[Mifos-users] Some domain questions around centers and groups.

[Keith Woodlock]

Hi all,

For us technology people currently working on mifos its important that
we have a good grasp of the domain. This helps us to develop a better
product, one that is more flexible and responsive to change in the
microfinance industry. We will try to document what we learn here
http://mifosforge.jira.com/wiki/display/MIFOS/Microfinance+Customer+and+Domain+Knowledge+Center
so that we may produce a better domain model for mifos which we
document here http://mifosforge.jira.com/wiki/display/MIFOS/Mifos+Domain

So on that note I have a few questions to spark off a conversation/discussion:

In mifos at present we have the concept of a center and a group. It
seems some mfis have centers whilst others manage their activies just
by managing groups (no centers). So in mifos we cater for the
following:

Center Hierarchy: Center->Group(s)->Cilent(s) A center is made of one
or more groups which are made up of one or more clients

Group Hiearchy: Group(s)->Client(s) A group is made up of one or more clients.

Q1: What is a center?

Q2: What is a group?

Q3: What is the difference between a center and a group?

Q4: Why is it that some MFIs carry out their business operations
without the use of centers and some do not?

I realise these questions are a little bit basic but it would be good
to see how users/people in the field/experts respond and can lead onto
other discussions in the domain.

Regards,
Keith.

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[Vivian Lu]

Hi Keith,

I’ll answer based on what I’ve experienced, although that’s limited to two MFI’s in Bolivia and Nuru MF operations in Kenya. I’m sure others will have different definitions –

Q1: Centers are physical locations where MF clients meet to conduct activities associated with the loan cycle, from the loan application process to regular meetings where repayment takes place. The centers imply administrative capacity, like cashier services and record keeping, and are maintained as fixed, staffed offices. Multiple loan officers, managing multiple groups, are associated with a center.

Q2: Groups consist of members that are clients of the MFI, and have some obligation to the other members in that group (like meeting attendance, or solidarity guarantee of loan repayment). I think of groups as the typical unit of microfinance. Groups are managed by a loan officer and depending on the organization and client type, may meet in a center or an informal location, in a meeting with other groups or independently.

Q3: I would say members within a group are directly linked; for example, financially through loan guarantee. Centers are usually determined by geography and not by direct financial or operational obligation between members.

Q4: I think it can depend on the organization’s target population. I’ve worked mostly in rural microfinance programs which require loan officers to travel to various rural (and usually informal) locations to conduct loan transactions. In my current organization, we hold meetings in local churches or schools, and groups attend the closest regional meeting even if they are technically from a different geographic region. In a previous organization, loan officers met with three rural groups per day in different locations, usually a group member’s home. In both cases, it didn’t make sense to have an actual center due to the geographic distribution of rural loan clients and the cost of maintaining a fixed center in a rural, low density location.

Looking forward to more discussion.

Best,

Vivian Lu

Program Manager, Nuru International

[Ryan Whitney]

Agreed with all of this, and this generally meets the standard Grameen II Model.  But I will add that we will always find exceptions.

For example, I know of one MFI that has the concept of Centers and clients, no groups.  Really, its just a big group (30-40 members), but they call them Centers and also treat them like groups (IE, center responsibility, etc).  This also creates interesting situations about how repayments are made (individually, as a whole center through bank deposits, etc.), how disbursals are made (individually by cash, individually by check, one large check, multiple check’s that span multiple clients, etc).  

I only highlight this as something to keep in mind when working on new features, to follow what we know but to make sure you leave in some flexibility so we can try to accommodate different models when we run into them.  This will help Mifos succeed in the long run.

BTW, for some further research, you can look up some general lending models:

• Grameen II (From the Grameen Bank in Bangladesh)
• ASA (From ASA in Bangladesh) - Lots of MFI’s converting from Grameen II to this model, from what I can tell
• SHG (Self Help Groups – Popular in regions of Africa and parts of India (from what I’ve seen)
  

There are others, but those are what I can think of.  Also, it’s rare to come across a MFI that follows any one model 100%, almost all of them start with the model and slowly modify over time (I can actually only think of one MFI I’ve met that follows a given model 100%).

Ryan

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[Keith Woodlock]

Vivian, Ryan,

Thanks for your replies. They were interesting.

I have started to capture these details at
http://mifosforge.jira.com/wiki/display/MIFOS/Microfinance+Customer+and+Domain+Knowledge+Center

Some follow up questions concentrating on Center for now:

> Q1: What is a center?

> Centers are physical locations where MF clients meet to conduct
> activities associated with the loan cycle, from the loan application process
> to regular meetings where repayment takes place. The centers imply
> administrative capacity, like cashier services and record keeping, and are
> maintained as fixed, staffed offices. Multiple loan officers, managing
> multiple groups, are associated with a center.

> Centers are usually determined by geography and not by direct financial or operational obligation between
> members.

