|
>View discussions about this entry País: Liberia
Organization: Liberty Finance
Year initiative/program began: - 2005
Field of work - Banking/Financial Services
Service / Activity focus (If "other" please explain in entry form) - Delivery Method
Year organization founded (yyyy) - 1978
Project URL: http://www.arcrelief.org
Positioning in the Mosaic of solutions
What is your signature innovation, your new idea, in one sentence? - To leverage incentives at every step of a graduated program from skills training to microfinance for conflict-affected populations by following clients from “refuge” to “return.”
Describe what makes your idea unique—different from all others in the field. - Over the last decade, ARC’s refuge to return strategy has successfully transitioned from emergency relief to development, a challenge with which other aid organizations have historically struggled. ARC is now creating an independent microfinance institution (MFI) called Liberty Finance, which marks the final stage of refuge to return in Liberia.
Aid agencies are under pressure to get money out quickly in emergency situations, and displaced populations are highly mobile. Done poorly, microenterprise development during the relief phase prevents the creation of the credit culture that is critical for development. Refuge to return prevents this problem by increasing the incentive to successfully complete each step of the program by offering graduated access to training and financial services. Development organizations struggle to establish MFIs in post-conflict countries because the majority of clients lack business management experience or credit histories. Refuge to return builds the credit histories of ARC’s target beneficiaries and allows us to begin lending to a list of vetted clients, thus cutting down default and cost. How do you implement your innovation and apply it to the challenge/problem you are addressing? - “Refuge to return” increases the incentives of good performance at every step of a graduated program for displaced populations. ARC provides camp-based income-generating or skills training programs to displaced populations, and certificates clients who complete the program to establish their credit history. We then follow individuals as they repatriate to provide business training, small grants, savings, and microcredit. Each step is contingent on the successful completion of the previous, and institutions for development are set up even before the conflict ends.
Do you have any existing partnerships, and if so, how did you create them? - ARC works with a broad range of donors, other international NGOs, and national NGOs. In Liberia, our donor base for refuge to return includes the BPRM (US government), UNHCR, UNCDF, UNDP, and private foundations. Many of these donors have supported us for the past decade of operations in Liberia, Sierra Leone, and Guinea. In Liberia, ARC’s microfinance program is one of only two partners of the Launch of an Inclusive Financial Sector (LIFS) initiative of UNDP and UNCDF.
One of the ways that ARC ensures the sustainability of its microenterprise development program is by building the capacity of three local partners to provide MED services. Over the past three years, we have trained and mentored LIDS, VDF, and SEDO to build their capacity. As their capacity and our program have grown, we have sub-contracted an increasing percentage of the overall services delivered to these local partners. In which sector do these partners work? (Check all that apply) -
Provide one sentence describing your impact/intended impact. - To prevent the resumption of conflict and promote economic development by facilitating the reintegration of displaced populations through microenterprise development and microfinance services.
Please list any other measures of the impact of your innovation. - ARC measures the success of refuge to return by the economic wealth generated for our clients and the increase in their standard of living. During the last year, 98% of our 2,530 business training and grants (BTG) clients expanded their businesses by 50% within three months and 96% managed active businesses after one year. Our 150 loans and savings clubs (LOSACs) collected $140,000 in savings, loaned $135,000, and generated $25,000 in interest over the past year.
During the microfinance stage, we hold ourselves to the standards of microfinance programs in peaceful countries. Liberty Finance currently provides $314,509 US in loans to 5,800 clients from six branch offices. Portfolio-at-risk (PAR) is 7.80%. 100% of the clients who have transitioned from our LOSAC program have made all of their interest payments on time. The ultimate test of the transition to development is the creation of an independent MFI. Liberty Finance has reached 78% operational self-sufficiency (OSS) and is poised to spin off with $300,000 in additional loan capital.
How many people does your innovation serve or plan to serve? Exactly who will benefit from your innovation? - ARC provided microenterprise development and microfinance services in the Liberian Counties that received the highest rates of returnees, namely Bong, Nimba, Lofa, and Montserrado. Over 90% of our clients are women. Just in the past two years of implementation of the refuge to return strategy in West Africa, we have provided business training and grants and facilitated loans and savings clubs for over 11,000 conflict-affected Liberians. Liberty Finance currently serves 5,800 clients, and aims to serve 15,000 clients in 2009.
