Subject: Would you lend her money to start a business? THIS 'BANK' DID

The New Paper - 21 Dec 2004

Would you lend her money to start a business? THIS 'BANK' DID

By Celine Lim

THINK private banking, and rich customers with bags of money come to mind.

But have you heard of the poor man's bank?

It's called microfinancing.

Chief investment officer William Toh was one of two plucky Singaporeans who helped Ms Helen Todd, a Malaysian born in New Zealand, set up a microfinance programme in East Timor (now Timor Leste) in September 2000.

Moris Rasik, which means ''independent life'' in the local language of Tetum, provides microcredit - the lending of small sums to the poor to start small businesses - to women.

Ms Todd, who has written articles and books on microfinance, runs the programme from Timor Leste. The two Singaporeans helped develop its strategic business plan.

Twice a year, Mr Toh, 48, flies to Timor Leste, at his own expense, to spend two weeks reviewing Moris Rasik's business plan.

The other Singaporean, a publicity-shy woman in her 40s with a finance background, declined to be named. She used to spend three weeks every four months in Timor Leste working on accounting and record-keeping.

Microfinance programmes provide services like microcredit, deposits, money transfers and insurance.

Microcredit may sound commercially unsound, but Mr Toh, whose job with Asia Life Assurance Society is his ''bread and butter'', said: ''Microfinance can be profitable, but not immensely, as the actual earnings of microfinance institutions are not that great initially.''

Moris Rasik faced extra obstacles.

Infrastructure in the districts it served, nearest the Indonesian border, was almost completely destroyed in the 1999 violence that preceded Timor Leste's independence from Indonesia.

When a jeep carrying two staff members collided with a military jeep, Moris Rasik found out only by word-of-mouth: There were no phone services.

Staff members have to carry wads of cash around for operational use, as the only two banks in Timor Leste are in the capital, Dili.

That's at least four hours away.

Still, Moris Rasik hopes to break even by 2007.

Mr Toh emphasised that Moris Rasik pays taxes and audits its accounts, although it is not required to by the Timor Leste government.

His Singaporean colleague said they keep very accurate records to track loan discipline.


In 1998, during the Asian economic crisis, the Indonesian banking system collapsed - yet the microbanking unit of Bank Rakyat Indonesia, BRI Units, remained profitable.

A World Bank case study of Bank Rakyat showed that its loan repayment rate stayed high, the deposit volume more than doubled and BRI Units actually emerged stronger than before.

With microfinance services, poor villagers can start their own businesses with a staff of about five people.

Mr Toh said: ''Providing microfinance services is like teaching people how to fish, rather than simply giving them the fish.''

''Most formal financial institutions do not lend money to the poor as they do not have property, which the bank can confiscate if they do not repay the loan.''

But Mr Toh noted that loan repayment rates for microcredit programmes tend to be high, despite high interest rates.

He explained that their clients repay their loans as they find it shameful to owe money.

They also want the next loan, which is given only if they repay the first one.

The average rate of earnings of 63 of the world's top microfinance institutions is comparable to that of commercial banks, reported the MicroBanking Bulletin.

Bankakademie International, a German bank training and consultancy institute, noted that commercial banks are ''slowly waking up to the potential of providing financial services to smaller clients''.

International banks such as DG Bank (Deutsche Genossenschaftsbank) or Citibank offer credit lines for microfinance institutions, according to Bankakademie's website.

Moris Rasik has received financial support from international organisations, including $70,000 from Touch Community Services and $100,000 from the Lee Foundation.

Copyright © 2004 Singapore Press Holdings Ltd. All rights reserved.

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