South Pacific Business
BUSINESS PLAN: YEAR 2010 ‐ 2012Contact Persons: Lorisa Canillas General Manager firstname.lastname@example.org Gregory F. Casagrande President/Founder email@example.com SPBD Microfinance Ltd. Taufa’ahau Road, Kolofo’ou P.O. Box 21, Nuku’alofa Kingdom of Tonga Tel. Nos. (676) 27087 & 28103
1.0 Executive Summary ... 3
2.0 Institutional Background ... 3
3.0 Markets and Clients ... 4
4.0 Environmental Analysis ... 6
4.1. Historical Background, Geography and Population ... 6
4.2. The Economy ... 6
4.3. The Political Environment ... 7
4.4. The Financial Sector ... 7
4.5. The Microfinance Subsector ... 8
4.5.1. Tonga Development Bank ... 8
4.5.2. Credit Union Association ... 9
4.5.3. Finance Companies ... 9
4.5.4. Money Transfer Agencies ... 9
5.0 Institutional Analysis ... 10
5.1. Product and Process ... 10
5.1.1. SPBD Group Loan Product ... 10
5.1.2. Savings Services ... 11
5.1.3. Training ... 11
5.1.4. In‐House Loan Insurance ... 12
5.2. Operating Systems ... 13
5.2.1. Management Information System ... 13
5.2.2. Internal Controls ... 13
5.3. Governance, Management and Staff ... 14
5.4. Financial Management ... 14
6.0 Growth Plan (2010 to 2012) ... 15
7.0 Financing ... 15
9.0. Implementation and Monitoring ... 16
Following the success of South Pacific Business Development Foundation in Samoa, a
replication was successfully launched in the Kingdom of Tonga with the establishment of
South Pacific Business Development Microfinance Ltd. in July 2009 also a microenterprise
development organization with a mission to assist unemployed and low income women
with financial services, training, on‐going guidance and motivation so that they can start or
expand self‐employment ventures and improve their lives and the lives of their families.
During its first 3 months of operations, SPBD Tonga has rolled out the program to 9 villages
and 543 aspiring micro‐entrepreneurs have received their first SPBD loans. The clients
actively participated in trainings and have also taken advantage of SPBD’s simple and
convenient savings services.
The purpose of this business plan is to provide SPBD Tonga a framework for the next 3 years
(2010 and 2012) to strengthen its presence and become the leading provider of
microenterprise development services for economically‐disadvantaged Tongan women. The
key strategic goals are to support 4,550 micro‐entrepreneurs by Year 2012 and attain
financial sustainability by Year 2011. Grants or loans will be raised to support the plan. SPBD
Tonga’s establishment and initial loan capital was provided through the equity of its
Founder, Gregory F. Casagrande, and further roll out was funded by social investors –
Microdreams Foundation (USA) and Jasmine Charitable Trust (NZ).
Tonga is a small archipelago of 170 islands and the only constitutional monarchy in the
Pacific. The main sources of income are agriculture, tourism and remittances. The country is
also heavily dependent on external aid. Economic constraints have kept productivity in the
country low causing a serious lack of employment opportunities. Underemployment is also
high with subsistence work a major economic source. Provision of financial services to the
low income sector has been minimal. It is in this context that SPBD Tonga can play a very
important role with its proven methodology and experience in effectively delivering
financial services to the low income sector.
South Pacific Business Development Microfinance Ltd. (hereinafter called SPBD Tonga) is a
privately owned microenterprise development organization with a mission to provide
financial services to economically disadvantaged people particularly women who cannot
access savings and loan products from traditional banks. SPBD provides unemployed women
and low income women entrepreneurs with financial services, training, ongoing guidance
and motivation to help them start or grow micro‐businesses. SPBD Tonga was incorporated
under the Companies Act 1995 on July 7, 2009 and licensed by the Ministry of Labour,
Commerce and Industries. Its offices are located in Taufa’ahau Road, Kolofo’ou District in
the capital Nuku’alofa.
SPBD has its roots in Samoa. SPBD Foundation in Samoa was founded by Gregory F.
Bangladesh. SPBD has assisted thousands of women in over 200 villages across Samoa.
Since its foundation, SPBD has disbursed over 27,000 loans to Samoan women amounting to
over ST$ 30 Million. SPBD is the leading and first successful microenterprise development
organization in the Pacific islands. Mr. Casagrande also founded SPBD Tonga which is a
replication of the Samoan operations.
