Moris Rasik – Micro Credit in East Timor

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Who they are and what they do

Moris Rasik (MR) is a microfinance program, which has been operating in East Timor since November 2000. Microfinance is the provision of basic financial services to people living poverty. The World Bank defines extreme poverty as living on less than $1 per day, and moderate poverty as less than $2 a day. The extension of credit through microfinance has proven to be an effective approach in helping individuals, usually women, to establish or expand a small, self sustaining business by making small loans, often in amounts of $200 or less.

MR follows a modified version of the Grameen Bank methodology of microfinance, with a primary focus on poor, rural women. These women form five member groups, are given some basic training and are then amalgamated into village based centers of between 20 to 40 women. All financial transactions take place transparently at a weekly center meeting, held in the village and serviced by MR field officers.

MR is the largest and most effective microfinance program in Timor, in outreach, portfolio size and portfolio quality. MR had an active client base of over 10,000 at the beginning of 2008. Its portfolio was $2.24MM and it held over $780K in client savings. It has a “portfolio at risk” past 30 days of only 1.2%. In August 2007 it broke even for the first time, and ended 2007 with an operating profit of $22,000.

The microfinance market in East Timor is extremely small. East Timor has a population of just under one million, with an estimated 70,000 households living in extreme poverty as defined by the World Bank. This means that MR is already reaching over 10% of these households. MR works among the poorest of these households, those who live in the central mountains and the remote southern coastal areas. As a result, MR can have a macro impact on the East Timorese economy, and be instrumental in stimulating the overall development of its rural economy.

MR is registered as a non governmental organization (NGO) in East Timor and is governed by a board of seven individuals, five of whom are Timorese. They include the Minister of Labour, the first Lady of Timor, an opposition leader in parliament and the Secretary-General of the Timorese Red Cross. The non Timorese members are MR’s founder Helen Todd and an investment banker from Singapore.MR_staff_2

East Timor is divided into 13 districts. MR to date has 12 branches in eight of the western and central districts of the country, including the East Timorese enclave of Oecusse in Indonesian West Timor. MR is a national program, but has a technical assistance agreement with the India based CASHPOR financial and technical services network, and currently has two foreign management staff. The rest of its 120 staff members are East Timorese.

The phrase Moris Rasik means “independent life” in Tetun, one of the native languages of East Timor.

The challenge

East Timor is a uniquely difficult environment for microfinance to succeed. A small and scattered population makes it difficult for micro credit institutions to achieve the economies of scale in creation of borrower circles and servicing by field staff necessary for financial sustainability. Very poor road networks, lack of public services like electricity supply, telecommunications, transport and basic law enforcement make it difficult to form and convene borrower circles or create and access markets for products. Human resources are very lacking and all of MR’s East Timorese staff of 120, until very recently, have been high school leavers with no work experience, trained by MR from scratch into professional and management positions.

The rural economy of Timor is limited, with most people dependent on subsistence agriculture and few markets, outside of the capital Dili, to stimulate production or value added trading activities.

maubisse_mkt_1As a result, while growth in client numbers has been satisfactory, growth in loan portfolio size has lagged behind targets, as the capacity of most clients to take up larger loans has grown more slowly than expected. This has slowed MR’s progress in becoming operationally self sustaining, that is, to grow to the size where revenues from its loan activities are sufficient to sustain the operation of the agency.

In the face of this slow progress to self-sufficiency, MR decided in the last quarter of 2005 to extend credit services to other sectors of the population through two new loan products – a small business loan to entrepreneurs in the various district capitals, who are just above the poverty line, and a consumption loan to lower-level government servants in districts where there are no banks. MR’s advantage in these new markets is its established presence in the district capitals and local staff with knowledge of the local market.

What we’ve funded

To facilitate MR’s progress towards operating self sufficiency, the Foundation has made a series of grants to increase the amount of on-lending funds available to MR clients in the eastern districts of East Timor as MR grows the scale of its presence there, and to provide technical assistance for training of field staff and development and implementation of improved accounting and reporting systems so that MR can operate more efficiently.

