MICROFINANCE FOR THE POOR:MOBILIZATION OF DEPOSIT FROM INFORMAL SECTOR

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This paper is divided into 4 parts. The first part will address the objective of our organization for seeking aid facility. The second part will explain how we intend to achieve these objectives by elucidating further the relationship between our objective and the problems in our environment and how the facility will help in solving these problems. The third point will present the needed budget and lastly our institutional capability to deliver on these promises.
OBJECTIVE;
• To tackle poverty which had been the bane of development of our people by creating an institution that will assist in improving their income generation, promote their understanding of social problem and ultimately enhance the quality of their living standards.
• To nurture, encourage and support local level investments in income and employment generating activities.
• To empower the people that our organization had already trained in various vocations to enable them practice the new acquired skills at a sustainable level.
• To put in place a pay back mechanism for every loan given to beneficiaries such that the microfinance bank will be self sustaining in maximum of 3 years.
• To create product and services that will be used to drive deposit and create credit for the sustainability of the microfinance bank including the use of SMS messages and ATM by the poor.
• To embark on capacity building that will give the beneficiaries of our services the needed managerial and entrepreneurship skill that will make the assistance gotten a life lasting one.
EXPLANATION OF OUR OBJECTIVES
POVERTY ALLEVIATION: Over the years the Government of Nigeria had embarked on series of policy and institutional reforms aimed at enhancing the flow of finance from the Banking system to small and medium scale industries as well as those that engaged in petty businesses (micro) activities. The convectional Banks perceive micro activities as bad risk; hence the very low of funding to the sector couple with the issues of high cost of fund and the short tenure nature of those funds. Since robust economic growth cannot be achieved without putting in place well focused programs to reduce poverty through empowering the people by increasing their access to credit, the government through the central bank of Nigeria CBN as part of its reform agenda embarked on the micro finance bank aimed at providing financial services to the poor who are not served by the conventional financial institution.
In the past, Nigeria Government has initiated series of micro/ rural programs targeted at the poor with the overriding objective of making credit readily available to those who were traditionally denied access to credit. Such credit was used for the development of small and medium industries which is the springboard for sustainable development in all emerging economies like Nigeria. The government has shown a great concern for the development of SMIs because of the underlying socio economic factors plaguing the nation. Some of the reasons include the past policies failed to generate efficient self sustaining impetus needed to uplift the country to the take-off stage of growth, the increased emphasis on self reliant approach to the development and the recognition that dynamic and growing petty business can contribute substantially to a wide range of developmental objectives. However the full potential of the micro business in the developmental process have not been realized owing to numerous bottlenecks. In the light of this, the Central Bank of Nigeria CBN as part of its reform agenda. Initiated micro finance Banks, a policy initiative aimed at bringing credit to the door step of those that do not have such access under the conventional financial system. The thrust of this paper is to articulate the prospects of the micro finance bank towards boosting the performance of the micro business thereby reducing the level of poverty and enhancing employment generation.
MICRO FINANCE
There are several definitions of the concept of micro finance. It is about providing financial services to the active poor who are traditionally not served by the convectional financial institutions. It is the provision of very small loans (micro credit) to the poor, to help them engage in new productive business activities. It includes a broader range of services mainly credit, savings, insurance, money transfers, loans, and other financial products targeted at the poor.
Micro- financing is not a new phenomenon in the Nigerian society as evidenced by cultural economic activities such as “Esusu” Ajo” ADASHI” “OTATAJE” which were practiced to provide funds for producers in our rural communities. The effort of government in Nigeria is to monetize micro financing in our rural and urban communities to improve the productive capacity of the rural and urban poor, enhance their economic standing which alleviates the level of poverty and aggregated to improve development of the national economy.
MICRO CREDIT
Micro credit refers to small loans made to low income individuals to sustain self employment or to start up very small businesses. Although there is no standard definition of micro credit, in practice such loans are quite small amounting to a few thousand of Naira. Simply put micro finance is the provision of very small loan to the poor to help them engage in new productive business activities or expand or strengthens existing ones.
ACHIEVEMENT OF GOALS
This project will focus on tackling poverty through creating an institution that will break the bottleneck of in accessibility to credit, mobilized deposits to reduced money that are in informal sectors of economy and improve access to financial services tailored to the need of poor.