During the first three months of operations, SPBD Tonga has assisted 543 unemployed and
low income women in nine villages with training, unsecured credit, and convenient savings
The specific goals of SPBD Tonga for the next three years (2010 – 2012) are:
• Attain an outreach of at least 4,550 women micro‐entrepreneurs by Year 2012
• Serve at least 15 new villages each year particularly in the rural areas of Tonga
• Assist women clients and their families with financing for housing improvement and
childhood education beginning Year 2010.
• Develop clients’ capacity by providing on‐going guidance and business trainings.
• Attain financial sustainability by Year 2011.
SPBD Tonga’s launch and current operations are funded by equity from SPBD Microfinance
Holdings/Gregory F. Casagrande, and concessional loans from Microdreams Foundation
(USA) and Jasmine Charitable Trust (NZ).
Funding Sources Type Amount in
Local Currency (TOP $) Amount in US$ (TOP$ 1 : US$ 0.53) Remarks SPBD Microfinance Holdings
Equity 182,282 96,607 Wholly owned by Gregory F.
Microdreams Foundation Loan 405,522 214,929 Various TOP$ and US$ Loans
with a term of 3 to 5 years with
2‐3 years grace period in
Jasmine Charitable Trust Loan 500,000 265,000 TOP$ loan with a term of 4
years with 2 year grace period
in principal payments. Another
tranche of TOP$ 500,000 to be
disbursed in January 2010.
TOTAL 1,087,804 576,536
The target outreach of SPBD are Tongan women in the lower end of the economic spectrum
but who have the entrepreneurial drive and livelihood skills to generate income for
themselves and for their families. These women are unemployed (i.e. not engaged in part‐
time or full time wage labour) or already engaged in small businesses. Currently, the women
clients of SPBD Tonga are engaged in the following businesses:
Vegetable gardens/plantations Fishing Pig farms Weaving Sewing Handicraft production
Food Processing (catering, food delivery, canteen, bakery, kava)
Tongan oil processing
Trading, road side stands, general stores, flea markets, export
Cleaning services, garden maintenance
SPBD targets Tongan women 18 to 65 years old. Women below 18 years old are qualified to
become SPBD members if they have a child to support. Women over 65 years old are also
qualified if they are in good health and if they have existing businesses. The expected results
of SPBD’s microenterprise development services are to empower women so that they can
improve their lives and the lives of their families.
Based on the Year 2006 Census, only 30% of Tongan women are employed and 40% of them
are underemployed being engaged in subsistence farming, fishing and handicrafts. The table
below provides an overview of the employment of women in Tonga:
Total Population 101,991
Women Population 50,219 49% of total population
Employed Women aged 15 and older 15,178 30% of total women population Employed women by type of work
Work for pay and operating business 5,690 37% of employed women Farming, Fishing and Handicrafts for sale 3,475 23% of employed women Subsistence Farming, Fishing and handicrafts 5,998 40% of employed women Source: Year 2006 Census of Population and Housing
Tonga’s average annual household income is TOP$ 18,600. At least 13,000 households are
earning less than the average household income. If we assume that 50% of these
households has demand for microfinance services, the estimated market of SPBD is 6,500.
Percentage Distribution of Households By Average Annual Cash Income
Income Group (TOP$) Percentage No. of Households
Less than 5,000 29% 5,083 5,000 to 9,999 28% 4,908 10,000 to 14,999 17% 2,980 15,000 to 19,999 8% 1,402 20,000 – 24,999 6% 1,052 25,000 – 29,999 4% 702 30,000 and over 8% 1,402 TOTAL 100% 17,529
Source: 2001 Household Income and Expenditure Survey
Minimum no. of households earning less than the
average annual household income
13,000 Estimated percent of above households with
demand for microfinance
Estimated Market 6,500
4.1. Historical Background, Geography and Population
The Kingdom of Tonga is the sole constitutional monarchy in the South Pacific. It is made up
of 170 low‐lying coral and volcanic islands of which 36 are inhabited. The total land area is
approximately 670 km2 over a stretch of 360,000 km2 of the South Pacific Ocean. It was a
British Protectorate in 1900 and acquired independence in 1970. Tonga succeeded against
colonization and this is considered a factor for its strong aristocratic system and cultural
Tonga is geographically divided into four main island groups: 1) Tongatapu and ‘Eua, (2)
Vava’u, (3) Ha’apai, and (4) Niua Toputapu and Niua Fo’ou. Tongatapu is Tonga’s largest
island at 260 km2. ‘Eua is an island within a three hour ferry ride from Tongatapu. The
Vava’u group is a 45 minute flight away from Tongatapu or a 24 hour ferry ride. The two
islands of Niua Toputapu and Niua Fo’ou are geographically closer to Upolu, Samoa than to
Tongatapu. Some of these outlying islands are fairly out of reach of mainstream commercial
According to the Year 2006 Census, Tonga has a population of 101,991 of which two thirds is
in the main island of Tongatapu. Majority of the population or 77% live in rural areas. The
growth rate of the population is less than 0.5% and the number of Tongan living overseas is
about the same as the population in Tonga. The country’s adult literacy rate is very high at
4.2. The Economy
Although the economy grew by 1.2% in 2007/08, the Tongan economy has been
underperforming for more than a decade according to a 2008 ADB report. There is a severe
lack of employment opportunities for the increasing number of graduates resulting to the
migration of educated and skilled Tongans to seek opportunities overseas. Productivity of
both labor and capital has been slow resulting to low returns of investment which in turn
slows down job creation.
