Workshop 2

New products and services to accompany your growth

Andrea Limone, PerMicro – 4 of June - Milan

Workshop Outline

0 – PerMicro description

I - Introduction – New products and servicesTriangle of microfinanceMicrocredit and MicrofinanceNew Product Development

II – Presentation of our speakers

· Riccardo Aguglia – Fair Finance· Pierre Matheus – Adie· Iulian Grigore Manol - Fair Credit House IFN

III - Audience discussion

IV - Recommendations and Conclusion

PerMicro - Why

We were born to assist side by side,

with competence and enthusiasm, who decided to start…

…An enterprise

…A training session

…A private or family path

PerMicro – Who we are

PerMicro is the first italian microcredit provider operating nationwide and putting together social goals with business management, technical skills and financial knowledge.PerMicro S.p.A. is a Non Banking Financial Intermediary (authorized ex. art. 106 T.U.B. by Banca d'Italia) created in Turin in 2007 and specialized in microfinance products.

PerMicro would be:

• A point of reference for Third Sector: cooperative society, associations, ONG

• A partner with public and private institutions involved in microcredit projects for local development

PerMicro’s mission is to increase the financial inclusion of weaker social classes, especially migrants, by delivering microcredit to unbankable people, to start or develop small business and to improve life conditions.

PerMicro – PartnersOltre VentureIt’s the first social venture capital society in Italy, born to develop new social business, sustainable and able to reply to increasing demand of services and social connections from social outcast people.www.oltreventure.com

Fondazione PaideiaWork to help disadvantaged children by promoting new initiatives and giving concrete support to those who are involved in this very difficult work on a daily basis.www.fondazionepaideia.it

Ubi Banca is the fifth largest Italian banking Group in terms of branches with a market share of approximately 6% and a significant presence in the wealthiest areas of the country. UBI Banca is a cooperative Group, listed on the Milan Stock Exchange and included in the S&P/MIB index.www.ubibanca.it

Fondazione Sviluppo e Crescita – CRT is a foundation established in July 2007 that, throughout venture philanthropy acts, contributes to the development and growth of Fondazione CRT reference area, matching traditional ways of working of Fondazione CRT with typical financial market instruments.www.fondazionecrt.it

PerMicro – Products

Microcredit Business Mission

Start or develop micro enterprises of people without guarantees to accede to traditional banking credit

WhoItalian and foreign people with:- A business idea- Entrepreneurial capacities- A Social network

HowIn addition to microcredit we provide support to create a business plan and to manage and develop the activity

Conditions- Amount: up to 15.000 euros- Length: up to 8 years- Rate and charge: 9-12%

PerMicro – Products

Microcredit Family

MissionServe pressing needs (home, health, learning).

Who- members, employees and voluntaries of cooperative

societies- people left out of credit system but integrated in a social

network

HowClient support and quick answer to primary needs

Conditions- Amount: up to 15.000 euro- Length: up to 5 years- Rate and charge: 8,5-10,5%

PerMicro – New products

In processing...

Customer oriented

- Mortgage- Microinsurances for specific needs - Legal advice for immigrants- Other services for immigrants (telephone cards)

Public oriented

- Services for local administrations- Announcements for micro and small enterprises

PerMicro – MethodologyPerMicro’s network is composed by associations, ethnic communities, development agencies, parishes and other social groups.

The network connects PerMicro with clients, granting for their seriousness and mentoring them through their business.

Network

PerMicro

ClientClient Client

ClientClient

Evaluation and selection

Pre-screening

PerMicro – Methodology (2)Net credit is an operating model based on the trust between PerMicro and local networks.

Social network is involved:

FIRST

Contact and interest testing, sign of an agreement with PerMicro, information and reports to the associated, pre-screening and connection between PerMicro and applicants.

IN PROGRESS

Sign of the “moral guarantee”.

AFTER

Monitoring of business progress and refunding plan.

Two good reasons make the debt refunfing the primary interest of the social network:

 1_ if the associated waive his debt, will be increased the

economical treatments of his network for the next opportunities;

2_ if not, all the next microcredit will be given to an associated of that network with more difficulties/costs.

