CGAP Training Business Planning for MFIs Participant Materials: Trainer Notes


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Participant materials that accompany CGAP's Business Planning Training.

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CGAP Training Business Planning for MFIs Participant Materials: Trainer Notes

  1. 1. BP1: Welcome and Introduction CGAP, Revised July 2013 SESSION 1: WELCOME AND INTRODUCTION Session Summary Objectives: By the end of the session participants will be able to: State each other’s names, State the training objective and agenda Relate objectives to their own expectations, Time: 90 minutes Materials: Flipchart paper and markers for each group Name tags Name tents (sample included) Masking tape Index cards Computer data projector Overhead projector Participant materials: CGAP Microfin Handbook Overheads BP1-O1 Workshop Expectations Assignment BP1-O2 Workshop Goals BP1-O3 Workshop Objectives Handouts: BP1-H1 Workshop Expectations Assignment BP1-H2 Pre-Test BP1-H3 Workshop Goals and Objectives BP1-H4 Training Course Schedule BP1-H5 Microfin Handbook
  2. 2. BP1: Welcome and Introduction CGAP, Revised July 2013 Session 1: Welcome and Introduction Welcome 15 minutes 1. (2 minutes) Representative of sponsoring organization welcomes participants and opens workshop. 2. (3 minutes) Remarks from official guests; e.g. CGAP representatives, etc. 3. (2 minutes) Introduction of and hand over to facilitators. 4. (8 Minutes) Setting the Stage. Opening remarks by facilitators. Welcome participants to the course using the following points as a guideline. (adapted from the preface to the CGAP Business Planning and Financial Modeling Handbook version 1)  The past 30 years have witnessed the development of a microfinance sector to provide financial access to populations excluded from formal financial institutions worldwide. Microfinance institutions serve an ever-increasing number of low- income clients, but the demand for such financial services still far outstrips their capacity. In recent years, the sector has been subject to severe criticism, raising the alarm on questionable practices such as lack of pricing transparency and aggressive collections. Critics warn against increasing risks of over indebtedness and shows that the effects of MFIs' services are sometimes negligible or even negative. In order to achieve sustainable growth and reach its socio-economic goals, the industry must continue to become more professional, in order to reach the double bottom line..  To meet the growing demand, most microfinance institutions strive to increase their outreach. But rapid growth strains an institution’s systems and changes its financial dynamics. Without effective planning and projection tools microfinance institutions can—and often do—undermine themselves, and in doing so, may fail to reach their social and financial goals.  Many microfinance institutions have business plans. They are often over ambitious, because the underlying projections are insufficiently detailed to reveal the hurdles that the institution must overcome in order to expand. Often they are prepared by outsiders, created in response to requirements of potential funders, and remain on the shelf once funding is received rather than serving as an ongoing management tool.  In the past, many business plans were funded by funders/investors, in particular, to help microfinance institutions reach financial sustainability. However, as concerns around client protection and other sector risks increase, we are reminded of how critical it is to put clients at the center of the industry's decisions.
  3. 3. BP1: Welcome and Introduction CGAP, Revised July 2013 An in-depth study of clients' needs in terms of financial products and services, and also of the expected profits, must be included in the MFIs' business planning process. This is how an MFI will be able to reach both its financial and social goals.  The Consultative Group to Assist the Poorest (CGAP) designed Microfin and this course to help microfinance institutions develop their own business plans. This course will provide guidelines for preparing strategic and operational plans and, most especially, detail in how to make accurate financial projections to accompany those plans. Such plans and financial projections are certainly not secure predictions of the future—under the best circumstances they involve assumptions that will always need adjustment in the face of changing realities. But even if good business plans are not crystal balls, the exercise of preparing one, with participation by staff at all levels, can help an institution in three ways: o The institution’s stakeholders will have to face, and arrive at a consensus on, key strategic and operational issues that the exercise will bring to the surface. o If the financial and operational planning is carefully done, the process almost always shows participants the important dynamics of their business that they did not understand before. o The plan that results can serve as a roadmap to the institution’s goals. With a good map in hand, one that is periodically updated, management will know when the institution is deviating from that path and which direction it needs to move to get back on track.  During this course we will introduce how to develop those plans; we will review some basic concepts of planning and then apply them to microfinance using the Microfin Modeling software. The Microfin computer model, the analysis of your own institutions and the case study of a fictitious microfinance institution will be our major learning tools. We will present the model, discuss its use and work in groups on computers both inputting and analyzing data from the case study. Your active participation in these activities is critical to the success of the course.  We hope that the strategic, operational and financial planning and modeling exercises will help your organizations achieve their operational goals in a sound manner that supports the financial and social longevity and sustainability of the institution. The aim is to ascertain a qualitative change, both in the lives of your clients and in the sustainability of your MFIs.  Before we get started let us find out who is here and why you came! Participant Introductions and Expectations (75 minutes) Trainers may substitute other experiential activities that achieve these goals – learning who the participants are and obtaining participant’s expectations as appropriate.
  4. 4. BP1: Welcome and Introduction CGAP, Revised July 2013 5. (5 minutes) Distribute expectation cards. Ask each participant to write on the card several reasons of why they came to this workshop and to list several points of what they expect to get out of it - to learn or be able to do as a result -of this workshop. 6. (20 minutes) Show BP1- O1 and Hand out BP1-H1, Workshop Expectations Assignment and briefly explain. Explain that in their groups, participants should first introduce themselves by saying their name, describing their job, and briefly what they wrote on the card, explaining why they came to the workshop. Ask each group to then prepare a drawing that reflects the main things that they want to learn and do at the workshop (their expectations). Emphasize that we’re not looking for a drawing of a “planning process” or an organizational chart; we’re looking for a more creative expression, like a happy institution that results from our planning efforts! You may wish to prepare a flipchart with two simple drawings. Direct their attention to the flip chart with the two drawings. On the top half, draw a shape like an organogram, with layers of boxes connected by lines. Draw a big “X” through this drawing. On the bottom half make a simple drawing of a house and a family of “stick people” outside the house. Divide participants into groups of 4 or 6 people (depending on total group size) by asking them to count off. Tell each group to meet under the sign (previously posted in various corners/spaces of the room) with the number corresponding to the group. (The Ones under the sign that says 1.) Hand out flip chart paper and markers to each group, and explain that they have 15 minutes to complete the process. Supervise small groups as they work, especially in keeping time 7. (20 minutes) Introductions and Presentations. Reconvene the groups and begin presentations. Remind participants of the one rule - everyone must speak! Call each group to the front and post their drawing somewhere in the room. All group members should come forward to present each other and the drawing to the large group. As expectations emerge from the report back, make notes on the flip chart labeled expectations. When all the groups have taken a turn, ask if there are any other key expectations which have not been included on the flip charts, and write down any responses. Collect index cards to supplement the expectations. 8. (15 minutes) Pre Course Audit/Pretest Explain that in order to fine tune our time together it is helpful for us to understand what you already know. We have designed a pre course audit that we would now like you to complete. Remind participants that if they know all the answers there would be no need for them to attend this course! We hope there are some blank spaces so that we can keep our jobs! Distribute BP1-H2: "Preliminary assessment".
  5. 5. BP1: Welcome and Introduction CGAP, Revised July 2013 Collect for later analysis for group formation and course emphasis. 9. (5 minutes) Expectations and Schedule Use overheads BP1-O2 "Overall workshop goals", and BP1-O3 "Specific objectives". Handout BP1-H3 "Workshop goals" and briefly go over the workshop goals, and objectives, tying the sessions into the expectations expressed by participants earlier. If certain expectations will not be met, candidly explain why. Distribute BP1-H4 Training Schedule and review. 10. (2 minutes) Materials Distribute a copy of the BP1-H5, CGAP Microfin Handbook, which contains detailed information to accompany the course. They have also received a Business Planning Course Binder. Explain that they will receive other materials throughout the week that can be inserted into this workbook. 11. (2 minutes) Workshop Norms and Logistics Complete a list of ground rules for the workshop by soliciting input from the participants (e.g., start on time, everyone must participate, ask if anything is unclear, no smoking, one person speaks at a time, there are no such thing as a “stupid” question, etc.). Introduce the concept of the “energizer” and determine a way to fulfill this role. For example: “The last person to enter the room is the ENERGIZER of the day.” Explain that when we feel like we’re dragging a bit we should request that we have someone lead a one-minute energizer to perk us up (like tell a joke, lead us in calisthenics, etc.). Review any logistics (hotel, meals, break times, etc.) 12 (2 minutes) Conclusion. Take any questions that participants have at this point. Close by pointing out that: • The participants are a vital part of the learning process. Participants will be able to build upon the experience and knowledge of other participants, and share their own knowledge and experience for the benefit of others. • Various resources will be available for making learning a continuous process (handbook, exercises, case study, model on diskette, facilitators, etc.). • Emphasize that we will spend a great deal of time during this course working in small groups on a detailed case study and that much of this time will be spent at computers. • We will employ the latest in adult education methods for which the foundation is learning by doing. We will not be ‘lecturing’ as you may be accustomed to. We ask that you bear with us and allow the process to run its course. While we are available to answer questions as needed, we do believe that the best remembering comes from your own discoveries!
  6. 6. BP1: Welcome and Introduction CGAP, Revised July 2013 • Let's get started!! After completion of this session: • Remember to evaluate the skills assessments/Pretest • The participants should be evaluated on their skills in the use of Microfin, planning experience, and knowledge of financial management. Make a list of the sub group options.
