Targeting the Poorest of the Poor
27 August 2008
In Cambodia, AMK has the lowest average loan balance per borrower. According to MIXMarket, AMK’s average balance at the end of 2007 was $86 per borrower. To put that in perspective the second lowest was AMRET at $164, which is nearly 90% higher. HKL, Credit MFI, and Maxima (the other three Cambodian MFIs working with Kiva) have an average loan balance of $603, $564, and $514 respectively. Currently, 93.4% of AMK’s loans are below $300 and their average loan balance is now $114. AMK chooses to keep their average loan balance low. They limit individual loans to $500 and they limit the amount an individual can take out as part of a group loan to $150. The reason they do this is because of their mission statement:
“To help large numbers of poor in Cambodia to improve their livelihood options through the sustainable delivery of appropriate and viable microfinance services”
In my last blog post I mentioned how most MFIs were trying to increase their average loan balances to improve their efficiency. AMK, on the other hand, has created a business model that relies more on lending to as many clients as they can. This allows them to use their capital to reach the poorest villagers in Cambodia. The data shows that this business model is working. In 2007, their loan portfolio started at $5 million dollars and grew to over $10 million. From this they made a net income of $823,222 and their return on assets was 9%, which is beyond incredible considering the average loan size. Also, I should mention that AMK is currently owned by Concern Worldwide and Concern Worldwide UK. They have returned all of the profits to AMK as retained earnings, so all the money earned by AMK is reinvested back into the business.
Road in Toek Noem Village
AMK, just like every financial institution in the world right now, is having a hard time getting additional capital because of the credit crunch. Because of this, they are hoping to raise the percentage of their loan portfolio that comes from Kiva. Right now it is about 2.6%. For awhile AMK had limited the number of group loans they were posting because it was too difficult to keep track of them so they could report payments to Kiva. Group loans are usually a mix of monthly-installment loans, end-of-term loans, and credit line loans, so each group loan would have to have payments manually reported after each clients payments were tracked. This was a shame because the group loans are AMK’s best way of reaching the poorest villagers in Cambodia. Group loans can now easily be tracked with the new loan tracker I created for AMK, so they are now going to increase the number of group loans they post on Kiva. You can find them by looking at the loans with the smallest loan size per entrepreneur that are currently fundraising on Kiva.
If you really love what AMK is doing in Cambodia you should join the AMK Fan Club, a Kiva Lending Group which is part of the new Kiva that is about to be rolled out very soon. If you can’t wait leave your e-mail address as a comment and I’ll invite you to the group!
27 August 2008 at 4:06 am
I love it that AMK loans to the poorest of the poor, but I’m a little less happy to see the trend toward large group loans. I understand the efficiency issues for AMK, but group loans are slower to fund on Kiva–these days sometimes taking the whole month to fund–and some people strongly prefer to loan to individuals instead of groups.
Funding will be quicker if AMK can keep the Kiva groups small (perhaps dividing the large village groups into smaller subgroups for purposes of posting on Kiva). Or even better, posting individual loans for group members as BRAC is starting to do in some cases.
Either way, compelling and reasonably detailed loan writeups help a loan fund quickly. And for group loans, we like to know how each group member will use the funds. Some lenders have strong lending preferences and want to support only particular types of loans, and other lenders want to make sure they aren’t funding a business that they have moral qualms about.
Just my $.02!
Thanks very much for updating us on AMK’s work.
27 August 2008 at 12:22 pm
While I understand the issue about the speed in which group loans are funded, I don’t have any problems lending to groups. In fact, I seem to trust group financial soundness more than individuals. By that, I mean that I believe that groups are more likely to weather adversity and ensure that the loan as a whole, is repaid.
I will say, however, what tends to catch my eye in a loan application, is the DETAIL provided. If a plan is submitted, well thought out and presented, I likely will provide funds for it.
30 August 2008 at 3:45 pm
Thanks for an excellent post and all your great work. It is wonderful how well Kiva has used the internet to help facilitate effective economic development for those with the fewest economic resources.
31 August 2008 at 2:40 am
Congratulations on making a positive difference for change with your loan tracker. Also, thanks for the excellent blog post.
7 September 2008 at 1:38 pm
Good work. Keep it up!
16 September 2008 at 10:43 pm
Great blog! I’m excited to hear that Kiva is becoming a more important part of AMK’s portfolio, and am looking forward to helping them achieve this. Keep up the good work!