Microfinance Programme

Below is the case study for the MC/MED Microfinance Programme in Tyre, South Lebanon.

Project nameMC/MED Programme
(Micro-credit and Micro-Enterprise Development Programme)
LocationTyre, South Lebanon
Date case study completed05-Jan-11
Contact for more informationJonathan Holmberg
Country Director
MRDS-Lebanon (NGO operating the MC/MED Prog.)
For more information on this project contact the TBN office at info@tbnetwork.org
Background, purpose and progress to date
What was the problem / opportunity?Post-war of July/August 2006; many local small businesses (micro-enterprises) were badly affected by the US$ billions of infrastructural damage the south of the country suffered. Homes, assets & businesses were either destroyed or suffered indirectly due to the violence. These people, many of whom are highly motivated entrepreneurs needed fresh capital to start from scratch &/or keep their small businesses from collapsing.
What is the Project's vision?MRDS-Lebanon was founded in 2008 and officially registered as an NGO in 2009 with the GoL. Having run a privately-funded business-recovery Pilot scheme in 2007-2008, once the NGO was operational & registered, an integrated microfinance (MF) programme offering both micro/small-loans ($200-2,000) as well as business-training (literacy classes, foreign language acquisition, business-planning & development and in the future we hope business-finance) was launched. The vision of the programme is to support:
Job-creation &/or Livelihood development through supporting micro-enterprise start-ups as well as business development of existing micro-enterprises;
Offer personal & business training to micro-entrepreneurs;
Bring back hope for a brighter future in an area of the world that has suffered over 3 decades of violence & neglect (economically & politically);
In and through all this, be a holistic witness to ChristÕs love and compassion
How is this vision to be achieved?It's already begun in earnest: 34 micro-loans issued (total capital lent = US$56,000); including a number of repeat-loans to 27 different clients.
A dozen or so MED-module classes have been started &/or completed by just over half of all the clients who had loans issued (not all are eligible).
What progress has been made to date?Progress is hard to measure in a purely 'quantitative' manner. But in summary:

  • 4 new business-start-ups have been helped to get started - 3 of which are still operating;

  • 24 existing businesses have been aided and supported in their development & growth;

  • 14 clients have received subsidized training in Arabic literacy, English language & Business training through the MED-modules;

When will the project be self funding, i.e. cost covered by earned income?The project is unlikely to cover office overheads for the foreseeable future.
Impact
What has been the direct and indirect impact of the project to date?I made mention above to some of the quantitative results that have been achieved through the programme; from a qualitative perspective, it is clear from conversations have with many clients that they have been deeply grateful for the helping hand-up (instead of the usual NGO 'hand-out'). Many have seen hope restored in their lives through being able to access credit that has enabled them to buy the needed raw materials/working capital &/or capital assets needed for their micro-enterprise to grow.
In the words of one of these clients - a 60yr old electronics technician who runs a repair & sales shop and has received two loans so far - who was interviewed for the NGO's Land of Cedars News e-newsletter in 2009:
"Firstly, I have self-confidence and hope to be able to re-start my life afresh! Secondly, I want to say that the programme is very good for all beneficiaries. The financial help is actually not the main thing, but when you know somebody else cares about you, it makes you very happy."
Specifically, how many FTE jobs have been created or sustained? Created = 4
Sustained = in the region of 24-35 (including family members & others also employed by the client who received the MC-loan)
How much direct and indirect investment has been made to date?Direct investment into the programme (loans from private individuals to increase the capital fund used to make micro-loans) Ð all loans to be repaid within 2-3 years of being received: US$ 16,759 (rounded due to FX-rate differentials in conversions from £-$ mostly!)
Indirect investment (I am not sure exactly what you mean by 'indirect', but the figure here represents donations to the capital fund): US$ 21,507
Lessons learned
What lessons have been learned? What do you know now that you wish you knew at the outset?

