Green Microfinance - supporting renewable energy in Vietnam

Biogas facility in Vietnam © MACDI 2014

In recent years a growing number of ‘green microfinance’ initiatives have encouraged eco-friendly microenterprises and supported the use of renewable energy. One such programme is implemented by Lendwithcare’s partner in Vietnam, the Microfinance and Community Development Institute (MACDI). MACDI provides loans to rural households so they can install household plants that use animal waste to generate biogas, a clean fuel that can be used for cooking, lighting and heating.
According to Minh Thai Dinh Thi, Director of MACDI, the motivation for providing biogas loans has as much do with the economic as the environmental benefits. She explains that “since households do not need to spend money on buying firewood, and for the poorer families the time spent by women and girls gathering firewood, biogas plants simultaneously save money, time and also reduce deforestation”. 

Biogas offers other compelling advantages. It promotes better health through eliminating smoke from cooking with firewood. It also reduces harmful pathogens from animal waste that might lead to illnesses (the Asian Development Bank estimates more than 70 million tonnes of animal waste is improperly disposed of each year in Vietnam, contaminating the environment and often finding its way into streams and rivers). Importantly it also converts animal manure into an improved fertiliser, saving farmers money on expensive chemical fertilisers. Many families who have installed biogas plants have also commented that their general environment looks cleaner with less foul odours and flies. While the biogas technology can work in most climatic conditions it seems particularly suitable to countries such as Vietnam with generally warm temperatures and sufficient rainfall. 

Biogas being used for cooking in Vietnam © MACDI 2014

However, despite the potential benefits, the adoption of biogas technology has been slow. This is mainly because of the relatively high cost of biogas plants for people living in rural areas with limited financial resources. To overcome this obstacle, starting in 2011, MACDI has been providing households with loans for between US$500-700 with a long repayment period of between 24-36 months to install the biogas plants. On average, households with at least two cattle or six pigs can generate sufficient biogas to meet their daily basic cooking and lighting needs and the investment pays for itself after about three years. To date, almost 400 families have benefited from the loans. MACDI negotiated with a specialist company to build, service and maintain the biogas plants to ensure they are correctly and safely installed so that they have a long life span. MACDI also provides borrowers with training on management and upkeep of the biogas plants to ensure that they receive the best returns from their investment.

Most of MACDI’s borrowers are small-scale farmers who grow rice and maize and typically raise livestock and poultry. Whilst previously the pig, cattle and buffalo manure and crop residue was left to rot or burned (wasting valuable plant nutrients), households now feed the manure mixed with water, but also some crop residue and other organic matter, into the biogas plant where it decomposes. Under anaerobic (without air) conditions the rotting matter produces biogas which is pumped into the home, usually the kitchen, and used for cooking, lighting and in the winter months heating as well. The slurry which has a high nutrient content is used as a fertiliser and crop yields of vegetable crops such as potatoes and onions, fruit, sugar cane and rice have reacted particularly favourably. The biogas generally comprises  just under 60% methane, almost 40% carbon dioxide and a small fraction of other gases such as hydrogen, nitrogen  and hydrogen sulphide. Although methane is a damaging greenhouse gas, since it is burnt the process is essentially ‘carbon negative’.

The potential for biogas in Vietnam is huge, with more than two-thirds of the population earning a living from agriculture, animal husbandry and fishing and most have traditionally relied on wood, agricultural residue and animal dung for their energy needs. Lendwithcare is supporting MACDI to increase the scale and outreach of its green microfinance programme to ensure more rural households in Vietnam are able to install household biogas plants and have access to clean, sustainable and affordable energy.




You can invest in a green loan today by simply visiting the Lendwithcare website www.lendwithcare.org

By Dr Ajaz Ahmed Khan, Lendwithcare Microfinance Advisor

Is peer-to-peer (P2P) lending an efficient way to support microfinance?

The Lendwithcare.org Homepage

Peer-to-peer (P2P) micro-lending platforms, such as lendwithcare, have become a popular method of supporting small businesses in developing countries. Local microfinance institutions (MFIs) select borrowers and appraise their loan applications, which if approved, are financed by the P2P platform. Lendwithcare was established in 2010 and to date some 17,000 individual lenders have financed loans to more than 8,000 borrowers across ten countries.  Our experience over the past four years is that as their loans are repaid, lenders invariably re-lend; rather than withdraw their money. While lendwithcare has proven to be very popular with supporters, is it an efficient way for MFIs to access funding?

