1.Microfinance in Practice Workshop Welcome =) Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com

2. Workshop Outline

Introduction

Microfinance process : interview to analysis

Support to small entreprise

Intro to hard skills:

• Finance

• Accounting

• Monitoring and evaluation (M&E)

Toolkit

Lessons learnt

Tips

Resources

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 3. My background

IDS Coop Placement :

Support to Income Generating Activities (IGA) for members with HIV/AIDS in Burkina Faso, through WUSC-Uniterra. 10 months

• Different partners

• Different types of work

• Different types of IGA

Mandate

A typical day on placement

What made coworkers and other volunteers special and inspirational

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 4. My background

Access Riverdale

Roles

Microfinance in Canada

• AR, Calmeadow/Alterna, Momentum, Developpement International Desjardins

The need is definitely here

Not only business loans

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 5. Introduction - Microfinance in Practice:

4 principles

Appropriate services

• Often: short term loans, repetitive, small amounts, friendly approach

Simplify operations

• Literacy constraints + printing expensive + computer challenges

Motivate people to reimburse

• You have to be a presence, call them, see them, visit them

• Incentives

Charge interests that cover all fees

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 6. Introduction Why microfinance? Is it for me? Framework : Community Economic Development Q & A - -- f f f -- Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 7. Microfinance Process, from interview to analysis

Goals of process:

Get to know the entrepreneur and the business

• Understand on what levels you can help

• Assess integrity, character, reputation, etc.

• Evaluate the risk of the business

• Importance of having local staff on board

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 8. 5 Steps of Process

Receive microcredit application

Gather and validate information

Detailed analysis of application

Make decision

Monitoring and Reimbursement

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 9. 1. Receive microcredit application

• needs, match with product, eligibility

• can be during an interview most of the time, try to minimize paperwork

• interview preparation: get familiar with sector of activity (research!!) and come up with a series of questions :hand-out info to gather

• hand-out: documents to ask for

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 10. 2. Gather and validate information

• Canada = Beacon scores, call references

• Visits to residence and business of critical importance

• Goal : understand the financial need and see what you can do.

• Financing needs come can be of different natures :hand-out

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 11. 3. Detailed analysis of application Huge diversity in institutional cultures and how people think about this Think in terms of risk; is it increased or decreased by what you find, and how can you help? Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 12. Intro to Risk Assessment When making decisions, always evaluate if it raises or lowers the risk to the MFI/NGO and what are the ways to mitigate that risk.Refer to financing needs hand-out.Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 13. 4. Make Decision Explain clearly, always give feed-back Sometimes credit is not what is needed and you can be able to provide other types of support (see next section) Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 5. Monitoring and Reimbursement Different arrangements Q & A : -- f f f -- 14. Support to Small Business

Most common things I did :

Develop or adapt management and M&E tools

Training: broad/specific

Financial analysis of IGA project

IGA project development & Proposal/business plan writing

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 15. Exploitation of IGA, starting & working capital Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 16. Management 101

What is management?

Entrepreneurship

Organization and strategy

Marketing

Accounting and controls

Human resources mgt

Production mgt

Information systems

Quantitative methods

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 17. Management 101

Innovation

How to choose an IGA?

• Supply/demand

• Value added

• Vertical integration

• Product diversification

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 18. Management 101

Market study

really important research

Know the clients and what they want

Implement like any other type of reseach

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 19. Management 101

Promotion and publicity

Tips:

• Professionalization

• Compare with other products

• use testimonies

• Have a prepared sales pitch

• Ensure you preserve a good reputation

• Do not get discouraged!

Networking

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 20. Financial Analysis what to remember from 1 styear econ Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com

Simple: income and expenditure

Capital and depreciation

Cost versus sales price (margin/benefit/profit)

Cash flow and income projections

21. Support to Small Business

Things to keep in mind:

Very culture-specific so talk to friends about their conceptions of economics, competition, etc.

Integrate planning everywhere

Field research and talking to people involved in these IGA crucial

Work in teams, try to get people from different sectors on board

Network right away!

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 22. Support to Small Business

Often the credit is not the major need of the client:

CRUCIAL role of training

My major role = advising, like a consultant howironic!!

Always be constructive, help the clients improve

Technical Assistance typology of IGA

3 sectors: agriculture, industry and services

Match people with resource people

Q & A -- f f f -- . BREAK

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 23. Intro to hard skills

Finance

Not the stock market!

How much you need to know really depend on the kind of work youll do

Well cover :

• Principles of credit

• Break-Even Analysis

• Basic Financial Ratios

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 24. Principles of credit

Loan term and repayment frequency possibly most significant variables

Cash patterns : regular vs irregular cash flow

Loan term : match with business cycle

Loan Utilization: consumption vs production, or use for other IGA (risk)

Loan purpose: fixed assets vs working capital

Interest rate : declining balance vs flat method

Fees and charges: have a proportionally higher impact than interest rate because not calculate on declining balance

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 25. Break-even analysis

Fixed costs (FC) : rent, depreciation, salaries, etc.

