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MicroDreams

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The content below is not actively maintained and may be out of date. We last updated the content below in January 2011.

MicroDreams does not currently qualify for our highest ratings.

More information:

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Published: January 2011

Summary

MicroDreams starts and funds microfinance institutions in the developing world.

Our review consisted of reviewing MicroDreams' website and phone conversations with Greg Casagrande, Founder and Managing Director.1

We do not currently recommend MicroDreams, feeling that the Small Enterprise Foundation provides a better opportunity for donors interested in supporting microfinance.

Table of Contents

What do they do?

MicroDreams started as a fundraising organization for a microfinance institution in Samoa, South Pacific Development Foundation (SPBD-Samoa). It now supports microfinance institutions in Samoa (SPBD-Samoa), Tonga (SPBD-Tonga), Fiji (SPBD-Fiji), Bolivia (Emprender), Ecuador (FUNDAMIC), and Peru (IDER CV).2 It provides grants, loans, loan guarantees, and technical assistance to these organizations.3

All of MicroDreams' partner organizations offer microloans.4 Two of MicroDreams partners, SPBD-Samoa and SPBD-Tonga, offer savings services in addition to loans. MicroDreams' partners in South America are not licensed to offer savings services.5

MicroDreams has also run cash-for-work programs and other disaster relief programs in Samoa in response to emergencies there.6

Key questions about social impact: Lending

In evaluating MicroDreams, 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).

Is the organization focused on social impact?

We asked MicroDreams for evidence that its partner organizations monitor whether borrowers are benefiting or being harmed by credit, such as by monitoring client drop out rates and the reasons why clients drop out. We did not receive evidence from MicroDreams that social impact is being monitored by its partners. We are concerned that monitoring social performance is not part of MicroDreams' process for selecting partner organizations.

How frequently do borrowers drop out of the program?

We have not seen evidence that MicroDreams' partners track their drop out rates. We asked MicroDreams for drop out rate data, but have not received it.7

For more information on microfinance drop out rates and how they are calculated, see our microfinance glossary.

Do MicroDreams' partners monitor why borrowers drop out?

We have not seen evidence that MicroDreams' partners survey drop outs for reasons why they left the program.8

Do MicroDreams' partners prevent client over-indebtedness?

MicroDreams told us:9

The keys to preventing over-indebtedness are to:

  1. Focus on microenterprise financing through which clients make productive investments and generate substantial returns.
  2. Work in areas not served by other microfinance/MED institutions so that clients aren't borrowing from one lender to pay off the other.
  3. Avoid consumer financing.

These are all key aspects of what we do.

Are borrowers protected against harassment by loan officers and group members?

MicroDreams told us:10

Our partners' field staffs want to ensure that their clients have successful businesses and hence the ongoing guidance and motivation that they provide is well tailored to help the clients to succeed at their businesses...Partners fire staff if a staff member harasses clients. If clients are harassed they all know that they may walk straight into the local field office and lodge any complaints they would like to make.

We have not seen evidence to support these claims. We would also like to see evidence of how the organizations responded to complaints in the past.

What interest rates do MicroDreams' partners charge?

MicroDreams provided information on this question for two example loan types at two partner organizations.11 With this limited information, we do not have a full picture of the costs borrowers pay for loans supported by MicroDreams.

For more information on microfinance interest rates and how we calculate the cost of a loan to borrowers, see our microfinance glossary.

What are MicroDreams' partners' repayment rates?

Some of MicroDreams partners have reported information on their repayment histories to Mix Market,12 but due to our remaining questions about MicroDreams' monitoring of its social impact, we did not explore this question in depth.

For more information on collection rates and other forms of microfinance repayment rates, see our microfinance glossary.

What are MicroDreams' partners' borrowers' standards of living?

We have not seen results of surveys that assess borrowers' standards of living. MicroDreams provided only general information on this question.13

For more information on standard of living surveys of microfinance clients, see our microfinance glossary.

Key questions about social impact: Savings

Are savers able to access their funds when they need them?

MicroDreams told us that "savings can be withdrawn with less than 1 weeks advance notice."14

What are the interest rates/fees on the accounts?