The obvious attraction for MFIs is that they do not have to pay any interest whatsoever on the capital they receive from lendwithcare. Although some MFIs are permitted to accept savings, most of our partners are legally prohibited from accepting deposits. Therefore, in common with many other MFIs, they must rely on external loans to finance their lending. Typically, they access capital from Microfinance Investment Vehicles (MIVs); these are specialist microfinance investment investors such as Blue Orchard, Oikocredit, Triodos and responsAbility, and from local commercial banks. Both these categories of lenders charge interest on their loans, although the MIVs typically charge lower rates than commercial banks and some also provide technical assistance and expertise.

Although lendwithcare does not charge any interest, the funding we provide is not cost free for our MFI partners. This is because they have to visit borrowers, collect details regarding their businesses, take photographs, upload all this information onto the lendwithcare website and then provide further updates on borrowers’ businesses. If the MFI’s clients are living in isolated villages spread over a large area then the administrative obligations associated with participating in lendwithcare could be considerable. This could mean that any benefits arising from interest free capital might be negated by an increase in operational costs. This raises the question, might it actually be cheaper for MFIs to simply access capital from the MIVs and other commercial lenders, even though they have to pay interest, than from lendwithcare?

During a recent visit to Cambodia, this is a question I posed to the Cambodian Community Savings Federation (CCSF) who have been working with lendwithcare for the past three years. CCSF works with rural clients, mainly rice farmers, in the provinces of Battambang and Banteay Meanchey in North West Cambodia. Pisey Phal, CCSF’s CEO, confessed that while they do access loans from several MIVs they prefer funding from lendwithcare because it is much cheaper for them.

Lendwithcare Entrepreneur with CCSF loan officer © CARE/Nancy Thomas

Pisey mentioned that during 2013 lendwithcare provided CCSF with US$416,000 to fund loans to more than 500 individual borrowers as well as a small grant to help with administrative costs. CCSF used the donation to cover the salary paid to one employee who was contracted specifically to work on lendwithcare – the grant just about covered all of his annual salary, although it did not cover his expenditure on fuel and the small amount of time that other staff, particularly the finance manager, spent on lendwithcare related duties. To access an equivalent amount of funding from an MIV or commercial lender, CCSF would have had to pay at least US$32,800 in interest charges, possibly more. Pisey added that lendwithcare funding would still be cheaper for them even had it not received the administrative grant. She added that the greatest advantage of lendwithcare funding is that it provided CCSF with a secure source of funding over a longer period of time, loans from MIVs in contrast are generally for shorter periods of 1-2 years. Furthermore, since loans from lendwithcare are repaid monthly and transfers simply offset against new loans being financed, Pisey mentioned that the exposure to possible currency fluctuations is greatly reduced.

From discussions with lendwithcare’s other MFI partners, they make an effort to ensure that any extra administrative costs are kept to a minimum by integrating lendwithcare duties with other routine operational tasks. For example, our partner in Ecuador, Fundacion de Apoyo Comunitario y Social del Ecuador, requests several loan officers from three branch offices to each collect four borrower profiles every month. The loan officers estimate that lendwithcare adds on average just an extra 1-2 hours to their monthly work burdens – they already visit borrowers to assess the feasibility of their loan application, the only extra work associated with lendwithcare is taking photographs and preparing a narrative for the website.  By dividing extra responsibilities related to lendwithcare between several staff, there is actually only a marginal increase in administrative work.

By Dr Ajaz Ahmed Khan, Microfinance Advisor at CARE International UK

Finalists for Lendwithcare Grassroots Entrepreneur Awards announced!

Public voting has closed for the 2014 Lendwithcare Grassroots Entrepreneur Awards and the ten most popular entrepreneurs, featured below, have been passed to our expert judging panel to pick an overall winner.

The standard of entrants has been extremely high. Every one of the 33 nominees is inspiring and has demonstrated an incredible level of enterprise and entrepreneurialism, often in the most challenging circumstances. The Lendwithcare Grassroots Awards recognises the most innovative and determined small businesspeople in poor communities in the developing world. The Awards celebrate creativity, enterprise and innovation, and prioritises social values and poverty alleviation.

It’s now down to our able panel of high profile names from across the business world to come to a final decision. Alastair Stewart, Deborah Meaden, Levi Roots, Nick Hewer, Richard Reed, Sir Stuart Rose, have a difficult decision on their hands! 

