The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

TRANSFER Solutions Provider (TSP), the Mango Card operator, is undertaking an Inter-American Development Bank (IDB) funded project that aims to create 1,000 new micro loan clients from the ranks of Bahamian entrepreneurs.

The programme, which was unveiled yesterday, will be underpinned by the development of a ‘risk rating system’ that will determine the creditworthiness of so-called ‘unbanked’ clients.

TSP signed a $150,000 technical cooperation agreement IDB, with the funds coming through its Multilateral Investment Fund (MIF) affiliate. TSP will itself pump $153,000 into the initiative.

Harvey Morris, TSP’s chief financial officer, said the initiative would ultimately help small businesses, entrepreneurs and the self-employed, such as hair braiders, who have difficulties in obtaining loans from commercial banks and traditional lending institutions.

“For the past six years we have developed our own platform for payments,” he said.

“We wanted to take it to a new level by ensuring that we have a full suite of products, and recognised that in one of the areas we are looking at, which was micro credit, we were having a problem looking at how to qualify our clients before we administer funds. We weren’t just looking at payday advances and the regular small credits that are given to persons; we were looking for something that can actually help the self-employed persons, like the hair braiders and the taxi driver,” Mr Morris said.

“We were looking to expand into new areas of credit, and as a result came up with this idea of developing a risk rating system that will help us to determine what we can expect from the credit we will advance.”

Mr Morris added: “This is going to look at new behavioural patterns, to determine how we can assess their creditworthiness to help in granting credit to them at acceptable risk.

“From all of our preliminary research there is a very big market micro finance landing market. People consider payday advances and that sort of thing micro credit. That’s not the area we want to concentrate on.

“We want to see someone who can use the funds and improve their financial conditions. We talked about the education of our clients. This programme is going to do a lot of consumer education to help move someone from just taking a payday advance every month for the next two years.”

Astrid Wynter, the IDB’s country representative, said the project’s objective coincided very closely with the bank’s development strategy for the Bahamas.

“We are committed to supporting the private sector through institutions, in this case Mango, that will reduce the gap between the financing needs of the population and the supply of financial products and services specifically as it relates to credit services to low income people in the Bahamas,” Ms Wynter said.

“This programme will help to expand an innovative micro credit product. The project will benefit approximately 2,500 recipients of financial education, including 1,000 new loan clients as well as two Mango staff members.

“The indirect beneficiaries will include approximately 9,500 existing Mango customers.”

Ms Wynter further explained that the programme would involve an in-depth study of focus groups from the target population, which will be used to develop a credit rating methodology.

“The project will also undertake knowledge exchange with other micro finance institutions that have tried similar activities, so there will be an opportunity to learn together,” she said.

“There will also be staff training to implement the new product, user acceptance surveys, the development and distribution of consumer education materials, and financial eduction programmes that will focus on budgeting practices, savings and loan repayment behaviour.”