MicroDreams told us that depositors "earn competitive rates of interest on their savings."15 We do not know if there are fees charged.

Who are the depositors?

We do not have information on SPBD-Samoa and SPBD-Tonga's depositors. We would like to know about their standards of living and whether they have other secure options for saving.

Other issues

In 2007, MicroDreams provided a loan guarantee to SOMED, a Ugandan microfinance institution,16 that went bankrupt later that year.17 MicroDreams was required to compensate some of the bank's creditors.18 MicroDreams' 2008 Annual Report notes: "Our MFI partner in Uganda, SOMED, appears to be problematic and rife with fraud. Our exposure to SOMED is limited and will be finalized in 2009. We will learn the appropriate lessons when this relationship is finalized."19 SOMED, however, is not mentioned in the 2009 Annual Report, nor on MicroDreams' website. We are not aware of whether MicroDreams has changed its parter vetting process following this incident.

Room for more funds

As of June 2010, MicroDreams was seeking additional funding to support the launch of a new microfinance organizations in Fiji in 2010 and in the Solomon Islands in 2011. MicroDreams told us that raising $1 million in the next year would allow it to "make very substantive progress" on these two projects. MicroDreams' revenues in 2009 were $167,600.20 We do not know how much in revenues MicroDreams expects in the next year.

Sources

  • 1.

    Greg Casagrande, phone conversation with GiveWell, December 8, 2009.
    Greg Casagrande, phone conversation with GiveWell, June 18, 2010.

  • 2.

    MicroDreams, "Annual Report (2009)," Pg 5. SPBD-Fiji opened in late 2010. See MicroDreams, "Mr. Microfinance Here to Help."

  • 3.

    MicroDreams, "MEDO Partner Selection."

  • 4.

    Mix Market, "SPBD: Data, Indicators."
    Mix Market, "SPBD Tonga: Data, Indicators."
    Mix Market, "Emprender: Data, Indicators."
    Mix Market, "FUNDAMIC: Data, Indicators."
    Mix Market, "IDER CV: Data, Indicators."

  • 5.

    "Because of their legal status, Emprender, Fundamic and IDER CV do not offer savings accounts. SPBD-Samoa and SPBD-Tonga do offer savings accounts in segregated bank accounts that are not used for on-lending." MicroDreams, "Response to GiveWell's Questions (July 2010)."

  • 6.

    "Immediately after the tsunami, MicroDreams' Samoan partner, SPBD-Samoa...found that over 145 SPBD members had completely lost their homes and businesses...MicroDreams quickly sent funds to support SPBD's immediate relief effort to these families. An aid package worth approximately ST$400 was delivered to each family. The aid package consisted of 24 liters of drinking water, 24 cans of tinned fish, a very large bag of rice, a range of household needs (plates, cups, spoons), buckets, a machete, mosquito coils, boxes of matches, soap, toothpaste, toothbrushes and other basic items as well as ST$150 in cash to each lady...
    MicroDreams launched a 'Cash for Work' Program...We worked with local leaders in 15 villages to identify important clean up and reconstruction projects to complete. The leaders then selected up to 25 workers per village, and MicroDreams provided the proper equipment (wheelbarrows, axes, shovels, rakes, paint, gloves, etc.) and the wages to pay each worker ST$200 for ten days of work...MicroDreams is also helping fund SPBD's emergency home and business reconstruction financing. We are making loan funds available to scores of families in devastated villages to help them re-launch businesses that have been destroyed and to begin the process of rebuilding their homes." MicroDreams, "Annual Report (2009)," Pg 9.

  • 7.

    MicroDreams told us, "Over 10½ years SPBD-Samoa has worked with approximately 12,000 clients. Today SPBD-Samoa serves approximately 7.500 clients. Hence over the past 10½ years, approximately 4,500 clients have left the programme." MicroDreams, "Response to GiveWell Questions (July 2010)."
    We have not seen drop out rate data for SPBD-Samoa (i.e. % of clients who left within a specified time period) or data for other partners.

  • 8.