When the Foundation first engaged with MR in 2005 its operations were sufficient to cover only 71% of its operating cost. In August 2007 MR was finally able to cover 100% of its operating costs from its activities, and by the end of 2007 it finished with its first “profit” ever of $22,000. As a result, MR is now in a position to transition from grant funding in support of its operations to more commercial funding in support of the expansion of services, and the extension of credit, to thousands more East Timorese borrowers.

Collaboration with Whole Planet Foundation

Whole Planet Foundation (http://www.wholeplanetfoundation.org/) is a nonprofit organization established by Whole Foods Market, providing grants for micro lending programs to microfinance institutions in Latin America, Africa and Asia. As of April 2008, Whole Planet has authorized almost $6.3 million to support micro lending programs in Latin America and Asia, with plans to expand support to Africa and elsewhere in 2008.

Whole Planet’s mission is to create economic partnerships with the poor in those developing-world communities that supply Whole Foods Market stores with product. The mission is achieved through innovative assistance for entrepreneurship, including direct micro credit loans and tangible support for other community partnership projects. Whole Planet represents a significant expansion of Whole Foods Market’s mission to actively participate in our global communities. Whole Foods Market gives to local causes every where we have stores through store leadership.  The creation of Whole Planet directly connects Whole Foods Market customers and Team Members to the villages in developing countries that supply us with products. From the beginning, entrepreneurial spirit has been a driving force behind Whole Foods Market’s success. In keeping with this spirit, Whole Planet is dedicated to helping families escape poverty by providing them with access to capital which they can use to start their own small businesses.

In 2008, Silverton made its largest one time funding commitment ever in East Timor generally and to micro credit specifically – a $100,000 grant to MR to increase the amount of funds it has available to lend directly to clients. Direct grants of loan funds can be “leveraged” by MR to obtain long term, low\no interest lines of credit for yet additional loan funds for clients – to meet the significant demand for micro credit in East Timor through the MR program.

Whole Planet matched Silverton’s $100,000 first year commitment amount and, contingent on MR satisfaction of certain performance benchmarks, offered to match further commitments by Silverton not to exceed $100,000 in additional funding for each of a second and third year.

Silverton and Whole Planet see great synergy, and great potential for impact, in their collaboration in support of micro credit generally and dare_7micro credit in East Timor specifically. The collaboration combines the large and evolving “stakeholder” network of customers, suppliers, employees and community partners that Whole Planet is building in support of its microfinance funding, with Silverton’s history and experience with the East Timorese microfinance sector. Silverton and Moris Rasik will benefit greatly from Whole Planet’s broader and deeper expertise, experience, resources and perspective in the microfinance sector generally. The resulting collaboration could be a seminal event in raising the visibility of microfinance in East Timor, while demonstrating the important part that microfinance can play in the development of emerging democracies and free market economies in “post-conflict” societies.

Most importantly and significantly, the combined financial resources brought to bear by Whole Planet and Silverton have the potential for a transformative impact on making financial services available to the poor in East Timor. MR estimates the unmet additional demand for its micro credit services in 2008 alone at an additional $1.1MM, and has an operating plan to raise and deploy funds to meet that need.

The collaborative grants from Silverton and Whole Planet have already allowed MR to access long term, low\no interest credit facilities as it expands and diversifies its sources of lending capital. The continued support for and success of MR’s micro credit customers is also leading to the demand for and expansion of financial services (such as insurance, larger loans, individual\business loans, savings products and the like) that will drive development of the financial sector in East Timor.

MR reports quarterly on certain performance benchmarks regarding increases in members, loan clients, savings and the like. Moris Rasik currently reports on such benchmarks pursuant to grant agreements with funders like the Grameen Trust and HIVOS (an NGO of the Dutch government which assists in micro credit funding and support). Additionally, MR recently completed its first independent audit of its operations, a copy of which may be viewed here.

Click here to view a power point presentation on the work of Moris Rasik in East Timor.