The Tongan economy is recovering from two shocks. One is the Civil Service Strike in 2005
which closed down government for several weeks and a riot in the following year which
destroyed 70% of the capital’s business district. These shocks created the perception that
Tonga is a very risky place to do business. Reconstruction work however has started with
loans from Australia, New Zealand and China although this will take some time.
The economy of Tonga is also characterized by an oversized public sector with 17 state‐
owned companies has perpetuated low productivity. The government is now closely
working with ADB on various initiatives to privatize or improve the performance of these
Poor quality and expensive infrastructure is another constraint. Tonga’s electricity is
considered the most costly in the Pacific. Agriculture and tourism are not fully developed
with poor global communication and transport links for goods and people within the
country and international destinations.
The agricultural sector’s output has also been declining for years. Agriculture is Tonga’s
largest sector with a share of 25% of the country’s total output followed by Commerce,
Restaurants and Hotels at 17%. Tonga has a climate conducive for agricultural production
but the agricultural department does not have the capacity to provide agricultural extension
(training) and advice to producers on how to access international markets.
The performance of the Tongan economy will largely depend on the recovery of remittances
and tourism. Migrants send remittances equivalent to 40% of Tonga’s GDP. In the year to
June 2009, remittances fell by 14 percent equivalent to 4% of GDP. The tourism industry
also showed a decline of receipts by 5.9 percent during the same period. These declines are
considered effects of the global financial crisis.
Inflation is at 1.2% year‐on‐year in June 2009. This is a remarkable decline considering the
surge of inflation rate to 12.2% in 2008 due to higher prices of fuel and food. Prices of
imports comprise two‐thirds of the Consumer Price Index (CPI). The country’s remote
location, weak infrastructure and vulnerability to natural disasters have discouraged the
manufacturing sector and have kept the country import‐dependent.
The government is indeed facing significant challenges but it has expressed willingness to
far‐reaching reforms and will encourage a private sector led development. The latter is a key
goal in the government’s latest Strategic Development Plan.
4.3. The Political Environment
Tonga has been a stable, undemocratic, hereditary monarchy for centuries. The nobility
controls much of the government structure. Following the riots in 2006, democratic reform
has become the overriding political issue in Tonga. In 2006, the King appointed a commoner
to the post as Prime Minister. The general election in 2008 showed the strong performance
of pro‐reforms candidates to parliament. The government is trying to promote a fine
balance and gradual approach to democratic change but there is increasing pressure for a
larger scale reform. It is being expected that majority of the parliament seats will be
popularly elected in a general election in 2010.
4.4. The Financial Sector
Tonga has four 4 regulated financial institutions ‐ ANZ Bank, Westpac Bank, Malaysian
Banking Finance (MBf Bank) and the government‐owned Tonga Development Bank (TDB).
The total assets of regulated financial institutions reached TOP$ 443.7 million in 2007/08, an
increase of TOP$ 47.1 million (11.9 percent) over the year. Total net loans by the banks to
the nonfinancial sector is TOP$ 333 million which grew by TOP$ 55.7 million (19.2 percent)
compared with a TOP$ 16.5 million (6.0 percent) growth recorded in 2006/07. Much of the
increase in lending is reportedly to finance construction. According to the National Reserve
Bank of Tonga, increase in lending is an indication of stability since the 2006 riots. At the
end of the 2007/08, the banks' outstanding loans portfolio comprised: 52.5 percent for
industries and businesses including agriculture; 45.8 percent for private individuals mainly
housing, and 1.7% for other types of loans. The share of agricultural lending is below 5%.
