An overview of project activity

ASA Team Leader, TSP : Aminur Rashid

Microstart Nigeria

Introduction

UNDP as part of the global campaign for micro-credit followed after the first micro-credit summit in 1997, launched a pilot micro-finance project named MicroStart aimed to disseminate and bring best micro-finance practices in the underdeveloped environment. UNDP-Nigeria decided to join the global initiative along with 24 other countries in the Africa, Asia and Latin America as part of its poverty alleviation package.

Selection of technical service provider

In 1999, through a competitive bidding process involving best micro-finance practitioners from different part of the world, UNDP selected ASA of Bangladesh (one of the largest and fastest growing sustainable MFI) as technical service provider of the project for its sustainable approach to micro lending through simple and cost-effective management. In the later half of 1999, contract was signed between UNDP, Nigeria and ASA-Bangladesh. ASA a deployed a two-member team to carry out the activity during the project period i.e., 3 years.

Constitution of microstart advisory board

This is followed by constitution of an Advisory Board for MicroStart (MAB) bringing stakeholders with various backgrounds, which included donor representatives such as the World Bank, EU, USAID, Ford Foundation, Japan Embassy etc., financial institutions such as Afribank, Peoples bank etc., whole seller in micro lending such as CDF  (community development foundation) etc., along with representatives from UNDP and government (National Planning Commission) to oversee and facilitate the implementation.

Activity

Implementation of the project started with the arrival of TSP team on January 17, 2000. As of September 2000, MSP activity can be grouped into the three phases namely Preparatory

Phase, Assessment Phase and Planning Phase.

I.         Preparatory Phase

As part of the project facilitation, TSP team and officials from UNDP Nigeria and SUM, met with the UNDP country representatives as well as with the donor communities including EU, USAID and Japanese Embassy and NPC (National Planning Commission)-government representative of the project. Besides this, meeting held with CDMR (Community Development and Micro-finance Roundtable)-a networking institution of MFIs and GBF (Growing Business Foundation)-a wholesaler of micro-finance. The team also visited LAPO (Lift Above Poverty organization) - a leading MFI and OF (Outreach foundation) - a new MFI to see their micro-lending activity.

An elaborated preliminary assessment form was prepared for the MFIs to be participated in the selection process of MicroStart Nigeria incorporating ASA’s experience of working with MFIs both at national and international level. This form is designed to serve as an application form and thus to serve the purpose of sort listing of applicants for final assessment.

A scoring table was developed incorporating ASA’s international experience including experience of MicroStart-Philippines for final assessment of the sort listed MFIs and to recommend to MAB (MicroStart Advisory Board) for approval. During the field visit of LAPO and OF, this form is tested with the practical situation. The format of scoring table is approved by MAB in its 2^nd meeting where 100 marks are allocated to different issues to be validated, which are as follows:

Minimum score for qualification is set at 60.

II.         Assessment Phase

Preliminary assessment form is sent to 49 MFIs/organizations in 20 different states of Nigeria (list collected with the help of CDMR, UNDP, Women’s World Banking network, Peoples bank, MAB members, individuals etc.). A special meeting with CDMR members was arranged for this occasion where the preliminary assessment forms were distributed directly among the MFIs. Distribution of the preliminary assessment form to MFIs is done by 2^nd week of February 2000.

On the basis of the preliminary assessment form received from the 33 interested MFIs from 18 states, 20 MFIs from 13 states were sort listed on the basis of the following criteria for final assessment by visiting them on the ground.

1.          Legal status of the institution (e.g., NGO, MFI, credit union, co-operative, company etc.);

2.          Registration;

3.          Year of establishment;

4.          Year of inception of micro-credit program;

5.          Number of paid staff in micro-credit operation;

6.          Number of voluntary staff in micro-credit operation;

7.          Working area under micro-credit program i.e., number of state, LGA & villages/communities covered;

8.          Outreach of micro-credit operation;

9.          Sources and nature of fund received for the last five years;

10.      Rules and frequency of group meeting;

11.      Frequency of savings deposition;

12.      Types of savings;

13.      Rate of mandatory/minimum voluntary savings deposition per member;

14.      Savings managed/controlled by institution or member;

15.      Sources & nature of fund received for disbursement for the last 5 years;

16.      Approach/methodology followed in micro-credit operation;

17.      Rules of loan disbursement and repayment procedure;

18.      Loan disbursement and loan repayment for the last five year;

19.      Loan outstanding/portfolio;

20.      Amount of overdue loan (Past due <30 days and Past due >30 days);

21.      Sources and nature of institution’s own fund used for lending operation;

22.      Proposed area for establishment of model branch for MSP;

23.      Profession and educational qualification of members of executive committee/governing body;

24.      Future expansion plan;

25.      Possibilities of overlapping of similar services in the proposed working area.

Sort listing of MFIs was completed by 2^nd week of March 2000.