METHODS OF APPROACH
• Introduction of financial literacy programme,deposit mobilization etc via training,seminars and worhshops
• Awareness creating campaign through advertisement.
• Development of good saving culture among poor,marginalized people in the society through good banking character and relationship

INNOVATION TO BE EMPLOYED
Products will be designed to meet the need of religion ,gender ,social economic status, age, culture or ethnics and locations.
ANTICIPATED RESULTS
• Increase level of financial saving in urban/rural household
• Increase voluntary deposits from the public for lending
• Reduced the vulnerability of poor to external shocks and improved financial standings.
• Improvement in Gross Domestic Product (GDP)
STATEMENT OF TECHNICAL, FINANCIAL AND SUSTAINABILITY
This project incorporated nearly all efforts to carry different set of people who were either underserved, not served well or whose products of their choice are not available.All of which had been considered in this project.

The interest income, fees, commission, management processing fees will be used for expansion and this will be base for sustainability of this project to allow exit of the donor and continuation of institute. In the same vein, Cash and cash equivalent which are the liquids asset of the bank will be monitored with great efforts to grow the asset base at a reasonable rate.

CHARACTERISTICS OF MICRO BUSINESS ACTIVITIES
Micro finance as a concept is on economic development approach intended to benefit low income women and men. The term refers to the provision of financial services to low income clients, including the self employed. Financial services generally include savings and credits; however, some microfinance organizations also provide insurance and payment services. In addition to financial intermediation many MFIs provide social intermediation services such as group formation, development of self confidence and training in financial literacy and management capabilities among members of a group. Hence the definition of microfinance often includes both financial intermediation and social intermediation.
Microfinance is not simply banking, it is a development tool.
Microfinance activities usually involves

• Small loans typically for working capital
• Informal appraisal of business and investment
• Collateral substitutes such as group guarantees or compulsory savings
• Access to repeat and larger loans, based on repayment performance
• Streamline loan disbursement and monitoring
• Secure savings
• Enterprises development services such as skill training and marketing and social services.

Microfinance clients are typically self employed, low income entrepreneurs in both urban and rural areas. Clients are often traders, street vendors, small farmers, service providers such as Hairdressers, drivers, Rose plantains sellers and artisans and small producers such as blacksmith and welders. Usually their activities provide a stable source of income (Often from more than one activity)
The poor are bankable, as they can save, invest repay loans and have need for insurance services. The challenge of micro finance is not repayment of loan given to the poor; the poor have integrity and must meet some stipulated conditions before draw down. The challenge is actually generation of enough deposit to meet the rate of loan request due to the level of poverty in the country. Our experience as explained below would testify to our claim that with more fund at our disposal we surely make a lot of people cross the Rubicon of poverty.

EFFECT OF OUR EXPERIENCE IN OUR NGO (GUILDANCE COMMUNITY DEVELOPMENT FOUNDATION)

We have injected lives to many people in Nigeria through micro credit, skill acquisition, managerial skill and entrepreneurship development programme.Guildance Community Development Foundation had trained 1,810 entreptreneurs,loan 90 traders (micro credit) and collection of voluntary daily contribution from 225 as at the time of writing this concept paper.

CURRENT PARTNERS:

We are currently partnering with the following organization:
1.Arabic and Islamic Institute
2.Arabic and Islamic Training Centre
3.Jama’at Tawunil Muslimeen
4.Network of Tropical Forest
5.Kabee Luxury Intercontinental Limited
6.Mgbala Agwa Youths Forum
7.CADEM Poverty and Health Action Resource Centre
PROJECT MANAGEMENT
The Project Director will be responsible for programme management. He is going to be supported by a Project Coordinator,Programme Manager,Senior Financial Specialis,and two Administrative staff for accounts and driving. Capacity building of staff is an important function of the senior management.
He is assisted in his functioning by an Executive Body, which is the governing board of the organization. The Executive body consists of 6 members who meet regularly to discuss on the strategic and policy level decisions of the organization. Personnel and organization polices are in place which show welfare and procures to be followed in execution of project.
K.FINANCIAL MANAGEMENT
I. The financial systems are in place, account manual has been developed and account has been computerized. Accounts are audited by internal auditor on quarterly basis and by a Chartered Accountant on a yearly basis.GDCF are going to keep required books of accounts and maintain a double entry book keeping system. The project will have programme wise ledgers and maintains cashbook and program related records. Besides this the project will also maintains assets register and log books. The project will be audited quarterly by internal audit.
There will be set up a comprehensive planning and budgeting system, which will confirm to policies’ methods and benchmark of funding agency. The monthly management accounts of the project will be compared with budget and management will report quarterly to the board of directors and donor agency.

