Improving productivity to lift more families out of poverty

Fonkoze newsletter, Washington D.C., 19 November 2001

Fonkoze already has more than 8,000 active micro-credit borrowers.

This is a great achievement in Haitis difficult operating environment, but Fonkoze is not satisfied. We want to offer our services to many more of Haiti's poor!

In addition to ongoing efforts to access more capital and build the loan fund, Fonkoze is working hard to improve the productivity of its lending operations.

Improving productivity means offering our services to more clients without increasing operating costs.

Fonkozes primary operating expense category is employee salaries.

So, improving productivity means dramatically increasing the number of clients served without increasing the number of employees.

The key productivity statistics to follow are number of clients per credit officer and loan portfolio quality. A credit officer is someone who manages loans for Fonkozes clients. Credit officers schedule meetings for clients to reimburse their loans, help collect delinquent loans, and work with clients to make certain they are able to repay on time.

As of last year, credit officers averaged approximately 200 clients per credit officer. Fonkoze has the ambitious goal of averaging 500 clients per credit officer in the next three years and improving portfolio quality at the same time. This means that Fonkoze could serve more than twice as many ti machann for the same operating costs!

Fonkoze has always organized clients into groups of five ti machann.

The members of each group select each other, knowing that if one member does not repay her loan, the others will have to reimburse the loan for her. They know that their futures depend on each other!

The key to improving productivity is to organize the ti machann solidarity groups of five women into centers of 6 8 groups as the Grameen Bank in Bangladesh has discovered. Mr. Salam is a senior manager at the Grameen Bank of Bangladesh who has joined Fonkoze for a period of 10 months. He has worked for the Grameen Bank for 19 years as a student of Professor Mohammed Yunus, the founder of the Grameen Bank (the first pioneer of micro-credit lending). Mr.

Salam explains the importance of the center meetings:

If there is no social network of the poor people within the village, they are not encouraged to mobilize more savings and also they are not thinking about their futures. The center meeting is the most important place for motivating them to be more conscious of their future. Fonkoze credit agents can best perform their responsibilities through these centers.

Clients will meet together in these centers to make their repayments and to make deposits in their savings accounts. In the new system, clients will reimburse the late payments of their solidarity group partners on the spot, each time a reimbursement is due! This means fewer delinquent loans. It also means that credit officers no longer need to visit each group individually, so they can handle many more clients than ever before without increased delinquency!

Fonkozes financial health will improve, and our services will expand.

Fonkoze is putting in place an excellent, new training system for its credit officers to ensure that they put these new lending techniques into practice. With insight from Fonkozes partners mentioned below, this training program and improved productivity will become a reality in Fonkozes 18 offices throughout Haiti.

To motivate the credit officers, Fonkoze has installed an incentive system that offers credit officer bonuses based on the following criteria:

First, portfolio quality lower delinquency and default ratios equalmore money for credit officers. If a minimum standard for portfolio quality is not met, the credit officer forfeits the possibility of any bonus.

Second, outstanding loan balance a higher outstanding loan balance equals more money for credit officers.

Third, number of new members the more new clients a credit officer can bring on board, the more money for the credit officer.

By balancing these three objectives, credit officers have an incentive to help Fonkoze more efficiently serve the poor, as Rob Barger, Fonkozes Director of Human Resources points out:

For a long time, Fonkoze has counted on the initiative and self-motivation of its employees to do their jobs well. However, as the institutions grows and we begin to think more long-term, there is a greater need for transparent periodic evaluations of employee performance. In reference to our credit agents, we are combining the implementation of the new incentive system with a sort of continuing education seminar where our more successful and experienced credit agents share their own best practices with newer credit agents.

Fonkoze intends to improve productivity and serve many more of Haitis poor with the grateful acceptance of help from several of its partners Concern Worldwide, MicroStart, and the Grameen Foundation USA. These valuable institutional partners are working with Rob and Mr. Salam to improve credit officer productivity in the Mibale pilot office. They will also assist Rob in spreading the changes throughout all of Fonkozes offices.

This productivity improvement program is another example of how Fonkoze constantly seeks to learn and to improve administrative efficiency to make every dollar of income lift more families out of poverty!