24.9.09
CII Presents at International Ag Conference
Sept 24, 2009Common Interest presented its Village Banking program at the Echo Asia Agricultural Conference in Chiang Mai yesterday. Participants from all over South and South-East Asia attended this bi-annual conference as a way to network and share information and experiences from their regions. The Village Banking workshop proved to be popular with representatives from the Thai community and ended in a lively discussion of the benefits and challenges of a saving and loan program.
23.9.09
Common Interest First to Test Microfinance Regulations
PRESS RELEASE
(Sept 23, 2009)
Recent announcements from the Bank of Thailand (BOT) have suggested that a new priority will be to promote the microfinance industry in the country. This is about to be tested by Common Interest Foundation who intends to transform its charitable microfinance program into a regulated microfinance operation.
While neighbouring countries, such as Cambodia, have seen its microfinance industry flourish in the past decade, Thailand has seen very little activity. Current Thai laws and regulations are considered too restrictive and too challenging to operate a viable microfinance program. Besides a few NGO programs, microfinance is conducted primarily through government programs such as the BAAC and Government Savings Bank. Not only have the laws stifled the microfinance industry, but many rural people are left to rely on illegal loan sharks who often charge interest rates as high as 20% per day.
To help correct this, the BOT has been developing new laws to help promote microfinance and to hopefully attract more from the private sector. Common Interest Foundation is attempting to be one of the first to respond and to legally register its microfinance operation in Thailand.
Common Interest currently runs a charitable microfinance program that helps rural villages to establish its own Village Bank. A “Village Bank” is a term used to describe an informal group of members from the same village, typically women, who save together each month and subsequently use their collective savings to provide loans to each other. Loans disbursed within each Village Bank are known as ‘Internal Loans’. Since Internal Loan demand usually exceeds the amount of funds available within the Village Bank, the group can request additional funds or ‘External Loans’ from Common Interest.
As a way to attract more funds to its program, Common Interest intends to transform its microfinance project into a Non-Bank Financial Institution. The new company will be run as a for-profit company but will have a strong social mission. Profits from the company will be channelled back to the foundation to help fund the foundation’s other charitable programs.
Current laws require the new company to have an initial capital registration of 50 million baht. This is substantially higher than what the foundation currently has. The foundation has sent a letter to the Governor of the Bank of Thailand requesting an exemption to this requirement on the basis that the new microfinance company will be a social company. Organizations and Investors around the world are watching this process to see if Thailand truly is opening its doors to microfinance.
For more information on this application, please contact:
Nittaya Den-Aksornkul, Program Officer
Common Interest Foundation
Tel / Fax: 053-855000 or 089-5558664 (Mobile)
(Sept 23, 2009)
Recent announcements from the Bank of Thailand (BOT) have suggested that a new priority will be to promote the microfinance industry in the country. This is about to be tested by Common Interest Foundation who intends to transform its charitable microfinance program into a regulated microfinance operation.
While neighbouring countries, such as Cambodia, have seen its microfinance industry flourish in the past decade, Thailand has seen very little activity. Current Thai laws and regulations are considered too restrictive and too challenging to operate a viable microfinance program. Besides a few NGO programs, microfinance is conducted primarily through government programs such as the BAAC and Government Savings Bank. Not only have the laws stifled the microfinance industry, but many rural people are left to rely on illegal loan sharks who often charge interest rates as high as 20% per day.
To help correct this, the BOT has been developing new laws to help promote microfinance and to hopefully attract more from the private sector. Common Interest Foundation is attempting to be one of the first to respond and to legally register its microfinance operation in Thailand.
Common Interest currently runs a charitable microfinance program that helps rural villages to establish its own Village Bank. A “Village Bank” is a term used to describe an informal group of members from the same village, typically women, who save together each month and subsequently use their collective savings to provide loans to each other. Loans disbursed within each Village Bank are known as ‘Internal Loans’. Since Internal Loan demand usually exceeds the amount of funds available within the Village Bank, the group can request additional funds or ‘External Loans’ from Common Interest.
