The need for dialogue to understand the ASEAN Economic Community


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The formation of the ASEAN Economic Community (AEC) is one of the most significant issues nowadays but also the least discussed.    When fully implemented in 2015, it is expected to transform the economic environment in the region.  The design for the region as a single market and production base is presented in the document entitled ASEAN Economic Community Blueprint approved by the ASEAN heads of states in 2007.  The blueprint has five core elements and general features such as:

  1. free flow of goods, which will be done through  the elimination of tariffs;
  2. free flow of services, allowing companies to supply services across national borders within the region;
  3. free flow of investment, allow  infusion in specific industries;
  4. free flow of capital, lower restrictions on foreign direct investments;
  5. free flow of skilled labor, allowing professionals to practice their profession within the region.

One of the main questions is the impact of the integration in the microfinance industry in the region. Will it facilitate credit access to more marginalized sectors or will it be sidelined in the process?  Presently, the microfinance sectors in various countries are in various stages of development. Consider the following:

  • In the Philippines, the initial public offering (IPO) of the AG Finance was approved by the Securities and Exchange Commission (SEC), the first ever in the country. The draft guidelines for NGO-MFIs was also released for comments, strengthening the legal framework for the industry with providers that includes banks and cooperatives;
  • In Cambodia, PRASAC, the biggest MFI is in the process of transforming into a bank, following the steps of ACLEDA, the country’s biggest bank that started also as an NGO-MFI. Other big MFIs are also poised to follow the same route as the country’s economy continue its upward trend;
  • Vietnam is moving cautiously as it continue to develop the legal framework for microfinance. With government banks also involved in the provision of microfinance services, the role and participation of non-government institutions are  slowly and stringently being studied;
  • Myanmar is fast in catching up as it develops the legal framework for microfinance operations.  Provision of microfinance services is currently through existing NGO-MFIs and the cooperative sector. In related development, ACLEDA of Cambodia was supported by the International Finance Corporation (IFC) to set up microfinance operations in the country.    

Definitely, the microfinance sector will be affected by the economic integration as each country is in different levels of development.  Are we going to see MFIs crossing national boundaries? Or will the commercial MFIs lord it over the non-stock, not-for-profit MFIs?  Will there be harmonization of laws on microfinance? These questions have to be answered as the microfinance sector responds to the effects of economies going south.  

Another question is the social cost of integration. As goods and products from other countries flow in, production and income of local companies with the same products will be affected.  Closure of small enterprises will mean laying off people dependent on these enterprises.  The question is, will the integration bring about opportunities for the local producers to develop capacity to enhance its products, or will it stunt the growth of local companies as more efficient suppliers from other developed countries are coming in.

As more questions need more definite answers, the ASEAN Secretariat and the respective governments of the member-countries should facilitate dialogues and information campaign to enlighten the people about the impact of the integration. In same light, the people should also take initiatives to learn about the issue and be ready when it is implemented.  

Moonlight: Lantern powered by the Sun


As the light of the moon is a reflection from the sun, so is the power of the MoonLight lantern coming from the heat of the sun.  Moonlight is one of the practical and multi-functional solar-powered tools developed by Kamworks.    It can be used as a lantern when farmers go out to their farms early in the morning; it can be fixed in the house as a lamp to provide light at night; and it can even charge cell phones!

Moonlight is a good alternative for kerosene lamp in the rural areas or a battery flashlight that needs new batteries often. It is lightweight, safe and can be carried by children without fear of electric shock, smoke or fire.  It is also convenient since one day exposure of its small panel will provide power that will last for a maximum of 6 hours.

The lifespan of the Moonlight is 5 years and it carries a warranty of 6 months. If it is broken, it has spare parts in Cambodia and repairs are done in the assembly plant of Kamworks in Kandal province. The assembly plant employs young Cambodian technicians as well.

The Cambodian SUN program offers Moonlight as one of its products.    The program is also supporting the development of new solar-powered tools and products and the enhancement of existing products to help in improving the living condition of people in areas where access to electricity is limited.  It is hoped that people even in areas covered by the electric grid will use products like Moonlight and gradually shift to more renewable sources of energy.

