26 Sep 2011

Technical assistance & knowledge transfer : status of 2 years experience in sustainable business development

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Employee Volunteering Programme

Employee Volunteering Programme

 

In 2009 started the first wide-sized Employee Volunteering Programme (EVP) supporting a microfinance project, ever launched in Luxembourg.
The success of this on-going experience lies in the dynamic coming from several actors having provided together their respective contribution with the common objective to set up responsible microfinance services (ranging from credit and saving to training) for ethnic minorities living in the Northern mountainous region of Vietnam.

The EVP has been launched in partnership with the French NGO Entrepreneurs du Monde who has started some microfinance activities in this remote area in the fall 2007. The following Luxembourg-based actors * have joined the EVP : the NGO Aide au Vietnam who has facilitated the relationship and the administrative tasks through its local connexions ; the Comité de Soutien de la Microfinance, who has provided technical advices ; and obviously the volunteers themselves coming from the banking sector mainly who have actively used their professional skills for 18 months already to roll out the actions scheduled.

Technical assistance : a key-component to maximise the impact of microfinance

During the 3rd annual Microfinance conference organized in Luxembourg by the ALFI (Association of Luxembourg Fund Industry) on the 17th March 2011, Damian von Stauffenberg from MicroRate stated that microfinance is becoming a “young adult” resulting in biggest challenges to overcome. One of them is to take into account the large diversity of situations at the grassroots : from Asia to Latin America passing through Central Europe and Africa, the hurdles the poor are facing can be extremely different to each other. There is a growing demand to develop specific solutions and practices close to each situation in order to secure the social impact on one side and a reasonable financial return on the other side.

In this perspective, it is to remind that microfinance is not only a question of microcredit … meaning that technical assistance (TA) aiming at reinforcing local capacities should also be part of the global package. The TA is too often let aside just because it costs, not only money but merely time. It requires on top of this a strong commitment from the MFI, in order to make it a success. Some MIVs (microfinance investment vehicules) fund the TA through the allocation a certain percentage of their financial return (for instance 10 bps). Some of them see in TA a non negligible leverage to reduce the risk on the MFIs (microfinance institutions) they invest in. Indeed capacity building does help MFIs to reinforce their governance and their professionalism as a whole.

The implementation of the best practices available in the industry is what has been driving the activities of Entrepreneurs du Monde since their inception. In the course of time, the similarities between microfinance and banking are being more and more tangible : the risk management, the questions of governance and “Chinese wall” or the management of human resources for instance are becoming highly decisive for running with success a microfinance programme.

The Luxembourg financial place is definitely an ideal location to find out the relevant competencies and host EVP initiatives aiming at facilitating knowledge transfer for supporting a sound growth in microfinance.

Rationale of the on-going EVP in Vietnam

A detailed analysis of the microfinance project “Chi-Em” was carried out in June 2009. The investigation’s area was as wide as possible including : the observation of operations at the offices and field activity (processing of client information, identification of potential clients, administrative tasks such as maintenance of the client database and reporting tools) ; participation to workshops in villages (presentation of Chi-Em and the loan programme) ; interviews with villagers (8 clients and 20 non-clients) ; overview of village needs and surroundings ; discussion with the Chi-Em staff.

A quick analysis of the Vietnamese microfinance environment reveals bad conditions to operate as a private actor. The market is led by state banks heavily subsidising micro-credit to the poor with rates from 8 to 10 % a year while annual inflation rate exceeds 20 %. The main selection criteria for credit agreements are the official statistics on poverty. The arguments of the credit requests are quite overlooked so as the capacity of the beneficiaries to pay back.

As a conclusion, there is a real need to help independent practitioners to build-up a responsible microfinance offer targeting a demand for income generating investments. To achieve this goal, local professional capacities are to build up as the local market fails to deliver them due to poor on-going practices and track-record.

Mission statement and methodology to run an EVP

The results of the detailed analysis of June 2009 were carefully worked on in close collaboration with Entrepreneurs du Monde during the summer 2009 in order to set-up actions of enhancement aiming at getting the “Chi-Em” programme more capable to face the lack of experience of its staff. The challenge identified is twofold : 1) offering micro-credit at rates closer to inflation (in order to get the programme financially sustainable) but in return assisting the beneficiaries in their business with an extensive catalogue of skills trainings and field consultations on demand (veterinary and agricultural advices), management trainings and social support ; 2) targeting the poorest of the poor, specifically from minorities who are traditionally let behind the fast economic development of the country.