As a way to attract more funds to its program, Common Interest intends to transform its microfinance project into a Non-Bank Financial Institution. The new company will be run as a for-profit company but will have a strong social mission. Profits from the company will be channelled back to the foundation to help fund the foundation’s other charitable programs.
Current laws require the new company to have an initial capital registration of 50 million baht. This is substantially higher than what the foundation currently has. The foundation has sent a letter to the Governor of the Bank of Thailand requesting an exemption to this requirement on the basis that the new microfinance company will be a social company. Organizations and Investors around the world are watching this process to see if Thailand truly is opening its doors to microfinance.
For more information on this application, please contact:
Nittaya Den-Aksornkul, Program Officer
Common Interest Foundation
Tel / Fax: 053-855000 or 089-5558664 (Mobile)
18.9.09
Retention Rate Report
As mentioned in a previous post, Common Interest has been collecting data on its retention rate. Village Banking historically has had the lowest retention rate among the various microfinance methodologies. Common Interest decided to take a look at our retention rate and determine if there are things that we can learn from it in order to better improve our services for our members. After checking every group, we are happy to report that our retention rate is over 94.5% for the past year. Currently, Common Interest has 1183 borrowers and additional savers which brings our membership total to over 1200. During the past year, we have lost a total of 68 members. Here is the breakdown:
- 21 Members were cut from the program by Common Interest.
- 19 Members no longer feel that it is necessary to take a loan.
- 13 Members were forbidden by their own group to take another loan.
- 2 Members found cheaper loans from government programs.
- 4 Members did not trust the other members in her group.
- 3 Members are seriously sick.
- 3 Members moved.
- 3 Members died.
Some may be asking why Common Interest cut 21 members. These members are from one community who started our program and fully repaid their loans. However; the goal of our Village Banking program is to assist the community in building and growing its own group. While capable of doing it themselves, the community rarely attempted to complete its own bookkeeping, or enforce its own rules. It continued to rely on Common Interest staff to perform all of its duties for them. Common Interest has informed this group that they will have the option of re-joining the program once they show commitment to becoming their own self-running Village Bank.
For the other categories, Common Interest intends to speak more to the 19 individuals who felt that they no longer had a need to take a loan. While we certainly do not intend to push people into borrowing, we want to ensure that our program can meet their needs if they actually do need additional funding. One reason could be that the Village Banks are all accumulating their own funds. In time, we know that the Village Bank will be able to cover more and more of its own loan demands. This could be part of the reason.
- 21 Members were cut from the program by Common Interest.
- 19 Members no longer feel that it is necessary to take a loan.
- 13 Members were forbidden by their own group to take another loan.
- 2 Members found cheaper loans from government programs.
- 4 Members did not trust the other members in her group.
- 3 Members are seriously sick.
- 3 Members moved.
- 3 Members died.
Some may be asking why Common Interest cut 21 members. These members are from one community who started our program and fully repaid their loans. However; the goal of our Village Banking program is to assist the community in building and growing its own group. While capable of doing it themselves, the community rarely attempted to complete its own bookkeeping, or enforce its own rules. It continued to rely on Common Interest staff to perform all of its duties for them. Common Interest has informed this group that they will have the option of re-joining the program once they show commitment to becoming their own self-running Village Bank.
For the other categories, Common Interest intends to speak more to the 19 individuals who felt that they no longer had a need to take a loan. While we certainly do not intend to push people into borrowing, we want to ensure that our program can meet their needs if they actually do need additional funding. One reason could be that the Village Banks are all accumulating their own funds. In time, we know that the Village Bank will be able to cover more and more of its own loan demands. This could be part of the reason.
7.9.09
New Collection Method
(Multiple Groups make payments at once in Mae Taeng).We have been trying to find ways to cut costs while providing our services to more villages. With only one vehicle, we are limited in the amount of groups that we can visit in any given day. This month, we decided to test a new idea that will save considerable time and expenses as well as provide a way to expand our program to more villages.
