Since its founding in 1984, the Negros Women for Tomorrow Foundation (NWTF) has explored a range of ways to live up to its mission of helping poor Filipino women achieve self-sufficiency and self-reliance. NWTF offers an impressive array of products, including micro-loans to assist micro-entrepreneurs, insurance and student loans, and continues to look for innovative products and services to meet the needs of its clients and to grow the organization.

Arc Finance talks with Raymond Serios, Director of Research at NWFT, about how the MFI embraced energy lending as a way to expand its mission and find new ways to grow and attract customers. In 2009 Arc Finance helped the organization launch its energy loan portfolio, and since that time the program has changed in a number of ways as NWTF has learned more about client demands, and as energy products have continued to diversify and evolve. In this extract from a wide ranging interview, Raymond reveals how NWTF’s business strategy and operational approach to energy has transformed over time, moving from a narrow focus on consumer credit to a model in which members are trained and financed as energy product sales agents.

Arc Finance:  Your energy program is now entering its fourth year. How are things going?

Raymond Serios: The program is doing well right now.  We’re currently working with three different solar product suppliers - Sun Transfer, Barefoot Power and Pharos Offgrid – and we are offering a greater range of devices than when we started.  We’re also selling and financing efficient charcoal cookstoves, manufactured by Envirofit. Negros Women now has 60 branches, and our solar project is active in about 35 of the branches. Most of the other branches are relatively new so we don’t work in them yet, but we plan to by the end of the year…  When we first started we were bringing in around 120,000 pesos ($3,000) in gross sales per month.  Last month alone we made almost 700,000 ($17,500) in sales.

AF:  Operationally, how have things changed? Are customers still introduced to the products at monthly center meetings? And what is the current role  of loan officers?

RS: Basically, our new strategy is modeled after Avon. We … came up with the ‘business partner’ program, where anyone who sells a product gets a commission.  They can be loan officers or clients, so it’s a healthy mix. For operational purposes, we put a cap on the maximum commission that the loan officers can receive.  For new centers, the business partner can be the loan officer, which provides an incentive for the loan officer to introduce and sell the products at the center meetings.

AF: Has that worked out well for you?

RS: Yes, it’s worked out very well.   We did a sort of sales blitz in the branches where we explained the products to them and came up with marketing materials. … We also provide starter loans, which can have 5-watt power packs, desks lamps, etc., to new business partners. We sell all sorts of packages, but we give discounts to new business partners.

AF: Do you give them the items on consignment? Do they take out a loan to cover the costs of their product inventory? How does that work?

RS: Yes, they get the loan and a discount on the price. For example, a 5-watt PowaPak costs 7,000 pesos and a desk lamp costs 1,500 pesos. Together, two desk lamps and one 5-watt power pack would normally cost 10,000 pesos, but we give it to new business partners for around 9,000 pesos with an added commission. They get a cash commission upfront to start, but we expect them to sell those products.

AF: Is your strategy to have more of your members serve as business partners? Or will loan officers make up the greater share? 

RS: Both, actually. The first part of our strategy is to have our members and loan officers act as salespeople. The second part of our strategy involves our “green loan staff”. The green loan staff members go around accrediting the different members at our business centers, as well as providing information about the products and technical assistance.

AF: When your members become business partners can they offer end-user credit for the products or do people only pay in cash?

RS: It’s totally up to them.  They can pay in cash or offer credit as long as they have enough money for the amortization. We’ve seen people offer it in credit and they get a little commission, so they can pass it on.  The credits usually last between two and three months, but some members extend it for people they really know, like their extended family. They’ll also extend the loan to pay the length of the loan term that they have with us. So if their loan with us is for six months, they’ll give a six-month loan. If they need to pay 200 bucks a week, then they’ll collect 230 bucks a week.

AF: That’s really interesting. Your program has moved from a model that uses your loan officers as marketers and movers of products to a model where you’re trying to convert both loan officers and members into business partners that make commissions based on their sales … for cash or on an informal credit basis. 

AF: How much is NWTF’s program diversification – and its commitment to energy, in particular - driven by the need for NWTF to distinguish itself from its competitors?

RS: We want the loan officers to really know the clients. Then, we’ll arm the loan officers with all the products—solar, stoves, student loans—so that they can provide for most of the client’s household needs and basically grab a bigger share of the pie, or the household.  We’ve lowered the loan officers’ caseload for group microfinance. Efficiency dictates that you increase their caseload to maximize income. However, we felt that a lower caseload was advantageous from a social and customer service perspective. After lowering each loan officer’s caseload to a maximum of 350 clients—as opposed to the 500 to 700 clients they served previously—we felt we would still more than break even. We wanted our loan officers to focus on providing better service and a more positive experience to customers. We’re banking on Filipino loyalty. This system works for our organization because we know that the clients and their families will be more loyal to and stay with us compared to the competition. Last year, Negros Women experienced phenomenal growth. Last year, we had 70,000 or 80,000 clients. Now, we have close to 140,000 clients. We almost doubled our client base in one year.

AF: Wow! How did you do that?

RS: We changed the incentive scheme. We introduced a lot of new things, but coming up with a close-to-perfect incentive scheme really pushed our strategy. Last year, we had a salary review. We decided that we needed to increase everybody’s salary and created a performance-based system for loan officers. Instead of increasing their salary upfront, we provided a substantial performance-based incentive, which can be anywhere from 15% to 30% of a loan officer’s monthly salary. That’s an additional 15% to 30% in cash that loan officers can get by doing very simple things. A basic example of this is that we now give incentives for recruitment and repayment. If you recruit a certain number of clients and maintain a certain repayment base, we’ll add 20% or 30% to your salary. Importantly, we’ve come up with a system to give that salary on time. We give the incentives a day or two after the branches submit their reports. That’s one thing we did to spur growth. We also tried to simplify operational processes. Once I figured out that the system was working, I decided that I’d try to replicate it so it functions for energy loans products, as well. That’s how we came up with the business model.

AF: If you had to articulate a concrete business case to other MFIs for doing energy, what would that be?

RS: Obviously for Negros Women it’s being true to the mission. But even more than that for us, there’s really a business side to this. There’s really a lot of potential in this work.   For one, there’s so much need in developing countries. From a macroeconomic perspective, the Philippines is about 80% or 90% electrified, but when you go around, there are a lot of people without access to electricity.   Also, you give people cost savings. We’ve seen this already from the poorest clients and even from businesses that are using these loans to build green buildings and infrastructure, such as solar powered air conditioners. There’s a big opportunity in this area and that opportunity might set your institution apart from other financial institutions.  We’re very much convinced about going this way.

AF: What’s the biggest challenge that you still have with energy? 

RS: One major challenge is educating people on how to use the products. In the next few months, we want to experiment with bigger systems. For example, solar home systems with a DC to AC inverters. That’s hard though because these are customized systems. Depending on your needs, we’ll tell you what product works for you, but that process is time consuming and has to be dealt with carefully. So client education is the next battleground for renewable energy distribution.

To learn more about NWTF, see our case study on the organization.