  7. 7. BP1: Welcome and Introduction CGAP, Revised July 2013 BP1-M1 SAMPLE NAME TENTS To Use: Cut along arrowed line, then fold on dotted line. Make sufficient copies (preferably copied on hard paper) for all participants. Distribute to participants and ask participant to write their name in the space provided. I hear, I forget I see, I remember I do, I understand
  8. 8. BP1: Welcome and Introduction CGAP, Revised July 2013 I hear, I forget I see, I remember I do, I understand I hear, I forget I see, I remember I do, I understand
  9. 9. BP 2: Introduction to Business Planning 2-1 SESSION 2: INTRODUCTION TO BUSINESS PLANNING Objectives: By the end of the session participants will be able to: Explain the purpose and elements of business planning. Link basic business planning knowledge to planning for microfinance Time: 120 minutes Materials: Business Planning Framework prepared on 2 pieces of flip chart paper, titles and boxes only Flipchart, markers, Masking tape Computer data projector Index cards General Strategic and Business Planning Reference Materials Practical local Examples/References to Planning Process BP2-M1: Examples of strategic objectives Overheads: BP2 - O1 Planning helps…. BP2 - O2 Planning for Outreach, Financial and Social Sustainability BP2 - O3 Business Planning Terminology BP2 - O4 Business Planning Framework (Complete) Handouts: BP2 – H1 Business Planning Framework (Complete) in color if possible BP2 –H2 Introduction to Business Planning Flip Charts Microfin Business Planning Framework At the end of this session, hang up the pre-prepared business-planning framework (titles and boxes which were prepared earlier) in a central place where everyone can see it. This flipchart will be posted on the wall for the remainder of the week, so it should be carefully done. To be large enough to be visible, it should be done on multiple sheets of flipchart paper. Use different colors of markers for the main headings so that they are easily distinguishable, arrows where appropriate, etc. If necessary in your market, the trainer could make and additional flipchart with the terms/steps commonly used before these flip charts to further illustrate how their local experiences fit into the framework used in this course.
  10. 10. BP 2: Introduction to Business Planning 2-2 Session 2: Introduction to Business Planning Importance and Purpose of Planning 1. (2 minutes) Introduce the session. State that we have just discussed the goals and objectives of this course. We are here to apply our planning skills to all aspects of planning most particularly to financial modeling using Microfin. Let's start back at the beginning! What do you know about business planning? 2. (5 minutes) Definition of business planning. To focus the session, distribute index cards and ask participants individually to write their own definition of Business Planning. Review a few answers and explain that they should hold on to their definitions, as we will be redefining them as the course proceeds. Explain that several terms may be used: development plan or business plan. Concepts and contents remain the same, regardless of terminology. 3. (5 minutes) The importance of planning. Ask: Why do you think planning is important? What is the purpose of planning? After a few moments show BP2-O1. Explain that planning provides a framework for change. It is both an operational tool which guides the activities of staff and board, and an evaluation tool which allows individuals to monitor progress in reaching the goals outlined in the plan. Planning will enhance an MFIs' ability to expand outreach, reach its target clients, guarantee the quality of services in response to clients' needs, and increase sustainability. It is not a process to go through simply in order to receive money from funders or investors... 4. (7 minutes) Brainstorm: What are the characteristics/qualities of a good plan? Write answers on flipchart. Answers should include: - It is a process - done over time; - It has all departments involved, - It is developed by a group – not one person in isolation - It is owned by the organization; - It can be enacted with the available resources, - It is a working document – referred to, not shelved; - It is also concrete, measurable and a good read! - Most of all, it draws a clear path for the MFI: by responding to its clients' needs the MFI will achieve its social and financial goals. Summarize brainstorming by highlighting that planning is an iterative process and worked on by a team of people representing various ‘departments’ in the organization.
  11. 11. BP 2: Introduction to Business Planning 2-3 5. (2 minutes) Ask: In particular, why is planning important to MFIs? Ensure that the responses are linked to the "double mission" message. I.E. That good planning will allow MFIs to embark on realistic efforts to reach financial sustainability (financial self-sufficiency and capitalization for growth) and their social viability (defined as an institution's capacity to achieve its mission sustainably and to fulfill clients' needs in an appropriate and responsible manner). Show BP2-O2: « Planning, profitability, sustainability, viability». 6. (5 minutes) Business Planning Framework. Ask who has been involved in a Business Planning process by raising his/her hand. Follow on by asking a few persons to describe the particular process they were involved in. 7. (10 minutes) Explain that we will now take a few moments to think more about the planning process. Divide participants into groups of 3, of those that are seated next to each other. Explain that they have 10 minutes to write down the main steps/parts of the Business Planning process. Tell them: Think of the major steps one has to complete when doing a business plan and then ask them to try to put the elements in a chronological order.(What would they do first, second, last, etc.) (Note: While monitoring the groups, try to get them to focus on broad concepts like mission, SWOT, budgeting, objectives, goals, satisfying clients' needs, etc., and not get into any more detail than this. They should strive for no more than 10 steps to their planning process.) 8. (10 minutes) In plenary, process results, ask in large group what was discussed in the triads. Begin by asking what things did you consider first? Next? And so on. Keep discussion moving (it is not necessary to obtain an exact order – grouping activities as “first tasks” is fine, remember the participants have already discussed the topic for 10 minutes.) Try to take as many answers as possible. (Co-facilitator can write up main ideas as they come up on a flipchart.) Summarize, acknowledge commonalities and previous knowledge. Ask: What are your comments on the best order to follow for a planning process? Focus the discussion. Note that overall plans often start with “mission” -(what the institutions stands for) and end up with a “strategy” (a plan to achieve the mission). Note that the mission should be internally defined – not externally by someone outside of the organization! Also point out that the process is not linear, some activities occur simultaneously, and some activities are continuous like market research or examining the competition, assessing institutional resources etc. For example, the mission is reviewed after the market research, and SWOT for feasibility prior to final strategy development. 9. (2 minutes) Referring back to the list draw out by asking how we can group these activities. Try to quickly move the group towards Strategic, Operational and
  12. 12. BP 2: Introduction to Business Planning 2-4 Financial modeling. If this does not work then move into the next step immediately as always relating to the points on the flip charts. 10. (5 - 10 minutes) Explain that first we need to introduce some key terms and definitions that we will be using throughout the week. Use BP2-O3, Business Planning Terminology. Through questioning, define the planning terms one-by- one, emphasizing how they differ. For example, using the overhead reveal the term to be defined and ask participants for some ideas, then reveal the working definition used throughout the course. 11. OPTIONAL (10 – 20 minutes) Bridge activity from local reference points to course framework. Depending on the group and the terms/processes in general use in the region that the course is being offered, trainers may wish to take some time to relate common practices to the definitions above as a lead into the framework that will be used in this course as described below. 12. (10 - 15 minutes) Explain that we will now study the BP Framework used in Microfin and once again see how it compares to the outlines they have just developed or to other frameworks they may be accustomed to in their countries. State that we recognize that there are many different models available for use in planning. Explain that the approach we have developed and chosen to use in this course is only one approach to business planning. It may have different components or terms but the framework we are presenting includes all the major components needed to formulate a general business plan as well as provides extra emphasis and tools specific to microfinance. Present the Business Planning Framework. Show overhead BP2-O4, Business Planning Framework. Reveal and explain framework for our planning strategy, review components one by one through questioning. Relate to participants’ list and experiences; build on this in the presentation. Emphasize main ideas, particularly stressing the priority given to markets, the focus on CLIENTS as the main theme in our business planning approach, that planning as an iterative continuous ongoing process, completed by a task force, and the usefulness of projections and financial modeling in microfinance. Point out the parallels between strategic components and operational components (e.g., markets and clients influence products and services). However do not go into detail, as this will be done in a later session. Refer to BP2-M1: "Examples of strategic objectives". 13. (5-10 minutes) Hand out BP2-H1 Framework to the participants, filled out and in color if possible, as well as BP2- H2: "Introduction to Business Planning". Give participants a few minutes to review the framework. Facilitate general discussion - Ask: What are your reactions to the framework? How can you apply it in your institution? How
  13. 13. BP 2: Introduction to Business Planning 2-5 does this framework compare to your own experiences, differ from what you are familiar with? From typical NGO approaches? Answers: emphasis on markets, consider the institution as a whole, provides an on-going management tool, spells out the essential steps to help define a development plan, has a tool specific to microfinance, links social and financial goals, etc. Take any other questions and comments. 14. (5 minutes) Summary. State that this framework provides an outline of the business planning process that this course presents. The remainder of the course will look at each component of the framework in various levels of detail. The focus will be to practice completing the projections needed for financial modeling in order to complete a business plan for microfinance institutions that will enhance their abilities to be successful, profitable, financially sustainable and socially viable. Bridge to next session.
