Strategies

Private Community Partnership (PCP) and Rural MFIs

For eService delivery, if sustainable diffusion of ICT into rural areas is half of the solution, behavior change intervention is the other. In 2004, ICT4D  (read as ICT for Development) project was launched to establish 15 telecenters. Only two ever became operational at the end of the project, by 2006, they shut down . Nation's internal conflict was reported to be the key factor for its poor result.

In our informal assessment of the project, it is identified that funded projects are  sometimes susceptible to risk of failure, because during the 'handover'—from the funding agency to the recipient community—more than often, recipient party's capacity and competency are not adequately developed and the resources are not generated from within to mach the initial investment (or fund). Inadequacy in capacity and competency hinders organization's overall productivity after 'hand over'; absence of and inability to generate internal resources blindsides the essence of  stake or 'Ownership'. Further, after the projects are handed over, the recipients would not have reliable and long-term service institutions in the locality for service, maintenance and, in general, support.  As an alternative, we needed organizations that have following characteristics:

- Network based—so that replication and scaling up will be easier
- Engaged in economic activities through internal investment—aware of stake or "Ownership' and may not always seek donations
- Community based—so that services reach directly to community
- Located in rural areas.

Micro Finance Institutions (MFIs) were the appropriate candidates. Among these MFIs, rural Small Farmers Cooperatives (SFCs) stood out as appropriate network.-based partner. SFCs came to being through a pilot project named Small Farmers Development Program (SFDP) in 1975 with the joint effort of Asian Development Banks (ADB), Gesellschaft für Technische Zusammenarbeit (GTZ)—an international cooperation enterprise for sustainable development, Government of Germany— and Agriculture Development Bank, Nepal (ADBN).  In the year 1993 and thereafter SFDPs were institutionalized SFCs.


Today, there are 250 SFCs spread across 45 districts  (in 2005 there were only 198). Each SFC has about 600 separate household members. It should be noted that these rural MFIs even survived the 12-year long conflict. However, significant numbers of the SFCs were affected: some lost their office buildings; some lost recorded documents; some lost membership; and some experienced this repeatedly. Against all odds, they have bounced back and are stronger than ever.
 
With the concept of private social enterprise partnering directly with the grass-root rural community based organizations, in 2005, Mr. Tikajit Rai, coined the partnership model: Private Community Partnership (PCP). After a year long pilot in three target SFCs, Magnus proved that the model is effective.
 
The PCP model has three main underpinning components:

- Strategic Behavior Change—an intervention to change SFC employees' behavior to adopt use of ICT
- Value Chain Approach—SFCs are actors in the value chain with the enterprise and both partners invest and enjoy the benefits and rewards
- Distributed support and services—regional offices of the enterprise provide quick and easy access to reliable and long-term services and support

The beneficiary MFIs now are: 1) Developmental Cooperatives; 2) Commercial Cooperatives or Saving & Credit Cooperatives (SACCOs); and the Grameen Model MFIs. In the first category, SFCs  and Women Development (WoDev) cooperatives are Magnus' network-based PCP partners. Currently, there are 103 SFCs that Magnus already has implemented its strategies  (both Phase I and II); and the additional 60 SFCs will be integrating the strategies in the beginning of new Fiscal Year 2067/68 (within March, 2011). In case of WoDev, Phase I is being piloted at Phikkal (Ilam) and scale up begins in year 2011.  Mangal Murti (Kathmandu) , Grameen (Chitwan) and Shiva Shakti (Bardiya) SACCOs; and Nerudo and Manushi are the SACCOs and MFI PCP partners, respectively, for both phases. 

 

Strategic Behavior Change (SBC) Intervention

Targeted MFI employees' ICT literacy rates are low, in general. Some of the managers have not touched a computer keyboard or a mouse in their lives. Educating these  primary stakeholders on benefits of ICT through power point slides or even a week long workshop would not be practical enough to help them understand the ICT's implications. 

So, how to integrate Strategic Behavior change (SBC) intervention in the PCP? In other words, how to change their behavior so that they would start believing in increased efficiency and benefits on ICT adoption?

The enterprise developed localized and highly intuitive account/finance software named Simple Finance®. For Nepalese MFIs, it is required that they do account closing biannually. During a year long pilot in the three target sites, the use of Simple Finance® demonstrated that 15-day long manual account closing is reduced to 7 minutes; access to member information was substantially fast; loan process time was reduced substantially; calculation of installments for the visiting members were automated; and working environment became much better. Cost and Benefit Analysis (CBA)—based on the data of the whole pilot year—showed that the Return of Investment (ROI) for MFIs vary from 7 to 10 months depending on the size of the financial transactions. Unknown experience of investing in a new thing--ICT in this case--now made sense and became feasible. The training packaged with SBC intervention helped these farmers overcome fear of technology. Against general understanding of Pvt. Ltd. as a 100% profit driven entity, SFCs developed trust in Magnus and believed it is "More than profit" organization.   

Training on computer and the software is provided free of cost and first six months (or from first account closing to next) the MFIs enjoys free support and maintenance services.  The economic benefit through replacement of manual system, social capital that MFIs gained through ICT integration stimulated the change in their behavior—despite the upfront cost for ICT integration appeared expensive—and thus ICT diffusion was strategically possible even in communities that have real low ICT literacy rates. For each MFIs at least two employees are trained on how to operate on computer and the software. It is mandatory that at least one of the two trainees is female. See recommendations made by then RUFIN, GTZ (Government of Germany) on Simple Finance Software: Page 1 & 2.


News & Events

Training participants and trainersOn October 1st, 2010, Magnus completes a five day microfinance training in which participants Women Human Rights (WHR) are trained on microfinance, its institutionalization and processes, ICT implications and accounting. There are roughly 500 groups of single women in the country who are supported by WHR and in the process of institutionalization into microfinance institutes (MFIs).

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To reflect and leverage enterprise's knowledge-base, expertise and experience in MFI domain, Magnus is launching Nepal Microfinance Gateway, a portal to assist national and international stakeholders in terms of relevant data and information in the sector. 

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Magnus Consulting Group Pvt. Ltd. has built strategic partnership with Nepal Agriculture Co-operative Central Federation Ltd. (NACCF). The partnership is expected to strengthen what Magnus has been doing with rural Small Farmers Cooperatives through its PCP model and BCI strategies.

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Mr. Tikajit Rai writes for MicroFinance Insight, a bimonthly international magazine, a US based MFI knowledge base company. This agreement was reached at recent MasterCard, Grameen Foundation and CGAP funded workshop series that was held in Hyderabad, India, in April, 2010.

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Magnus Consulting Group Pvt. Ltd. wins the MF banking software development project for Sana Kisan Bikash Bank Limited (SKBBL), also known as Small Farmer Development Bank, and starts the six-month long project.

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