TYM Social Performance Assessment Completed


One of the main services of PFTAS is focused on the promotion of social performance management (SPM) as a tool for microfinance institutions. Part of these technical advisory services is the conduct of social performance assessment to determine if the institution has translated its social mission into operational policies and actual practices. In Vietnam, PFTAS has conducted a series of assessment to four microfinance institutions – Dien Bien Phu, Ha Thinh, Thanh Hoa, and World Vision MFU – as part of the Financial Inclusion project funded by EU and AFD which ended last January.

This year, PFTAS provided the assessment services to the TINH THUONG ONE MEMBER LIMITED LIABILITY (TYM) Microfinance Institution. TYM started as a project of the Vietnam Women’s Union (VWU) tracing its humble roots in 1992 in Minh Phu commune, Soc Son, Hanoi, where the first 20 women were provided with financial services. In 1998, it was made as an independent department of the VWU and an income-generating unit in 2006. Finally, it was registered and licensed as a microfinance institution in August 2010. At present, TYM is operating in several provinces with a loan portfolio of $23,244,130.00 serving 84,090 clients.  Average loan size remains low at $276.42, reflecting the low-income level of the borrowers. Being one of the only two licensed microfinance institution in Vietnam, it has the burden of covering more areas and reaching out to more clients and at the same time lead the way for the other emerging institutions in the country.


The CERISE Social Performance Indicators (SPI) was used in the TYM assessment. The tool focused on four main dimensions to evaluate the institution’s adherence to social performance practices. The dimensions are: targeting and outreach; product and services; benefits to clients; and social responsibility. The tool was administered to various levels within the institution, from the decision makers, the management team and to the field staff in the branches. Clients were also included in the diagnostic exercise. The results of the assessment will provide a picture of the institution and will be the basis for adjustments and realignment.

The results showed that the institution is clear with its mandate of serving the poor especially disadvantaged women. It has not veered away from their mission and has been consistent since its formation 21 years ago. Being the first to be licensed and the only one operating north of the country can be considered as one of the main strengths of the institution. The wide range of products and services and the big operational network that ensures outreach even to the remotest areas of the country contributes to its effectiveness as a financial services provider to the poor.

Developing appropriate Financial Literacy (FinLit) materials


Adult education requires more innovative methodologies relevant to the absorptive capacity and the culture of the participants.   PFTAS has developed practical materials that can be used by MFIs to introduce new financial concepts, effect change in attitude and reinforce financial discipline among its clients.   One of the main materials developed by PFTAS was the flipchart.  Its main utility is being a “conversation-starter”.  Credit officers or promotions staff of MFIs can use this to start a conversation and generate interest in discussing financial issues. In the process, the clients are sharing their ideas, while the staff of the MFIs can share new concepts. The chart primarily uses images that the clients can relate to.  The material is presently being used by 7 MFIs in Cambodia and 4 MFIs in Vietnam.

Another set of materials developed are the “reminders”. These are stationary materials placed in strategic places where clients often go – markets, MFI offices, community centers and the like.  Billboards, streamers and stand-alone posters fall under this category. These materials contain messages that reinforce the topics discussed with the credit officers.  Calendars can also be considered as part of reminder materials.  Other than promote the MFI as an institution, it can be a strong Finlit material that is present in the house of the client the whole year round.

With over indebtedness becoming one of the main concerns of the microfinance industry, a more comprehensive financial education program should be developed and implemented.  It is not a concern of individual MFIs but rather the whole microfinance industry.

Addressing the bane to solar energy promotion


More than thirty people huddled under the house of the village chief to listen to the presentation of the Cambodian SUN marketing staff. Using a flipchart, they discussed the technical aspects of the product and after sales support to the solar home system (SHS). It was fast, within fifteen minutes and the presentation was finished. Question-and-answer portion followed and excited voices asked questions at the same time. The marketing staff patiently answered each question to satisfy the curiosity of the audience.

Surprisingly, the price was not the main concern, but the “cowboys”.  The term refers to the agents selling solar panels house-to-house in the rural areas of Cambodia. They sell solar home systems cheap, as they do not concern with quality of the products. The main approach is “let the buyers beware”.  No after sales service is given. Some promise to provide but when the units break down, nobody comes or the telephone number cannot be accessed.