  14. 14. BP 2: Introduction to Business Planning 2-1 BP2-M1 Examples of strategic objectives Examples of strategic objectives1 , operationalized with SMART objectives: Specific, Measurable, Achievable, Realistic and Time-Bound Strategic objectives SMART objectives (to reach within 12 months) Social objectives Improve access to services for poor micro-entrepreneurs Increase poor clients in rural area by XX% Keep poor clients’ satisfaction level in rural areas at XX% Widen the range of services by introducing X new products; new products make up XX% of the portfolio Monitor the improvement of clients’ living conditions, measured by the PPI tool (Progress out of Poverty Index 2 ) Improve the well-being of the families of the institution’s clients for at least 3 years, assessed through the evolution of their poverty levels, measured with the PPI tool (XX % clients are satisfied and XX% clients have been improving their PPI score for 3 years) Financial Objectives Improve financial performance with better efficiency Reach a ratio of financial self-sufficiency >100% Improve cash management through improved internal management Complementary services for clients Widen the range of services to include health insurance to improve clients’ capacity to handle health risks Lead a feasibility study about starting a competent partnership to help the institution develop health insurance. Help clients manage their business better though specialized training Institutional improvements Working with a credit bureau to improve the quality of information on clients and avoid risks of over-indebtedness Upholding credibility thanks to transparency and sending out quality information and reports 1 Based on Strategic Management Toolkit, Microfinance Centre (MFC) for Central & Eastern Europe and the New Independent States 2 A tool that measures poverty lines of groups and individuals (
  15. 15. BP 2: Introduction to Business Planning 2-2 Operationalize the mission with Specific Objectives, measurable, realistic, and adequate for a specific time period. Examples of Specific Objectives Social Objectives SMART Objectives (to reach within 12 months) Reach more poor in rural areas Increase poor clients in rural area by XX% Satisfy the financial needs of target clients Keep poor clients’ satisfaction level in rural areas at XX% Widen the range of services by introducing X new products; new products make up XX% of the portfolio Improve the well-being of clients’ families Improve the well-being of the families of the institution’s clients for at least 3 years, assessed through the evolution of their poverty levels, measured with the PPI tool (XX % clients are satisfied and XX% clients have been improving their PPI score for 3 years)
  16. 16. BP 2: Introduction to Business Planning 2-1
  17. 17. BP3: Strategic Planning 3-1 SESSION 3: STRATEGIC PLANNING: MISSION, MARKETS AND CLIENTS Objectives: Participants will be able to: State the components of and write a mission statement Define market and clients for microfinance Identify strategies for planning and apply them to a case study Time: 155 minutes Materials: Projector, Flip chart, markers (one for every five participants), Masking tape Overheads: BP3-O1 Mission Statement – Key points BP3-O1opt "Deconstruct" the mission BP3-O2 Social performance path BP3-O3 LEDA's Mission BP3-O4 LEDA’s Goals BP3-O5 LEDA serves… BP3-O6 Market Segments BP3-O7 Planning-serving segmentation BP3-O8 Microfinance Client Traits Handouts: BP3-H1 From Mission to Strategy BP3-H2 Strategic planning: Strategic planning: integrating SPM into microfinance capacity building - Imp-Act/MicroSave technical note BP3-H3 Mission implementation evaluation tools BP3-H4 Market and Clients - Key Points BP3-H5 Market analysis: example of segmentation for medium term loans BP3-H6 Tools to know your clients/members better BP3-H7 Case Study Part 4 - Correction of the Exercise Case Study: Parts 1 – 3 LEDA Case Study: History, Mission, Market and Clients Part 4 Exercise
  18. 18. BP3: Strategic Planning 3-2 Session 3: Strategic Planning Introduction to strategic planning 1. (5 minutes) Introduce and explain the session objectives. Refer back to the Framework overhead/handout and point out that we will now focus on the strategic planning side of the framework. State: We will go through each component of the framework first defining it and then applying it to a case study, LEDA. We have already learnt that some of us are familiar with strategic planning and have even participated in strategic planning exercises; (from pretest and the previous session) we hope to be able to also learn from your experiences. NOTE WELL: Most of the session is lecturing through Questions and Answers. Keep the session interactive and lively! Mission and Goals 2. (5 minutes) Ask: What do we do first? Answer Strategic Planning - Formulate a Strategy. Review what strategic planning is; note that the outcome is a strategy that will then need a plan of implementation (the operational plan). Once again, state that planning is an iterative process and that “steps” are not necessarily conducted in a linear fashion. However in the course we will present them one by one and discuss how they overlap and link to one another! 3. (5 minutes) According to the framework, Ask: What is first? Answer: Establish our mission! Ask: What do we mean by mission statement? What are the main elements of a mission statement? What is your mission? Take a few responses and ask for examples of each element. Summarize using BP3-O1 and notes from BP3-H1 as a guide to bring participants to a common understanding as to how the term is used in this course. Remind participants that our mission is our reason for existence! 4. (5 minutes) Write this question and responses on a flipchart. Brainstorm: Why is mission (statement) important? Key answers might include encouraging stakeholder commitment and ownership to the organization, providing focus and direction to the organization during implementation, providing long term commitment or direction by the institution, and explaining the institution's social orientation. Explain that in order for the concept of “mission” to be real within an organization, rather than just words or a catch phrase, it must be implementable. The mission is the entry point, but the institution needs to have the resources and means in place to achieve it.
  19. 19. BP3: Strategic Planning 3-3 Hence the mission is the cornerstone of business planning. The purpose of the remainder of the plan is to help the organization achieve its mission; the organization’s mission sets the stage for all subsequent activities. It is then important to define the mission precisely: Who are the target clients? Which services will fulfill their needs? What are the expected changes for clients? How can the organization make sure they are well served and protected? Which values should the organization promote? 5. OPTIONAL (10 minutes) If possible, trainers should provide some local examples of mission statements on overhead for review to illustrate the major components. BP3-O1optional: “ Deconstruct “ the mission and ask participants to review page 2 in BP3-H2 “Strategic planning: integrating SPM into microfinance capacity building“. 6. (5 minutes) Ask: What are goals and how do goals relate to a Mission statement for an MFI? Summarize by stating: Strategic goals are statements that begin to outline HOW an MFI intends to pursue its mission. They are fairly broad statements that highlight what the general plans of the MFI are to achieve its mission. They are often related in terms of outputs or outcomes. The goals will later be broken down into SMART (social and financial) objectives. The activities/processes/systems will allow more specific guidance of implementation and monitoring accomplishments - results and their impact - with more precision. Show BP3-O2 "Social performance pathway", a visual illustration of this theoretical framework. 7. (15 minutes) Ask various participants to describe the mission and goals of their organizations, and to talk about their experiences or thoughts concerning that mission. Ask: Is your organizational mission clearly stated, precise, and known to all? Is it being fulfilled? Or are you experiencing mission drift? Why or why not? Briefly discuss some of the reasons. Summarize by highlighting qualities of mission statement that help get them fulfilled. Relate to above discussion and include such concepts as: Stakeholder understanding of mission, commitment to success, participatory development, based in reality (not to get donor funds, etc.). Trainer should have relevant local examples available in case there are none from the group. (For example, a case of a well-stated and clear mission, focused on realistic goals, and an (anonymous!) example of a vague, over-ambitious, unclear mission. Mention that there are tools to help MFIs check that their mission and goals are in line with their systems and results. Hand out document BP3-H3 "Social assessment tools" and spend 5 minutes reading a few key issues. Stress that to implement any
  20. 20. BP3: Strategic Planning 3-4 mission, we need to take into account client protection (to ensure no harm to clients, at the very least), hence the possible use of Smart Campaign tools. 8. (8 minutes) Introduce the Case Study. Explain that in this course we will be practicing our planning and financial modeling skills by using a case study. The MFI in the case study is called LEDA. Show BP3-O3 LEDA’s Mission Statement and BP3-O4 LEDA’s Goals. Review with participants and explain that the case will be further introduced later in this session. Markets and clients 9. (5 minutes) Ask after we have defined our mission and goals what should we focus on next in our strategic planning activities. Answer – Our market, meaning the clients, people or organizations (very small businesses, SMEs, producers' organizations, etc.) whom we wish to serve, and their needs. Defining a market is one of the first steps you will undertake. Ask if anyone can remember who LEDA’s clients are? Take a few answers and show BP3-O4 “We serve ‘low income self-employed in urban areas” Ask for reactions that lead to the question: Does that tell us enough about who LEDA plans to serve? Answer should be no, an MFI must have a more specific picture of WHO it is going to serve  the market must be analyzed in more detail. Ask: What else do we need to know? What might you add to this description to present of clearer picture? Quickly write a few new ideas on the overhead. Concentration of clients, where they are, what they need, their gender, types of businesses, socio-economic situation, behavior and attitudes toward financial services, etc. 10. (10 minutes) Refer back to the Framework and explain that we will now look at the most crucial element of our plan - the WHO of our mission statement. Remind (ask) participants that in our approach we focus our plan on our market first and build our strategy around them. Ask: What do we mean by markets? Take a few answers. State there are many definitions that will vary from the economist to the marketer; we will focus on how they are used in Microfin and how we will use these terms in this course. Answer: A market is the set of all actual and potential buyers of a product. A potential market is the set of consumers who have some sort of interest in the product. You may choose to define your market narrowly or broadly, bearing in mind different circumstances for each.
  21. 21. BP3: Strategic Planning 3-5 What do we mean by clients? This would equate with the current and potential market above. Since this is the potential we will look in greater depth at the characteristics of these consumers. (Trainer may provide local definitions as are common if necessary.) Ask: How do we determine who the clients in the markets are? Answer: conduct market research, gather information to determine who we can serve so that we can be profitable and achieve our social mission while seeking profitability. Discuss: What methods can we use to get the information required. For example, surveys/focus groups of existing and potential clients, demographic statistics, etc. 11. (5 minutes) Ask and briefly discuss: Why is an analysis of markets and clients important? Answer: this is a critical element in our formula for success - because without markets there is no growth, and without satisfied clients we have no institution! Explain that through such an analysis, they will be able not only to determine what markets to expand in, but also to fulfill clients' needs better by tailoring products and services to meet client demand and by identifying risks for clients. This analysis can also help MFIs stand apart from competitors while improving their social performance (by targeting a segment of population that was left out, for example). Explain that while markets and clients commonly fit into an environmental assessment in a typical strategic planning process, special emphasis is placed on them in order to underscore their importance to microfinance. We often find that in the ‘sea of replication’ we overlook the specifics of our markets and the related client needs. The success of our MFIs is directly related to satisfying our clients with products and services that they require, value and will pay for. 12. (10 minutes) State: Let us briefly examine a process for analyzing markets and clients. Let us focus on Markets first. Ask: How do we get more detailed information about Markets? Introduce the concept of market segmentation. Ask participants for definitions. Summarize by saying that - a Market segment is the division of a market into distinct groups of buyers who might call for separate products or marketing mixes based on their unique characteristics.