How is your initiative financed (or how do you expect your initiative will be financed)? - ARC Liberia works with a broad range of donors, including the US government, UN agencies, and private foundations. Our donor base for refuge to return includes the BPRM (US government), UNHCR, UNCDF, UNDP, and private foundations. In Liberia, ARC’s microfinance program is one of only two partners of the Launch of an Inclusive Financial Sector (LIFS) initiative of UNDP and UNCDF.
As Liberia enters the development phase of its post-conflict reconstruction, non-traditional donors are beginning to show great interest in the Liberian microfinance sector. Liberty Finance is currently exploring possibilities for funding from private foundations including the Open Society Institute and Citi Foundation. We are also preparing to access commercial and concessionary loans from private banks in Liberia and international development agencies. If known, provide information on your finances and organization: -
The American Refugee Committee is an international NGO working in seven countries. ARC Liberia has an annual budget of approximately $4 million and a staff of approximately 100 full-time employees. As it is phasing out, ARC Liberia’s MED program has five full-time staff, as well as three local partner organizations working as sub-contractors. Liberty Finance has $315,000 in loans outstanding. Operational self-sufficiency, or the percent of our operating budget that is currently covered by interest income, is 78%. Liberty Finance has 56 full-time staff members, including one expatriate CEO and 55 Liberian employees. We have six branch offices in areas with high concentrations of returning refugees, including the capital city Monrovia and three other counties. What are the main financial barriers and how do you plan to address them? - The major financial barrier to Liberty Finance at this stage is the lack of sufficient loan capital to reach OSS and spin off. Liberty Finance requires approximately $300,000 in grants or $500,000 in commercial loans over the next six months to spin off from ARC Liberia at the beginning of 2009. This amount of loan capital will allow Liberty Finance to generate enough interest income to cover all operational expenses.
Aside from financial sustainability, how do you plan to grow the initiative? - Liberty Finance is also constrained by a lack of qualified microfinance professionals to work as senior managers, as the civil war destroyed the education system, and caused a near-complete “brain drain” of educated professionals. Liberty Finance has fought to retain qualified staff despite intense competition by building the capacity of our existing staff and frequently promoting internally, which creates an incentive for staff loyalty. Many of our current managers began in entry level positions when Liberty Finance began operations.
What was the motivation or defining moment that led to the creation of this innovation? Tell us the story. - ARC’s mission is to help refugees, internally displaced persons (IDPs), and host communities rebuild lives of dignity and self-sufficiency. Though many of our programs are based in refugee camps, it is not enough to simply help individuals in exile develop new skills without facilitating opportunities for those skills to be applied to rebuild communities once the conflict ends. Particularly in West Africa, where we worked with Liberian refugees in Guinea and Sierra Leone for almost a decade, we had to help our clients transition from relief to development.
When the peace agreement was signed in September 2003, we moved into Liberia. During the first year of our program, we provided business training and grants (BTG) to 2,000 clients, 80% of whom were former refugees, IDPs, or combatants, and facilitated loans and savings clubs (LOSACs) for 600. Over the next two years we continued to expand to reach 4,500 BTG clients and 6,500 LOSAC members. We added a business literacy component in the 2007-2008 project cycle that taught 600 women basic literacy and numeracy. Less than one year after the peace agreement, we began setting up Liberty Finance, which began lending in January 2005. In the first year, Liberty Finance expanded to three branch offices in Monrovia. As commercial banks began operating in the counties, Liberty Finance quickly set up branch offices in the county capitals to reach the rural poor. After only three years of operations in an extremely difficult post-conflict environment, Liberty Finance is ready to become independent. Please provide a personal bio of the social innovator behind this initiative. - Note this may be used in Changemakers marketing material. Please upload a photo of the project innovator or innovation at the bottom of the page. Liberty Finance CEO Enam Haque has worked in microfinance management for the past twelve years. Originally from Bangladesh, he worked in Bangladesh, Tanzania, and Afghanistan before coming to Liberia. Most recently, Mr. Haque managed BRAC’s Tanzania microfinance portfolio worth $6.8 million that served 58,000 clients with a 99% repayment rate. Mr. Haque is supported by ARC International’s MED Technical Advisor Mr. Terry Isert, who has ten years of experience in microenterprise development and microfinance and masters in international development and business administration.
