Hello all -
I currently feel blessed to be working in a microfinance institution here in Burundi – “Turame Community Bank.” Just to fill you in, they operate “community banks” in which groups of 30-45 people (90% female) elect 5 executive leaders and apply for individual loans with Turame that are guaranteed by the group. Savings isn’t compulsory… but almost. Once all group members have repaid their personal loans (weekly installments @3%/month – 4 month term) they can apply for a new loan cycle, but personal loan amounts are judged by the level of savings they have. Turame has recently developed a “Staff salary loan” product, moving away from “free” advances on salaries, and are creating a few solidarity groups which would help successful clients graduate into a larger loan range. So that is that.
But this week a young woman from headquarters has arrived to help a partner organization begin implementing a savings driven operation that CARE created. From what I gather, they only work with churches that form groups. They (I’m not sure who “they” is at this point) train trainers to lead these advanced savings groups in which members save for a period up to 1 year, and then make decisions on who to give loans to and for how much. The idea is to help with consumption smoothing (not focused on entrepreneurial activities alone) and emergencies. Once established the groups should be self-sustainable and are expected to spontaneously replicate. Supposedly, CARE has recently declared this to be its most successful program and is diverting all of its microfinance resources to these new groups.
All that to say – what do you think. Did we study this model in class? It isn’t familiar to me, but perhaps I wasn’t paying attention.
Final thing – Turame is struggling with its poor, problem ridden MIS software (Management Information Systems) and can’t expand to its new teller stations as expected due to the limitations of the software. They are looking for something new, and Wendy mentioned a new product that is out, but it is between .5 to 1 million! Perhaps I shouldn’t be surprised but I am. It seems like a large constraint for growing MFIs that could successfully expand and need updated software, but cannot afford such a tremendous cost. I find myself questioning why an MIS system designed exclusively for MFIs could cost so much, and why there aren’t more feasible AND adequate systems available out there for growing MFIs. Why don’t one of you get on that and design a less expensive system… 
Hope you are all well. Can’t wait to hear more stories and development adventures.
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October 3, 2008 at 10:57 pm
bakubrown
Well, here we go, my first foray into the world of blogging. I guess you can teach old dogs new tricks!
I remembered we talked about MicroFin in class Karri. I’m not sure if it will fit the needs of your program but it is a free program for Micro Finance developed by Chuck Waterfield. The website is microfin.com I think the main issue might be the number of clients that the program can handle.
I find the model you mentioned very interesting, especially since it is focused on consumption smoothing. All the models we studied seemed focused on entrepreneurship. Any way, the one model it reminded me of, and I don’t remember if we really studied it, is village banking by FINCA. Though like you, it seems like a model we did not really look at.
And thus, my first contribution to a blog is ready!
October 21, 2008 at 9:23 am
Rossco
Karri: Microfin, I believe handles most of the administrative functions behind a microfinance initiative, but I’m not sure if it actually helps you in the day-to-day management of cash deposits and disbursements. Be sure to check it out. I downloaded it in a few minutes and played around with it.
As to the model you discussed, it sounds like a bit of a tough sell for most MFIs. It has to rely heavily on the trainer, since he or she must be able to convince members to save money for a full year before loaning it out to others! I think that a traditional microloan product would be easier to convince people to join: “get a loan and pay it back.”
This new system sound like its slogan would be “contribute your hard-earned money for a year and then act like the board at a Credit Union.” I wouldn’t want that responsibility! It sure could work, but it sounds a bit cerebral and relies heavily on the trainer. Keep in mind that it would also mean a full 12 months that villagers would save before they could see loans being disbursed. (on the other hand, you wouldn’t need to ask a donor for hundreds of thousands of dollars, since the people would create their own capital)
I love your note, Karri, that this method has been anointed the “best method” (whose criteria?) and then pushed out to everyone else! Sounds funny and all too familiar.