Variable costs (VC): supplies, raw materials, stationary. Calculate on average (AVC)

Contribution Margin (CM) = average revenue AVC

Break-even point (BEP)= FC / CM (in intems/time)

Break-even revenue = BEP X AVC + FC

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com . 26. Basic Financial Ratios Forthcoming online. Sorry =( Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com . 27. Accounting

Essential:Tool of analysis, control and M&E

Your to-do list :

• learn to use the accounting equations : assets = liabilities + equity

• learn to read and UNDERSTAND the 3 main financial statements: balance sheet, income statement and statement of cash flow

• learn double-entry, ledgers, credit-debits

In practice : simpler (books, records)

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 28. Accounting in Practice

Tips to microentrepreneurs (based on my experience in Burkina Faso) :

Write down EVERY single transaction

Keep and file every transaction record

Get organized - supplies

Do not mix IGA money with familial/personal /NGO money (separate bank accounts)

Be lucid and conservative in management of gifts to friends/family and in the customer credit policies

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 29. Accounting in Practice

Tips to small entrepreneurs (based on my experience in Burkina Faso) :

set the salary for the boss

have written procedures for cash flow

get familiar with computer software like Excel or Ciel Associations

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 30. Monitoring and Evaluation

Impact of microfinance hand-outs

5 principles to strive for :

• Offer financial services in the long run :permanence

• Reach a high number of clients :size

• Reach the poorest (or specific population):outreach

• Cover operational and financial costs :sustainability

• Reach high productivity and lower costs :efficiency

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 31. M & E

Keep in mind :

Need to constantly re-evaluate the project

Microfinance is a tool for an end, not a goal in and of itself Integrate PLANNING everywhere

Be creative in making the work happen! Hard to understand for many people what is the impact you want? Through which kind of activities?

Donors want to see sustainability, e.g. self-financing

Q & A - -- f f f --

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 32. Tool-kit

ABC of tools

Make sure theyre adapted to literacy/numeracy levels

Always develop them participatorily

Complicated not necessarily always better

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 33. Printed tools

Microcredit application

SWOT analysis

microcredit contract

microcredit file

monitoring file

impact assessment questionnaire

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 34. Unprinted tools

IGA and market study guides and powerpoints

general ledger

typology of IGA

other M&E tools in Excel

management proceedures

Q &A -- f f f --

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 35. Lessons Learnt Importance of group work, but also challenges e.g. people dont speak when the leader is not there, etc. Need to ensure people understand their role (very CLEAR) and how the group is supposed to function Group projects versus individual projects Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 36. Lessons Learnt Credit TEAM need to do capacity building Listening and Empathy the most important skills ever Rethink your role as the expert so much to learn from others Try to have people familiar with the different trades on the IGA committee Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 37. Lessons Learnt Group projects versus individual projects Technical assistance typology of IGA 3 sectors : agriculture, industry andservicesMatch people with resource people Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 38. Lessons Learnt People have diverse agendas and they may mistake you for someone who has funding (some people are just opportunist) Be really open minded and realistic as to peoples levels and needs Synergize Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 39. Where I screwed up :

Worked too independently

• More impact if take more time to develop tools together rather than doing them all and

Time management Spreading myself too thin

Not action-oriented enough (did lots on paper but not that much in reality. REVS+ example)

Denied the imperative of learning accounting

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 40. Where I screwed up :

My own attitude towards placement as learning

• Attitude towards expectations

• Taking lots of time reading audit reports and trying to make a sleek manual

• Too much time trying to understand things

May have overemphasized savings

• They have an opportunity cost

• But good Local Economic Development strategy because mobilizes the funds locally

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 41. Where I screwed up :

Tried to make things too complicated

Classism/Positionality made it hard to relate to people

• Talked more to middle-class, professional people

Compare with Ella, Kate and Denise

Q&A - -- f f f --

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 42. TipsGet the people high up in the hierarchy on your side Show commitment and instigate meeting habits with resource personTry to mobilize resources to do on-site follow up and inspections Network right away! Business development centre, other agencies They have training materials, tools andresearch instruments already designed Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 43. Tips Build partnerships! (sustainability) Do not reinvent the wheel Always test your trainings before hands, especially the examples Follow up on trainings whenever you can try to get participants to organize local trainings Dont get too caught up in academic ways Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 44. Tips Match product to need (big investment longer loan) Know the institutional culture of your NGO Research tips: SPSS, Delicious Dont freak out lots of time for self-briefing on placement! Keep a work diary and to-do list, write a lot about life and work Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 45. Tips Be patient! Learn communication styles (who calls who? Setting up meetings?) Remember youre leaving after 8-12 months Think of what your baseline is and ensure youll get all the data START WITH THAT if theres no baseline, ensure you create it Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 46. Tips

Use slow times to:

• • Do Community Economic Analysis

• • Enjoy learning about the informal/formal economy and the financial sector

• • Create information briefs on major IGAs (with investment, exploitation cycles, equipment costs, financial flux)

• • Help identify the gaps, opportunities (market research) and see where the microfinance services are needed

• • Learning about informal economy and cultural economics a REALLY good use of your time!

Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 47. Resources Skills/Training Calmeadow documents : Accounting and Finance QuickMBA: Accounting and Business:www.quickmba.com Accounting Coach:www.accountingcoach.com UNCDF: Accounting applied to microfinance COURSE: www.uncdf.org/mfdl/index.php?_mode=students.home Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 48. Resources General Mohammed Yunus, Banker of the Poor Consultative Group to Assist the Poorest (CGAP):www.cgap.com Check me out on delicious.com (username: onomatopee) Q &A -- f f f -- Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 49. Conclusion Microfinance rocks! Its okay to be a keener! Hard/Soft Skills a process All experiences are diverse no one size fits all solution. Be humble and realistic : Youll screw up too, dont worry! Go out and learn about something microfinance/CED-related Contact info:[email_address] , 416 595 0761 Whats next? Workshop Evaluation Thanks =) Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com 50. Workshop Evaluation Thanks =) Microfinance in Practice Workshop UTSC, 27/03/08 -- f f f -- Facilitated by Emanuele Lapierre-Fortin, onomatopee@gmail.com