Total deposits of the banks grew by TOP$ 34.7 million (13.8 percent) to TOP $286.0 million
in 2007/08 and the total number of accounts reported to have decreased by 2.5 percent to
48,920 accounts. All banks are profitably operating with a combined pre‐tax profit of 4.1%
of average total assets. The consolidated capital adequacy ratio (CAR) is 20.4% against the
The National Reserve Bank of Tonga (NRBT) regulates foreign exchange operations. The
authority includes licensing of foreign exchange dealers. In addition to the commercial
banks, the NRBT has licensed four other institutions – Fund Management Ltd. (Western
Union), Rowena Financial Services Ltd., Meili Lei Langi Money Transfer and Mana Money
4.5. The Microfinance Subsector
Before the establishment of SPBD Tonga, the Tonga Development Bank is the only
institution that is providing commercially‐based microfinance services. While there are
credit unions and indigenous microcredit schemes, their outreach and portfolio were very
limited. Commercial Banks require collateral or assignment of salaries for all its lending
services and thus have not been able to serve the low income sector for loans. The
commercial banks however is the main provider of deposit services holding 98% of all
4.5.1. Tonga Development Bank
TDB was established in 1977 and fully‐owned by the government. TDB has a Micro Lending
Unit that caters to loans TOP$ 10,000 and below. It has branches on all 4 of the main
islands. TDB also provide business development services.
TDB launched a new microfinance product in early 2009 and it has the following features: Loan Amount TOP$ 2,000 (disbursed in lump sum or staggered) Interest Rate 10% per annum declining Fees TOP$ 40 Collateral Unsecured Term 4 months to 24 months depending on the project Methodology Individual Lending
Target Clients Rural clients (male or female) with business experience of at least 2 years
No. of Clients as of 31/10/09 177
Loans above TOP$ 2,000 must be secured. TDB also has a Women in Development loan
product of up to TOP$ 5,000. Women in groups or individual are eligible for funding
provided they have an asset as security for the loan and an existing working relationship
with the women’s section of the Ministry of Agriculture.
4.5.2. Credit Union Association
As of September 2008, there were 37 Credit Unions (CUs) with a total 3,106 members. The
three largest CUs have 55% of total members. Fifteen or more people are required to form
a credit union. Total assets of CUs amounted to TOP$ 1.3 million and loans outstanding
were TOP$ 924,000. These credit unions only make loans to members and the maximum
loan amounts are determined by a member’s individual savings contribution. Members
cannot use land or homes as collateral and no one will be given a loan above their own
savings balance. The CUs are restricted by the Credit Union Act to charge interest rate
beyond 1% per month of the outstanding balance. This restriction makes it difficult for CUs
to cover administrative expenses with revenues.
4.5.3. Finance Companies
There are 237 finance companies registered with the Ministry of Labour, Commerce and
Industry. These finance companies are easily accessible and convenient to use since a
person can obtain money on the spot. Typically, these lenders require a Tongan security
such as Tapa or a family heirloom and provide half of the fair market value of the item. The
interest rates are known to be extremely high in the range of 10% per month or even higher
at 20%‐30%. If the borrower cannot repay the loan in a timely fashion, then the lender will
sell the security at fair market value, thereby earning even higher returns on their capital.
These providers are known as being extremely aggressive in collecting their money as it
comes due and have a reputation for such practices. In most cases, these lenders are
approached in helping to fill cultural and family obligations rather than for business pursuits.
4.5.4. Money Transfer Agencies
Remittance service is a major financial service required by Tongans with 80% of households
reporting remittance as a source of income. Remittances largely do not pass through the
banking system with Western Union being the leader and reportedly having a market share
of 60% to 70%. Western Union reported an average remittance of TOP$ 400. The second
largest agency is Meili Mei Langi, a church based money transfer agency with offices in
Australia and New Zealand. Moneygram is operated by Westpac but even with its 5
locations in Tonga it is less utilized. Albeit very costly, the use of Western Union and Meili
Mei Langi is widespread because of the perceived speed and ease of access of these
5.1. Products and Process
SPBD offers the following products and services:
1. Small unsecured loans for micro‐businesses, housing improvement and for children’s
2. Simple and small balance savings services to build‐up funds for future needs;
3. Training and on‐going guidance;
4. In‐house loan insurance which covers clients’ outstanding loans with SPBD in case of
5.1.1. SPBD Group Loan Product
SPBD Group Loan Minimum Loan Amount TOP$ 1,000 Maximum Loan Amount TOP$ 5,000 Maximum Increment Per Loan Cycle TOP$ 500 Loan Purpose First Loan Cycle: Business Second and Subsequent Loan Cycles: Business Housing Improvement Childhood Education Term 52 weeks (one year) Repayment Weekly Interest Rate 25% per year flat Development Fee (to cover for cost of training, evaluation and monitoring)
2% of loan amount deducted from loan disbursement
SPBD is using a modified Grameen group lending methodology. SPBD differs from traditional
banks or finance companies because SPBD provides unsecured credit and does not require
documentary proof of steady and sizeable income to secure loan repayment giving
opportunity for women who are unemployed or with low incomes to access savings and
Potential clients undergo five pre‐membership training sessions wherein the women form
their groups and centres, build the strength of the group and centre, understand SPBD rules
and lending procedures, prepare a simple business plan and loan application. After loan
disbursement, the groups/centres meet weekly with SPBD Centre Managers (loan officers)
in their villages for repayment collections and on‐going guidance.