 Leonida Bironga Makori

 

Leonida, from Kenya, is a 32 year old entrepreneur. She has been involved in the franchise business for CARE’s Group Savings and Loan (GS&L) project. So far, Leonida has trained over 50,000 individuals on CARE Kenya’s GS&L project. She also supplies carbon-free cook stoves and micro solar lamps to GS&L members on credit, which has improved the individuals’ lives as they have been able to pay for these appliances in installments. She has distributed over 644 carbon-free cook stoves and 636 micro solar lamps to her community through the GS&L programme. Through her work with the GS&L programme, she has employed 30 community-based trainers, whom she pays from her own income, creating long-lasting community change.

La Morm

La Morm, from Cambodia, is a seamstress with a difference. She is incredibly committed to investing in her community and decided to take out a small loan to purchase sewing machines to train local apprentices. Apprentices pay $12 to be trained by La Morm over two months and once they have completed their training can take the machines home to start their own businesses. The machines cost £150 each and apprentices take on this loan if they choose to take the sewing machines home. This entrepreneurial education education has transformed her community forever.


Bora Mau

Bora, from Cambodia, is a truly dynamic entrepreneur. She used a small loan to invest in both her husband’s welding business and her fish and chicken farms, increasing her profit margins to between 20-30%. Bora Mau believes education is crucial in the fight against poverty, and in addition to investing in her businesses, the entrepreneur set-up a school where she teaches over 100 local children in the morning and evenings.

 Anwar Bibi

Anwar, from Pakistan, is an embroiderer. She went through critical illness and her son died in a fire accident, inducing heavy medical expenses. She started embroidering with her daughter, earning little. After a loan, she expanded to six employees, and now plans on sending her children back to school. She turned her fortunes around, even becoming an earning source for others. Anwar has proved that if you are determined, you can turn things around for the better. Apart from providing a better lifestyle to her family, she has also become a source of income for four families.


Bertha Nkhata

Bertha, from Malawi, runs a bicycle taxi business alongside her smallholding farm. This taxi business enables her to pay the school fees for her two children as well as buying a solar light to enable the family to be productive in the evenings and use basic kitchen equipment. Bertha also employs casual labourers for her farm, thus creating much needed local employment.
She is happy to know that she is a self-sufficient woman, giving her independence rather than having to always rely on her husband.


Teresa

Teresa, from Egypt, first took a loan of just £17 and purchased ducklings. She was able to repay the loan and earn some money. The whole family work in poultry and expanded their business with further small loans. She encouraged her friends and neighbors to form Village Savings and Loans groups and she trained them on how to raise ducks. Moreover, her group members elected her to be the chairwoman. Being the group chairwoman affected Theresa’s character, and the leadership and decision making skills she has  learned have changed her community.


Appoline Ahossi 

Appoline, from Benin, produces cassava flour and tapioca. She only employs young women and girls, paying them fairly and allowing weekends off, as she believes in women’s potential to be an economic driving force in Benin. She has employed up to ten women simultaneously. Aware of environment protection, Appoline uses clean, fuel-efficient stoves in her production.



 

Elisabeth Houessou

Elisabeth, from Benin, is an example of achievement and innovation in her village. She has overcome a variety of problems related to her production and has managed to become a quality producer of gari (cassava flour), also innovating and developing new products like a snack from coconut milk and sugar. Also, Elisabeth employs staff permanently, always recruiting women in difficulties showing solidarity with other women and a desire to help her community. Finally Elisabeth has been training women in the production of quality gari for 10 years, passing on her knowledge to other people.


Amake Albiro Ogoudele

Amake, from Benin, produces cassava flour, employing eight full-time staff, and exporting her produce across the Nigerian border. During the busy December month, she hires more staff. Aware of environment protection, Amake uses fuel-efficient stoves to reduce firewood consumption, and participates in reforestation campaigns. She is a role model for her community.




Victorine Fianyo

Victorine, from Togo, is a fantastic example of how microfinance can give people living in poverty the opportunity to transform their lives. 18 years ago, she accessed her first loan of just £25 to buy basic ingredients for her ‘Kom’ (a corn meal very popular in parts of West Africa) stall which she set-up outside her home. Today she produces Kom wholesale, has built her own shop where she sells a diverse range of goods, employs seven people, and can afford to send all her children to school. Indeed, much to the entrepreneur’s great pride, her fourth daughter has just gone to Germany to complete higher education – something quite rare indeed.

Have your chance to invest in next year's Grassroots Entrepreneur of the Year and visit www.lendwithcare.org today!