Transparent financial systems contribute to maintaining trust between a project and all of its stakeholders. There will be set up a comprehensive planning and budgeting system, which will confirm to policies methods and benchmark of funding agency. The project will record financial transactions, and monitor and report on its financial status. It will establish a simple mechanism to track all of the flows of funds into and out of the project, as well as within the project. The system organizing cash disbursements and receipts, maintaining journals/ledgers and bank accounts, and meeting payroll, petty cash, transport, and procurement needs. The monthly management accounts of the project will be compared with budget and management will report quarterly to the board of directors and donor agency.

An independent audit will take place for this project during mid-term evaluation and at the end of the project. An auditor certified by the Institute of Chartered Accountants of Nigeria (ICAN) will audit the account. The result of these audits will include recommendations on how GCDF’s financial management system should be strengthened, if necessary.

II.PROJECT LOGISTIC SUPPORT
GCDF will have the primary responsibility for financial administration and management and for monitoring performance towards project objectives. It will also be responsible for ensuring compliance with the terms of the project agreement including the submission of financial and technical reports.
Financial and administrative support will be provided and will include input from Finance and Administrative personnel and administrative staff. A driver/logistician will be hired to support the project. Specific activities are planned under each project objective. However, there are inter-linkages between the objectives and activities as well. Implementation of the activities is programmed over a three-year period.

L.POLICY
Overall, GCDF maintains a policy as specified within its Project. This ranges from the goals and objectives of the organization to the anonymity clause. It further takes on a nondiscrimination clause, by which it will offer assistance to all qualifying individuals regardless of sex, race, ethnicity, and religion.

M.IMPLEMENTATION CAPACITY

STRENGTHS TO IMPLEMENT THE PROGRAMME

Dedicated and focused project team Excellent knowledge by local representative of the local conditions including strong networks with youths, church,mosque and leaders
Existing network of trader
Local representative has relevant qualifications and experience.

PAST PROJECTS

Deposit mobilization from informal sector and Empowerment among secondary school in Oyo State (Bishop Phillips Academy )

Entreprenureship Development Seminar with Ifesowapo Social club of Monatan,Ibadan,Oyo State,Nigeria.

Jama’at Tawunil Muslimeen Ten days Workshop,Vocational training (skill aquisition) and Entrepreneurship development.

L.MONITORING ANG EVALUATION
I.DATA BASE MONITORING AND EVALUATION

GCDF will establish a database of HIV/AIDS initiatives, and a monitoring and evaluation support function to help strengthen capacity for analysis of the impacts of this project and various initiatives. An M&E officer will be required to combine programmatic expertise in designing and selecting impact indicators tied to strategic plans, as well as in systems and technologies for collecting, analyzing and feeding back such monitoring information.
II.MONITORING AND EVALUATION –CAPACITY DEVELOPMENT-FOR IMPACT ASSESSMENT AND FEED BACK
Performance monitoring and evaluation (M&E) are essential elements of project implementation. In general, performance monitoring helps follow intervention progress while evaluation focuses on measuring achievement against some standard. For this project, M&E represents tools for tracking results and making necessary adjustments throughout the duration of the project. The project will focus on specified activities as contained in the implementation schedule and annual work-plans.

At one level, project implementation monitoring will help track, for example, whether planned activities are operating on schedule. At another, M&E will focus on measuring the impact of stated project objectives.
The project will prepare quarterly technical reports, which will include project implementation information, goals for the immediate future and analysis of lessons learned.

The project executants will have overall responsibility in the oversight, monitoring and auditing of the project.GCDF’s Director’s role will be to provide oversight to project executants and staff and liaise with the funding agency on project progress. The project executants, a Nigeria national, will have the daily responsibility for the project’s implementation and management. In addition to reporting to reporting to the GCDF Director, s/he will also report to the GCDF Board of Trustees on the project’s progress, challenges and constraints. The project coordinator will follow guidelines established by the Project Committee, comprised of GCDF, Funding agency and other partners, and will report monthly to the GCDF Director and Project Committee. The project will report quarterly to the Funding Agency through the GCDF Director on the project’s progress.