An in‐house credit scoring system is used to determine the next loan sizes. For example, the
client’s next loan amount is reduced by the number of times she is in arrears, number of
times she did not honour group guarantee, and number of absences in weekly meetings.
Savings balance and weekly household cash flow also determine the next loan amount.
The interest rate policy of SPBD is to set interest rate and other charges based on market‐
related cost of funds (including inflation cost), administrative expenses, expected loan
losses, and recapitalization needed for SPBD to become sustainable. This is evident in the
current pricing structure which will yield an annual effective interest rate of 52.9%. The
pricing will be regularly reviewed by SPBD in response to changes in the cost structure and
5.1.2. Savings Services
The following are the types of savings deposit:
1. Initiation Deposit – Ten Pa’anga (TOP$ 10) paid during the training period of a new
2. Compulsory Savings – Five percent (5%) of the loan amount which is deducted from loan
proceeds and can be withdrawn after the loan is fully paid.
3. Voluntary savings – Minimum of one Pa’anga (TOP$ 1) per deposit is accepted during
the weekly meetings. Voluntary savings can be withdrawn anytime during members’
centre meetings to cover for loan repayments or at SPBD offices for any other purpose.
Members have found the services of SPBD a convenient and secured way of savings and
have motivated them to set aside small amounts from their incomes or to keep funds
until the next business purchase. These savings can also be for building up funds for
future needs such as marriage, childbirth, school fees, church contributions and or
emergency needs such as medication and funeral expenses. This can also be a group
savings to create and build up a centre guarantee fund to cover the loan repayment of a
member who is delayed or amounts generated from group fund raising activities to be
used for whatever purpose the group/centre may decide to undertake.
Members with SPBD loans that are in arrears for two (2) weeks cannot be allowed to make
withdrawals. When the arrears go beyond four (4) weeks old, SPBD reserves the right to
deduct the amount in arrears from her savings account as full or partial settlement of those
arrears and the savings account is considered closed.
Members’ savings are not utilized by SPBD for onward lending. These savings are kept in a
commercial bank account or term deposits in trust for SPBD members. Members’ savings
with SPBD earns interest of 1.5% per year based on average daily balance. Each member has
a savings passbook.
SPBD offers clients training on the following:
1. Group/centre formation training – Involves a series of processes where members self‐
select and assess each other and build the strength of the group and centre. The
members are also trained on SPBD policies and procedures.
2. Business training – This is to assist members to analyze their customers/markets, assess
their skills and existing business capacity, prepare a simple investment plan or loan
budget and calculate expected revenues and expenses.
5.1.4. In‐House Loan Insurance
Each member who receives an SPBD loan is required to obtain an insurance cover by SPBD.
The loan insurance cover eliminates the burden from the member’s family and other
group/centre members to repay the loan in case the member dies. The loan insurance fee is
two percent (2%) of the total obligation (principal and interest) and this is deducted from
the loan disbursement.
SPBD Tonga’s performance indicators for the 3 months ending October 2009 are shown
Performance Indicators Oct‐09
Outreach Cumulative No. of Loans Disbursed 543 Cumulative Amount of Loans Disbursed (TOP$) 543,000 Cumulative no.of new clients 543 Loan Portfolio Portfolio Outstanding (TOP$) 491,623 No. of Loans Outstanding 542 Average Loan Outstanding (TOP$) 907 Savings Portfolio No. of Savings Accounts 641 Compulsory Savings (TOP$) 33,560 Voluntary Savings (TOP$) 17,372 Average Voluntary Savings Per Client (TOP$) 27 Sustainability Operational Sustainability (revenues/expenses) 30% Portfolio Quality PAR 30 Days 0.00%
5.2. Operating Systems
5.2.1. Management Information System
SPBD Tonga uses CommonCents 101 Microfinance Software. The software integrates client
information system, loan portfolio tracking, savings tracking and general ledger system. It is
user‐friendly and can produce accurate daily, weekly, monthly and annual portfolio and
financial reports. The software provides security levels and security rights as well back‐up
Loan portfolio quality is monitored daily. Loan and savings portfolio levels are monitored on
a weekly basis, and management and financial reports are prepared monthly.
