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Micro & Small Enterprise Lending Products: Credit Union Innovations. Lucy Ito World Council of Credit Unions, Inc. (WOCCU) Emerging Products for Micro & Small Enterprise Finance World Bank & World Bank Institute March 20, 2001. WOCCU/CUES/Philippines (December 2000) Member-Savers:

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Micro small enterprise lending products credit union innovations

Micro & Small Enterprise Lending Products:Credit Union Innovations

Lucy Ito

World Council of Credit Unions, Inc. (WOCCU)

Emerging Products for Micro & Small Enterprise Finance

World Bank & World Bank Institute

March 20, 2001


Cu lending innovations

WOCCU/CUES/Philippines

(December 2000)

Member-Savers:

147,669

Savings & Shares:

$10.5 million

Loans Outstanding:

$8.1 million

WOCCU/Ecuador

(September 2000)

Member-Savers:

792,255

Savings & Shares:

$79.3 million

Loans Outstanding:

$68.3 million

CU Lending Innovations


Woccu cues philippines a coupling of methodologies

Model Credit Union (MCUB)

Asset-Accumulation

Savings-Based

Mixed Outreach

Financial Disciplines

Individual Loans

Strategic Needs:

New Product Dev’t

New Members

Credibility/Brand

Village-Banking (SCWE)

Income Generation

Loan-Driven

Target: Poor Women

Product Discipline

Group Loans

Strategic Needs:

Source of Loan Funds

Graduation Options

Strong Host MFI

WOCCU/CUES/Philippines:A Coupling of Methodologies


Mcub scwe
MCUB & SCWE

  • Model Credit Union Building (MCUB)

    • Financial Disciplines:

    • Quality Products & Services (Savings & Credit)

    • Efficiency of Operations

    • Usage of PEARLS Monitoring System

      (See: WOCCU International CU Prudential Standards)

  • Savings & Credit with Education (SCWE)

    • Introduces a village-banking group loan product to CUES credit unions


Basic village banking model
Basic Village Banking Model

  • 5-6 women form a Solidarity Group.

  • 5 Solidarity Groups form a Credit Association.

  • Credit Association representing 25-30 women behaves as a single client to host or sponsoring institution.

  • Transactions and funds within Credit Association are handled internally by Management Committee.

  • Source of credit funds = external donor funds.


Ffh innovation on village banking product credit with education cwe
FFH Innovation on Village Banking Product: Credit with Education (CWE)

  • 5-6 women form a Solidarity Group.

  • 5 Solidarity Groups form a Credit Association.

  • Credit Association representing 25-30 women behaves as a single client to host institution.

  • Transactions and funds within Credit Association are handled internally by Management Committee.

  • Integrated financial and educational service delivery system. Non-formal education on high impact topics (health, nutrition, other)

  • Source of credit funds = CU member savings & external donor funds.


Woccu cues innovation on village banking cwe savings credit with education scwe
WOCCU/CUES Innovation on Village Banking/CWE: Savings & Credit with Education (SCWE)

  • 5-6 women form a Solidarity Group.

  • 5 Solidarity Groups form Savings & Credit Association (SCA).

  • Members may save onlyand skip loan cycle(s).

  • SCA joins CUas anAssociate Member.

  • SCA Management Committee handles internal transactions; but, no internal fund. Rather, SCA deposits funds into CU.


Woccu cues innovation on village banking cwe savings credit with education scwe1
WOCCU/CUES Innovation on Village Banking/CWE: Savings & Credit with Education (SCWE)

  • Source of funds = CU member savings only.

  • Members may graduate to become individual members in their own right.

  • Coupled with Model Credit Union Building Methodology.

  • Automation of manual record-keeping to increase efficiency and reduce cost.


