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Opportunity International (2007-2008)

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We published a more recent review of Opportunity International here.

In a nutshell

What do they do? Opportunity International is a microfinance organization that provides financial services to low-income people in the developing world (close to 30 countries in Africa, Eastern Europe, Latin America, and Asia).

Does it work? We have little to go on besides our independent analysis of microfinance in general; our knowledge of Opportunity International's high overall repayment rate (one of the conditions we feel is important for microfinance programs, as explained in our independent analysis); and more detail on one of Opportunity International's programs in Mozambique. Based on this information, we would guess - without much confidence - that Opportunity International's programs are generally improving lives.

The Details

What do they do?

Opportunity International seeks to improve the economic well-being of low-income people in the developing-world by providing financial services: loans, savings accounts, and insurance. We have only the most general information on their programs as a whole (see Attachment B-4 Pg 6-7, which gives an overview of these three different types of services). Below we give an overview of the one region, Mozambique, that we were able to obtain more detailed information on.

Loans program (Mozambique)

The information below comes from Opportunity International's “Credit Policy, Guidelines and Procedures” documents for its bank in Mozambique (Attachment B-3). Unless otherwise noted, our statements refer to these guidelines (i.e., they are statements about Opportunity International's stated principles, not reports about actual execution).

Opportunity International provides three types of loans:

  • A trust bank loan is a small loan to a group of 8-30 people (Attachment B-3 Pg 6). The group approves the loan and its use, which is subsequently monitored by a bank officer (Attachment B-3 Pg 7), and the group shares collective responsibility for repayment. All members of the group must contribute 10% of loan funds to a Loan Guarantee Fund, which serves simultaneously as funds to support loans that aren't repaid and as a savings vehicle for group members, which they can withdraw from at the end of a loan cycle when all debts have been repaid (Attachment B-3 Pg 7). The minimum loan is $20 per member and the maximum is $6,000 per group (Attachment B-6 Pg 1). In the first half of 2007, the average loan size was $107 (Attachment B-2). The loan term is 12-27 weeks with an annualized interest rate of 72% (Attachment B-6 Pg 1).
  • A solidarity group business loan is a larger loan (Attachment A-1 Pg 2) made to a group of 3-8 people (Attachment B-3 Pg 9). The minimum loan is $20 per member and the maximum is $2,000 per group (Attachment B-6 Pg 1). In the first half of 2007, the average loan size was $146 (Attachment B-2). The loan term is 12-35 weeks with an annualized interest rate of 72% (Attachment B-6 Pg 1).
  • An individual business loan is a larger loan, made to an individual who can provide a guarantor or collateral for the loan (Attachment B-3 Pg 13). The loan must be used to expand the borrower's business (Attachment B-3 Pg 13). A loan officer monitors the use of the loan at the borrower's business or residence to ensure that the loan is used as it was intended (Attachment B-3 Pg 14). Loan sizes are $200-80,000 (Attachment B-6 Pg 1). In the first half of 2007, the average loan size was $617 (Attachment B-2). The loan term is 4-12 months with an annualized interest rate of 66% (Attachment B-6 Pg 1).

To be eligible for any of these loans, an applicant must meet a set of requirements outlined in Attachment B-3 Pg 4. These requirements include age restrictions (applicants must be between 18 and 65 years old) and a requirement that applicants be able to own and operate a business. In addition, although Opportunity International has no formal gender criteria, it reports that 85% of its clients are women (Attachment B-4 Pg 4).

Savings

Opportunity International provides two types of savings accounts to its clients (Attachment B-5 Pg 1):

  • Transaction accounts require $4 to open, yield no interest, and charge a monthly maintenance fee of $0.04. The first four withdrawals each month are free, but clients must pay $0.40 for each subsequent withdrawal. Clients are also charged a fee of $0.40 each time the account's balance falls below $4 (the minimum) and must pay $2 to close the account.
  • Savings accounts require $4 to open, yield 0%-9% interest (depending on the amount deposited), and charge a monthly maintenance fee of $0.04. The first withdrawal each month is free, but clients must pay $0.40 for each subsequent withdrawal. Clients are also charged a fee of $0.40 each time the account's balance falls below $4 (the minimum) and must pay $2 to close the account.

Does it work?

We believe, from our analysis of microfinance in general, that a microfinance program is likely to improve lives when it is serving people who face considerable economic uncertainty, lack access to traditional financial services, and are willing and able to "pay" for financial services (for example, repaying loans with interest).

Opportunity International reports a 98% repayment rate on loans made to Trust Groups (Attachment B-4 Pg 6), implying that the third of these conditions is generally being met. We have little other substantive information on its clients in general, although it did give us a more detailed picture of its operations in Mozambique (see especially Attachments B-1 and B-2). Note that most of its clients in Mozambique are generally under an "extreme poverty line" (US $1/day) that, according to one independent study, is often connected with economic uncertainty and lack of access to traditional financial services (these issues are discussed more in our general overview of microfinance).

Knowing what we know, we would guess that Opportunity International is generally improving its clients' lives, but would need far more detailed information on its operations around the world to have confidence.

The Organization

Financials. The following is from Opportunity International's 2004-2006 IRS Form 990s (available via Guidestar) and Attachment D-3.

Year Revenues (in thousands) Expenses (in thousands)
2004 $28,250 $25,363
2005 $24,440 $22,645
2006 $45,201 $29,627
2007 (est) $37,450 $35,825

As of the end of 2006, Opportunity International held $109 million in assets, the equivalent of approximately 2.5 years of operating expenses (Attachment D-2 Pg 2). This constitutes a large increase over its 2005 assets ($33 million) is likely due to the fact that revenue grew much faster than expenses that year. In 2007, expenses rose to where they are nearly in line with revenues.

Board of directors.The names of Opportunity International's Board of Directors are available in Attachment B-4 Pg 19. However, Opportunity International did not provide information on their affiliations.

Conclusions

We chose to award Opportunity International because:

  • Without strong evidence on the effectiveness of any economic empowerment program, we chose to award an organization working in microfinance. Our general analysis of microfinance implies that it is a helpful intervention; the evidence is not strong, but it is stronger than the case for other programs we're aware of.
  • Opportunity International was the only microfinance organization to give us a detailed picture of even one of its regions (Mozambique in this case). That said, we have not been able to get a clear bird's-eye view of the organization's operations and programmatic finances (although we do have standard financial information of the form provided in auditors' reports and Form 990s).

For a donor committed to economic empowerment programs, we recommend Opportunity International with major reservations. We hope in the future to gain a far more detailed understanding of the organization (or other organizations doing similar work).

Attachments

A. Application and response

D. Financials