a) Please identify the individuals that your innovation benefits (Please check all that apply) - Producers, Consumers, Holders of assets
b) Do you help the people you serve to buy goods or services using financial innovation? If so, how? - ARC Liberia and Liberty Finance enable vulnerable microentrepreneurs to create wealth with which to buy critical goods and services for their households. Preliminary results from an impact assessment of ARC’s MED program conducted in September 2008 show that our 2,500 business training and grants clients (the first step of our graduated program) have generated an average of $13 per week in profits, 86% of which is saved, through their new or expanded businesses. This increased income has enabled them to invest in critical goods and services for their households: 60% were able to invest in housing, 92% spent more on education, and 71% spent more on health due to their participation in the BTG program. As BTG is the first stage of our program, and microentrepreneurs generate increasing amounts of income as they graduate to LOSACs and microloans, it is reasonable to estimate that beneficiaries of the subsequent stages of refuge to return gain at least as much purchasing power as a result of their participation in the programs.
c) Do you help the people you serve to sell goods or services using financial innovation? If so, how? - Refuge to return enables conflict-affected entrepreneurs to sell goods and services by managing microenterprises and loans and savings clubs (LOSACs). Beginning with business training and grants (BTG), ARC gives microentrepreneurs the business management skills and start-up capital required to start retail businesses that supply items such as rice, oil, and dry goods. Once these entrepreneurs have begun to generate profit, we organize them into LOSACs to pool their growing savings. LOSACs offer interest-generating savings services to their members and lending services to both members and non-members. Liberty Finance’s microloan clients expand their more mature businesses to provide goods and services to an increasing number of customers.
Contact Information:
Enamul Haque
CEO Liberty Finance (microfinance institution) Discussions about this entry |
Refuge to Return: Building the Institutions for Development during Emergency Relief
|
|
Copyright © 2009 Changemakers | Legal & Privacy Policy | Credits
Changemakers is an initiative of Ashoka
|
 A Changemakers Partner
|
A Changemakers Partner
|
|
|
||
Liberty Finance directly addresses one of the largest challenges for citizens of developmental economies – access to the markets. Living in the US, we take for granted our access to the capital markets. By the time we reach college, credit card companies are literally mailing us credit every month asking us to open a credit card accounts. However, citizens in developing economies do not have this luxury. Most do not have access to a formal bank and access to a loan or credit is even rarer
If access to markets is the solution, then why haven't the markets provided access? Quite simply, there is much risk to lending to regions like Liberia. There is little information about the credit worthiness of the borrowers and there are even fewer lenders. Liberty Finance addresses these issues and has already seen incredible success. In fact they are already able to cover 2/3 of their operating expense from their lending operations. How has Liberty Finance already seen such success? Well, they are privy to local knowledge of the markets and have implemented innovated programs.
Local knowledge allows Liberty Finance to be able to see an individual's social capital within a community. Put in another way, if you don't have anything to put up as collateral and you don't have another way to prove your credit worthiness, what are you going to put up? Your word, your reputation, your social capital. Liberty Finance is actively involved in the communities they lend to. The borrowers of Liberty Finance also are helping to develop stronger communities. Liberty Finance has taken access to local knowledge one step further and has seen even greater success.
Liberty Finance is not simply a give me your application, here is your loan, and pay me the interest, type of operation. Instead, Liberty Finance has been able to develop their borrowers’ credit worthiness and build people's credit histories. Liberty Finance starts individuals on grants, then creates bank accounts and a habit of saving, and finally they have access to the credit markets. As a result the loans from Liberty Finance are not handouts from the government. The capital they lend is the actual savings the participants have saved. With over 5,800 clients, Liberty Finance has collected $140,000 in savings, loaned $135,000, and generated $25,000 in interest income. Now that's success.