    MicroDreams told us that "the main reasons for these people to leave the SPBD programme are:

    1. 65% - They have achieved their personal and business goals. They no longer need the assistance of SPBD. They are financially self-sufficient. If they choose they are now able to bank with the formal banking sector.
    2. 20% - They have gained full time employment and have left their micro-business.
    3. 10% - They have married and moved to another village.
    4. 5% - They decided to take a rest." MicroDreams, "Response to GiveWell Questions (July 2010)."

    MicroDreams did not provide information on how this was determined or data from other partners.

  • 9.

    Greg Casagrande, phone conversation with GiveWell, June 18, 2010.

  • 10.

    Greg Casagrande, phone conversation with GiveWell, June 18, 2010.

  • 11.

    "MicroDreams' partners offer a wide variety of loans with a wide variety of interest rates. Typical examples are as follow:
    SPBD Samoa key terms are:
    i. 52 week, ST$1,000
    ii. Weekly payment : ST$24.42 (ie. 27% flat)
    iii. 2% (ST$20) loan insurance fee. This ensures that the remaining balance of the loan is written off in the event of death.
    iv. 1% (ST$10) life insurance fee. This provides a $1,000 death benefit payable to customer designated beneficiaries.
    v. Interest and fees cover the cost of the funds, the insurance benefits and the upfront training and ongoing weekly training, guidance and motivation sessions.
    vi. 5% savings required – can be withdrawn immediately after the deposit is made

    SPBD-Tonga key terms are:
    i. 52 week, TOP$1,000
    ii. Weekly payment : ST$24.03 (ie. 25% flat)
    iii. 2% (TOP$20) development fee paid up front.
    iv. 2% (TOP$20) loan insurance fee. This ensures that the remaining balance of the loan is written off in the event of death.
    v. Interest and fees cover the cost of the funds, the insurance benefits and the upfront training and ongoing weekly training, guidance and motivation sessions.
    vi. 5% savings required – can be withdrawn immediately after the deposit is made"
    MicroDreams, "Response to GiveWell Questions (July 2010)."

  • 12.

    Mix Market, "SPBD: Data, Indicators."
    Mix Market, "SPBD Tonga: Data, Indicators."
    Mix Market, "Emprender: Data, Indicators."
    Mix Market, "FUNDAMIC: Data, Indicators."
    Mix Market, "IDER CV: Data, Indicators."

  • 13.

    "MicroDreams partners with organizations that work exclusively with poor clients. Partners assess prospective clients' income level, quality of housing and amount of owned assets. They typically lend to first time clients with family incomes less than US$3/ day/person. Housing conditions are measured such as type of roof (tin, scrap, grass), type of foundation (dirt, wood, cement), type of wall (cement, lumber, scrap, none), condition of toilet (flush, latrine, pit), toilet ownership (indoor, outdoor, shared), access to electricity and running piped water (indoor, outdoor, shared), quantity and physical condition of assets, marital status, number of dependents, education, and health condition. Typical first time clients may live in huts with grass roofs, dirt floors no walls, shared outdoor toilet, shared outdoor water faucet, one illegal wire tapping into local electricity." MicroDreams, "Response to GiveWell's Questions (July 2010)."

  • 14.

    MicroDreams, "Response to GiveWell's Questions (July 2010)."

  • 15.

    MicroDreams, "Response to GiveWell's Questions (July 2010)."

  • 16.

    In 2007, MicroDreams made loan guarantees totaling $120,000 to three banks including SOMED in Uganda.
    MicroDreams, "IRS Form 990 (2007)," Pg 17.

  • 17.

    "In 2006, SOMED began to have repayment problems to at least one of its creditors...In Dec 2007, the Ugandan authorities closed down the institution, citing allegations of embezzlement, extortion, and fraud." Rozas 2009, Pg 14.

  • 18.

    Phone conversation with Greg Casagrande, MicroDreams Founder, 12/8/09.

  • 19.

    MicroDreams, "Annual Report (2008)," Pg 4.

  • 20.

    MicroDreams, "Annual Report (2009)," Pg 11.

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