PerMicro - Where

y. 2008

PerMicro - Results

PerMicro - Results

MICROCREDIT PROVIDED TO BUSINESS BY APPLICANTS' NATIONALITY

Nigerian24%

Rom anian14%

Chinese2%

ITALIAN12%

Senegalese16%

Moldovan2%

Moroccan7%Kenyan

2%Egyptian

2%

Ghanese2%

Philippine2%

Thai2%

Pakis tani3% Bangladeshi

5%

Peruvian3%

Ecuadorian2%

Communication15%

Transport & Porterage

15%

Art & Culture19%

Food Services18%

Massages7%

Consulting4%

Tailoring11%

Import - Export11%

PerMicro - Results

FINANCED ACTIVIT IES BY TYPOLOGY

Itinerant trade37%

Sedentary trade12%

Agriculture2%Cons truction

5%Services

44%

PerMicro - Results

M ICROCREDIT PROVIDED TO FAM ILIES BY APPLICANTS' NATIONALITY

Nigerian7%

Peuvian2%

Philippine24%Pakistani

2%

Colombian2%

Moroccan2%

Ghanese2%

Cameroonese2%

Tunisian2%

Togolese7%

Senegalese7%

Ukrainian2%Albanese

2%Yugoslavian

4%Romanian9%

ITALIAN20%

Bangladeshi2%

Introduction Triangle of microfinance

Zeller, M. & Meyer, R. - 2002

Simultaneously: · Outreach - reaching the poor · Financial sustainability - meeting operating and financial costs over the long term · Impact - having discernible effect upon clients' quality of life

Argues that tradeoffs are sometimes inevitable, but even so, synergies among the three make the concept valuable because if clients perceive the MFI to be sustainable, more of them will seek its services.

Outreach

SustainabilityImpact

Two different ways to consider sustainability:

Sustainability(Self sufficiency)

Financial self sufficiency:

Operational self sufficiency Operational revenues

Operational costs

Operational revenues

Adjusted operational costs

Measures the ability of the organisation to recover its operating expenses, explicit financial costs and the provision for loan losses. Is not considered the origin and costs of financial funds

Incorporates the opportunity cost of funds by accounting for inflation and market rate of interest for the total funding requirement.

Impact

INDICATOREUNITA' DIMISURA VALORE DELTA PUNTEGGIO

PRIMA (fino a6 mesi prima)

DOPO (12mesi dopo)

I - REDDITOI -1 reddito €I -2 rimesse inviate all'anno €

II - OCCUPAZIONE

Impact evaluation in PerMicro: Income Employment Banking House Health Hobbies and Sports Education Transportation

Outreach

Six aspects of outreach:

• Worth

• Cost

• Depth poverty approach

• Breadth

• Length self-sustainability approach

• Scope

M.Schreiner 2002

Outreach (2)

Worth“...their willingness to pay”

For loans, worth increase as the terms of the contracts are more closely

matched to borrower demand.

CostSum of price costs and transaction costs for clients.

DepthThe value that society attaches to net gain of a given client > poverty is

a good proxy of depth, if society has preference for the poor (income).

Indirect proxies: sex, location, education, ethnicity...

Outreach (3)

• BreadthNumber of clients.

LengthTime frame of the supply of microfinance.

• ScopeNumber of types of financial contracts (products) offered.

Microfinance

MicroCredit

MicroHousing

MicroSaving

MicroInsurance

Financial assistance

Introduction Microcredit and Microfinance

Introduction New Product Development

• What

...satisfies customer's need.

Core, actual and argumented product.

•When

...once the MFI has established itself as a stable and viable player in the

market.

•How

Four phases... see next pages.

Nhu-An Tran, 2000

Introduction New Product Development

Phase 1: Identification and Preparation

Phase 2: Design and Development

Phase 3: Pilot Test

Phase 4: Launch and Commercialization

• Riccardo Aguglia – Fair Finance· Pierre Matheus – Adie· Iulian Grigore Manol - Fair Credit House IFN

Questions: · Which are your current products/services?· Why did the organizations decide to start new services?· Why did they select those specific services? On which

ground?· How did they introduce such services?· How have their clients been involved in the start of such

services?· What are the main results so far?· What has been the impact of such services on their

microcredit activities?· What are the lessons learnt?· What are the perspectives?

Our speakers...