Key scwe implementation elements
Key SCWE Implementation Elements

  • Weekly Meetings:

    • Loan repayment installments made

    • Voluntary savings made (withdrawable, interest-bearing, convenient)

    • Money is counted and books are balanced

    • Other:

      • Education seminar

      • Meeting chaired by Management Committee, not the credit union field agent

  • Management Committee Responsibilities::

    • Collects loan repayments.

    • Collects savings.

    • Balances the books.

    • Deposits to the credit union.


Credit design
Credit Design

  • Loan Amount:

    • P 1,500 ($37.50) maximum initial loan

    • 50% increase per cycle

    • Up to maximum P 9,000 ($225~$180)

  • Duration: 16-week cycle

  • Payment Mode: Weekly at meetings; lump sum to credit union.

  • Loan Purpose: Income generating projects with weekly income.


Cues scwe results 01 31 01
CUES/SCWE Results (01/31/01)

  • 733 active SCAs (11 CUs)

  • 22,045 SCWE members

    • Of 147,669 members (15% of CU membership)

    • 20,480 are borrowers (90%) (10% save only)

  • Cumulative loans granted: P195.2 M (US$3.9 M)

  • Loans outstanding: P51.5 M (US$ 1.03 M)

  • Portfolio at risk (30 days): 0% (7th cycle)

  • Pure voluntary savings: P7.0 M (US$140,000)

  • Coop graduation to zero-subsidy: 4 CUs (4/11)


Scwe demands on credit union resources
SCWE Demands on Credit Union Resources

  • Full Capacity: 60 SCAs x 5 x 5 = 1,500

  • Staffing: (5)

    • SCWE Supervisor + 4 Field Agents

  • Infrastructure:

    • Liquidity

    • Product Methodology Training

    • Information Systems

    • Fixed Assets (motor bikes)



Graduation opportunity for scwe members
Graduation Opportunity for SCWE Members

  • Member can simultaneously participate in SCWE and access individual savings and loan services.

  • Maximum P 9,000 SCWE loan size complements individual CU loan amounts:

    • SCWE Group Loans: 20,889

    • Individual Loans P1-10,000 ($1-200): 26,748

    • Individual Loans P10,001-20,000 ($200-400): 8,262

    • Individual Loans P20,001-30,000 ($400-600): 6,828

    • Individual Loans >P30,000 (>$600): 7,816

    • Total No. of Outstanding Loans: 70,543 (of which 67.53% <$200)

    • Liquidity = 32.43% (Small loan size is not due to queuing.)

    • See Dec 2000 Summary of Micro-Loans for Batch 1 & 2 Coops.


Graduation opportunity for scwe members1
Graduation Opportunity for SCWE Members

  • 73% of SCWE members indicate desire to become regular members.

  • But, graduation to date: <100

  • Eliminating Barriers to Entry:

    • Perceived Minimum Initial Share Capital Requirement:

      • P100 ($2) vs. P2,500 ($50)

      • Cf. average savings after 7 cycles P434 (~$9)


Other mfi innovations being used by woccu
Other MFI Innovations Being Used by WOCCU

  • Credit Scoring & Automatic Loans (from Calpia)

    • Approval in <5 minutes and lower interest rate.

  • Removal of Key Barrier For Good Borrower Entry: The Pre-Membership Education Seminar (FENACOAC-Guatemala):

    • 10-20 minutes vs. 3 days. Effect: attract good borrowers rather than desperado borrowers.

  • SME Loans Based on Cash Flow (WOCCU/Ecuador)

    • “Open-End” Lines of Credit

    • “Interest Free” Supplier Advances

  • IRnet (WOCCU’s International Remittance Network)

    • Credit unions can remit funds across 40 different countries for <$10 per US$1,000.



For more information on woccu cues philippines

For More Information on WOCCU/CUES/Philippines

Lucy Ito

Vice President

World Council of Credit Unions, Inc. (WOCCU)

5710 Mineral Point Road

Madison, WI 53705 USA

Email: [email protected]

Phone: (608) 231-8871

Fax: (608) 238-8020


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