This blog comes to us from Claire Kelly, WPF’s Regional Director for Asia/Pacific.
Adding Value: Berendina’s Enterprise Development Services (EDS)
Providing access to credit is the fundamental service of all of Whole Planet Foundation’s microfinance partners. But what is the best way to support borrowers as they use their loan capital to start or grow a small business? It is actually a very difficult question.
Client trainings can leverage the investment that clients can make in their business, but they cost money to implement. To cover the cost of client trainings, an institution may need to raise interest rates or add fees. And perhaps there are some clients who would prefer to pay a cheaper price for the loan rather than pay for trainings that may or may not be applicable to their business needs. In addition to increased costs, clients may end up forced to waste their valuable time in a training that somebody else has decided is valuable.
WPF’s Sri Lanka partner, Berendina, addresses this challenge with a market-driven training program called Enterprise Development Services (EDS). According to BMI’s annual report, “The objective of the EDS service is to ensure the long-term sustainability and growth of the borrowers’ business ventures by developing a wide variety of their skills, which primarily include their technical skills, business management skills and financial literacy.”
Clients choose which trainings they would like to attend and the clients pay for their desired training sessions. Berendina staff therefore has to work hard to respond to client demands for high quality support on topics the clients feel can develop their business.
Berendina has developed 3 types of client support enterprise services:
Type A EDS: This includes technical training (e.g.: sewing, food processing & preservation), agriculture training (e.g.: poultry management, composting) and financial literacy. These trainings focus mostly on teaching or developing skills that clients can use as income-generating activities. At the loan disbursement, borrowers are issued coupons valued from 1200-2500 LKR (about $8-16USD), depending on the size of the loan. The total value of the coupons are repaid over the course of the loan along with the principal and interest payments for the loan.
Above, BMIC clients receive coupons at loan disbursement.
The borrower can redeem the coupons for participation in various trainings, depending on her preferences. For example, the clients in the photo below each paid 4 coupons (1200 LKR, which is about $8) to participate in a sewing training. The cost covered 2 full days of instruction from a local specialist (resource person), materials for the course, and meals each day. If the borrower doesn’t wish to participate in any training during the loan cycle, she can cash in the coupons at face value at the end of the cycle towards the repayment of the last installment. Each Berendina branch has one EDS officer who is in charge of running the program. The EDS officer gets feedback from the clients about what trainings they are interested in and s/he uses this information to register qualified resource people into the pool of Berendina instructors. Then the EDS officer works with the microfinance officers to promote the upcoming courses and organize the event. EDS is especially popular in the WPF-supported Kaliwanchikudy branch thanks in large part to the dedicated staff there. At this point, Berendina has a gross profit for the direct services and the entire program is 80% self-sufficient.
Coupons can be redeemed for Type A technical trainings (such as sewing).
Type B EDS (Business Support) Clients can also receive individualized assistance from their Berendina Enterprise Development Officer. Typical business support services include helping a client to register her business, helping a client to sign up for livestock insurance or giving business advice on something like advertising. While the technical trainings require coupons, the Type B and Type C EDS services are offered free of charge as a benefit to Berendina members.
Type C EDS (Special Income Generating Projects): Berendina members who participate in the same type of enterprise also come together periodically as part of Type C EDS. While the members in the photo below belong to different cluster groups for their borrowing, they all weave natural baskets from Palmera leaves. This group can have more business opportunities when united together. For example, the group can better organize to buy raw materials in bulk, market their products, design and share new models (such as woven flowerpots) and link up with other support services. Berendina is organizing a craft fair in the new year that will showcase artisan products of different types, including the Palmera products.While some do basket weaving as a main livelihood activity, most weave Palmera products as a side project. For example, Ranjini (pictured in orange below) does tailoring for her main income generating activity. (She is in her first loan cycle with BMIC, borrowing 30,000 LKR, approximately $200.) However, she also produces about 3 or 4 baskets on the side for some extra income every week. According to Ranjini, it is the training provided by Berendina’s EDS program that really makes the loan capital useful.
Ranjini meets with other clients who are all involved in Palmera weaving as part of Type C EDS (market linkages).
Access to loan capital alone is only one way to help micro-entrepreneurs build a business that will provide income for themselves and their family. They also need access to other tools like savings accounts, insurance, technical assistance and training. Berendina’s EDS methodology is an excellent example of an innovative model providing support in a sustainable AND client-centric way.