Timor-Leste

Project

The project aims to help the Microfinance Institution of Timor-Leste (IMFTL) by

• strengthening its corporate governance and management,
• improving its operational and financial performance,
• improving its client orientation, especially poor women.

The TA will also help prepare business plans and a strategic plan for the divestment and privatization of IMFTL.

• The Project provided for rehabilitation of 21 credit unions to give outreach to some 8,000 poor families. The Project provided support until early 2003, by which time 17 credit unions proved beyond rehabilitation and only 4 achieved a level considered operational.

• Implementation of the Microfinance Development Project required development of a policy and legal framework within which the intended microfinance institution could be developed. ADB funded technical assistance to support that development and a second TA to establish a management information system(See Technical Assistance on Strengthening the Microfinance Policy and Legal Framework and Microfinance Information Technology System)

• The project established a new micro-finance institution, the Instituicao de Microfinancas de Timor-Leste (IMTL). IMFTL established a head office on 13 May 2002, and now has three branches. A total of 34 staff has been recruited to run IMFTL with an additional 12 security staff employed directly by IMFTL. To enable staff to undertake efficient microfinance operations a wide range of training activities and workshops were undertaken.

• Some 6200 deposit accounts had been opened and about 7500 loans had been issued. The microfinance group’s first cycle of loans are mostly small and averaging about $45. It now serves the needs of the poorer households in selected districts for savings and as a source of small, short-term loans. Efforts are being made to expand micro finance operations to more districts.

• The microfinance group's first cycle of loans are mostly small and averaging about $45. It now serves the needs of the poorer households in selected districts for savings and as a source of small, short-term loans. Efforts are being made to expand micro finance operations to more districts.

• Easy access to micro finance especially by women is enabling the formerly resource-poor population to start their own small businesses. Market vendor loans are evenly split between men and women but micro finance group loans have a strong gender bias, with some 90% of loans to women.

• The TA built upon work by the private sector and international agencies which identified opportunities for microfinance through rehabilitation of credit unions and a microfinance bank. The TA assessed options and requirements for viable microfinance in Timor-Leste and, by August 2000, had produced the feasibility study leading to the TFET funded Microfinance Development Project.

The TA supported the Microfinance Development Project by addressing policy issues and regulations relevant to microfinance institutions, particularly in matters influencing the ability to lend to the poor. The TA:

• drafted a credit union law;
• proposed guidelines and standards for credit monitoring and supervision;
• proposed credit union central fund policy and guidelines;
• proposed a foundation for issues of ownership and control of the microfinance institution;
• and drafted statutes and by-laws of the foundation and the Microfinance Bank.  -- need to change status to Closed

This TA continues the work of two earlier microfinance related TAs to establish efficient operational systems for the microfinance institutions and credit unions. FAO has installed and customized its microfinancing software and additional computer and networking hardware has been acquired. Training has been undertaken and the system is operational and will be installed in new branches.