projecteverest

Social Consulting

Malawi - Social Consulting and Microfinance

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Access to socially beneficial assets through access to capital
Vision: Decentralised bridge of capital between the developed and developing world

PROBLEM
Financial inclusion is a severe limitation for the Malawian economy, as only 18% of adults have access to a bank account, with only 6% of the nation’s population having access to formal lending. Savings is also a major issue: 54% of Malawians don’t have savings, with the major cause due to lack of money after expenses (Lee, Research Summary).

Malawians are alienated from formal financial services with the major issues being:
- Lack of collateral
- High-interest rates
- Fear of indebtedness
- Low/irregular income

Formal financial institutions provide some capital, but this is usually limited to those with a strong history of financial information. If consumers do not have an adequate financial history, they are either rejected or are charged high interest rates. Organisations external to the commercial banking system, such as FINCA (for-profit business) and Umunthu Microfinance (charitable organisation) have tried to provide access to finance to these communities, however it remains difficult for individuals to obtain loans through these organisations.

Without the opportunity to expand their businesses or pursue economic opportunities, Malawians are hampered in their capability to improve their financial situation and increase their income. Whilst some ingenious solutions have been created locally such as village banks (a collaborative effort by a community to distribute loans to their community), these organisations often cannot meet the demand among their communities, nor issue large-scale loans.

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  1. Kurt Michl
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  2. olivedippie
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  3. Sebastian Arnold
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  4. Rose Martin
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Work Update

Since the Microfinance team has been involved with the solar project, we have learned a lot about how a potential Microfinance system could be applied to asset products such as the solar light. However, our high default rates and inability to track payments with automated processes also shows us that there is a long way to go in terms of understanding how to manage and run this system effectively. As a team, we still need to explore a few things in order to guarantee that this system can...

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Proposed Experiment

Lean Phase: Solution Assumption: The solar team are ‘ willing to pay ’ for access to the Microfinance ‘product in a box’ solution, and the solar team will prove this by paying with usage of the system. Time Box: 2 weeks. Success Metric: The success of this experiment will be measured by whether the solar team actively uses this ‘product in a box’ system, which will be tested with sales of the solar unit. Criteria: Green Light: Proceed to utility testing and iterating...

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Proposed Experiment

Lean Phase: UVP Assumption: The solar team is willing to work with PEV on their Microfinance ‘product in a box’, as it will allow them access to a greater customer base if they are able to loan their solar product effectively and efficiently. Assumptions related to this: This relies on the ability of the Microfinance team to explore and efficiently set up the following attributes of this ‘product in a box’: A CRM that is able to track payments effectively A list of security...

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Work Update

The Microfinance team in Malawi has done a bit of research in the past into village banks, and have identified a problem of theirs as access to sufficient amounts of capital in order to increase the amount they can loan out to their customers, as well as the frequency of these loans. This July, the Microfinance teams will explore this further by proceeding to offer and currency test to village banks, offering to solve this problem by allowing them access to low interest loans for more...

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Proposed Experiment

Lean Phase: Solution Assumption: Village banks are willing to share their accounting information and customer data with PEV, in exchange for a low interest loan to be used as increased capital for the village bank, therefore allowing them access to larger loans and more frequent loans for their customers. This will require PEV to gain access to important information about village banks, their customers, and their accounting and payment records in order for PEV to successfully build...

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Proposed Experiment

Lean Phase: UVP Assumption: Village banks are willing to meet with PEV to discuss the potential to increase capital amounts in village banks, therefore allowing access to larger loans and more frequent loans for their customers. Time Box: 2 weeks Success Metric: The success metric is the number of village banks who identify with the above assumption. The team will interview 15 village banks. CRITERIA Green Light: Proceed to currency testing with village banks....

Rose Martin
by Rose Martin (Admin)
0 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Problem

The Problem and Background: Village Banks in Malawi are informal institutions that work whereby villagers come together to guarantee each other’s loans by providing capital to the bank to be invested. Village Banks are an interesting customer segment for the Social Consulting teams because they have incredibly low default rates, and thus could be an interesting institution to leverage to provide sustainable financial access to Malawians. In Malawi these village banks are used by many...

Rose Martin
by Rose Martin (Admin)
1 Votes
Comments 1
Rose Martin
by
Rose Martin (Admin)
Project Summary

The February Social Consulting team focused on developing a better understanding of our customer base. through gaining a better understanding of our customers, and their interaction with us as a business, we gain insight into what we can do to improve our service to them. This is all in the aim of reducing the  high default rate we are currently experiencing with our payment plan loans. To do this, we focused on interviews with our customers to understand why they are defaulting, and not...

Kurt Michl
by Kurt Michl
0 Votes
Comments 1
Kurt Michl
Experiment Results

https://projecteverest.crowdicity.com/post/964670 Lean Phase:  Customer Segment Assumption:  The previous risk profiling tool was inaccurate (the weightings aren’t accurate or the metrics may not be explanatory), with less than 50% of the defaulting and non-defaulting customers being identified correctly ( see data here ). This may be due to the scores/weightings not being based on any data, as well as potential irrelevancies in the metrics. Via surveys of the remaining customers, we...

Kurt Michl
by Kurt Michl
0 Votes
Comments 1
Kurt Michl
Proposed Experiment

21 sales in February have been made in a single village (Sumani 2) where the chief is the guarantor for 19 of these sales. The chief has expressed a desire to ensure that all customers are paying. This allows us an opportunity to make the most of this situation and test the replication of social pressure and the influence of village chiefs.    Lean Phase: Channel and Revenue Assumption:  By implicating a member of the community in the assurance of payment, more we can replicate...

by Kurt Michl
2 Votes
Comments 2
Kurt Michl
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