  1. Microfinance (MF) is as much an art as a science! It is imperative to do detailed background checks on potential clients who apply for loans: investigate their current financial situation (are they already in debt to people / banks ?) as well as investigate their reputation;

  2. Due to the 'private entrepreneurship' attitude of many Lebanese, I opted for loans to individuals rather than group-loans; I wonder in hindsight if that was actually the best thing to do? In an urban setting I feel it was, but if I did more work in a rural setting, I would opt more for the group-lending (and saving) models of MF that exist;

  3. Have legally-binding contracts with each client (to protect the capital lent) by having a guarantor sign & backup each client + ensure 'social collateral' if not financial collateral is properly in place before loans are made; follow-through on terms of the contract and do not set precedents by giving preferential treatment to one client over another (news spreads!) + reputation can be lessened due to not being perceived as professional enough if the NGO/MFI engages in 'preferential deals' with certain clients

  4. Raise enough capital to start with (I would say at least $30-40k) to be able to grow the programme faster

  5. Have well-established administrative & financial systems in place from the beginning, but be open to grow, learn and adapt from mistakes made!

  6. If possible, create MF-products that are tailored to the very needs of the clients, instead of trying to squeeze round pegs into square holes - 'client and his/her needs comes first'


I still would love to be able to develop a form of micro-insurance (MI) and need to investigate the possibility/financial feasibility of setting such a sub-project up in our setting... I suspect the econometrics of it might be impossible due to us being such a small programme still. BUT, I know that affordable medical insurance is one of the most desperately needed thing in South Lebanon for many of our clients... If an MI scheme could be launched and made to work in a sustainable and efficient manner, this would probably literally save lives and help countless hundreds if not thousands of people there...
Expansion and replication
What are your plans to expand or replicate the project?The programme is forecast to keep growing in 2011, but not as fast as it grew in 2010!
An exciting new programme development called the 'EP3' (Environmental Preservation & Protection Programme) is being planned for launch sometime in 2011 Ð funding permitting. This new programme, which it is hoped will be operational in and around Tyre will seek to do a number of things: offer opportunities for children & members of the general public to learn more about environmental sustainability & protection (through school programmes, ECO-ACTION!‰ field trips, awareness-raising campaigns using multiple media, etc); launch a job-creating recycling scheme in Tyre (to start with) and finally Ð and here is the link with the MF programme Ð promote & develop an eco-friendly village-based handicrafts project that will enable local women & youth to start their own micro-enterprises (with funding from MRDS-Lebanon through its existing MF-programme) which will be involved in the manufacture, marketing & sales of beautiful hand-made household decorations & various artefacts such as jewellery & hand-bags Ð all of which are made out of 100% recycled materials (and follow classy Italian designs!)
God-willing, should the MF &/or the EP3 programmes really grow and develop, they might spread further afield to other parts of Lebanon and maybe beyond!?...
How many FTE jobs do you expect to have been created or sustained in 3 years? If the EP3 programme really takes off, this could potentially create jobs for hundreds of people! (Through the recycling scheme(s) that will develop, as well as through the manufacture, marketing & sales of the eco-handicrafts...
Through the MF programme, probably another 30-50 more direct clients receiving MC-loans to start &/or expand existing businesses during that time period, and indirectly a further 15-30 people being employed by these new clients Ð maybe more?
What help do you need to achieve your goals?Further capital funding (always on the look-out for new investors!) Re. the MF-programme; as well as trainers willing to come out to do coaching & training (through the MED modules related to business & finance especially + 1-on-1 coaching!); finally any advice from people who have been involved in micro-insurance and could offer advice to me as to whether such a scheme would be feasible in our South Lebanese setting...
A number of different things Re. the EP3 programme, namely:
Programme (&/or various project-components) funding support: various options could be considered
Micro/small-business mentoring; marketing/e-marketing of handicrafts; business coaching for local micro-entrepreneurs; financial advice for the NGO
Expert Advice on SWM (Solid Waste Management) / running recycling schemes
Could this project be replicated by others elsewhere? What would be needed to do this?Yes, I believe so - both the MF & the EP3 programme - with some contextualization/adaptation needed of course!
Are there documents to aid replication in the TBN resource library?No. All the literature we use is in Arabic or English. I could make things available if that was of interest to others.

You can also download this information as a PDF.

Micro-finance - Lebanon
Micro-finance – Lebanon
Microfinance Lebanon.pdf

222.7 KiB
Details…

No related content found.