  22. 22. BP3: Strategic Planning 3-6 Ask: How do you normally segment markets in your institutions? Or how do you think we can easily segment markets? Take answers and reveal BP3- O5 and explain as relevant. (see BP3-M2) Hand out BP3-H4 "Market and Clients - Key Points" and BP3-H5 "Market analysis: example of segmentation for medium term loans". Explain that market segmentation is the process by which an institution collects data about its clients and their needs. This helps identify the niches where needs for products have not been addressed and where client groups can be targeted for a product prototype. State: Therefore we will take this as the first step in our market analysis - to identify all of the organization’s, current, as well as potential markets using the above criteria. 13. (5 minutes) Explain that once you have identified markets for analysis, you must determine what information should be gathered about that market, and how the information will be gathered. Ask: What might you want to know about a given market? Make a list on a flip chart. Answers should include size, growth potential, breakdown of activity by sector, demand for services, infrastructure, competition, etc. If it is a market you are already serving, you will also want to assess client satisfaction with the existing program. Show BP3-O7 "Planning- serving segmentation" and explain that the answers just provided will segment a market to help in planning 14. (5 minutes) Ask: What about your potential market? What specifically might you want to know about your existing or future clients? Briefly discuss some answers and show BP3-O8 "Microfinance Client Traits" as summary. Note for example that some client characteristics, such as the literacy level, will later influence what the MFI needs to do to define its products (and here, to address client protection principles by making sure, for illiterate clients, that information is delivered in an understandable manner). This may entail costs that need to be taken into account in the planning process. If the institution is already established in a market, it is still necessary to assess current financial behavior (how clients are using available financial services and why) as well as client satisfaction regarding existing products. 15. (5 minutes) Ask: Where/how would you obtain all of this information? Quickly list answers on the flip chart. Answers – document research, file reviews, on-site investigation with, for example, poverty measuring tools (PPI, PAT. Hand out document BP3-H6 "Tools to know your clients/members better" for more information), individual client/employee interviews, group interviews, business associations, etc.
  23. 23. BP3: Strategic Planning 3-7 Remind participants that sound market research includes talking to existing clients. These interviews will help determine if clients are satisfied, if they profit from services or, on the contrary, if they are losing capital or becoming over- indebted. If the MFI is thinking about increasing its number of clients in an area with fierce competition, are there risks of over-indebtedness? Etc. Such information can help determine what products and services to offer. Market research and client needs analysis is an ongoing activity. It takes much time and is carefully planned. (Refer to separate course on the topic of Market Research) To stay competitive an MFI must always know what its customers think and want and how it can attract new customers. 16. (5 minutes) Ask: Once you have obtained all the necessary information about potential markets and clients, how might you decide initially whether it represents a sound opportunity for your organization? Answer should be that you compare its size and growth potential and expected profits to your own organizational priorities, including your mission and goals and resources, as well as to other factors – such as competition, client buying power, etc. This is how markets and clients relate to mission and goals and other components in the strategic planning process. Hand out BP3-H2 Key points Markets and Clients. 17. (7 minutes) Reintroduce the LEDA case study. Explain that presently, we will analyze LEDA’s position with regard to Markets and Clients. Refer to Case parts 1 - 3. Give participants time to read case individually. Ask group what their questions are relating to the case. 18. (20 Minutes) Divide participants into small groups of about four each. Ask participants to discuss and complete the assignment that is found in LEDA Case - Part 4). (You may have decided to omit Case part 4 from the case study. If so distribute it now as a handout BP3-H3) (A fun way to divide groups – have each group represent a market segment! For example, write on pieces of paper and have the participants choose from a hat. The number of papers should equal the total number of participants and each segment should be written four times on separate pieces of paper. For groups of 28, have seven market segments (you live in the north east, you live in the city, you live in the south, you are a farmer, you are a retailer, you are a producer, you provide a service. Write each of the segment names on four pieces of paper and put them into a paper bag/hat. Pass the hat around and have each participant pick a piece of paper. Have all the farmers form a group (of four), all those who live in the south form another group of 4, etc…) 19. (10 minutes) Return to plenary. Ask: What did you find out about LEDA’s market and clients? Who do you think should be LEDA’s market? Ask participants to support their market identification for LEDA through the research done (in LEDA case Part 4). Facilitate a discussion on market and client identification. Try to take answers from several groups and include differences of opinion. Ask if the potential new markets fit with LEDA’s missions and goals. Do not entertain the last question on the worksheet at this point.
  24. 24. BP3: Strategic Planning 3-8 Refer to BP3-M1 Case Response Guidelines. 20. (10 minutes) Summarize the main points (Mission is cornerstone of the MFI and the Market is everything!) from the session and the discussion. Bridge to next session by referring to the final question. Ask: What kind of additional information is required to make final strategy decisions? Take answers and highlight responses that refer to more information on the environment or the institution. Explain that environmental and institutional analyses are the next steps in the strategic planning process. Review, take any questions and link to next session.
  25. 25. BP4: Strategic Planning 4-1 SESSION 4: STRATEGIC PLANNING: ENVIRONEMENTAL ANALYSIS, INSTITUTIONAL ASSESSMENT, STRATEGY Objectives: Participants will be able to identify environmental opportunities and threats Identify institutional strengths and weaknesses Identify objectives and activities for LEDA Design a strategy for LEDA Time: 255 (20 min optional for activity 14) Materials: Flip chart, markers, Masking tape, blu tak/sticky stuff A4 paper of 5 different colors (20-30 pieces each of the four colors, and 30 pieces of white) BP4-M1 LEDA Case Study Part 7 answer guidelines BP4-M2 Technical Notes Overheads BP4-O1 Context Analysis BP4-O2 Institutional Assessment BP4-O3 Categories of Context Analysis BP4-O4 Categories of Institutional Assessment BP4-O5 Defining Strategy BP4-O6 Choosing a Strategy BP4-O7 Objectives and Activities, definitions BP4-O8 Objectives and Activities, example Handouts: BP4-H1 Context Analysis – Key Points BP4-H2 Institutional Assessment – Key Points BP4-H3 SWOT analysis adjusted to social performance BP4-H4 Optional Case Study Part 7 – Exercise (if removed from case booklet) BP4-H5 Defining and Choosing Strategy BP4-H5opt Optional – Case Study Part 9 – Exercise (if removed from case booklet) BP4-H6 Strategic Planning Action Plan Case Study Parts 5 & 6 LEDA Case Study: Context Analysis and Institutional Assessment Part 7 Assignment - Context Analysis and Institutional Assessment Part 8 LEDA Case: Summary of LEDA Strategic Analysis Parts 9 Assignment: - Developing a Strategy Flipcharts: Exercise Instructions – Color Code Context (title only) Institution (title only)
  26. 26. BP4: Strategic Planning 4-2 Session 4: Strategic Planning continued Environmental Analysis and Institutional Assessment 1. (5 minutes) Introduction. Refer participants to the BP Framework on the wall and bridge to “context analysis and institutional assessment” as our next step. Ask for a brief explanation of what the two are. Summaries by saying that we need to look both inside and outside our MFI and consider what is going with regard to our plans. 2. (5 minutes) Ask if anyone knows of a common way to examine the environment and institution? The answer we are looking for is SWOT analysis. Facilitate a brief discussion to clarify what a SWOT analysis is and how and why it is normally conducted. State that we will spend the rest of this session practicing SWOT analysis and integrating elements of social context in this analysis. The SWOT analysis will indicate the implications for the MFI and its clients to reach its social and financial goals. 3. (5 minutes) Ask: What is an environmental analysis? And WHY would an MFI conduct one? Answer: an assessment of the socio-economic, political, regulatory, climatic etc. context through which an organization operates, to gauge how foreseeable external challenges will affect an MFI’s capacity to achieve its goals. It is an identification of the opportunities and threats which are posed by the context that may affect the program, its clients, as well as the organization itself. Summarize using BP4-O1: "Context Analysis." 4. (5 Minutes) Ask: What do you understand by Institutional Assessment? Answer: the internal examination of the institution/organization. The evaluation of the strengths and weakness of the MFI with regard to their resources and the markets, clients and environmental factors determined in the previous steps. Summarize using BP4-O2. 5. (15 minutes) Let us think more deeply about these challenges – environmental opportunities and threats and institutional strengths and weaknesses. State that we are going to complete an exercise that will help us sort through our SWOT! We will have an opportunity to list a SWOT for an MFI based on our experiences. This exercise can also be replicated in your boardroom! – We hope you will find it useful. (The technique is a modified storyboard.) Illustrate by example. Explain that we will begin the exercise with something that
  27. 27. BP4: Strategic Planning 4-3 we know. Ask participants where Markets/Clients fit in to this picture? Explain that as we previously mentioned Markets are part of the environment – they are external to our institution! We discussed them separately because of their import to our work. So as an example we will use markets and clients. Ask the participants for an example of Market/Client opportunities and threats that relate to Markets/Clients. Something that will need to be analyzed during our planning activities. Prompt them to think of an example from their own MFI. You can mention opportunities for development in new areas, or opportunities to meet demand which is not covered, such as savings. Competition may pose a threat, with risks of client indebtedness, or client or employee exit in favor of competition. Take two pieces of different colored A4 paper. Write from the suggestions one Client/Market opportunity on one color and on a different color one threat that was mentioned. Post them on the wall. Remember write large and use few words. Explain that the group will be divided in half. Half the group will work on identifying environmental opportunities and threats and the other half on identifying institutional strengths and weaknesses. Each person will write one opportunity and one threat OR one strength and one weakness. All of the papers will be posted on the walls. On a flip chart, write the color code for the exercise, for example Blue = Environmental Opportunity, Pink = Threat; Green = Institutional Strength and red= weakness, etc. Alternatively, handout paper labeled similarly. Also write on the flip chart – WRITE ONE IDEA PER PIECE OF PAPER – WRITE BIG AND CLEAR! 6. (20 minutes) Split the large group into half and each facilitator should work with a sub-group. To the "context" half, give each participant two pieces of A4 paper of two different colored papers. Ask them to individually write one example of environmental opportunity which might be open to a MFI, on each piece of ‘pink’ paper. After 5 minutes distribute the other color (‘green’) paper. Ask them to write one example of an environmental threat which a MFI might face, on this piece of paper. Remind them to use large letters and few words so that their cards are easily legible/readable to others. Also to think of examples from their own MFIs. SIMULTANEOUSLY, To the Institutional half of the group, distribute two pieces of different colored paper, and ask them to individually write one Strength an MFI might have and choose to exploit on one color paper, and on the other color one weakness that an MFI might possess and may need to be addressed. (The directions may be easily confused. Both facilitators should be actively involved, clear directions must be given and the color code flipchart clearly visible
