About this pageGiveWell aims to find the best giving opportunities we can and recommend them to donors. We tend to put a lot of investigation into the organizations we find most promising, and de-prioritize others based on limited information. When we decide not to prioritize an organization, we try to create a brief writeup of our thoughts on that charity because we want to be as transparent as possible about our reasoning. The following write-up should be viewed in this context: it explains why we determined that we wouldn't be prioritizing the organization in question as a potential top charity. This write-up should not be taken as a "negative rating" of the charity. Rather, it is our attempt to be as clear as possible about the process by which we came to our top recommendations.
A note on this page's publication dateThe last time we examined Al Majmoua was in 2010. In our latest open-ended review of charities, we determined that it was unlikely to meet our criteria based on our past examination of it, so we did not revisit it. We invite all charities that feel they meet our criteria to apply for consideration. The content we created in 2010 appears below. This content is likely to be no longer fully accurate, both with respect to what it says about Al Majmoua and with respect to what it implies about our own views and positions. With that said, we do feel that the takeaways from this examination are sufficient not to prioritize re-opening our investigation of this organization at this time.
SummaryAl Majmoua is a microfinance institution in Lebanon. It offers group and individual loans and business training.1 It is not licensed to offer savings services.2 Our review of Al Majmoua consisted reviewing materials it submitted to us and a phone conversation with Alia Farhat, Al Majmoua's Business Development Manager. Al Majmoua does not currently qualify for our highest ratings.
Table of Contents
Key questions about social impactIn evaluating Al Majmoua, we have used our key questions for evaluating microfinance charities. The sections below cover its answers to our key questions (see the previous link for why we consider these questions important). We find Al Majmoua's stated commitment to social performance monitoring promising, but have a number of remaining questions. Al Majmoua told us that it is not yet able to answer our question about clients' standard of living.
Is the organization focused on social impact?
How frequently do borrowers drop out of the program?Al Majmoua told us that it calculates its drop out rate on a monthly basis and analyzes it twice per year to account for clients who rejoined, and that it uses the drop out rate formula used by Mix Market (details in footnote).3 We have not seen documents from Al Majmoua's monthly or semi-annually tracking process. Al Majmoua reported annual drop out rates to Mix Market of 22% and 37% in 2008 and 2009 respectively.4 For more information on microfinance drop out rates and how they are calculated, see our microfinance glossary.
Does Al Majmoua monitor why borrowers drop out?Al Majmoua told us that it has in the past solicited feedback from drop out clients through focus groups and through exit surveys administered by loan officers, which it believed resulted in biased information. As of July 2010, it was designing a new exit survey to be administered by staff members other than loan officers.5 We have not seen results of past focus groups or surveys. We do not know how often these have been conducted or whether feedback was acted on.
Does Al Majmoua prevent client over-indebtedness?Al Majmoua told us:6
When clients apply for a loan, we spend time gathering information about their debt status. With the client's permission, we consult the client's wholesale suppliers to determine the client's repayment history with the supplier...We teach clients about the risks of accumulating a lot of debt through our business development services, and provide them, through the distribution of a client protection letter, with supplemental information based on the SMART campaign principals.In the case of a client's death, the loan is written off.7
Are borrowers protected against harassment by loan officers and group members?Al Majmoua told us:8
We signed the SMART campaign client protection principals. We distribute an official letter to all clients with all principals and acceptable loan officer practices. We sit down with clients to explain the letter's contents to them in simple terms. We explain that loan officers are not allowed to take any money from clients, they can't pressure them to take another loan, and they must respect the client's confidentiality. There is a complete module of training that we provide to our loan officers that deals with these issue. We are currently designing a redress procedure to allow clients to report violations of the principals. At the end of the letter, we provide a hotline number, and follow up on complaints and institute corrective action where appropriate. We are currently finalizing the procedures and testing the hotline as a pilot program in a couple of branches.We do not know what complaints have been reported in the past or how Al Majmoua has responded.
What interest rates does Al Majmoua charge?We do not currently have enough information to calculate the full cost to borrowers of taking an Al Majmoua loan. In 2009, the microfinance rating agency Planet Rating wrote: "With an average EIR of 35%, the financial fees borne by clients are reasonable given the cost structure, with a decrease planned for 2010. For individual loans, rates are nevertheless a bit above market price for similar amounts."9 We do not know whether this rate includes all costs to borrowers. For more information on microfinance interest rates and how we calculate the cost of a loan to borrowers, see our microfinance glossary.
What is Al Majmoua's repayment rate?Al Majmoua told us that it tracks a monthly current collection rate.10 We have not seen data on what this rate has been in the past. We do not know how it accounts for rescheduled loans. For more information on collection rates and other forms of microfinance repayment rates, see our microfinance glossary.
What are Al Majmoua borrowers' standards of living?As of July 2010, Al Majmoua did not have aggregated standard of living data for its clients. It believed that it would have this data by early 2011 as it had just began systematically collecting and recording this information.11 For more information on standard of living surveys of microfinance clients, see our microfinance glossary.
Room for more fundsAl Majmoua told us that it could absorb at least $1 million in additional loan capital in 2011. Al Majmoua is seeking $500,000 to $1 million to start a youth entrepreneurship program. About 90% of this funding would be used for loan capital while the rest would support non-financial services such as training.12
- Drop out rates. Can Al Majmoua share details of what its drop out rate has been in the past and how it has used this information in its decision-making?