It is no wonder that most of the questions raised were about customer service.  A specific case shared was the case of a neighbor who bought a unit and after 2 years broke down. Nobody came to repair, and the panel on the roof is a clear testament of an unfulfilled warranty. Another case is a donated set to the school. After several months, the unit was broken and nobody came to repair or maintain it.  Again, the set of three solar panels at the roof of the school reminds the people that it cannot be maintained, and investment to the SHS will be a waste of money. Business practices like these do not contribute in making solar home systems as alternative energy sources in the rural areas. It also deprives the people, especially the poor of cheap, quality and long-term energy source.

One of the main emphases of the Cambodian SUN program is to address the negative effects of cowboy sales.  With the tripartite partnership, the supplier ensures the quality of the product and the after sales customer service; the microfinance institution does not only provide loans but monitoring as well; and, the marketing firm ensures continuous information and education activities to the clients.  It is a good sight to behold that at the end of the marketing session, several people signed up for installation. They will be assessed by the microfinance institution if they are qualified. Once ascertained of their capacity to pay, units will be installed in their houses.

One unexpected result as we leave the village is a cash sale.  While the marketing staffs were answering questions, a lady phoned her children to inform them that she will be buying a solar home system unit. And she paid in cash!

PFTAS advanced in SPM Technical Assistance to its partners


The Social Performance Task Force (SPTF) just released documents from the concluded annual meeting of the task force this year in Panama. Reviewing the issues raised and discussed at the meeting, we at PFTAS can claim that we are advanced in our approach in SPM mainstreaming. We not only shared the concepts of SPM but have addressed the issues raised in the annual meeting. We have conducted assessment, facilitated strategic planning to integrate SPM in the long-term plans and have assisted our partners in initiating the mainstreaming of changes that they have identified and prioritized. This forward looking stance is our comparative edge over other consulting firms.

I would like to reprint the message of the SPTF Secretariat verbatim on the main issues discussed during the annual meeting:

1. We need a new approach to strategic planning: To many people’s surprise given the prevalence of strategic planning, it turns out that this is still an area of weakness in our industry. Two key themes arise here. Firstly, the need to integrate SPM into the very fabric of strategic planning. SPM isn’t a line item in the strategic plan – it IS the strategic plan. Unless this happens, SPM will always exist in parallel with in the organization, and we’ll always be fighting to operationalize it. The second theme is this: death to the five-year plan. In the context of rapidly changing institutions and markets, the plan should not be set in stone for five years, but a living breathing document. To facilitate this, managers need to build in time on a regular basis to take a pause from day-to-day operations and focus instead on critical self-reflection and the strategic vision.

2. We need a new approach to change management: The Universal Standards for SPM set out WHAT we need to change within our institutions to achieve our social mission, but MFIs also need guidance on HOW to manage the organizational change process. This is a real skill gap among organizations (which also relates to the gap in strategic vision among leaders). Two key ideas emerged during the meeting: organizations need to consider whether an SPM Champion and an SPM Board Committee are appropriate to their individual context. While having these functions offers visibility and accountability to the SPM agenda, they also bring the risk of marginalizing or “silo”-ing” it.

3. We need to unpack the issue of balanced returns: A range of stakeholder interests come into play when talking about the interaction between prices and profits. Firstly, we need to focus at the role of investors in terms of driving expectations. Secondly, we need to understand client preferences and outcomes. Thirdly, we need to ensure that MFIs are deliberate and skilled in the challenge of setting prices – because evidence suggests that it is not an automatic trade-off.

4. Harmonization is key: In the coming years, the SPTF will be making a big push towards harmonizing data collection and reporting processes, and aligning them to the Universal Standards. Assessors and auditors have also worked to harmonize their tools to the Universal Standards. At an institutional level, the Universal Standards can and should be used to guide and shape the work of external technical support that MFIs receive, to ensure that efforts to strengthen institutional systems and processes support rather than hinder Universal Standards compliance.
Where SPM is fully integrated into the strategic planning process, this can be facilitated.

5. We need to understand the linkages between Universal Standards compliance and improved client outcomes: This issue came up in several sessions – notably the balancing returns discussion – which absolutely need to be grounded within an understanding of what’s happening at the client level.

6. MFIs need practical guidance each step of the way: Again, the need for practical guidance to how to implement the Universal Standards came up as a strong message from members. Important here to reiterate the commitment of the SPTF to delivering on this promise and highlight progress made to date.

PFTAS will continue to provide quality and relevant technical assistance to its partners consistent with industry and global standards.