  28. 28. BP4: Strategic Planning 4-4 by all.) 7. (10 minutes) Still in separate halves, tell the participants we will now share our ideas and simultaneously try to categorize them. Each facilitator separately takes a few (10, 5 each color) papers at random from the group and posts them on the wall. Ask the sub-group, if any of the concepts are similar or fit together. Arrange those papers under one another. Ask for a volunteer to organize 10 more pieces of paper (participants should give ideas that are not yet mentioned) – reading them aloud and posting them, related ones underneath each other. Ask someone else to take 10 more and repeat. Facilitator should keep this moving, do not let it get bogged down with a lot of discussion. Remind participants/volunteers that everything does not have to fit together in a category – there is an option for an ‘other/miscellaneous’ category! Also note well – opportunities/threats or strengths/weaknesses may be listed under the same category. This presents an opportunity when processing to remind participants that each situation is unique – a strong board for example may present problems for some MFIs while for others it is a strength! Since there will be some noise in the room it is suggested that the walls used for posting the papers are as far apart as possible. 8. (5 minutes) Once cards have been organized into groups, ask participants to supply a title for each group. For example, write Markets and Clients in large letters on ‘white’ paper and post above the samples you wrote earlier. Do the same for the other groupings, have either the facilitator or participants write a title on the ‘white’ paper and post above the group. 9. (5 minutes) Reconvene large group. Ask members to go to the opposite wall and look at the list made by the other group for 5 minutes. While the groups are looking at the storyboard, the facilitators should quickly write the Group Titles (the white papers) as a list on separate flipcharts titled – Environment and the other Institution. 10. (5 minutes) Then ask all groups members to return to their seats. First review the Environmental Categories flipchart. Acknowledge the groupings and which may include the following: funding environment, government policies and regulations, demand for services, natural factors, economic environment, political environment, competitors and collaborators, and markets and clients. Ask if the participants would like to include any other categories or add other significant opportunities and threats to the wall cards. Show and explain BP4-O3 "Categories of Context Analysis.” In summary, remind participants that an opportunity for one MFI may be a threat for another – that is
  29. 29. BP4: Strategic Planning 4-5 why categories can have both. 11. (5 minutes) Next review the Institutional Issues flipchart. Acknowledge the categories and be sure they include/relate to the following: credit and savings products, board issues, management issues, legal structure, human resources, ownership, administration, financing, financial management, etc. Ask if the participants would like to include any other categories or add other significant strengths and weaknesses to the wall cards. Show and explain BP4-O4 in summary. 12. (5 minutes) Ask for final comments and personal experiences to be shared on environmental analysis and institutional assessment. Distribute BP4-H1 "Context Analysis – Key Points" and BP4-H2: "Institutional Assessment – Key Points". 13. (5 minutes) Ask: How does analyzing the environment and institution in these categories fit into our strategic planning process? Facilitate discussion on how this step in strategic planning relates to previous steps by identifying how the environment or institution will hinder/facilitate the organization’s ability to achieve its mission and reach identified clients and be profitable! Note that it may become apparent at some point that the organization might need to review its mission based on the information gathered during the market research, environmental analysis and institutional assessment. Point out that that is why planning is called an iterative ongoing process! 14. (20 minutes) State that we are going to focus on social aspects. They have often been neglected but they are an integral part of the SWOT analysis. Hand out document BP4-D3: “SWOT analysis adjusted to social performance”. Ask participants to read the document and to underline the social aspects in the analysis of the PAGLAUM Cooperative in the Philippines : highlight in particular the cooperative's identified strengths, thanks to its clients' participation and its reputation to favor the poor; opportunities for strategic alliances with local NGOs to develop non-financial services for clients; identified threats in the face of increasing client over-indebtedness, acknowledgment of climate change and overexploitation of fish stocks which are a threat to client fishermen, etc. 15. (5 minutes) Ask and briefly discuss: What obstacles do you fore see that would make carrying out these assessments difficult? What can we do to overcome the difficulties? Answer: the lack of reliable or precise information about the context, the lack of clarity in the MFI's mission, which prevents a match between context analysis and goals to achieve, etc. 16. (10 Minutes) State: Let us apply the techniques of SWOT analysis to LEDA and see how they rate! Refer to LEDA case study parts 5, and 6: "Context Analysis"
  30. 30. BP4: Strategic Planning 4-6 and "Institutional Assessment." Allow a few minutes for individual reading. 17. (20 minutes) Refer to Case Part 7 (or Hand it out BP4-H3). Ask the group to complete the activity in groups of fours. (Divide the group into subgroups of 4. Choose a method of dividing the group that ensures each group has two people who worked on Environmental and two who worked on Institutional in the previous activity. For example, have ‘of the previous halves’ line up across from each other. Make subgroups by choosing two from each line to work together, this way each group has two people who worked on Environmental and two who worked on Institutional in their sub group.) Monitor group work of case problem. 18. (10 minutes) Return to plenary. Facilitate a large group discussion on the priorities identified for LEDA as noted in the subgroup activity. Facilitator should stay focused on the Priority areas. (Remember the participants have already discussed this for 20 minutes.) 19. (10 minutes) Ask: Once opportunities and threats, strengths and weaknesses are identified, what can we do about them? (Answers may include maximizing opportunities, overcoming threats, and turning potential threats into opportunities. Accentuate the positive, eliminate the negative!) While conducting this analysis, it is important to keep in mind the social goals in the institution's mission, so as to understand what the implications will be, both for the MFI and for its clients. Ask for examples. Facilitator should be prepared to provide local examples of an organization overcoming it weaknesses, turning threats into opportunities, for example by building alliances (e.g.: lobbying with national professional associations to change a regulatory framework which is too strict for rural funding, or working in a credit bureau, or sharing information between MFIs to avoid client multiple borrowing). Ask and discuss: What are the implications for LEDA in terms of its previously defined mission and targeted market, as well as to the development of their strategy? 20. (5 minutes) summarize and bridge to next section. Ask for outstanding questions. Ask: What is our next step now that we have examined our external and internal environments? Answer: LEDA has significant information so that they may begin to develop a strategy for planning its operations. Remind participants that things change! - Information must be constantly gathered and analyzed and incorporated into the planning process!
  31. 31. BP4: Strategic Planning 4-7 Strategy 21. (5 minutes) Refer to the Framework and review where we have been and are. Ask: – What is a strategy? Its Components? How is it done? How is it used? Developing a Strategy involves examining the information and making choices about how we will accomplish our social and financial mission, while making sure clients are protected. It outlines clear objectives and activities needed to achieve our goals. We must also take into account the social mission, to define acceptable deposits and resources, while describing how the institution is planning internal changes to achieve its stated goals and objectives. When defining strategic goals, the following issues need to be considered: How are the changes planned in operations supporting both social and financial goals? At this point, it is important to stress that some elements in the mission are not necessarily explicit. Usually, social goals can be explained. Financial sustainability is usually implicit but financial goals can be defined (for example, affordable services for clients). Finally, client protection goals are most of the time implied. However, they must be a minimum requirement for each MFI. 22. (5 minutes) Put up overhead BP4-O5, Defining Strategy and give a brief lecturette on the topic. 23. (10 minutes) Ask: What do we consider when choosing a strategy? For example, how does market affect your choices? Clients? Environmental Opportunities and Threats? And Institutional Strengths and weaknesses? Take some answers, discuss and summarize main points to be considered using BP4- O6. The strategy should include what products to offer in which markets (responding to and based on assessment of markets and clients as well as other environmental issues), and which areas of institutional capacity must be improved in order to succeed (based on institutional assessment). It is critical to compare and contrast information across categories. For example, what if a certain market looks very appealing but is targeted for aggressive expansion by a competitor? Also, the strategy must ultimately enable institution to reach its mission and goals. 24. (5 minutes) Ask: How are strategies actually expressed? One way is to clearly define objectives and activities for each mission goal for each area of operational planning. A strategy boils down to a list of ACTIONS as to what the MFI needs to DO in order to achieve its goals and mission. Use BP4-O7 and BP4-O8 to explain. Hand out BP4-H4. 25. (15 – 20 minutes) Let us try to individually write a strategy for LEDA. Refer to the case study Parts 1 – 8. Explain that you might need information from all the case study parts to best define your strategy. Note that Case part 8 presents a
  32. 32. BP4: Strategic Planning 4-8 summary of the strategic analysis for LEDA based on the information gathered to date. The assignment is to write a strategy for LEDA using the worksheet in Case Part 9 (Handout BP3-H4 if you have chosen to hand out assignments separately). (This can be done in pairs or triads if trainer feels it is appropriate for the group.) Explain the goal/objective/activity approach using the example that is filled in on the assignment sheet (Case Part 9) and on BP4-O8. Explain that these are the goals that were established in the Mission and Goals step of the planning process, but that now we are adding objectives and activities within each goal. The part of the strategy we are developing now answer the question: What does LEDA need to DO in order to achieve its goals? 26. (10 minutes) Facilitate a discussion on the strategy assignment. Take some responses; ask for group comments, common responses, differences, etc. Try to bring the group close to the strategy found in the case study (BP5-H1 Case Part 10). Acknowledge that all are right answers, and this is indeed the process necessary to take in your own MFIs to accomplish the strategic planning process. 27. (7 minutes) As a review, ask participants to summarize the steps and purposes for each in the strategic planning process as we have so far discussed. Summarize all topics related to building a strategy and ask for any questions on the strategic planning process. State that we have only presented in a very abbreviated form the steps one should take to develop a strategic plan. Remind participants that a strategic Plan is not accomplished in a day! Research and analysis take time! 28. (10 minutes) Let us take a few moments to think about how we can institute strategic planning back in our institutions. Hand out BP4-H6 Action. Have participants begin to complete the forms. Give only 5-10 minutes and tell participants to complete think more about it overnight. We will discuss some ideas tomorrow morning. 29. (2 minutes) Ask: Where do we go now? Refer to framework and move the group to Operational Planning. Bridge to next session.