5.2.2. Internal Controls
SPBD’s internal control system is comprehensive. Members’ attendance during weekly
meetings is mandatory to observe the collection and to make the process transparent. Since
centre managers (CMs) handle cash, collections are recorded extensively and reconciled to
ensure accuracy and to minimize fraud. All cash collections must be receipted. The centre
secretary maintains a centre book where members’ payments are recorded. The CMs record
the payments on his/her own CM Book, on the Centre Billing Statements, and Cash
Collection Summary. The centre secretary signs off on all CM documents to ensure that all
payments are recorded and their books reconcile. The collections are also read out to the
The CMs turn‐over cash collections to the Finance Team everyday and physical cash are
reconciled against all the payment records. Cash are transferred to the safe in the General
Manager’s office and deposited in the bank by the following day.
Bank accounts are reconciled weekly to ensure that there are no irregularities and
legitimate bank entries are recorded to the general ledger.
Operational audit will be conducted on each centre at least once a year which involves a
review of attendance and tardiness recording, cash handling, loan transaction recording,
savings transaction recording, and check on grievances/complaints by centre members .
Segregation of duties is practiced for client initiation, loan booking/processing, loan
approval, loan disbursement and accounting. Dual control/signatures are required for all
transactions. Loan ceilings are set, as well as limit on expenditures to be approved by the
SPBD Tonga financial statements will be audited annually. It is in the process of identifying a
qualified and reputable auditing firm for this process.
SPBD Tonga has comprehensive policy manuals covering credit policies, field operations,
finance and administration, and human resources.
5.3. Governance, Management and Staff
Governance is currently solely undertaken by SPBD Tonga’s founder Gregory F. Casagrande.
Mr. Casagrande approves business plans, organizational policies and procedures, and other
initiatives of SPBD Tonga. A well respected Tongan attorney, Dana Stephenson, has been
identified to join the board and more will be selected as the organization grows.
Mr. Casagrande is also the founder of Microdreams Foundation based in the USA, a
microfinance acceleration fund that has supported emerging microfinance institutions in
Africa, South America, and the Pacific Islands. Mr. Casagrande served as director for the
International Association of Microfinance Investors (IAMFI), Microfinance Pasifika Network,
and Planet Finance. He also served on the United Nation's Board of Patrons for its
International Year of Microcredit ‐ 2005. In addition to microfinance, Mr. Casagrande also
serves as Chairman for three New Zealand software companies: Biomatters Ltd., Calcium
Solutions Ltd. and English to Go Ltd. Prior to these activities, Mr. Casagrande held various
positions in Ford Motor Company, Mazda Motor Company and Coopers and Lybrand in
product development, manufacturing, marketing, financial management and led teams in
the United States, Japan and Europe.
The executive position is held by an experienced expat Lorisa Canillas as General Manager
(GM). Ms. Canillas is responsible for implementing activities and initiatives to attain the
organization’s strategic objectives, implement organizational policies and procedures and
ensure compliance by all staff, develop and execute strategies to improve financial
performance, and manage the day to day operations in Tonga. Prior to joining SPBD, Ms.
Canillas was a Technical Adviser for the Microfinance Investment and Technical Assistance
Facility (MITAF), a project of UNDP, UNCDF and KfW to accelerate microfinance growth in
Sierra Leone. She has worked for the largest development bank and then with the second
largest commercial bank in the Philippines particularly in specialized lending for small and
medium enterprises (SMEs).
The current staffing of SPBD Tonga also include 1 finance and administration officer, 4
centre managers and 1 administrative assistant who are all Tongans. A recruitment plan is in
place based on client caseload to ensure efficiency in operations. New staff undergoes a
training program that includes lectures/discussions and hands‐on field work and the
trainees are evaluated on the quality and quantity of output as well as knowledge of SPBD
products and processes. SPBD Tonga pays competitive salaries and benefits including an
incentive scheme that is heavily weighted on outreach and portfolio quality.