- Reasons for drop out. Can Al Majmoua share findings from surveys and focus groups on why clients dropped out of the program? Did Al Majmoua act upon the feedback it received?
- Client protection. What complaints have been reported through AL Majmoua's hotline? How has Al Majmoua responded?
- Interest rates. What is the current fee structure for Al Majmoua's loans? How often are repayments due? Is there a grace period?
- Repayment history. Can Al Majmoua share data on what its collection rate has been in the past? How are rescheduled loans accounted for?
- Clients' standard of living. What are Al Majmoua borrowers' standards of living?
- Al Majmoua. Audited financial statements (2009) (PDF).
- Al Majmoua. Introduction (DOC).
- Al Majmoua. Social performance standards report (2008) (XLS).
- Al Majmoua. Social performance standards report (2009) (XLS).
- Farhat, Alia. Al Majmoua Business Development Manager. Phone conversation with GiveWell, July 13, 2010.
- Mix Market. Social performance standards report (2009) (XLS).
- Planet Rating. Social performance rating of Al Majmoua (2009) (PDF).
- SMART Campaign. Client protection principles. http://www.smartcampaign.org/about-the-campaign/smart-microfinance-and-the-client-protection-principles (accessed December 7, 2010). Archived by WebCite® at http://www.webcitation.org/5untCGURF.
- 1. "Al Majmoua started its micro-credit activities through the provision of Group Loans (GL) exclusively to women in rural or semi-urban areas. In tune with its clients' evolving needs, Al Majmoua launched in 2001, a flexible individual lending (IL) program (to both women and men) that is today its core financial product. In addition to its loans for enterprises, Al Majmoua provides loans for salaried people on the bottom end of the wage scale, a housing improvement loan, a seasonal loan for the agriculture sector, and an ICT loan in rural area. As of December 2009, Al Majmoua had 122 full-time staff and has thirteen branches in all of Lebanon. In 2006, the organization it added free business development services (BDS), including business management / financial education trainings, capacity building, community development, and socially oriented activities for women and youth." Al Majmoua, "Introduction."
- 2. "We are not allowed to take deposits from clients. We do encourage clients to save, but we cannot force them. They save with other institutions, such as formal banks." Alia Farhat, phone conversation with GiveWell, July 13, 2010.
"We compute our drop out rate on a monthly basis, using the standard Mix Market formula. It is usually around 25%. We analyze the trends in the drop out rate on a semi-annual basis to allow us to account for clients who took a short break from credit, but return to the program within a few months." Alia Farhat, phone conversation with GiveWell, July 13, 2010.
The Mix Market 2009 Social Performance Report calculates the drop out rate as (B+N-E) / B where B = Total number of borrowers at the beginning of the reporting period N = Number of new borrowers during the period E = Total number of borrowers at the end of the reporting period Mix Market, "Social Performance Standards Report (2009)," Sheet SPS Report - PART I.
- 4. Al Majmoua, "Social Performance Standards Report (2008)," Sheet SPS Report - PART I. Al Majmoua, "Social Performance Standards Report (2009)," Sheet SPS Report - PART I.
- 5. "Until now we didn't have a systematic exit survey. We are now designing a survey to be administered to exit clients. Previously, we were receiving feedback from exit clients through focus groups. I will send you reports from those focus group sessions. Before that, loan officers were administering exit surveys to clients, which resulted in biased information. Our new survey will be administered by people who do not normally work in the field." Alia Farhat, phone conversation with GiveWell, July 13, 2010.
- 6. Alia Farhat, phone conversation with GiveWell, July 13, 2010. For more about the SMART campaign principals, see SMART Campaign, "Client Protection Principles."
- 7. "We have only one fee, which is a $5 per loan fee that covers loan write-off and a funeral benefit in the case of a client's death." Alia Farhat, phone conversation with GiveWell, July 13, 2010. "Loans are written off on a monthly basis and they include both loan pricipal and any interest that may have accrued. Loans are written off in two cases: Death of the client. More than 365 days in arrears." Al Majmoua, "Audited Financial Statements (2009)."
- 8. Alia Farhat, phone conversation with GiveWell, July 13, 2010. For more about the SMART campaign principals, see SMART Campaign, "Client Protection Principles."
- 9. Planet Rating, "Social Performance Rating of Al Majmoua (2009)."
- 10. "We compare scheduled repayments to repayments due in a month. Our non-repayment rate is below 2%." Alia Farhat, phone conversation with GiveWell, July 13, 2010.
- 11. "We are starting to systematically collect and store this information in our MIS now. We were chosen by Oxfam Novib to implement social performance management. In the past we have collected standard of living data as part of the loan application, but have not compiled the data. We will be able to provide aggregated standard of living data in 6 months." Alia Farhat, phone conversation with GiveWell, July 13, 2010.
- 12. "Al Majmoua is currently in an expansion phase. At the end of 2008 we had about 12,000 clients. At the end of 2009, we had about 18,000, and currently we have about 20,000 clients. We are in need of loan capital financing. We could easily absorb 1 million dollars in loan capital in 2011. One of our objectives for the coming two years is to focus on youth entrepreneurship. The youth program could cost half a million to one million dollars especially if it is coupled with non-financial services such as entrepreneurship training, start-up businesses training, financial education, basic management training, and awareness sessions for building life skills and confidence. We have started to design this and have been receiving technical assistance from a number of organizations like Save the Children. At this point, we just lack financing. We need both loan capital and an additional 10% of what loan capital we receive for non-financial programs." Alia Farhat, phone conversation with GiveWell, July 13, 2010.