Case Studies

Increasing agricultural production and revenue are important goals in Haiti, where even though 65% of the population is employed in agriculture, food shortages are still common. A key element in expanding production is increasing the availability of agricultural credit from Haiti’s financial institutions. However, convincing financial institutions to expand agricultural lending can be difficult because they perceive it as high-risk for the institution. USAID/Haiti’s HIFIVE project, an Associate Award under the FIELD-Support LWA, is addressing these issues with new risk mitigation and incentive structures.

This success story explores recent developments at Le Levier, a federation of 20 credit unions with 200,000 member-clients, which is participating in an innovative USAID credit guarantee program that provides 50% risk coverage for a variety of agricultural credits.

On March 11, 2012, professors Pascaline Dupas and Jonathan Robinson published a study on "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya" which was conducted in 2006, 2007, and 2008 and funded by The Abdul Latif Jameel Poverty Action Lab (J-PAL) and Innovations for Poverty Action (IPA). Sampling was done in three waves with a total of 200 people. Dupas and Robinson worked with the Financial Services Association, a village bank in the market town of Bumala between Nairobi and Kampala, in order to offer savings accounts to randomly selected microenterpreneurs. These savings accounts did not pay interest, but clients were charged for withdrawals. The researchers analyzed savings account usage, which was recorded daily in logbooks over the period of several months. The researchers found that women benefited from these accounts and invested more in their businesses than men. Additionally, there was not a very high uptake of savings accounts, which could be attributed to people's mistrust of village banks. To learn more, please refer to the following post by David Roodman called “First Randomized Trial of Microsavings."

In October of 2011, economists Lasse Brune, Dean Yang, Xavier Giné and Jessica Goldberg published a new study on commitment savings. This study was conducted with the help from the formal bank Opportunity International Bank of Malawi. This study supports some of the earlier findings from a study by professors Pascaline Dupas and Jonathan Robinson and provides interesting additional information. This study focused on male tobacco farmers, who received loans from the Opportunity International Bank of Malawi as part of a 10-15 member group. As David Roodman pointed out in his blog post, “this study was designed to shed light on why commitment savings accounts help people, by measuring impacts on intermediate variables.”

USAID's HIFIVE program, led by WOCCU under the FIELD-Support LWA, has partnered with Haitian financial institutions and provided support to help them develop credit products and services adapted to the needs of Haiti's agricultural producers. This Success Story explores how one credit union, SOCOLAVIM, based in St. Marc has begun offering a variety of credit products to meet the needs of local value chains, including rice, bananas, plantains, and livestock. Supporting the producers involved in these value chains in turn supports the local tourist industry, supplying local food products to beach hotels and restaurants.

The Smart Campaign´s Client Protection Principle on Fair and Respectful Treatment of Clients requires that financial service providers create a corporate culture that values high ethical standards among staff and ensures that controls exist to prevent, identify and correct corruption or mistreatment of clients. FUNDESER´s efforts in meeting this principle can serve as a good practice example to other institutions.

The Smart Note, “Responding to a Crisis at Fundeser” describes how the MFI dealt with the aftermath of both the worldwide credit crisis and the internal No Pay Movement (Movimiento No Pago). It explains how the institution overhauled its Human Resource department in an effort to steer the institution to recovery.  Funderser’s approach to rebuilding its brand and credibility was to make high ethical standards and sound risk management central to the institution’s corporate culture. Additionally, the Smart Note shows the thought process and follow-up strategy that Fundeser’s board members and senior managers implemented.

In response to high unemployment and growing rates of rural poverty often due to suffering rural economies and increased migration in the Eastern Caribbean, USAID-funded Eastern Caribbean Youth Microenterprise Program (ECYMP) through the FIELD-Support LWA, designed to accelerate the creation of sustainable livelihoods and self-employment opportunities for vulnerable youth. The program piloted an innovative “Accelerator” model with grant funding to support youth businesses leveraging specific market opportunities in partnership with other private sector actors. The Accelerator Grant Fund awarded four in-kind grants totaling approximately $131,000 in the region.

This beneficiary success story highlights the experience of Ismela Henry, a dynamic youth entrepreneur from St. Lucia, who was awarded a start-up grant to establish her business and become one of the few young self-employed women in her community.