  33. 33. BP 5: Introduction to Operational Planning and Financial Modeling 5-1 SESSION 5: INTRODUCTION TO OPERATIONAL PLANNING AND FINANCIAL MODELING Objectives: By the end of the session, participants will be able to: • Explain the purpose of operational planning • Explain how strategic planning, operational planning, and financial modeling are related • Describe the overall structure of Microfin • Discuss some of the key features of Microfin Time: 105 minutes Materials: Flipchart, Markers Computer data projector BP5-M1 Preparation Instructions CGAP Microfin Handbook Overheads: BP5-O1 Planning and Financial Modeling Framework BP5-O2 Microfin Overview BP5-O3 Microfin Features BP5-O4 Structure of Microfin (can also be projected from a Microfin page) BP5-O5 Demonstrate…. BP5-O6 Don’ts and Dos Handouts: BP5-H1 Business Planning Framework – Operational and Financial Worksheet BP5-H2 Business Planning Framework Complete BP5-H3 Microfin Features BP5-H4 Structure of Microfin BP5-H5 Don’ts and Dos (should be cut in half and placed on the computers)
  34. 34. BP 5: Introduction to Operational Planning and Financial Modeling 5-2 SESSION 5: Introduction to Operational Planning and Financial Modeling Topic Preparation Since this the first time that participants will work on the computers, great care must be taken to ensure that the computers are all functioning properly, booted up with Microfin open on the desktop. The computer projector also needs to be set up and tested before this session. 1. (5 minutes) As a review, ask participants to summarize the steps in the strategic planning process as we have so far discussed. Focus on the last step – developing a strategy and refer to the practice we did with LEDA and their own MFI to develop a strategy. Bridge into Operational Planning. Introduction to Operational Planning 2. (8 minutes) Ask: What is operational planning? And why do we need Another Plan?! How is it different from the Strategic Plan? Summarize answers by explaining that the operational plan provides a structure for implementation of the chosen strategy. The strategy provides an outline of what we are to achieve. The strategy acts as the bridge between strategic and operational planning. Operational planning is the process of thinking through the implementation of the desired goals, objectives, and activities, and planning what actually needs to happen step by step to achieve those goals. Operational planning will help determine whether the strategy is achievable. 3. (10 minutes) Introduction to Financial Projections. Ask: What are financial projections and how do they relate to operational and strategic planning? Answer: Budgets and financial plans express the operational plan in financial terms, they tell how much money we will need to implement our strategic plan and also begin to identify the sources, flows and costs of the funds needed to implement the plan. An operational plan may be great but not so if there are insufficient funds to put the plan into action. Similarly, if the plan fails to ensure financial sustainability, then the MFI will have failed to achieve one of its goals. It will not be able to provide the right services to its target clients and thus will not be able to achieve social viability. This is why the plans are so interlinked and dependent. We must work on them together to achieve the best results. Ask: Who should develop financial plans? Why? Answer should be – Financial Plans should be completed not just by the finance manager but by a team, with broad participation of staff and managers, because plans will be more accurate and realistic, and it is more likely that they will be implemented in the
  35. 35. BP 5: Introduction to Operational Planning and Financial Modeling 5-3 same fashion envisioned by all of the MFI's stakeholders and clients. 4. (5 minutes) Distribute BP5-H1 "Planning and Financial Modeling Framework" and ask participants to complete it individually. 5. (10 minutes) Review Answers briefly and highlight the main points as below. • The analysis of markets and clients indicates the nature and conditions of products and services to offer and where (in which markets) to offer them. They will be tailored to their needs. The analysis indicates who the clients are, how many can we reach, what types of products do they want, etc. • The analysis of the environment provides additional information on where to provide services, in terms of relevant external factors that will affect the choice of appropriate marketing channels which will focus on defining and projecting credit and savings products. Where is the competition? How do we deal with that – other markets? Products? Who are the collaborators? How can we use them? What are the potential regulatory obligations or opportunities to take into account, etc.? • The institutional assessment provides information on how to best provide the services by enhancing institutional resources and capacity, so as to improve services and ensure products will have a positive impact on clients. How many Loan officers? What is their caseload? What are their training needs? How can we make sure a critical situation will be handled (vulnerability of certain clients) individually, in case of illness or decease of a client / collectively, in case of crisis of a financed branch? How many administrative staff? Motorcycles? Computers? Rent? • Financial Sources and Management relates to developing a financing plan and improving financial management. Where does the financing come from? How much does it cost? 6. (5 minutes) Continue to quickly review answers using the Business Planning Framework (BP5-O1) and summarize the relationships between operational planning and financial modeling. Explain that the goals of financial modeling are to develop realistic yet ambitious financial budgets while strengthening the financial management skills of staff. Distribute BP5-H2 Completed Framework. Remind participants that we will now work through the elements of the framework to develop our operational plan using Microfin to model and make our financial projections. 7. (5 minutes) Summary of Business planning and bridge to Microfin. We now have a completed framework that illustrates the flows and relationships among strategic planning, operational planning and Financial Modeling; together they will make up our Business Plan. Ask participants to find the definition of “business planning” which each of them wrote on cards yesterday. Ask for a show of hands as to who would like to change his/her definition based on what they have learned! Give them time to reread their definition, and to revise it if
  36. 36. BP 5: Introduction to Operational Planning and Financial Modeling 5-4 necessary. Ask two or three participants to share their definitions, and to say whether their ideas have changed since this was written. A good definition of business planning should include reference to Strategic, operational and financial planning – an example is: A market-led process of strategic and operational planning, incorporating the institution as a whole, which is focused on the “bottom line” and social viability. We are about ready to move on to use Microfin as a planning and financial modeling tool. Microfin is Excel-based software based on the planning process thus far described. It was created specifically for microfinance institutions to assist them in their planning. Before moving on, take any questions on the planning process in general. Introduction to Microfin Ensure computers are set up for participants and facilitators also as per instructions in BP5-M1 – trainer’s materials 8. (2 minutes) As an introduction, display BP5-O2, Microfin Overview, review points briefly. Avoid any detailed explanations or lengthy responses to questions; instead explain that these points will be covered in more detail throughout the course. 9. (5 minutes) Display BP5-O3, Microfin Features. Explain that Microfin has been structured to carefully follow the Business Planning framework presented. Lecturette: Review the features of Microfin. Ask questions first – What do you expect Microfin will have to offer us as a financial modeling tool? Relate ideas in the Business Planning Framework and the strategic planning process. Ask: What are the limitations of financial models? Answer: they are only as good as the knowledge, assumptions, and strategy of those who use them, and they must be grounded in the current reality of the institution. They are only tools to help us along the way. .Refer to trainer notes, the Microfin Handbook and BP5-H4 for points to cover. Hand out BP5-H4 Microfin Features 10. (10 minutes) Structure of the model: Have participants refer to their copy of the MICROFIN STRUCTURE handout (BP5-H5). Display MICROFIN STRUCTURE either on the projector from Microfin or by using BP5-O4. Briefly explain each box in the structure and its links to operational planning. 11. (5 minutes) Starting up Microfin. Explain that most of the technical details related to running Microfin are stated in the Microfin Handbook and will be reviewed on the last day of the course. Explain that for the moment we will focus
  37. 37. BP 5: Introduction to Operational Planning and Financial Modeling 5-5 on what the model can do for us in terms of planning as we wish to master the basics first! Open the model using the projector. Explain that when they first open Microfin, it will run a short macro (or program) to set up the model for use. It is possible they may be asked if they want macros enabled. This is included for virus protection. They will need to enable macros for Microfin to function properly. After the macros the wizard appears. The wizard takes you through 6 set up prompts asking you about language, pop-up menus, tutorials, optional pages and recalculation options. Respond as you wish. Today we will be working in English, with the help options and with manual recalculation! Once the wizard finishes the INTRO page will be displayed. 12. (5 minutes) Project the Intro Page. Show how the page indicates the version of Microfin as well as the version of Excel that is currently running. Explain that there are many different versions of Excel. Some versions cause major recalculation errors when using Microfin. If they are using Excel 97 and have a version prior to 8.0b, they will receive a warning message. We will provide more information on this later in the course. 13. (5 minutes) Help Systems. Show how the pop-up menus and on line help work. Explain that Microfin has an on-line help system that contains the complete text of the Microfin Handbook. The help system works like most Windows based software. Click on the help button to bring up the Contents page. Very quickly highlight some of the below mentioned points. • show how the outline expands to show sub-steps • Show how green underlined text indicates hypertext links • Show how pictures of Microfin are embedded in the help file. Show how the cursor changes to a hand as it moves over sections of the help file. • Show how each page contains links to Related information • Click on the Index button on the menu row to show how Microfin help topics can be searched by topic • Click on the Exit button to leave the help system and return to Microfin 14. (15 minutes) Basic use features. Explain that Microfin is an easy to use Excel spreadsheet application. Optional Give participants 10 minutes to ‘play’ with the model if convenient. Let them go to the computer stations if they are close at hand. This will give them an opportunity to learn by doing! Summarize in a 5 minute discussion and further demonstration if necessary some of the features as noted below. Remember to ask participants to first present what they discovered. Use BP5-O5 to show main points.