5.4. Financial Management
SPBD aims for sustainability. It is ensured that performance monitoring and reporting keeps
track of sustainability metrics. For portfolio quality, SPBD reports Portfolio at Risk (PAR) 30
days although for day to day operations PAR 1 day is being tracked. Productivity of
employees is also closely monitored. Liquidity forecasting is carried out monthly and
quarterly. SPBD prepares 3 year business plan which will be updated annually.
Tonga’s unemployed and low income sectors have been largely underserved for years.
Following the success of SPBD Samoa, SPBD Tonga is also expected to be the leader in the
development of microfinance in Tonga, help fight poverty and contribute to the
development of the Tongan economy and its people.
Through SPBD’s microenterprise development initiatives, unemployed and low income
Tongan women will start and grow self‐employment ventures. The plan is to reach and
support 1,910 micro‐entrepreneurs in 2010, 3,350 in 2011 and 4,550 in 2012.
Highlights of the growth plan are shown below.
Growth and OutreachYR 2010 YR 2011 YR 2012
Lending Total Loan Portfolio 1,182,108 2,360,458 3,701,139 Overall growth in portfolio 115.6% 99.7% 56.8% Number of active clients 1,910 3,350 4,550 Overall growth in loans 172.9% 75.4% 35.8% No. of New Clients 1,282 1,634 1,537 Total Loan Disbursements 2,224,000 4,491,500 7,083,000 Average loan disb. size 1,155 1,344 1,563 Average outstanding loan balance 619 705 813 Voluntary Savings Total Voluntary Savings Deposits 62,757 126,582 197,714 Percent change in savings deposits 213.8% 101.7% 56.2% Number of voluntary depositors 1,910 3,350 4,550 Percent change in depositors 172.9% 75.4% 35.8% Compulsory Savings Compulsory Savings as % of portfolio 9.4% 9.5% 9.6%
The main island of Tongatapu where two thirds of the population live is expected to be
exhaustively covered within the three‐year period. SPBD would have also helped its client
micro‐entrepreneurs to improve their housing conditions and children’s education through
the housing improvement and childhood education financing that SPBD provides.
Furthermore, clients’ savings habits will be developed so they can build their assets and
reduce their vulnerabilities. Clients’ enterprise skills will also be developed through training
and on‐going guidance.
SPBD Tonga has gained a foothold in Tonga through the equity of its Founder and social
investments. It aims to continuously attract grants and loans to fill the gap of internally
generated funds (client loan repayments and revenues), and to achieve the outreach plan
Uses of FundingYr 2010 Yr 2011 Yr 2012 Loan Disbursements 2,224,000 4,491,500 7,083,000 Operating Costs 486,773 640,218 801,261 Capital Expenditures 24,361 28,721 41,565 SPBD Loan Repayments (Principal only) 0 200,000 400,000 TOTAL 2,735,134 5,360,439 8,325,826
Sources of Funding
Client Loan Repayments 1,588,352 3,309,460 5,736,108 Revenues 463,653 1,054,093 1,777,371 Grants or Loans 683,129 996,887 812,346 Total 2,735,134 5,360,439 8,325,826
SPBD Tonga’s projected financial statements and performance indicators are shown in
As already practiced portfolio levels and outreach as well as financial performance will be
monitored monthly. Reports are available by the immediately following month. Reports to
funders can also be made available monthly or quarterly.
SPBD Tonga is currently in the planning and design stage of social impact monitoring and
will be shared to relevant parties once completed.