In the district of Mae Taeng, we currently have 8 Village Banks. Rather than drive to each of the, we have asked the Village Banks to meet at one location anytime during a 3 hour period. At that one location, all of our staff would be available to help collect payments as well as check bookkeeping records. The Village Banks liked this idea since it meant that they could come at a time that was convenient for them rather than having to wait for our arrival. In order to help encourage punctual attendance, we also offered a draw for groups who arrive early with completed documents and full payments. Every three months, we will draw a group from the tickets for a prize of 1000 baht. The groups were very excited. Afterall, they are getting a chance to win money - just for making a payment on time! Common Interest is very excited as well. Not only do we save substantial on fuel but we also were able to complete a task in 3 hours that normally takes 6.
We will be testing this for one more month in Mae Taeng. Once we have sorted out all the "bugs," we hope to change all of our districts to this system.
1.9.09
Client Retention Rates
Common Interest has been spending some time looking at its
Retention Rates is an important topic for MFIs. Adding new members is must more costly than providing loans to repeat members. Inevitably, some members will not take subsequent loans. Reasons vary but a good MFI should track its members to see if there are problems with its program or products. Common Interest is currently in the process of doing this now.
Common Interest follows the Village Banking methodology which, according to an Inter-American Development Bank study, has an average of 15% lower retention rates than other microfinance methodologies. In the Western Hemisphere, Village Banking retention rates hover around 73%. This means that each year, an average of 27% of an MFI’s members stop taking loans. This is significant.
Hidden in the fast membership growth during the past 6 months, Common Interest has also seen approximately 25 of its members not take subsequent loans. This corresponds to a retention rate of around 98% which is substantially higher than the Americas. However; we are currently interviewing each one to find out why they stopped taking loans. We want to see if there is something in our system or products that could be modified in order to make our program more appealing to our members.
We will post final results when we have completed our survey. To date, we have discovered the following reasons:
- 3 members felt that it was not necessary to borrow more. (They all continue to save though).
- 2 members have moved.
- 2 members have died.
- 2 members do not want to go into debt again.
- 1 member’s family forbids them from taking any more loans.
- 3 members do not trust their fellow group members.
- 2 members were not allowed by their group to borrow again.
We are interested in these results. An initial look makes it appear that most of the reasons are based on group politics, not the actual program. Once we have a full report, we will look into it again and see if there are additional reasons for the drop-outs. Common Interest is committed to modifying its program so that it can be best suited to the needs of its members.
Retention Rates is an important topic for MFIs. Adding new members is must more costly than providing loans to repeat members. Inevitably, some members will not take subsequent loans. Reasons vary but a good MFI should track its members to see if there are problems with its program or products. Common Interest is currently in the process of doing this now.
Common Interest follows the Village Banking methodology which, according to an Inter-American Development Bank study, has an average of 15% lower retention rates than other microfinance methodologies. In the Western Hemisphere, Village Banking retention rates hover around 73%. This means that each year, an average of 27% of an MFI’s members stop taking loans. This is significant.
Hidden in the fast membership growth during the past 6 months, Common Interest has also seen approximately 25 of its members not take subsequent loans. This corresponds to a retention rate of around 98% which is substantially higher than the Americas. However; we are currently interviewing each one to find out why they stopped taking loans. We want to see if there is something in our system or products that could be modified in order to make our program more appealing to our members.
We will post final results when we have completed our survey. To date, we have discovered the following reasons:
- 3 members felt that it was not necessary to borrow more. (They all continue to save though).
- 2 members have moved.
- 2 members have died.
- 2 members do not want to go into debt again.
- 1 member’s family forbids them from taking any more loans.
- 3 members do not trust their fellow group members.
- 2 members were not allowed by their group to borrow again.
We are interested in these results. An initial look makes it appear that most of the reasons are based on group politics, not the actual program. Once we have a full report, we will look into it again and see if there are additional reasons for the drop-outs. Common Interest is committed to modifying its program so that it can be best suited to the needs of its members.