So in mifos we have the notion of an 'office' and an 'office
hierarchy' by assigning each office an 'office level'. This way we can
allow for organisational structure such as:

Head Office -> Regional Office -> Branch Office
Head Office -> Divisional Office-> Regional Office -> Branch Office
Head Office -> Branch Office

As you say, a Center represents a 'physical location', possibly one
that may change from time to time but its really a convenient location
whereby loan officer(s) can arrange to meet with groups/clients so
that they can carry out the various administration, record keeping and
financial services.

So I can see how a 'center' would be important for implementation of
microfinance in rurual areas.

For larger MFIs, would it be fair to assume that they would have
branches that not only target rurual areas but also urban areas where
the notion of a 'center' would not be used (i.e. the groups or
individual clients come into the branch directly)?

Also In mifos, we allow for updating a center (but dont require it for
creation) with details about 'official titles' assigned to members of
the center. Is this sort of information typically useful to be
tracked?

Another concept we allow in mifos is the attachment of Fees/Charges to
a center (presume a small fee for loan officer travelling out to
center) Is this common/appropriate?

> For example, I know of one MFI that has the concept of Centers and clients,
> no groups. Really, its just a big group (30-40 members), but they call them
> Centers and also treat them like groups (IE, center responsibility, etc).

> I only highlight this as something to keep in mind when working on new
> features, to follow what we know but to make sure you leave in some
> flexibility so we can try to accommodate different models when we run into
> them. This will help Mifos succeed in the long run.

The key word you mention there Ryan is Flexibility which is something
we want to build into mifos. With respect to use of term 'center'
above, as you say, this seems more like an edge case and in reality
they are using the 'joint liability' concept on a big group that they
call a 'center'.

further opinions/expierences on centers and groups are welcome from
others on the list.

Regards,
Keith.

[Nayan Ambali]

Hi Keith,

>For larger MFIs, would it be fair to assume that they would have
>branches that not only target rurual areas but also urban areas where
>the notion of a 'center' would not be used (i.e. the groups or
>individual clients come into the branch directly)?

Yes(at least in India). they target urban areas also, but in urban area most popular product is individual lending (no group concept) and mostly collateral. And MFI work like bank, means community members has to come to branch for important transactions.


Thanks
Nayan Ambali

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Nayan G. A.
9901154134

[Gayl Kennedy]

Hi Keith

at the MFI in Nigeria we had some centres which were small, 4-8 people which we treated as one group but others were much larger with 20-30 people and they were divided into groups of about 5 people which guaranteed each others repayments. 

In mifos for the small centres we still set them up as a single group under the centre to ensure if we did any reporting by centre or by group we did not omit them.

All groups met at the "centre" on the same day / time to make their repayments.  The field officer went there for the meeting and disbursed the loan / collected the repayments and updated the paperwork. When she returned to the office (branch in Mifos terms) she gave the paperwork and receipts to the mifos data entry person to update the system after the cashier had confirmed the money and the supervisor had checked the paperwork.  Typically the centre met at the leaders house or business.

We only used fees associated to the loan not to the centre.  For example the loan application fee. 

 

We also had some clients who used the services of the MFI but did not operate in the same model - typically a business person who had a need for working capital for a large order for a wedding for example.  They did not belong to a centre or a group.  They were set up directly under the branch and were given a loan and a savings account for their collateral.

Regards

Gayl

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[Keith Woodlock]

Gayl, Nayan,

Thanks for your points. I have summarised details so far as follows:

MFIs/NGOs exist to provide financial services for clients

- client may want to use these services due to:
- they are very poor and have no collateral and can't getting
banking services from other sources
- the MFI/NGO provide better deal than local loan sharks/banks
- the MFI/NGO may also provide training/education/advice as
part of package.

- some MFIs/NGOs are poverty-focused and interested in improving the
lives of their clients
- see http://mifos.com/products/business-approach/measurable-social-performance
- some MFIs are profit-driven and interested in making a profit from
provision of their services

Clients
- clients typically are very poor and have no collateral
- some clients will have collateral (savings, other) and just
require access to funding

- for those with no collateral, credit or loans are typically
provided using the concept of 'joint liability', several clients will
form a group and accept 'joint liability' of the loan. The internal
peer pressure ensures that clients meet their repayments

- for clients/groups that exist in rurual locations, its typical for
'field officers' to travel to a 'center' (which is typically some
building in village convenient for the members of center/group) where
repayments/deposits and new groups/clients are handled

- for clients/groups in urban locations, its typcial for them to
walk into branch and carry out transactions

Q. Is it normal for groups and 'joint liability' to be used in urban
situation? Is 'joint liability' really just used when 'collateral'
does not exist?

Regards,
Keith.

[Gayl Kennedy]

Hi Keith

There are different ways used in MFIs but the one I was associated with worked as follows:

 

For a client in a group they look for 10% collateral to be held in the clients saving account for the duration of the loan term.

For a client not in a group they look for 40-50% collateral to be held in their savings account for the loan term.

For the group clients, they are also encouraged to add to their savings every month to build up their collateral for the next loan cycle (higher value loan).

 

Gayl