Income Statement2010 2011 2012
Financial Income 463,653 1,054,093 1,777,371
Interest on loan portfolio 348,530 833,880 1,441,943
Fee income 100,080 202,118 318,735
Financial Revenue from Investments 15,042 18,095 16,694
Financial Expense 83,573 131,988 183,639
Interest and fees on borrowed funds 81,947 128,197 177,027
Interest paid on savings deposits 1,626 3,791 6,612
Net Financial Income 380,080 922,104 1,593,732
Provision for loan losses 25,443 27,258 33,024
Net Financial Margin 354,636 894,846 1,560,708
Operating Costs 486,773 640,218 801,261
Program 301,206 414,154 543,299
Salaries and benefits 78,624 153,911 246,477
Other operational expenses 196,596 226,085 259,998
Depreciation 25,986 34,157 36,824
Administration 185,567 226,064 257,961
Salaries and benefits 92,095 119,226 138,386
Other operational expenses 85,068 97,828 112,502
Depreciation and amortization 8,404 9,009 7,073
Net Operating Income -132,137 254,629 759,447
Net Non-Operating Income/(Exp) 0 0 0
Non-Operating Revenue 0 0 0
Non-Operating Expense 0 0 0
Net Income (before taxes and donations) -132,137 254,629 759,447
Amount of taxes paid 0 63,657 189,862
Net income (after taxes and before donations) -132,137 190,971 569,586
Donations for Loan Fund Capital 0 0 0
Donations for Fixed Assets 0 0 0
Donations for Operations 0 0 0
Unrestricted Donations 0 0 0
Net Income (after taxes and donations) -132,137 190,971 569,586
Balance Sheet2010 2011 2012
Cash in Bank and Near Cash 19,400 38,700 60,650
Gross Portfolio Outstanding 1,181,624 2,359,974 3,700,655
(Less: Loan Loss Reserve) -23,642 -47,209 -74,023
Net Portfolio Outstanding 1,157,982 2,312,764 3,626,632
Short-term Investments 547,366 378,700 210,800
Savings reserves 173,957 351,157 551,864
Other Current Assets 0 0 0
Sub-total, Current Assets 1,898,705 3,081,321 4,449,945
Land 0 0 0
Buildings (gross) 0 0 0
Furniture and Equipment (gross) 129,541 158,262 121,202
(Accumulated Depreciation) -48,500 -91,667 -56,938
Net Fixed Assets 81,041 66,595 64,263
Other Long-Term Assets
Long-term Investments 0 0 0
Other long-term assets (net) 0 0 0
Sub-total, Long-term Assets 81,041 66,595 64,263
TOTAL ASSETS 1,979,745 3,147,917 4,514,209
Accrued/(Pre-paid) expenses 0 0 0
Savings deposits 173,957 351,157 551,864
Short-term Concessional Loans 200,000 404,000 0
Short-term Commercial Loans 0 0 0
Other Current Liabilities 0 0 0
Sub-total, Current Liabilities 373,957 755,157 551,864
Long-term Concessional Loans 1,705,526 2,301,526 2,801,526
Long-term Commercial Loans 0 0 500,000
Other long-term Liabilities 0 0 0
Sub-total, Long-term liabilities 1,705,526 2,301,526 3,301,526
TOTAL LIABILITIES 2,079,483 3,056,683 3,853,390
Accum. Donated equity, prev. Periods 0 0 0
Donated equity, current period 0 0 0
Shareholder equity 182,282 182,282 182,282
Accumulated dividend payments 0 0 0
Accum. Net Surplus (Deficit), prev. Periods -149,883 -282,020 -91,048
Net Surplus (Deficit), current period -132,137 190,971 569,586
Equity Reserves 0 0 0
TOTAL EQUITY -99,738 91,234 660,819
TOTAL LIABILITIES AND EQUITY 1,979,746 3,147,917 4,514,209
Ratios2010 2011 2012
Portfolio QualityReserve Ratio 2.0% 2.0% 2.0%
Annualized Loan Write-off Ratio 0.2% 0.2% 0.1%
Operational Sustainability 77.8% 131.8% 174.6%
Financial Sustainability 69.1% 114.4% 147.1%
Adj. Pre-tax Return on Performing Assets -13.6% 5.1% 14.5%
Adj. Pre-tax Return on Equity (AROE) #N/A #N/A 139.6%
Equity Multiplier #N/A 34.50 6.83
Quick Ratio 5.1 4.1 8.1
Efficiency and Productivity
Yield on Portfolio (annualized) 48.7% 55.0% 55.9%
Operating Cost Ratio 52.8% 34.0% 25.4%
Borrowers per Centre Manager 318 372 379
Portfolio per Centre Manager 197,018 262,273 308,428
Average cost of debt (annualized) 5.2% 5.2% 5.6%
Overhead percentage 38.1% 35.3% 32.2%
Centre Managers as % of total staff 60% 64% 71%
Program Other Op Costs / Portfolio 16.6% 9.6% 7.0%
Net FA per branch staff person 8,942 5,094 3,713
Head Office Other Op Exp / Portfolio 7.2% 4.1% 3.0%
Net fixed assets / Admin staff 7,401 4,731 4,451
1.) Asian Development Bank (ADB), 2008. Transforming Tonga: A Private Sector
Assessment, Asian Development Bank, Manila.
2.) David Lucock and Klaus Maurer, 2008. Microfinance in Tonga, Asian Development Bank,
3.) National Reserve Bank of Tonga, 2008. Annual Report 2007/2008, National Reserve Bank
of Tonga, Kingdom of Tonga.
4.) Patrick de Fontenay and Siosiua T.T. Utoikamanu, 2009. Tonga: Economic Survey 2009.
Pacific Economic Bulletin Volume 24 No.3 October 2009, Australian National Univerity,