Meeting a Diversity of Client Needs: Nano Loans with Potential for Giga Impact

Imagine your family earns 200,000 FCFA (equivalent to 300 Euros) per month and you live in a small town in Senegal. What would you do with a loan of 40,000 FCFA (60 Euros) for 1 month?

Beginning in 2015, Microcred has been piloting various iterations of its latest Baobab product, “crédit Taka” for clients in Africa. In its current pilot phase in Senegal, these nano loans are available through Microcred’s Baobab network. The Taka pilot began in September 2016 in Senegal in two locations, Liberté 5 in Dakar and Mbour, with 53 Baobab agents. The Taka loan offers clients anywhere from 5,000 to 250,000 FCFA (8–380 Euro) for 1 month. For this pilot, a scoring model was developed based on Microcred’s existing client base. The model was designed to categorize clients into different loan eligibility categories according to their loan repayment and savings history.

Currently, the majority of clients in the outstanding Taka portfolio have loans of 5,000 to 75,000 FCFA (8–114 Euro). In 3 months, 845 Taka loans have been disbursed for a value of 45.5M FCFA (69,096 Euro). In mid October 2016, Microcred launched a Taka pilot in Madagascar as well and in 1 ½ months, 418 loans have been disbursed for 88.4M Ariary (25,214 Euro).

How do clients obtain a Taka loan? How does it work exactly?

Eligible clients receive an SMS message letting them know how much they are eligible for and that they can obtain the loan through a Baobab service point. Often, clients call their portfolio manager, with whom they have a close relationship, in order to learn more about the Taka loan. A key aspect of the Taka loan is that if clients pay back the loan within 15 days, they can become eligible for an increased loan amount the next time. If the client repays the loan within 30 days, they will be eligible for the same amount the next time. On the other hand, if the client repays the loan after 30 days, they will not be eligible for another Taka loan in the near future. While launching the product at scale will provide a deeper understanding of impact on our clients’ capacity to better manage money, th initial client feedback is positive and is helping us to fine-tune the product.

What are clients saying about Taka loans?

Sékou has owned and managed a men’s barbershop for 12 years. He has been a Microcred client in Senegal since 2007 with several loans. Before Microcred, Sékou had never used a bank.

After a family crisis, he decided to reduce his loan amount to 400,000 FCFA until he can stabilize his finances after the shock. In August 2016, Sékou started using the Baobab point near his barbershop to make deposits into his account and repay his loan. Then in September he saw the flyer for the Taka loans and asked the agent about how the loan works. Shortly afterward, he received a text message letting him know he was eligible for a Taka loan of 59,000 FCFA. He immediately knew what it was about since he had spoken with the agent and went to the Baobab point to accept the loan and withdraw the money. He repaid the loan within 15 days and received a second SMS with a new Taka loan offer of 60,000 FCFA. Now he has already taken a 3rd Taka loan. When asked about why he decided to take the loan, Sékou explained, “Taka interests me because it is from my bank. We started the bank together: with every loan I advance.”

Janine is a Baobab agent and Microcred client since 2014. Her Baobab point offers multiple services including mobile money and money transfer services. She also sells some school and office supplies. To date she has had 3 loans from Microcred of 400,000 FCFA each, which she voluntarily limits because she does not like to have too much debt. As a Baobab agent, she was trained before the Taka loan launch on the specifics of how the loan works. When she has a Baobab client she can see if they are eligible for a Taka loan and she lets them know about it. If they are interested, she can resend the SMS to the client with the loan offer. Janine herself has received 2 Taka loans: the first for 22,000 FCFA and the second for 23,320 FCFA. “I use the Taka loans for immediate needs in my business.” When asked about the benefits of the loan, Janine explained, “I prefer a shorter repayment period. I think it’s better than repaying a loan in 10 or 12 months. It’s easier to manage money on a short term basis.”

The initial takeaways from clients have shown us that the value of Taka loans is threefold:

• Disbursements are instant meaning that clients can access cash in an emergency and when they need it.
• Baobab locations are close to where the clients work and live adding to the convenience of obtaining the loan.
• Long time clients appreciate being offered new products that can help them to succeed and feel that their relationship and loyalty deepens with the bank.

In 2017, after adapting the product based on the pilot phase learning, Microcred plans to fully deploy Taka loans for all Microcred clients throughout Senegal and Madagascar. The next step will be to further develop the credit scoring model for new clients based on the use of their Baobab account including deposits, transfers and bill payments.

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