M.IMPLEMENTATION PLAN

A three-year time period is proposed for the project for the following reasons:
Assuming equipment, staff, procedures and participatory work-plans are in place within the first six-months;
Given an emphasis on partnership work a two year period would be to short;
In the first year we hope to achieve the following:
First 3 months – Bureaucracy and formalization of official documents / receipt of take off grant.
Third 3 months – Procurement, logistics, security issues, commencement of activities.
Last 6 months – Continuation of activities and first year appraisal.

A step-wise approach to the project components is anticipated over the three-year implementation period. Detailed implementation schedules will be developed in the participatory planning sessions preceding activities on each component. These will be reviewed revised as necessary, every six months. However, these specific component activities planned under each project objective are inter-linked.

N.PROJECT INTEGRATION FEASIBILITY,SUSTAINABILITY&BENEFICIARIES

I.PROJECT INTEGRATION
An informal integration has occurred between different players during proposal development as GCDF consulted with other NGO and government partners who are also undertaking deposit initiatives. GCDF has worked to ensure that the activities being proposed complement and enhance the work of other partners.

II.PROJECT FEASIBILITY AND SUSTAINABILITY
GCDF is in a unique position to implement a project with so many inter-connected strands. The existence of a Youth Village as a functional, operating entity, based in Iwo, means that GCDF has a network of youth club members, the logistical base, and the working relationships with partner agencies, to move rapidly to start up the project once funding is secured.

Central to this project is empowerment, and phasing of responsibility within the institutional context. The project is based around GCDF. The project is not creating new structures of doubtful longevity and depth.GCDF has looked at sustainability in more detail and alternative options for sustainability given the goal of sustainable impact rather than sustainable financing.
In the same vein, this project is based on the real need of the people and the area. Planned activities are worked out after assessing the needs of the target people like traders,youth,faithbased organization etc. The programmes and services proposed are actually realistic and time bound and the project as such is feasible and viable because of the following reasons:
GCDF is a well experienced NGO working in the last 9 years.
It has got good rapport with the govt. and other institutions in the rural and urban area.
It has got trained manpower and good financial back-up from other funding partners.
The objectives of this project are SMART in nature and based on MDG activities.
GCDF enjoys people’s participation in all its developmental programmes and so also for this Project.
III.TECHNICAL SUSTAINABILITY

All aspects of this proposal are technically feasible and strongly supported by people in the localities. Activities are based on priorities set in the project proposal and have been discussed with stakeholders.

S.W.O.T. ANALYSIS

I.STRENGTH
Dedicated and focused project team
Excellent knowledge by local representative of the local conditions including strong networks with local government, Mosque church and leaders
Local representative has relevant qualifications and experience
Community experts available and willing to provide volunteer services.

II.Weaknesses:
Little experience of the project team in planning and executing such a project on an international basis, local representative is sole local expert
Although there are many volunteers, few are active

III.Opportunities:
Support from local authorities,NGOs and organizations
Access to international knowledge and educational support

IV.Threats:
Lack of participation by some faith based sect.
Difficulty in identifying and attracting well-trained and skilled managerial staff
Global financial pressures may reduce international interest in the project

ANTICIPATION PROBLEMS AND ASSUMPTION
Factors we have identified that could inhibit the success of these activities are:
• Uncontrollable factors such as political unrest, environmental instability
and epidemics of other diseases. Political and environmental stability can
never be assured but we feel that this project is too important to reject for
these reasons.
BUDGET ESTIMATE

AMOUNT IN NAIRA
A PERSONNEL 15,000,750.00

B FRINGE BENEFIT 5,786,004.00

C TRAVEL 4,352,000.00

D EQUIPMENT 18,786,542.00

E SUPPLIES 3,987,000.00

F CONTRACTUAL SERVICES 5,555,500.00

G OTHERS 3,000,000.00

H FACILITIES 26,000,000.00

TOTAL 82,467,796.00

US DOLLAR EQUIVALENT($) 499,804.82

DOLLAR RATE TO NAIRA EQUAL TO 165 NAIRA AS AT THE TIME WRITING THIS PROPOSAL