximize returns on future investmentsConstruct production capacity of MSEs thus reducing dependabilityExpectation of return as a way to improve the operational model

Questions that still need to be addressed

Need of intermediaries?Subsides for losses?Money transfers and receiving guarantees?Need and role of intermediaries?

BRINGING THE AVERAGE CITIZEN TO THE GAME

KEY OBJECTIVES AND KEY QUESTIONS?

angels of microfinance

Small Business & Entrepreneurship