After selecting 20 MFIs for final assessment, each of the MFI was visited by TSP team members for a period of 2-3 days. During the visit, MFIs were extensively validated according to the scoring table along with the field visit to see the operation on the ground. This activity was carried out between 3^rd week of March – April 2000.

Finally 8 MFIs were selected by the TSP for participation in the MSP and was presented to the 4^th MAB meeting on June 01, 2000 with details report and related documents for approval. MAB approved the participation of all the 8 MFIs. As one of the MFIs (SEAP) was yet to receive registration, approval was subjected to the registration. The following are the eight (8) participating MFIs:

1.       DEC - Development Exchange Centre, Bauchi, Bauchi state

2.       JDPC – Justice Development and Peace Commission, Ijebu-Ode, Ogun state

3.       LAPO – Lift Above Poverty organization, Benin city, Edo state

4.       NUSHO – Nalt-United Self Help Organization, Nsukka, Enugu state

5.       OF – Outreach Foundation, Yaba, Lagos state

6.       PDC – Peace Development Centre, Uyo, Akwa Ibom state

7.       SAP – Save and Produce, Jos, Plateau state

8.       SEAP – Self-reliance Economic Advancement Program, Ilorin, kwara

MAB also approves the work plan of TSP in this meeting and a provision of payment of $15,000 in equivalent naira per MFI as take off grant to facilitate and speed up the activity, which was subjected to the approval of financial plan and signing of the Micro Capital grant Agreement by the MFIs. The amount is part of the total amount needed per MFI. A certification form to effect the payment was also approved during the meeting.

From June 2000, an experienced person worked with both banking and MFI sector is selected as LTSP to work with the TSP. 

III.    Planning Phase.

A weeklong basic training program for the executives/management staffs of 8 MFIs was arranged, which was carried out from May 29 – June 02, 2000. Two participants from each of the 8 MFIs were participated.

As part of the implementation process, each MFI is given approval to open a model branch except for LAPO who is given approval for opening two model branches. Individual MFIs will suppose to be facilitated upon the performance of the model branch from the second year of the project.

Financial plan for all of the model branches were prepared during the period of June – July 2000. In order to help the MFI to prepare this, TSP team members and LTSP were visited these MFIs and spend 2-3 days per MFI. Financial plans include detail program policy and guideline, budget, savings and credit plan, cash flow projection, sustainability analysis etc. Highlights of the financial plan for 1^st year is given hereunder:

A 4-day long basic training program for the model branch staff was organized from 24-27 July 2000. Two staff (Branch manager and one credit officer) from each of the MFI were attended the training.

The financial plan of 7 MFIs (except SEAP as it didn’t receive registration from corporate affairs commission in Abuja) was presented to the MAB and got approval in its 5^th meeting held on August 02, 2000. MAB also approves the format for Micro Capital Grant Agreement to be signed between UNDP and respective MFI.

Signing of the Micro Capital Grant Agreement has been completed as all the agreement along with the certification form signed by the 7 MFIs are received by the 3^rd week of August 2000. Payment of the take off grant to 7 MFIs is made by August 2000. Each of the seven (7) MFIs has received the take off grant of Naira 1,591,500 (equivalent of $ 15,000) in September 2000.

As SEAP has received registration in the last week of August 2000, a special MAB meeting was arranged on September 08, 2000, which approves the financial plan of SEAP and also approve the transfer of fund for the 2^nd pilot branch for LAPO. After signing the agreement, SEAP has received the take off grant of Naira equivalent of $ 15,000 in the last week of October 2000.

As approval of total budget for 9 pilot branches has already been received from NPC, MFIs has received the remaining fund in the first week of January 2001.

Implementation of micro-credit program is now underway in all the 9 pilot branches of 8 participating MFIs.

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