  38. 38. BP 5: Introduction to Operational Planning and Financial Modeling 5-6 • Show how the entire model is contained in a single Excel file, with information divided into separate pages which are represented by the tabs running across the bottom of the screen. Move to the Products page by clicking on the tab. • Show how the links, “go to” buttons and the tool bar work. • Show how Microfin separates input areas (blue and gray color) from output sections (white color) to make it clear to the user where information is requested. Explain that blue cells indicate “key input” areas, which the user must fill in for the model to be complete. • Type in 100 in the blue cell for the First cycle line. Explain that Excel spreadsheets are normally set up for automatic recalculation, but because of the large size of Microfin, this feature has been disabled in order to avoid the lengthy recalculation process after every data entry. Show how the Calculate indicator shows up on the bottom status line. Ask: Does anyone know how to recalculate an Excel spreadsheet when automatic recalculation has been disabled? (Answer: Hit the F9 key) • Hit the F9 key and show how the 100 is carried forward. Explain that the gray cells are “optional input” areas and can be used to fine-tune the analysis. Type 200 into the Month 3 column of the First cycle line and hit F9 showing how the 200 is carried forward. • Explain that Microfin generates tens of thousands of projection numbers, which can easily overwhelm the user and make it difficult to determine what is actually happening. To make the process of interpretation much easier, Microfin includes a very valuable feature which depicts quantitative information in graph form. Move to the GRAPHS button and show the sample graph of number of active loans by cycle. Click on the dropdown list to show the large number of graphs that Microfin generates. 15. (5 minutes) Project the Navigator Page. Explain its features and ask participants how they think it might be useful. Validate responses. 16. (2 minutes) Microfin Golden Rules. Show BP5-O6. Stress that it is very important to input data properly or the model can be potentially ruined. There are two practices to avoid in this respect. Explain two of the biggest problems however result from not saving your work and from not recalculating. Distribute BP5-H6 (cut in half) and blutak or tape and hang on the computers! 17. (3 Minutes) Ask for any questions and summarize main points. Bridge to next session - With the golden rules in mind – let’s get started!!
  39. 39. BP 6: Model Set Up 6-1 SESSION 6: THE MODEL SETUP PAGE Session Summary Objectives: By the end of the session, participants will be able to be able to: complete the Model Setup page identify and input required institutional and inflation information, enter historical financial statement data and utilize information to complete basic financial ratio analysis Time: 105 minutes Materials: Flipchart, Markers Overhead projector Computer data projector BP6-M1 Model Set up Discussion Guide BP6-M2 Balance Sheet Definitions CGAP Microfin Handbook Overheads BP6 – O1 Basic Rules for Microfin BP6 – O2 Model Setup Page Summary BP6 – O3 LEDA Ratios Handouts: BP6-H1 Model Set up Page Summary BP6-H2 OPTIONAL - LEDA Case Study Parts 10 – Strategy BP6-H3 LEDA’s Ratios Case Study LEDA Case Study Part 10 – Strategy LEDA Case Study Part 11 - Historical Financial Statements and Ratios Flipcharts Computer Groups – List of names and computer stations
  40. 40. BP 6: Model Set Up 6-2 Session 6: The Model Setup Page Understanding the Model Setup Page Topic Preparation Before this topic, LEDA6.XLS needs to be loaded into the projected CPU. Make sure that “consolidated mode” has been selected on the Model Setup page. Ensure LEDA Historical Financial information has already been entered. Prior to the session, the participants should have been organized into groups of 3 persons. The groupings should be based on results of the Pre Test as well as registration data. Write the group members and their station on a flipchart and set aside until later. Since this the first time that participants will enter data on the computers, great care must be taken to ensure that the computers are all functioning properly Remember to turn off pop-up menus on the projector. Note to the instructors - Important Instructions about using Microfin presented in this session and the next are based on Microfin's version 3. Later versions are available and offer new features. Instructors will be able to download the last online version from Microfin's website and use it during the session. The training participants should do the same. It will then be necessary for them to adapt the model presentation to the features of the new version. Instructors should prepare in advance so as to make sure they master the new changes implemented in version 3. Outline 1. (5 minutes) Review and Introduction. Ask participants to quickly review our position with regards to the process of business planning. Acknowledge that we are now in a position to use Microfin to assist us in our planning process. Ensure that you review the ‘rules’ again, first by asking participants and them summarizing by using BP6-O1. 2. (5 minutes) Explain that we will now move onto the first part of the model structure - Introduce the MODEL SETUP page. Display the Model Setup Page Summary of components using BP6-O2. Explain that this page requires the input of global variables that will be used throughout the model and contains information that feeds into many other pages of the model. Explain that there are
  41. 41. BP 6: Model Set Up 6-3 six main sections of this page which we will now discuss separately. Handout BP6-H1. (You may wish to also write the 6 areas on a flip chart for reference later in the session.) 3. (10 minutes) Demonstration - components of the Model set up Page. Switch to the model set up page on the projector, encourage participants to do the same on their computers. Give a brief demonstration on the following points. Remember always ask participants to share what they think or know FIRST – before giving the answers! See BP6-M1 for supporting lecturette notes. 1. Choosing Branch, Regional, or Consolidated mode 2. Loan Product Projections Approach 3. Institutional information 4. Inflation data and Indexing 5. Historical financial statements and Portfolio Information section 6. Financial Ratio Analysis. 4. (10 minutes) Re - introduce the case study. Refer to Case study Part 10 - Strategy (or distribute BP6-H2). Comment on the assignment previously completed where by the participants developed a strategy for LEDA. Acknowledge that everyone did a great job on the previous assignment and that in the interest of academia we will all need a common starting point. So that we may move forward together and we have taken some previous answers and consolidated them into Case Study Part 10, which will be the strategy that all of us will be using for LEDA in the remainder of this course. Remind them once again that the practice they did will help them understand the LEDA strategy that we have chosen to follow as well as honed their strategy development skills that they may be able to use in their own MFIs. Allow participants a few moments to review the strategy. Take any questions. (Sometimes participants resent doing work that is not ‘used’, take time to explain why we are now using a standard format!) 5. (30 minutes) Case study work on the Model Setup Page. Refer to LEDA Case study part 11. Explain that in the pre assigned computer teams they are to complete case study by entering data into Microfin for LEDA. Remind them to closely follow the instructions in the assignment, and that they need to take turns using the keyboard. Reveal flipcharts with computer group assignments listed and ask groups to proceed to their computer stations. It is critical that groups are monitored by all facilitators present. This is the first occasion of data input for the participants. Remind participants that they can refer to the handbook or the on line help system if they need assistance, that blue and gray cells are for data input and not to forget to recalculate!! Refer to
  42. 42. BP 6: Model Set Up 6-4 common errors below. 6. (5 minutes) Reconvene to one large group. Project the Financial Statements from the completed page. Ask: Did you balance!? (A possible Prize moment!) Explain that we will review the statements momentarily. Lead a brief discussion about Microfin - What was most difficult? Easiest? Problems encountered? Ask for first reactions to Microfin! Review common errors from box below and from observations/ interventions in small group work. Common errors in this exercise Participants frequently encounter the following problems when entering data on the Model Setup page: • Month and fiscal year entry: They often try to type out the name of the month (e.g., “Jan”) rather than the number of the month (e.g., “1”) • Uncalculated worksheets: They often forget to hit F9 to recalculate a worksheet and wonder why their change has not taken effect • Monthly vs. annual rates: They often ask if inflation rates should be entered as monthly rates or annual rates. Inflation and interest rates in the model are always entered as annual rates. • Protected cells: They are often confused by cells with formulas in the financial statements which are there to ensure integrity of data in cases where numbers must match those in another area of the financial statements (e.g., accumulated surplus, previous fiscal years). Once the worksheet is completed and recalculated, the amounts should match those in the case study. • Getting the financial statements to balance: If the data is not all entered correctly, the Balance Sheet will not balance. Check the “Data validation” section at the beginning of the financial statements to check for any errors, e.g., that provisions and depreciation have been entered as negative numbers. Check the last line of the Balance Sheet to determine the size of the error. Generally, if you have the group review their data line-by-line, they quickly find the error. 7. (5 minutes) Ask for questions about LEDA. Ask: Why do we need this financial data before we start our planning in earnest? What do the statements tell us about LEDA’s performance to date? 8. (5 minutes) Project the portion of the page that produced indicators. Facilitate a discussion on the following. Ask: Why would the model produce indicators, especially at this point? Why are we interested in Ratios? Possible Answers: Need to have a starting point for reference, will help with institutional assessment. Better than raw data - To analyze trends and useful for comparison within institution or to others in the business. Explain how with the raw numbers we can compare total income with total expenses, and we can look at one expense category in relation to another expense category, e.g., operating costs are 60% of total expenses. Point out that if we wanted to compare trend data from one year to the next, working with the raw numbers becomes difficult. If the institution grows, income will go up and all the expense categories will go up, but it would be difficult to determine if we are getting more efficient or not. 9. (5 minutes) Ask: We saw on the Model Setup page that we could pick different denominators for calculating these indicators. Why would we
  43. 43. BP 6: Model Set Up 6-5 want to choose one over the other? [Answer: It depends on what we want to measure. If we use Total Assets and have large real estate holdings, our numbers will appear very different than if we use Performing Assets. CGAP recommends using Total Assets. Mainly because most of an MFIs Assets are in their portfolio and they do not have a large proportion of their assets in Fixed or other Assets) 10. (10 minutes) Exercise on studying LEDA’s financial indicators. State that we will now take a few moments to look at LEDA’s ratios. Divide the participants into pairs and hand out BP6-H3, LEDA Historical Financial Statements and Ratios. Explain that this is a summary printout of what they just input into the Model Setup page. Ask them to study the financial ratios and try to assess LEDA’s financial strengths and weaknesses. (Note: It is assumed that participants are familiar with at least some basic ratios from previous courses. If that is not the case, you may need to distribute optional handouts that include the formulas for the ratios. Facilitators must exercise caution in taking too much time to review ratios, this is not a course objective.) 11. (5 minutes) Evaluation of LEDA’s starting financial performance based on ratios. Display BP6-O3 - ratios. Facilitate a BASIC group discussion of LEDA’s financial ratios. (Do not get involved in too many details at this point focus on the BIG picture.) Ask participants what they noted while studying the financial ratios for LEDA. Answers will include: LEDA is generating more income in FY10, their portfolio quality has gotten worse, they are much more operationally efficient, and they are not as dependent on grants as in FY09. Also note that more information is needed to properly assess LEDA and that it is also useful to compare LEDA with other institutions and industry standards. As available, trainers should try to download benchmark ratios from the latest version of the Microbanker Bulletin for use in this discussion. 12. (10 minutes) Summary and Closure. Ask for any questions on the Set up Page. Summarize. Focus on some of the following issues, ask: Why certain information is required, how it feeds to other pages, why we need that information before starting on the plan. Also remind participants of the need and reason for the initial financial information. Urge participants to review information on financial statements and ratios this evening as needed. Finally ask: what is the first step in operational planning? Bridge to designing financial products.