The action plan has been structured around 8 workstreams, that cover together a large spectrum of a microfinance activity :

Workstreams
Actions
Client database and MIS (management information system)
improve the structure and processing of the data
Client support « non-financial services » (training material)
create management training supports
Development of new products & services (financial)
not yet kicked off
Internal organisation and processing
update the operations manual and procedures
Human resources policy
set up HR management tools
Internal control and audit
set up operational controls and an audit plan
Business development (clients) & networking
not yet kicked off
External communication
improve social performance reporting

Each workstream has been broken down in macro-tasks, themselves being broken down in micro-tasks and deliverables. The workload has been scheduled in an annual master planning that is followed on in partnership with Entrepreneurs du Monde.

Every workstream has been “staffed” by volunteering resources upon their free choice and availabilities.

The mission statement ruling the partnership with Entrepreneurs du Monde has been clear : increase the operational efficiency of the microfinance programme and enhance the quality of services in the view to get it fit for a transformation into a MFI under the Vietnamese law in a near future. The working principles applying for most of the workstreams have been to get the volunteers develop or adapt existing tools in Luxembourg (as far as possible) and go to the field just for the final implementation.

Up to 21 volunteers have participated to the EVP since November 2009 and 10 of them have spent several days in the field to install the solutions.

Lessons learned and perspectives

A status after 18 months of collaboration was made by Miss Phuong Do Thi Bich – Head of the Chi-Em programme until April 2011 – during a conference held in Luxembourg on the 23th May 2011.

It was reported that the deliverables have met the expectations from “Chi-Em” so far.

One condition to success in such a collaboration is depending on how each party behaves regarding the other one … in other words, from the mindset shared. Volunteering programmes must be run under a “participating consulting” mode : the collaboration between the “Chi-Em” staff and the volunteers is based upon an implicit agreement stating that every party has to learn from the other one. Working remotely, facing communication hurdles (language), misunderstanding the local context, etc … are so much obstacles in the collaboration process, but it well managed (i.e. with giving the volunteers autonomy and room for creativity) it provides so much satisfaction to both parties. A real team work has been observed.

The motivation and professionalism of the volunteers have been praised by the “Chi-Em” staff, while outlining nevertheless that the remote work, the communication (language hurdles) and the misunderstanding of the rural context of microfinance have been actually time consuming.

This last observation might be the most relevant one to remember. It can be overcome only if the local management sees a real added value in reinforcing capacity building. It means having a long-term thinking about the business and not being under the pressure of short-term thinking investors.

Once these conditions are met, 3 key-success factors might be considered when starting an EVP : 1) set up a clear collaboration’s framework turned into a comprehensive roadmap (tasks, timeframe, validation process …) ; 2) put the multi-stakeholders process in the middle in order to avoid loosing partners adherence ; 3) give impetus to the volunteers team by giving them autonomy and room for creativity, because they are the real operators of the action plan.

When considering the sustainable finance industry in its whole, the concept of EVP turns out to be a valuable method easily replicable.

Profile of the “Chi-Em” project

Location : Dien Bien Phu (North-West Vietnam)
Around 18 staff (management, finance, operations and credit, training and technical assistance)

Key figures over the period of the EVP intervention

 Finance services
       2008
      2009
      2010
Number of active loans
792
767
1,988
Average loans disbursed
94 $
63 $
101 $
Outstanding portfolio
57,557 $
45,713 $
185,830 $
OSS (operational self-sufficiency)
15.6 %
29.6 %
34,7 %
Non-finance services
Number of participants to training sessions(clients and non-clients)
0
1,452
10, 784

Further details on : www.entrepreneursdumonde.org

Examples of deliverables already implemented in the field

  • 50 % of the Client documents and forms (over 10 pieces) enhanced
  • 8 training modules redesigned : Savings / Spending / Opportunity cost / Investing / Cost benefit Analysis / Incentives / Price and quantity / Planning and records
  • 100 % of the universe of working procedures updated
  • 100 % operational checks implemented and documented

Partenaires :

* These organisations have also financially contributed to the development of the microfinance activities in the field

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