This Smart Note focuses on the efforts of AccessBank Azerbaijan to practice non-discrimination among employees through deliberate efforts to hire people with disabilities (PWD). Additionally, the Smart Note provides a testimonial from one of AccessBank’s employees, Asad Aslanov, about his experience as a person with disabilities working as a cashier at the MFI. Through inclusive hiring policies, targeted recruitment of PWDs, and specialized training, AccessBank demonstrates a commitment to non-discrimination.

These efforts may make the institution a more welcoming environment for clients with disabilities, but further measures will be needed to achieve a similar level of non-discrimination for clients. Through this Smart Note, the Smart Campaign highlights AccessBank’s important first steps toward more comprehensive non-discrimination practices.

Treating clients with dignity and respect helps financial service providers adhere to both their social mission and financial goals. It is a “win-win”—the client is satisfied and the provider gains the client’s loyalty and continued business.  This dual advantage can motivate providers to improve their policies and procedures governing staff-client relations, including collections practices, ethical standards, complaints mechanisms, and staff training.

This Smart Note describes how Fundación Mundo Mujer Popayán developed a stronger pro-client attitude. The institution took time to listen to clients, collected their feedback and suggestions and used this information as guiding principles for developing new policies and procedures.  The result is a set of complementary policies, that, unlike previous material, use specific problem situations to address potential weaknesses in client protection practices.

This investigation concerned use of the Premium loan, Pro Mujer Peru’s (PMP) largest credit ever offered. The most common motivation for seeking the Premium loan was that clients simply wanted more capital for their businesses. In nearly every case, clients realized their plans for the loan, which is to say, nearly all the funds went directly into business investment. But the Premium loan was just part of broad credit and cash-management strategies among these clients. In total over the past year, they had taken out 5-6 separate loans averaging over $5,000 between them, with the Premium loans comprising just 30 percent of the total. The dominant pattern of business investment was loan patching. The Premium loan was taken up simultaneously or in sequence with other credits, both at PMP and other institutions, and applied toward the same purpose of business investment. Many people reported increased profits, compared with years past, as a result of the capital boost from the Premium loan. The Premium loan also enabled some clients to respond to opportunities to upgrade their businesses and to strengthen vertical and horizontal relationships in the value chain. All clients were engaged in obligatory savings connected to the Premium loan, which was noted as a pleasing feature. These clients like to be forced to save, but also wanted reasonable access to those savings when they needed them, which PMP’s policies provided. Few had or wanted conventional voluntary savings accounts. These initial observations on savings inspired a follow-up investigation in June 2009, which combined MIS analysis with additional interviews to challenge some of the conventional wisdom on limited value of obligatory savings. Key takeaways from the study included this rethinking of mandatory savings and complication of the notion of “graduation”– i.e. many clients “graduated” from PMP in the conventional sense (i.e. sought bigger loans with competitors), but retained their smaller group loans for intangible reasons such as loyalty and friendship.

Using a Financial Diaries methodology, Microfinance Opportunities undertook a project to explore the extent to which Opportunity International Bank of Malawi (OIBM) added value through the introduction of a mobile “bank-on-wheels” serving rural locations in Central Malawi. We collected the transactions data (all inflows and outflows, including use of financial services) for just under 200 low-income households, half of whom were OIBM clients using the mobile bank, for 18 months over 2008-09. The sample was mostly a mix of poor farmers and microentrepreneurs (median per capita daily income: $2 purchasing power parity [PPP]).

The study found that banks and individual cash transfers dominated the financial service market—banks captured the “big money,” while individual cash transfers helped mediate day-to-day needs. Use of the OIBM van dropped off over time, though several factors unrelated to the bank may have been at work. Multiple lines of transactional evidence suggest that OIBM and its van succeeded in adding value for its women clients.

On the topic of risk management, cash flow was unsteady—business owners commonly faced weeks of zero income, for example—and banks including OIBM played a smoothing role, though it was small compared to informal mechanisms. Also, households commonly needed to pay lump-sum expenses that exceed the sample’s median weekly income for an entire household ($55). Again, the banks played a role in supporting clients through these circumstances, but only in a small minority of cases.

The behavioral insights from this study will help inform improvements in microfinance operations, and we will continue to develop the Diaries as a practitioner’s tool.