Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
YOUTH FINANCIAL SERVICES Fundación Paraguaya Youth Loan Program
WHO WE ARE Fundación Paraguaya is a cutting-edge social enterprise, which develops innovative solutions to poverty and unemployment in Paraguay and proactively disseminates them worldwide. FP is an entity that has dedicated 23 years to promoting entrepreneurship, enabling people of limited resources to create jobs and increase their family income.
OUR BUSINESS MODEL Fundación Paraguaya is a self-sufficient social enterprise that promotes urban and rural entrepreneurship through three interrelated strategies: • A Microfinance program that supports micro entrepreneurs and emerging entrepreneurs generally relegated by other microfinance institutions. • An economic education program for children and young people (Junior Achievement). • A self sustainable agricultural school
OUR BUSINESS MODEL The three programs are separated in terms of budgets and finances, but are strongly integrated at the operational level so that each program enriches and is enriched by the other two. This synergy gives “added value” to each of the three programs and is the force that guides the institution’s “business model.” Additionally, it is an important ingredient in the success of the microfinance program.
YOUTH IN PARAGUAY • 62.1% of the population is under 30 years old. • 5.6% open unemployment • 26.5% sub-employment Young people are the most affected by this situation
Western region (Chaco): 10% of the population. Eastern region: 90% of the population. Chaco Greater Asunción Area Santani Coronel Oviedo Ofices: Matriz, Asunción, San Lorenzo, Luque, Villa Elisa, M.R.Alonso. Lambare 6 Caacupe Caaguazu Ciudad del este Ita Ybycui Carapeguá Encarnación San Ignacio • 30,366 clientes • Portolio US$ 14 millions • Overdue loans: 2,27% • 21 Offices • 140 cities/220 • 240 employees • Metodology: individuals, solidary groups, village banking • Amount: fromUS$ 40 to US$ 25.000 • Interest rate: market rate San Pedro Amambay Canendiyu V.Rica Pilar
WHY A YOUTH LOAN PROGRAM? • A neglected target market of young individuals who showed interest in creating their own micro enterprise, but did not have the chance to have access to loans. • Sons and daughters of our clients • Students of our economic education program • FP decided to develop a specific financial product oriented to young micro entrepreneurs between 18 to 29 years old, from urban and rural areas.
OUR COSTUMERS PROFILE • 6700 young entrepreneurs • Age 18 to 29 years old • Most of them come from poor families and do not have the chance to enter into the work force due to the lack of opportunities or sufficient training. • These young individuals generally decide to start their own business as an alternative to unemployment and poverty • 60% from rural areas and 40% are in urban and semi- urban areas. • 40% of them have successfully concluded high school and the majority of the remaining 60% has successfully concluded elementary school. • Loans adding up to 3 million dollars • Average loan of 500$.
LOAN SERVICE FOR YOUNG MICRO ENTREPRENEURS • Grants loans for the creation and expansion of micro and small enterprises. • Oriented to start up activities or for work and investment capital. • The amounts range between 40$ to $5,000. 500$ is the average loan. • Repayment terms vary from 2 to 24 months; most loans are re-paid at a 12 to 24-month period. • Payments: weekly, bi-weekly or monthly basis. • The interest rates are those established by the market, around 30%. • Loans are granted based on the payment capability, adjusted to the production capability of the micro entrepreneur and not necessarily based on guarantees. • Parents assume the position of cosigners, which ensures the family support of the business and allows the correct use of the loan.
LOAN SERVICE FOR YOUNG MICRO ENTREPRENEURS We provide access to financial services aimed at strengthening their personal and business skills • Loan officers: • Provides technical assistance and management training • Assistance in drafting accounting statements and investment plans • Business Incubator • Training for the elaboration of business plan. • Assistance on: accounting, financial, taxation and human resources issues. • Conducts training on marketing, finance and production • Provides commercial contacts and business opportunities.
PRODUCTIVE LOAN PROGRAM • Grants loans to the graduates from the Agricultural School so that they can apply what they have learnt at School in their communities of origin. • Allows young people to develop feasible projects. • All of the graduates present their business plan as part of the academic curriculum and all of them are analyzed by a loan committee. As a result, credit lines are financed for the projects. • The amounts range from100$ to 5,000$. • The loan amounts, payment term and interest rates vary depending of each project. • This loan “closes the circle” between theory and practice, deepening the impact and sustainability of our entrepreneurial education program.
VILLAGE BANKING • Targets groups of micro enterprising women. • Loan amounts vary per member according to each one’s payment capability, they range between 20$ and 330$. • Each cycle has a minimum and maximum amount established and culminates in terms between 2 to 4 months. • Payments are weekly or bi-monthly depending on the decisions made by the women bankers. • The program encourages savings, making it mandatory that each member save 10% on the amount of their personal share. • The program offers training in areas such as: Family Budget; Sales Costs; Self-Esteem; Leadership, among others. • Two mandatory training sessions are offered in each cycle in addition to coordinated training that crosses all phases.
OUR DIFFERENCE FROM OTHER MFI’S Two key aspects: • We concentrate our efforts on loans of low amounts granted to the smallest microentrepreneurs and entrepreneurs initiating activities, which are generally excluded by other financial entities. • Second, we offer more than just loans. Thanks to our particular business model, we also provide a broad array of educational, business, and community development services to the young client. • This is a self-sufficient and profitable program in financial terms, showing that it is possible to successfully finance young people.
OUR MAIN CHALLENGES • Legal Restriction in terms of age • Misconceptions about youth: Image associated to bad payment and late repayments • Need of a higher level of follow-up and assistance How we overcame this challenges • Joint signature with parents • Loan officer training • Business Incubator
SOME LEASSONS WE LEARNED • Supporting the loan and providing financial services • Evaluation of the family situation. • Loan officer oriented towards the work with youth and with experience in handling different types of business • Timely loans • Work together to understand the market and its needs