  44. 44. BP 7: Designing Financial Products 7-1 SESSION 7: DESIGNING PRODUCTS AND SERVICES Objectives: By the end of the session, participants will be able to: • Think about other products and services to provide • Define their loan products by loan amount, repayment conditions, and pricing • Design savings products • Use Microfin to model savings and credit products projections Time: 180 minutes Materials: Blank overhead transparencies Markers Computer data projector BP7-M1 Discussion Guidelines for Product Design Overheads BP7-O1 Designing Successful Products BP7-O2 Designing Savings Products BP7-O3 Loan Product Design Worksheet BP7-O4 Microfin Product Definition Page Layout BP7-O5 Loan Product Definition in Microfin BP7-O6 Compulsory Savings Product Definition in Microfin BP7-O7 Voluntary Savings Product Definition in Microfin Handouts: BP7-H1 Client analysis - worksheet BP7-H2 Loan and Savings Product Definition (2 pages) Case Study LEDA Case Study Part 12: Products and Services
  45. 45. BP 7: Designing Financial Products 7-2 Session 7: Designing products and services Key issues in product and service design 1. (5 minutes) Introduction to product and service design: savings, loan, credit products and other financial products in compliance with relevant regulations (insurance, transfers, bill payments etc.) but also non-financial products and services (training in financial literacy and other areas). Ask: Why do we begin with product design? Summarize answers by stating that: Only by offering products that are adapted to clients' needs and generate positive changes in their lives will an institution be able to retain clients and ensure loan repayment and the use of other products and services. Moreover, efficient products can help minimize financial risk and help reach and maintain financial sustainability. Ask: How do we design financial products? What factors do we consider? Answer: Products must strike a balance between what the client needs and values in financial services and the institution's goal of sustainability. Client needs are assessed through market research with potential clients and satisfaction surveys with current clients or even exit clients. This phase of client insight is crucial to analyze the risks for clients, understand their needs and adapt products to empower clients to enact positive changes (decrease vulnerability and create value for clients) while respecting the MFI's viability goals. Moreover, it is only by meeting clients’ needs that an MFI can hope to attract and retain enough clients. The number and design of products and services an MFI offers should be influenced by its analysis of clients and markets during strategic planning. Remind the participants that a study of LEDA’s markets and clients was completed earlier in the Strategic Planning process. Explain that now, we will more closely examine that information and determine how LEDA can design (and ultimately deliver) products that not only respond to the survey results but also fulfill its Mission and consider its institutional capacity. Operational Planning starts with product design: defining financial products and possibly non-financial products suited to the needs of different clients, businesses or business sectors. 2. (5 minutes) Designing Successful Savings and Credit Products. First ask what are the broad aims/goals of making successful products. Summarize using BP7- O1. 3. (5 minutes) Analyzing client needs to design products. Let's begin by studying in detail client in view of product development. Ask people who have already done
  46. 46. BP 7: Designing Financial Products 7-3 market research to explain how they used results to define products. Which data was the most useful? Write the answers on sheets and then ask the group if they can put them in categories. In theory, the discussion should mention data that generates a better understanding (1) of the workings of (potential) client businesses, (2) of their needs (both business and household), and (3) inherent risks (thanks to a context analysis). You can highlight that CGAP offers a specific course about designing new products. This course explains market research in detail. 4. (10 minutes) Ask the group: Describe some of the typical businesses of clients in your MFI. Based on the answers, highlight that our clients are, in fact, working in different types of economic activities, often combining production (agricultural or non-agricultural production), transformation, services (retail, etc.), crafts, employee status, etc. Remind them that each business is specific in terms of seasons, required production factors (e.g. workforce, monetary resources) and cash flow. Often, for microfinance clients, business and household economy are close-knit. "Purely domestic" events that create financial needs, such as marriage, birth, illness or death can influence production activities. Needs for funding are thus incorporated in an “activity system” which must be understood through market research. For each type of activity system and needs, we will need to identify specific risks (climate risks, such as floods for produce farming in LEDA's case; health risks; branch disorganization; price instability; risks of market saturation, etc.). The nature of risks linked to the activity influences the use of financial services and the type of services to offer. Remind them that in certain regions, there may be a risk of over indebtedness. Organizational failures of certain financial institutions, their multiplication in the same areas without coordination, excessive incentives to take out loans etc. may cause over indebtedness for clients. This risk can be analyzed through the quality of MFI portfolios in a region, satisfaction surveys or market research. The MFI will need to take into account these over indebtedness risks if they exist in its region and within its client groups. If the risk of over indebtedness is high, an improvement of the situation will be necessary before launching any new product. 5. (15 minutes) Explain that we are going to reflect on our clients' needs. Divide the participants in groups of 2 or 3 (from the same MFI or region if possible) and ask them to fill out (BP7-H1): “Product Design Worksheet”, regarding client analysis. Then, ask the groups to share their answers. During the ensuing discussion, express the idea that, depending on activity systems, household needs and context analysis, different types of products can be designed: loans for income-generating activities, loans for SMEs, specific loans for a well-identified sector with high added value (for example, produce
  47. 47. BP 7: Designing Financial Products 7-4 farming with well-identified outlets to supermarkets), emergency loans, "precautionary" savings for the household (illness, death), investment savings (schooling, productive project, etc.), insurance (loan, health, agricultural, etc.), money transfers, bill payments, etc. We can also envision non-financial services based on client traits: financial literacy, entrepreneur support services, training in other areas, etc. State that beyond clients' needs and activities, it is important to understand how the products we offer will help clients create, intensify, or modernize their activities. To summarize this discussion, we must remember that for different activities, MFIs must design different products. In the next activities, we will explain different features of savings and loan products. 6. (5 minutes) What are the key characteristics that differentiate one savings product from another? Show BP7-O2 top. Record key responses on a flipchart. (Answers to include: minimum balance, length of deposit, interest rate and calculation method, accessibility, withdrawal policies 7. (10 minutes) Ask the participants to discuss several scenarios that would result in designing different savings products to meet various client needs? Show BP7-O2 bottom. (Answers could include a discussion on daily earning that are expected and predictable or unpredictable, withdrawals, etc.) . Stress that the traits will differ according to goals (for example, precautionary savings imply strong product liquidity, with possible withdrawals at any time. On the opposite, investment savings can be blocked until the investment - for example for housing). Start a discussion: For clients, what are the advantages of savings compared to loans? Answers: better planning, greater availability, lower cost, less risks of over indebtedness, reduced vulnerability, etc. 8. (5 minutes) Brainstorm the key characteristics that differentiate one loan product from another? Make a list in the left-hand column of the Loan Product Design overhead (BP7-O3). Answers should include minimum and maximum loan size, credit approval terms (in particular, analysis of repayment capacity and acceptable level of indebtedness for clients, in relation to their household's available income and loans in repayment), repayment periods and amounts, grace periods, savings requirements, interest rates and method of calculation, commission or fee, lending methodology (individual loan, group-based lending, revolving credit).